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| Scottish councils' cash reserves are running out, says watchdog | |
| (35 minutes later) | |
| Many Scottish councils face losing all their reserves unless they continue to make deep cuts in spending, the local government watchdog has warned. | Many Scottish councils face losing all their reserves unless they continue to make deep cuts in spending, the local government watchdog has warned. |
| The Accounts Commission predicts that well over a third of Scotland’s 32 councils will face a funding gap by 2018 that is larger than their reserves, while Falkirk and South Lanarkshire believe that shortfall will dwarf their savings next year. | The Accounts Commission predicts that well over a third of Scotland’s 32 councils will face a funding gap by 2018 that is larger than their reserves, while Falkirk and South Lanarkshire believe that shortfall will dwarf their savings next year. |
| It estimates the cumulative size of the funding shortfall and councils’ use of reserves could exceed £1bn from this year through to April 2019, depending on how councils manage their budgets. | It estimates the cumulative size of the funding shortfall and councils’ use of reserves could exceed £1bn from this year through to April 2019, depending on how councils manage their budgets. |
| In its 2016/17 financial overview, the Accounts Commission reports that councils have substantially increased their reserves to some £2.5bn despite absorbing cuts in central government support of 8.4% since 2010/11, at the same time as taking on a heavier workload. | In its 2016/17 financial overview, the Accounts Commission reports that councils have substantially increased their reserves to some £2.5bn despite absorbing cuts in central government support of 8.4% since 2010/11, at the same time as taking on a heavier workload. |
| Originally intended to act as long-term sources of top-up funding in the face of ongoing cuts, those reserves would be essential to guarantee services at 13 councils within the next 12 months unless they continued to cut spending, find efficiencies or reduce services, it said. | Originally intended to act as long-term sources of top-up funding in the face of ongoing cuts, those reserves would be essential to guarantee services at 13 councils within the next 12 months unless they continued to cut spending, find efficiencies or reduce services, it said. |
| Scotland’s councils had put aside reserves of £2.5bn in March 2016 as a cushion against ongoing cuts and soaring social services costs. They had investments of £1.5bn, which helped bring down net debt to £13.6bn; excluding those investments, overall debt stood at £15.25bn. | Scotland’s councils had put aside reserves of £2.5bn in March 2016 as a cushion against ongoing cuts and soaring social services costs. They had investments of £1.5bn, which helped bring down net debt to £13.6bn; excluding those investments, overall debt stood at £15.25bn. |
| Councils are expected to see their incomes from the government, council tax and business rates fall annually from £11.94bn this year to £11.72bn in 2018/19 – including small increases in council tax rates for some councils. And in 2018/19, the commission estimates that the year’s deficit will be £553m – more than half the projected £1bn deficit from this year to April 2019. | Councils are expected to see their incomes from the government, council tax and business rates fall annually from £11.94bn this year to £11.72bn in 2018/19 – including small increases in council tax rates for some councils. And in 2018/19, the commission estimates that the year’s deficit will be £553m – more than half the projected £1bn deficit from this year to April 2019. |
| The report’s warnings have fuelled an increasingly intense debate on the future of Scottish local government financing in the run-up to next May’s council elections, when the Scottish National party is forecast to make substantial gains. | The report’s warnings have fuelled an increasingly intense debate on the future of Scottish local government financing in the run-up to next May’s council elections, when the Scottish National party is forecast to make substantial gains. |
| Professor John Curtice of the Scottish Centre for Social Research says the current polls suggest the SNP could win overall control of a dozen councils and become the largest party in 12 more. It already runs Perth and Dundee and would take control of Glasgow – the biggest political prize the SNP has yet to win – as well as Aberdeen, Edinburgh and Stirling. | Professor John Curtice of the Scottish Centre for Social Research says the current polls suggest the SNP could win overall control of a dozen councils and become the largest party in 12 more. It already runs Perth and Dundee and would take control of Glasgow – the biggest political prize the SNP has yet to win – as well as Aberdeen, Edinburgh and Stirling. |
