Mounting pressures from inflation, increasing costs and demand are exceeding the Scottish Government’s additional investment in Scotland’s councils.
In 2025/26 councils received over £15 billion in government funding, with more money set to be raised from council tax and charges for some services. With communities paying more for services, their expectations are increasing.
In its latest assessment of local government finances, the Accounts Commission reports that additional costs from wage increases, higher employer National Insurance contributions and intensifying service demands, including social care as Scotland’s population ages, mean councils must cover a budget shortfall of £647 million in 2025/26.
Whilst councils have partly met this shortfall through service savings and increased charges for services, continuing to use reserves and make one-off savings isn’t sustainable. It intensifies pressures on future budgets.
Longer-term change in the way services are delivered is happening but must accelerate. Action is also needed to better understand the impacts on the most vulnerable communities.
Capital funding is vital for councils to invest in public buildings such as schools and libraries, as well as roads. It also underpins the significant transformation needed in the ways services are delivered in the future.
Capital funding from the Scottish Government is increasing but has not returned to previous levels. Councils remain heavily reliant on borrowing to fund their planned £4.7 billion capital investment in 2025/26.
Mounting pressures mean Scotland’s councils must cover a budget shortfall of £647 million in 2025/26.
Difficult decisions lie ahead on what services can be delivered and how.
Derek Yule, Member of the Accounts Commission said: “There’s a growing expectation gap. Councils don’t have enough money to meet current demand, at a time when local communities are being asked to contribute more through increases in council tax and charges for some services.
“Councils need to provide clearer budget information and work with communities to determine how services will be delivered in the future. These conversations won’t be easy.
“With public finances tightening, however, not all cost increases faced by councils can be met by government funding. Local action is needed now to find solutions to immediate and future financial challenges.
“This means difficult decisions on what services can be delivered and making major changes in how they are delivered.”
The Scottish Government and councils must fundamentally rethink how they plan, fund and staff additional support for learning as part of core school education in Scotland.
Since legislation in 2004 to make additional support for learning (ASL) more inclusive, there has been an eight-fold increase in pupils recorded as receiving ASL; currently 40 per cent of Scottish pupils – or 285,000 children – receive ASL. Almost all support is now delivered in mainstream classrooms, and it has become an increasingly central part of what teachers do.
The Scottish Government failed to plan for the impacts of this inclusive approach, and poor data means it is not possible to determine the scale, complexity and nature of needs across Scotland. The Scottish Government and councils urgently need better information to understand pupils’ needs and appropriate level of resource to support them.
Existing measures show a wide gap in outcomes for pupils receiving additional support compared with other pupils, including being more likely to be absent or excluded from school. More appropriate ways of measuring the achievements of pupils who receive ASL are still to be developed.
Stephen Boyle, Auditor General for Scotland, said: “The Scottish Government has failed to plan effectively for its inclusive approach to additional support for learning. Current gaps in data mean it is unclear whether all children’s right to have an education that fully develops their personality, talents and abilities is being met.
“The Scottish Government and councils urgently need better quality data to understand pupils’ additional support needs and the resources required to provide support to enable all pupils to reach their full potential.”
Ruth MacLeod, Member of the Accounts Commission, said: “Councils and the Scottish Government must fundamentally rethink how additional support for learning is planned and provided as a core part of Scotland’s school education.
“This includes reviewing how mainstream and special education is provided to meet current and future additional support needs and demands.
“It is critical they work with pupils, parents and carers and staff throughout this process.”
COSLA’s Children and Young People Spokesperson, Councillor Tony Buchanan @antbuc1), has commented following report published today about Additional Support For Learning from the Auditor General and Accounts Commission.
The Auditor General and Accounts Commission published a briefing paper on additional support for learning (ASL) on 27th February 2025. It makes a series of recommendations to Scottish Government and Councils, touching on data, measuring the outcomes of children and young people with additional support needs, funding, workforce planning and school buildings.
The COSLA Children and Young People Board will discuss the briefing at their meeting on 7th March.
Councillor Tony Buchanan, said: “Local Government is fully committed to supporting all children and young people to learn and to providing opportunities so that they can realise their full potential. The briefing paper published by the Auditor General and Accounts Commission on additional support for learning is welcomed.
The COSLA Children and Young People Board will be updated next week, with an initial consideration of the recommendations. COSLA, alongside the Scottish Government, co-chair the Additional Support for Learning Project Board.
“There will be an opportunity for the project board to consider the recommendations fully when they meet next month and consider how these can inform their priorities.”
