Quarter of Scottish councils warn of effective bankruptcy

Almost a quarter of councils fear they will not be able to balance their budgets next year, a new survey has revealed.

The Local Government Information Unit, which represents both councillors and officials, said some councils in Scotland "may be unable to fulfil their statutory duties" because of financial pressures.

Its first annual state of local government finance in Scotland survey involved council leaders, chief executives and other senior figures from more than three-quarters of the country's 32 local authorities.

Its chief executive Jonathan Carr-Watson said: “With nearly a quarter of councils warning they may be unable to fulfil their statutory duties, it is only a matter of time before we see the first council in Scotland declare effective bankruptcy.

“Councils are pulling every lever available to them to balance their books.

“Every respondent said they were cutting spending on services, 97% that they would be increasing fees and charges, 89% that they would be spending reserves.

“But it is not enough.

“Councils have little to no confidence in local government finance and the issues behind the crisis are not going away.

“Scottish Government must work productively with councils to restore trust, remove ring fencing, identify revenue streams and reform core funding for councils to ensure residents, and particularly the most vulnerable in communities, are able to access the services they need and pay for."

Scottish Government funding needed to match pressures, say Cosla

The survey was released about a week after local government organisation Cosla warned of a risk of bankruptcy for councils if "the funding by Scottish Government does not match growing cost pressures".

And local authority leaders are still awaiting details from the Scottish Government on how much money they will get in compensation for the council tax freeze next year - a policy announced by First Minister Humza Yousaf without prior consultation with local government.

Details of that, along with how much cash will go to councils overall, will be set out in the Scottish Budget next week.

But Scottish Conservative finance spokesperson Liz Smith said: "We have now reached the point where council finances are completely unsustainable, and almost a quarter of them say that they are effectively bankrupt.

"Every single one is planning cuts and almost all intend to raise fees and charges.

"This is the predictable consequence of years of SNP mismanagement and underfunding, and of the sudden U-turn that introduced a council tax freeze - but without anyone having given any thought to where the money was to come from."

Scotland "facing most challenging budget settlement since devolution"

A Scottish Government spokesperson said: "Scotland is facing the most challenging budget settlement since devolution as a result of sustained high inflation and a UK Government autumn statement that failed to deliver the investment needed in Scotland's public services.

"The Scottish Government has increased the resources available to local government in 2023-24 by more than £793 million, a real-terms increase of £376 million or 3%, compared to the 2022-23 budget figures.

"Work is also ongoing with Cosla to establish a new fiscal framework for councils through the Verity House Agreement, a landmark agreement that is forging a stronger partnership between the Scottish Government and local councils through the spirit of collaboration and engagement."

The spokesperson added: "Decisions on local government budget allocations for future years are subject to the outcome of negotiations with Cosla, the results of which will be confirmed in future Scottish budgets.

"Any assumptions relating to possible future budget reductions are entirely speculative at this stage."

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