| The SNP government in Edinburgh has refused to support cross-party and expert calls for a fundamental reform of council financing but for the first time since 2008 will allow councils to increase council tax rates by 3% next year. Since the Accounts Commission forecasts ministers will continue cutting central funding, that will shift the political onus for raising taxes away from ministers and on to councils. | The SNP government in Edinburgh has refused to support cross-party and expert calls for a fundamental reform of council financing but for the first time since 2008 will allow councils to increase council tax rates by 3% next year. Since the Accounts Commission forecasts ministers will continue cutting central funding, that will shift the political onus for raising taxes away from ministers and on to councils. |
| In parallel with that option for an overall 3% increase, ministers have changed council tax bands by cutting them for the lowest rated homes but increasing tax on higher value homes. That will hit richer areas such as Edinburgh, Aberdeenshire, West Dumbartonshire and East Renfrewshire. | In parallel with that option for an overall 3% increase, ministers have changed council tax bands by cutting them for the lowest rated homes but increasing tax on higher value homes. That will hit richer areas such as Edinburgh, Aberdeenshire, West Dumbartonshire and East Renfrewshire. |
| The Convention of Scottish Local Authorities, the umbrella body for most Scottish councils, did not respond directly to the commission’s findings on its reserves but said its members were doing their best to manage. | The Convention of Scottish Local Authorities, the umbrella body for most Scottish councils, did not respond directly to the commission’s findings on its reserves but said its members were doing their best to manage. |
| Councillor Kevin Keenan, its finance spokesman, said the Scottish government made their task far harder by only giving councils funding estimates a year in advance. That made it harder to plan with any certainty. | Councillor Kevin Keenan, its finance spokesman, said the Scottish government made their task far harder by only giving councils funding estimates a year in advance. That made it harder to plan with any certainty. |
| “We all know the direction of travel for public sector finances,” Keenan said. “Whilst 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.” | “We all know the direction of travel for public sector finances,” Keenan said. “Whilst 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.” |
| Andy Wightman, the Scottish Greens’ local government spokesman at Holyrood, said these financial challenges strengthened the case for substantial reforms of council funding. The Scottish Greens have also called for all council debt to be written off. Councils spent £1.5bn last year servicing their debts. | Andy Wightman, the Scottish Greens’ local government spokesman at Holyrood, said these financial challenges strengthened the case for substantial reforms of council funding. The Scottish Greens have also called for all council debt to be written off. Councils spent £1.5bn last year servicing their debts. |
| “It is clear we now need to dedicate as much time and energy on negotiating a fiscal framework for local government to set the ground rules for future funding and to increase fiscal autonomy and democracy,” Wightman said. | “It is clear we now need to dedicate as much time and energy on negotiating a fiscal framework for local government to set the ground rules for future funding and to increase fiscal autonomy and democracy,” Wightman said. |
| Alex Rowley, Scottish Labour’s deputy leader, said it would aim to amend next year’s Scottish budget to increase higher rates of income tax in part to fund increased council spending. “These figures confirm that the SNP has slashed funding for local services, like schools and social care, which put the life chances of people across Scotland at risk,” he said. | Alex Rowley, Scottish Labour’s deputy leader, said it would aim to amend next year’s Scottish budget to increase higher rates of income tax in part to fund increased council spending. “These figures confirm that the SNP has slashed funding for local services, like schools and social care, which put the life chances of people across Scotland at risk,” he said. |
| No Scottish government minister responded. Instead, a spokesman said: “This report highlights the pressures that councils – like other parts of the public sector – face, but also highlights that they are continuing to improve services. We expect local authorities to continue to use resources as efficiently and effectively as possible to ensure taxpayers get the best possible services and value for money.” | No Scottish government minister responded. Instead, a spokesman said: “This report highlights the pressures that councils – like other parts of the public sector – face, but also highlights that they are continuing to improve services. We expect local authorities to continue to use resources as efficiently and effectively as possible to ensure taxpayers get the best possible services and value for money.” |