A lack of leadership has meant the Scottish Government has made minimal progress towards its challenging climate change goal of reducing car use, according to a new report by spending watchdog Audit Scotland.
In 2020, the Scottish Government said it wanted to reduce car kilometres driven by 20 per cent by 2030 as part of its efforts to cut greenhouse gas emissions. However, the government has yet to produce a delivery plan for achieving the target, which it is unlikely to meet.
Since 2020, car traffic has increased to near pre-pandemic levels, public transport use has reduced, and there has been no significant change in how much people walk and cycle.
The Scottish Government aims to reduce car kilometres by 20% by 2030.
This is part of its efforts to cut greenhouse gas emissions.
But car traffic has increased since 2020.
And @scotgov has no delivery plan and is now unlikely to hit its target.
Spending by councils and the Scottish Government on reducing car use is complex, fragmented and lacks transparency. Ministers have spent significant sums on concessionary bus travel and active travel but have not considered how best to target funding to reduce car use.
Councils have a key role in reducing car use, but some have prioritised the 20 per cent target more than others. Rural councils face bigger obstacles to delivering change due to geography and poorer public transport networks. Councils need clearer guidance and direction from the Scottish Government on their role in helping deliver the target.
Stephen Boyle, Auditor General for Scotland, said: “The Scottish Government set an ambitious and very challenging target to reduce car use by 20 per cent by 2030. But there has been a lack of leadership around delivering this goal.
“It’s now unlikely the government will achieve its ambition, so it needs to be clear how this will affect its wider ambitions to achieve net zero emissions by 2045.”
Ruth MacLeod, a member of the Accounts Commission, said: “All parts of government need to act to deliver the 2030 car use reduction target. Councils need to set out to what extent they will contribute and how they will measure their progress.
“But they also need clearer guidance and direction from the Scottish Government to agree their role in reducing car use in their area.”
Scotland’s councils continue to face severe financial pressures. The need to consult with communities, clearly communicate the impact on local services, whilst working together to shape and deliver urgently needed transformation, is more important than ever.
Councils closed a budget gap of £759 million during 2023/24, but this required them to make further and deeper savings.
Reflecting on the state of council finances in that financial year, the Accounts Commission reports many councils made savings or used reserves to deliver services within budget and offset a 3.3% real-terms reduction in revenue and income.
Using reserves to routinely balance budgets isn’t sustainable and risks financial sustainability.
Despite an overall increase in funding in 2024/25 and a further funding increase announced for the year ahead, intensifying demand for services, greater borrowing and depleting reserves pose ongoing challenges.
In 2023/24 councils borrowed more to invest in buildings and infrastructure, whilst Scottish Government money to support capital investment continued to decline. Council borrowing increased by over £400 million and almost all councils now face higher levels of debt and annual interest costs.
This investment is vital, however, in supporting spending on key areas including new schools and housing projects, whilst reducing the risk of buildings becoming unusable and impacting services still further.
Jo Armstrong, Chair of the Accounts Commission, said: “Scotland’s councils face a challenging future, with significant financial risks and uncertainties.
“This has been compounded by pressures out with their control, including ever-increasing demand on services and inflation. An expected increase in funding for the year ahead doesn’t cancel out the urgent need for transformation, at a pace and depth we’ve not yet seen.
“With services already being impacted, councils must be clear with communities the scale of financial challenge being faced. Working with communities to deliver differently is vital.”
It is crucial that the City of Edinburgh Council continues to engage with and then act on the views of its residents and communities as it considers options to make the significant savings needed, says spending watchdog the Accounts Commission.
The council isn’t alone in Scottish local government in having to make substantial savings. But the scale of savings needed – over £100 million by 2029 – means senior officers and councillors must work together to find sustainable ways to deliver differently, improve performance and ultimately reduce costs.
The council has ambitious plans to borrow money to improve housing and school buildings. But this will need to be managed carefully to ensure that plans are affordable and don’t have a detrimental impact on services.
Progress has been made since the Commission last reported, and many services are performing well. But now the council must address declining performance in areas including housing, waste and some aspects of street cleaning.
The Accounts Commission recognises the council’s ambitious plans to end poverty and become a net zero city by 2030.
Given current progress, however, there remains a significant amount of work to achieve these targets, not least in establishing cost implications.
Jo Armstrong, Chair of the Accounts Commission said:“We cannot underestimate the scale of financial challenge.
“The council has successfully achieved savings over recent years. But given increasing demand and financial pressures, the council must accelerate its transformation and change programme.
“Listening to and acting on the views of staff and local communities will be vital.
