Local Government Financial Overview
Councils in Scotland are facing an increasingly complex range of challenges and continuing pressure on their finances, says the local government watchdog, the Accounts Commission.
What issues are councils facing?
Challenges include increasing demand across many of the wide range of services councils deliver to local communities. Demand has to be met against tightening budgets in many service areas along with uncertainty stemming from external factors such as EU withdrawal.
One of the most significant issues for councils continues to be funding. In 2017/18, funding from the Scottish Government, councils’ main source of funding reduced by 2.3 per cent in real terms.
The reduction was largely offset by increases in council tax and councils’ fee income, with most councils applying the maximum three per cent increase to council tax. In total, the net effect of Scottish Government and council action was a reduction in funding of only 0.1 per cent in real terms, although the impact on individual councils varied.
In general, increased spending in education and social work was offset by reductions in other services.
Government funding forecast to reduce
The forecast trend is for further reductions in funding from the Scottish Government in the medium term. Pressure, therefore, remains on councils to make further savings and find ways to meet service demand more efficiently and effectively.
This, says the Commission, will require difficult decisions and innovative thinking by councillors and senior management working together. And it is important that these decisions are taken in a planned and coordinated way.
The importance of planning
Almost all councils now have medium-term financial planning in place – which is a positive development – and some have made progress with long-term financial projections.
Although overall reserves have continued to reduce, no council is using its reserves at a level that risks their financial sustainability in the next two to three years. However, the majority of Integrated Joint Boards (IJBs) – funded by councils and the NHS – have underlying financial sustainability issues.
Graham Sharp, chair of the Accounts Commission, said: “Councils did a good job last year in managing resources as budgets are tightened and demands on them rise.
“The position varies from council to council but there is a clearly need for continuing change in the way services are provided. It’s not been easy but the pressure on them – and the key services we all rely on – shows no signs of easing.”