Scots councils making £400m of service cuts face new £780m budget black hole

It has been confirmed that all have agreed to implement the freeze and share of a £144m pot to deliver it.

The Convention of Scottish Local Authorities (COSLA), the national association of Scottish councils has now called for a "real and meaningful solution" to the long-term issue of the underfunding of Scottish local government in order to "protect the essential front-line services of our communities".

Some 11 out of the 32 councils have said the Scottish Government funding will not fully fund the freeze while a budget black hole for 2024/25 alone was estimated at £585m.

It has emerged that local authorities have been forced to make recurring service cuts of nearly £168m in this financial year alone having slashed over £230m  last year because of budget shortfalls.

READ MORE: Revealed: Scotland's £1.3bn council tax debt mountain 

They have also sought to dip into vital reserves to the tune of just over £330m to help fill the gap, but public spending auditors say this is "unsustainable" and can only be seen as a "temporary plug".

More than half of Scots councils had initially rejected an "unbelievable" ministerial ultimatum to implement the freeze by the day before a Friday deadline or have their share withdrawn.

Finance secretary Shona Robison set the ultimatum over the council tax freeze to allow for a budget consideration the following Tuesday and came while most were planning to raise council tax rates.

It comes as a new analysis from a public spending watchdog has issued a new warning about the financial sustainability of the nation's councils with a further £393m service spending black hole expected in 2025/26 and a further £387m in 2026/27.

Budget gaps for this financial year ranged from £3.1m in Glasgow to £65.6m in Highland.

An analysis by the Accounts Commission, the public body responsible for reporting on the performance and spending by councils, states that a near 6% increase in Scottish Government revenue funding to councils in 2024/25 – totalling £13.25 billion - masks "significant underlying financial challenges and strain".

Almost all the increases in funding have been ring-fenced for policies and to cover the costs of pay increases in 2023/24.

It said that the full impact of proposed savings by councils on service delivery and communities is unclear and that it was the subject of further investigation.

Each year councils have a legal duty to set a balanced budget for the coming financial year, meaning that a council’s funding and income must cover their anticipated spending.

But some councils have experienced public opposition to the savings measures, including threats of judicial review of Aberdeen City’s proposed closure of a number of local swimming pools and libraries. That led to the council launching a consultation into the closures.

There was also a postponement of cuts to library and leisure services in Clackmannanshire and a reversal of plans to close 39 community facilities in North Lanarkshire in response to public opposition.

The Accounts Commission said that while the 2024/25 revenue funding for councils was £13.25bn before the extra money for the council tax freeze and indicating a real terms rise of 5.7%, funding adjustments meant comparisons with the previous year were "not straightforward".

COSLA's resources spokesman Katie Hagmann said that the public spending auditors were echoing their belief that there are "severe challenges" facing the nation's councils in trying to balance the books and deliver essential front-line services.

She said: “It is vitally important that these concerns, which have been consistently raised by COSLA leaders... are acted upon for the sake of Scotland’s public services and our communities who rely upon them.

“Now is the time to take real action.

"The reality right now for councils has never been more challenging. The effect of years of real-terms cuts to core budgets have been compounded by additional policy commitments and less flexibility in how we allocate increasingly directed budgets. This makes the ability to take local decisions on most of our budget, almost impossible."

She added: “We must seek a sustainable solution to these long-term issues in order to protect the essential front-line service of our communities before it is too late.”

Scottish Conservative shadow finance and local government secretary Liz Smith said the Accounts Commission analysis exposed "the truly eye-watering funding gap facing Scotland’s councils".

“Years of savage and sustained cuts have been passed down by SNP to local authorities, pushing them to breaking point," she said.

“Councils simply do not have the resources they need to protect vital day-to-day services that communities across the country rely on."

She said the commissioned analysis highlights that things "will only get worse unless SNP ministers finally back our calls and give councils a fair funding deal".

Finance secretary Shona Robison said that the Account Commission had confirmed that the Scottish Government provided a real terms increase in revenue funding for local government in 2024-25, building on increases in recent years.

“I have been clear that the UK Government’s Spring Budget and Autumn Statement failed to deliver the funding Scotland needs for public services. When more support is desperately needed for public services and infrastructure, Scotland’s block grant from the UK Government is still less in real terms in 2024-25 than in 2022-23 by around £0.4 billion," she said.

“Despite UK Government decisions leaving the country in a challenging financial situation, the Scottish Government has made available record funding of over £14 billion to local councils this year – a real-terms increase of 2.5% compared with the previous year. We will also continue to work with COSLA to empower councils through a new fiscal framework.”

Derek Yule, a member of the Accounts Commission said: “It's getting harder for councils to do more with less. They have to find and then deliver significant levels of savings to address budget gaps. Fully engaging with local people and being clear about the different and difficult budget choices is vital, whilst understanding the impacts on the most vulnerable.

“Councils need to improve the way in which they present financial information, and do this in a clear, consistent and accessible way. The Accounts Commission calls on councils to increase the accessibility and transparency of publicly available budget information. This will allow for improved comparison between councils, particularly around key information including actions to tackle existing and future budget gaps, as well as savings plans.”