MSPs have been told that there are “real concerns” about the financial sustainability of social care and education – amid calls for “radical change” to how local government is funded.

Experts from the Accounts Commission appeared before Holyrood’s local government and communities committee as MSPs gather evidence ahead of next year’s Scottish Government budget.

Elma Murray, chair of Accounts Commission, warned MSPs that “there will be considerable additional costs and loss of income for councils” as the Covid-19 crisis continues.

Ms Murray pointed to facilities being forced to close in the early part of lockdown and less money being brought in from rates, fees and charges.

She added: “Further costs have also been incurred in terms of redeploying staff in response to the pandemic, new responsibilities, shielding and social distancing measures, increased demand for some services and covering workforce absence.

“Lockdown has had a profound effect on key services such as education, social care, provision of benefits and many others.

“Very few, if any, council services have been unaffected by the impact of the pandemic through lockdown and social distancing.”

The Accounts Commission has called for the “need for strong leadership, radical change, robust workforce planning, collaborative partnership working and greater community empowerment and engagement”.

In an update on the NHS in Scotland published last October, Audit Scotland said a shortfall of as much as £1.8 billion could arise in health funding by 2023-24, however it is not known what effect the coronavirus pandemic may have.

Addressing specific areas of concern, Ms Murray said: “Social care has been extensively impacted by Covid-19. It is fair to say that there are real concerns around social care in the future.

“Education has also had to really pivot and change significantly – that is another service that the committee will have heard had been under pressure for a number of years.

“The move towards a different type of learning model when schools closed earlier this year right up until the summer break and then the preparations that had to be made to allow schools to return in full just in the last couple of weeks has increased the pressure, as far as we can see, as well.”

Ms Murray told MSPs that although they are gathering evidence for next year’s budget, councils are still struggling to balance the books this year.

Edinburgh City Council, which overspent on its 2019/20 budget for the first time in 13 years, is facing a £17 million budget gap this financial year – with officials warning the authority “will need to identify areas for disinvestment, service reduction or reform” to balance the books.

Ms Murray said: “Councils set their budgets for this year in February and that was before we entered the pandemic and before anybody really had a good sense about what this was going to mean.

“Councils will be looking very carefully now about how they manage to get through to the end of this year, never mind starting to look at how they set their budgets for next year.”

The committee convener, James Dornan, pointed to figures indicated that although Scottish council have experienced a real-terms cut of 3.3 per cent from 2013/14 to this year, since 2017 – real-terms funding has increased by 3.9 per cent for local authorities.

But Fraser McKinlay, controller of audit at Audit Scotland, warned that this assessment doesn’t take into account the growing demands that has been put on councils to provide more services.

He said: “The pattern of funding has changed over the last few years – we've seen an uptick in government funding which continues to be the biggest chunk of funding that goes to local government. But I do also think we need to look at the rising demand.

“I don’t think that we can say that the increase in itself has significantly relieved the pressures that local government is facing in terms of its financial sustainability into the future.

"Cosla would argue that those financial sustainability pressures continue to increase.”

Over a five-year period, funding for education has increased by 1.5 per cent in real terms, although councils have been told to provide more services such as ramping up early years provision.

But funding for social care has reduced in real terms by 1.5 per cent over the same period.

Mr McKinlay pointed to “significant reductions in spend” in other key areas, which he warned will be key sectors as local authorities attempt to recover from the pandemic.

He said: “If you look at social work and education trying to be protected in the best way they can in terms of spending, you can see then some really significant changes in spending in other important areas – things like planning and development services, central services, culture, roads and transport.”