29.11.16
Scotland’s local authorities face ‘bleak future’, says spending watchdog
Many Scottish councils risk exhausting their reserves unless they successfully balance continued deep cuts to services and rising demand, the nation’s local government watchdog has said.
In its 2016-17 financial overview, the Accounts Commission predicted that over a third of Scotland’s 32 councils will face a funding gap larger than their reserves by 2018, while two councils believe that the shortfall will impact upon their savings as soon as next year.
The Commission commended councils on how they handled financial pressures, having largely stayed on budget and increased their reserves to £2.5bn despite taking 8.2% cuts in central government support since 2010-11, but warned that further reductions and trials lie ahead.
“Councils’ budgets are under increasing pressure from a long-term decline in funding, rising demand for services and increasing costs, such as pensions,” the report said.
“All councils face future funding gaps that require further savings or a greater use of their reserves. Long-term financial strategies must be in place to ensure council spending is aligned with priorities, and supported by medium-term financial plans and budget forecasts.”
Scotland’s 32 unitary councils spent a total of £19.5bn in 2015-16, but while spending on providing services remains lower than in 2011-12, councils overspent on key services such as social care in response to rising demand, risking their long-term financial positions.
Councils expect to see their incomes from the government, council tax and business rates fall over the next few years to £11.72bn in 2018-19, despite some councils’ planned increases in council tax rates. The Commission estimates that in 2018-19, their deficit for the year will be £553m – more than half the £1bn deficit projected from this year to 2019.
The Convention of Scottish Local Authorities (Cosla), the umbrella body for most Scottish councils, welcomed the Commission’s praises for councils’ strong financial management but attributed most local authority difficulties to central government policy.
Kevin Kennan, Cosla’s financial spokesman, said: “We all know the direction of travel for public sector finances. While councils and councillors do their best to mitigate the damage to communities from political choices made at the centre, this is becoming harder and harder to do.”
Kennan added that it is ‘virtually impossible’ for councils to set medium and long-term financial plans when the Scottish government is only providing councils with funding estimates one year in advance.
CIPFA’s Local Government Directors of Finance group, comprised of the 32 chief finance officers of Scottish councils, seconded Cosla’s praise for recognition, but warned that the positive tone of the Commission’s report risked underestimating the pressures that councils currently face.
“After years of real term reductions in funding coupled with a rise in demand for core services, councils are already facing significant funding gaps,” said the group’s chair, Derek Yule. “But unfortunately by claiming that councils are in good financial health, this report does not take into account the current scale of uncertainty.”
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