“The council has real opportunities, including the potential to raise more income. It shouldn’t use the potential of future income, however, to delay making difficult decisions now as challenges will only intensify.”
Council Leader, Cammy Day, said: “We’re encouraged by the Commission’s findings, which recognise the good progress the Council has made since 2020.
“We’ve delivered a lot of change at a time of huge pressure on our services and on our budget, but we’ve stayed true to our priorities of protecting day-to-day services and investing in a fairer, greener future. Our aims to eradicate poverty and become net-zero by 2030 are ambitious, but we need to be aspirational to make sure they stay at the top of our priority list.
“Our focus on getting the basics right for our residents, meanwhile, is also bearing fruit with Edinburgh now a top performing Council in Scotland for street cleanliness, and continued improvements in key areas such as road conditions.
“We acknowledge, however, that there is still much more to be done and we’ve targeted substantial additional resources into key services such as housing, where we know performance has to improve if we are to tackle Edinburgh’s housing emergency.
“We’re continuing to adopt new technologies to make it easier for residents to come to us for help and, as recognised in the report, we’re looking forward to realising the huge benefits our Visitor Levy proposals will bring from 2026 – which we forecast will raise over £100m for the city by 2030.
“It’s no secret, however, that ever more difficult financial decisions lie ahead. Despite the unique pressures that come with being Scotland’s capital city, Edinburgh remains the lowest funded council per head in Scotland, which is having a huge impact on our finances.
“The latest projections show that we will face a budget shortfall of at least £30m next year and we’ll need to work even harder to ensure we can keep on delivering best value for the people of Edinburgh.”
In this Account Commission briefing about Scotland’s Integration Joint Boards (IJBs), we report that community health and social care faces rising unmet need and managing the crisis is taking priority over prevention due to the multiple pressures facing the bodies providing these services.
IJBs plan and commission many vital community-based health and care services.
People
One in 25 people in Scotland receive social care.
Expected to rise sharply due to an ageing population – 76% of people receiving health and social care are aged 65 and over.
By mid-2045, the number of people aged 65 and over is set to grow by nearly a third.
Performance
Where data is available, nationally there has been a general decline in performance of services and outcomes for people.
Data quality and availability is insufficient to fully assess the performance of IJBs and inform how to improve outcomes for people who use services with a lack of joined- up data sharing.
Care
Community health and social care faces unprecedented pressures and financial uncertainty. We have not seen significant evidence of the shift in the balance of care from hospitals to the community intended by the creation of IJBs.
Finances
IJB funding has decreased by £1.1 billion (nine per cent) in real terms to £11 billion in 2022/23. The funding gap is set to triple in 2023/24.
IJBs are making savings by not filling staff vacancies and using their financial reserves, but this is not sustainable.
Staffing
Vacancies are at a record high. Nearly half of services report vacancies. A quarter of staff leave jobs within their first three months. And there is continued turnover in senior leadership.
Action is needed now
IJBS need to share learning to identify and develop:
service redesign focused on early intervention and prevention.
approaches focused on improving the recruitment and retention of the workforce.
improvement to the data available.
commissioning approaches that improve outcomes for people.
ensure that their financial plans are up to date.
IJBs need to work together and with other stakeholders to:
ensure that the annual budgets and proposed savings are achievable and sustainable.
ENGLAND’S SOCIAL CARE WATCHDOG ‘NOT FIT FOR PURPOSE
The Care Quality Commission (CQC), the body responsible for regulating adult social care services in England, is ‘not fit for purpose’, according to the health secretary Wes Streeting.
Health and Social Care Secretary Wes Streeting was responding to an independent review that identified ‘significant internal failings’ within the health and social care regulator.
The interim report, led by Dr Penny Dash, chair of the North West London Integrated Care Board, found the number of inspections being undertaken were well below pre-Covid levels.
It also revealed a lack of clinical expertise among inspectors, a lack of consistency in assessments and problems with the CQC’s IT system.
Commenting on her findings, Dr Dash said: ‘The contents of my interim report underscore the urgent need for comprehensive reform within the CQC.
‘By addressing these failings together, we can enhance the regulator’s ability to inspect and rate the safety and quality of health and social care services across England.’
Mr Streeting commented: ‘When I joined the department, it was already clear that the NHS was broken and the social care system in crisis.
‘But I have been stunned by the extent of the failings of the institution that is supposed to identify and act on failings. It’s clear to me the CQC is not fit for purpose.’ Kate Terroni, CQC’s interim chief executive, said the regulator accepts in full the findings and recommendations of the report.
