SCOTLAND’S councils are facing a financial black hole of more than half a billion pounds in only two years’ time unless they make major cuts, according to an official analysis. The Accounts Commission forecasts the gap between the amount local government spends and its income could grow from £87 million in 2016/17 to an estimated £367 million in the next financial year, before rising again to £553 million in 2018/19. More than a third of Scotland’s 32 local authorities will face a funding gap that is greater than the amount of cash they have in reserves, its report said, despite managing their funds well in the face of deep cuts by the Scottish Governments to their grants. As well as dipping into their reserves, the analysis said councils last year balanced the books by imposing an extra £324 million of charges and fees on local residents and taking an extra £134 million in non-domestic rates from businesses.
But the report concluded they still “need to make significant savings to address forecast funding gaps” and warned that three local authorities, including Glasgow, have no medium or long-term financial strategy. Graham Simpson, Scottish Tory local government spokesman, said: “The funding pressures put on councils will undoubtedly see some increase council tax next year and this is on top of the rise already forced on hard-working families so the SNP can spend money raised locally on their own national priorities.” Alex Rowley, Scottish Labour’s deputy leader, said: “These figures confirm that the SNP has slashed funding for local services, like schools and social care, which put the life chances of people across Scotland at risk. The SNP shouldn’t use the Scottish Parliament as a conveyor belt for Tory austerity.” Council income totalled £18.9 billion last year, more than half of which came from Scottish Government grants. However, the report government funding was down 8.4 per cent in real terms since 2010/11 and cut by £489 million this year.
The analysis said councils “have experienced a long-term decline in their grant funding from the Scottish Government” and warned this “is expected to continue to fall in future, putting greater pressure on budgets”. Authorities spent £19.5 billion last year, £600 million more than their income, with spending increasing on “key services” such as social care “because of rising demand from an ageing population”. Among the other spending pressures the report cited were staff pensions and servicing more than £13.7 billion of debt. This cost local authorities around £1.5 billion in interest and repayments, with 22 of them spending more than 10 per cent of their income servicing debt. The report found council are paying off around £500 million a year of the cost building projects funded by various forms of private finance. They have spent a further £500 million over the past five years on exit packages for 13,000 staff. More than half of councils plan to use their reserves to balance their budget in 2016/17, with Angus Council planning to use 23 per cent of its reserve fund in a single year. Councillor Kevin Keenan, finance spokesman for local government body Cosla said: “It is virtually impossible to set medium and long-term financial plans based on short-term funding and yearly budgets from Scottish Government. “There is no doubt that despite difficult settlements from the Scottish Government, councils have managed their finances well but significant challenges lie ahead in maintaining this.”