CASH reserves at some councils risk running out “within two to three years” as they struggle to cope with funding cuts and increasing demand, a report has found.

The public spending watchdog said 20 local authorities had drawn on financial reserves for day-to-day spending in 2016/17 – more than double the year before.

And it said there had been a 7.6 per cent fall in Scottish Government funding for councils since 2010/11, with local authorities’ net debt now standing at £14.5 billion.

The Accounts Commission added: “Councils tell us that they are finding the situation more serious than ever, with savings becoming increasingly difficult to identify and achieve.”

Scottish Liberal Democrat leader Willie Rennie warned local authorities face having to make "extreme" cuts to services.

He said: "We are already hearing reports of councils contemplating extreme measures like moving to monthly bin collection or closing every library in the local authority.

"Councils are burning through their reserves at a rapid rate. This is not sustainable."

The Accounts Commission’s financial overview for 2016/17 found councils were showing signs of “increasing financial stress”.

It said local authorities were facing a “growing range of budgetary pressures”, including funding cuts and “ongoing demand pressures” such as an ageing population.

In the last financial year alone, councils slashed 2,200 jobs – paying out £78 million in severance deals.

Meanwhile, debt levels increased by £836 million, with councils spending almost ten per cent of their revenue budgets servicing these bills.

Resources for culture, planning and development, and roads have seen the sharpest falls in funding over the last three years.

In response to funding cuts, councils approved the use of £79 million-worth of cash reserves to try to balance the books in 2016/17.

Scottish Conservative local government spokesman Alexander Stewart called on the SNP to provide “far more support to councils right across the country”.

He said: “Under the SNP government, the financial health of Scotland’s 32 councils has deteriorated rapidly.

“Debt levels are eye-watering, and millions upon millions of pounds in taxpayers’ cash is now being used just to service it.

“We’ve even got to the stage where local authorities are dipping into the rainy day fund routinely just to stay afloat. And as auditors say, if that continues, there won’t be any reserves left to call on.”

Scottish Labour economy spokeswoman Jackie Baillie said the report “lays bare the impact of Tory and SNP austerity on our local authorities”.

She added: “After a decade of SNP government in Holyrood, our councils are at breaking point with rapidly shrinking budgets and sky-high debts.

“The truth is this is what happens when we have a government in Edinburgh happy to sit on their hands and pass Tory austerity onto our communities, with the SNP cutting local government budgets by £1.5 billion since 2011.”

Local authorities depend on Scottish Government funding for the majority of their income, with just 14 per cent coming from council tax.

Ronnie Hinds, deputy chair of the Accounts Commission, said their evidence found "councils are finding the financial pressures increasingly difficult to manage".

But a Scottish Government spokesman defended its funding record.

He said: “We have treated local government very fairly despite the cuts to the Scottish Budget from the UK Government.

"Including the extra £250 million to support the integration of health and social care, the overall reduction in local government funding in 2016/17 equated to less than 1 per cent of local government’s total estimated expenditure.

“The 2017/18 local government finance settlement, including the increase in council tax and Health and Social Care Integration funding, means that local government have an extra £383 million, or 3.7 per cent, in support for services compared to 2016/17.”