CASH-STRAPPED councils face soaring wages bills and higher debt payments as the ‘the spectre of Brexit’ hangs over Scots local government, a leading think tank has warned.

Calling for an urgent debate on the role of councils, the Fraser of Allander Institute said the UK’s exit from the EU was creating a whole new raft burdens for local authorities to deal cope with, coming on the back of years of cuts and mounting demands on frontline services.

It warns that a Brexit-inspired inflationary rise of just one per cent would push up salaries by over £60million. Higher inflationary pressures could also have cost implications via increases on charge associated with PPP-funded projects, currently crippling councils with annual payments of £500m-a-year.

Stating that local government was likely to face further years of budget cuts given expectations about the block grant from Westminster, as well as the SNP’s spending commitments and tax plans, it said Brexit could creating new challenges for delivering some services due to the impact of curtailing free movement on staff recruitment.

Fraser of Allander also questioned whether claims that a ‘positive Brexit’ where councils would be freed of restrictions on procurement and state aid rules would outweigh the new burdens.

Commissioned by the Scottish Local Government Partnership (SLGP), which represents Glasgow, Renfrewshire, Lanarkshire and Aberdeen councils, the report concludes: “These challenges in combination highlight why many are now calling for a debate about local government’s role in service delivery, and how these services are funded in the future. This is likely to be a key source of political debate during the upcoming local elections.

“Overall, there is no escaping that a debate about much broader questions, such as which services should be delivered by local government, how much autonomy local government should have, and how much responsibility it should have for raising its own revenues, is needed now more than ever.”

But SLGP convener Jenny Laing said a Holyrood inquiry was needed to review local government finance.

The Aberdeen City Council leader said: “This report says the future funding outlook ‘remains uncertain’ but the haze around the Scottish Government’s economic plans are so disorganised and opaque you could choke. As our grant disappears the amount of responsibilities being piled on to councils grows.

“Various institutions are already investigating our situation but I am calling for an urgent Holyrood inquiry in an attempt to bring some common sense to the situation.”

The report, ‘Fiscal Issues Facing Local Government in Scotland’, states that the requirement of councils to pay the Living Wage will add to the pressures on top of higher pension bills of near £100m as a result of auto-enrolment.

Pointing out all public services have been hit by Westminster’s austerity agenda, it states that councils’ allocation “has only declined by two percentage points” as a share of Scottish Government resource spending.

But the report predicts a 4.6 per cent real-terms cut to unprotected budgets in 2018/19 and a further cut of 3.6 per cent the following year.

A Scottish Government spokesman said: “We have treated local government very fairly despite the cuts to the Scottish Budget from the UK Government. Local authority revenue funding between 2010-11 and 2017-18 is broadly the same as the reduction in the Scottish Government’s overall budget imposed by the UK Government over the same period.”