‘Many of these align with areas we have prioritised as part of our work to restore trust with the public and providers by listening better, working together more collaboratively and being honest about what we’ve got wrong,’ she said.
‘We are working at pace and in consultation with our stakeholders to rebuild that trust and become the strong, credible, and effective regulator of health and care services that the public and providers need and deserve.’
The interim findings of the review of our operational effectiveness led by Dr Penelope Dash have been published this morning.In response, Kate Terroni, our interim chief executive, said: “We accept in full the findings and recommendations in this interim review, which identifies clear areas where improvement is urgently needed.
“Many of these align with areas we have prioritised as part of our work to restore trust with the public and providers by listening better, working together more collaboratively and being honest about what we’ve got wrong.
“We are working at pace and in consultation with our stakeholders to rebuild that trust and become the strong, credible, and effective regulator of health and care services that the public and providers need and deserve.
“Work is underway to improve how we’re using our new regulatory approach. We’ve committed to increasing the number of inspections we are doing so that the public have an up-to-date understanding of quality and providers are able to demonstrate improvement.
“We’re increasing the number of people working in registration so we can improve waiting times. We’re working to fix and improve our provider portal, and this time we’ll be listening to providers and to our colleagues about the improvements that are needed and how we can design solutions together.
“We’ll be working with people who use services and providers to develop a shared definition of what good care looks like. And we’re also developing a new approach to relationship management that enables a closer and more consistent contact point for providers.
“Additionally, to strengthen our senior level healthcare expertise, we have appointed Professor Sir Mike Richards to conduct a targeted review of how the single assessment framework is currently working for NHS trusts and where we can make improvements.
“Sir Mike’s career as a senior clinician, and a distinguished leader of high-profile national reviews, as well as his direct experience of driving improvement through regulation, make him uniquely placed to conduct this work.”
Accessing adult mental health services in Scotland remains slow and complicated for many people. In particular, ethnic minority groups, people living in rural areas and those in poverty all face additional barriers.
There have been big funding increases for services since 2017, but a lack of data makes it hard for the Scottish Government to see the impact of that spending. Waiting times for psychological therapies have improved. But ministers do not measure the quality of wider mental healthcare services, or whether they are improving people’s health.
The mental healthcare system is fragmented. The Scottish Government, NHS boards, councils, Integration Joint Boards, Health and Social Care Partnerships and the third sector are all involved in funding, planning or providing services. This makes accountability complex. And it causes complications and delays in developing care focused on the needs of individuals.
The Scottish Government plans to increase its Mental Health Directorate budget by 25 per cent and ensure that ten per cent of the front-line NHS budget is spent on mental health by 2026.
They have also committed to giving all GP practices access to community based mental health and wellbeing services. These commitments are essential to improving access to services and relieving pressure on the mental health workforce. But ministers’ plans are not on track.
Stephen Boyle, Auditor General for Scotland, said: “The Scottish Government needs much more information to understand the difference its investment in mental health services is making, from specialist services to community-based support.
“That planning must include moving beyond using waiting times as the sole measure of whether services are improving the lives of those in need. And it needs to include a costed delivery plan for the care that people can expect in their communities.”
Ronnie Hinds, Interim Chair of the Accounts Commission, said: “Councils and Integration Joint Boards have a vital role to play in improving the availability and quality of data needed to plan services and get the right levels of staffing in place.
“They also need urgently to develop shared goals and targets to improve how housing, welfare and other services work together in order to address and prevent the root causes of poor mental health.”
Scotland’s Integration Joint Boards (IJBs) face considerable financial challenges and immense pressures on their workforce, says public spending watchdog Audit Scotland.
IJBs have reached the point where significant transformation will be needed to ensure the long-term capacity, financial sustainability and quality of services individuals receive.
IJBs plan and commission many community-based health and care services. Demand for these services is increasing, in part due to demographic change and support for people with increasingly complex care needs.
The number of care hours for those aged over 65 reached nearly 25 million in 2021/22. The proportion of care services reporting vacancies increased by 11 per cent to 47 per cent, with a 30 per cent turnover of staff each year.
Most IJBs underspent on providing services in 2021/22. This was largely because of difficulties in recruiting staff, which led to unplanned vacancies, and pandemic-related reductions in service provision. The reductions in service provision were likely to have contributed to an increase in unmet health and social care needs.
In 2021/22 IJBs returned significant surpluses, with reserves doubling to over £1.3 billion. This was mainly due to additional funding received late in the year for specific policy commitments, including Covid-19. The Scottish Government are currently exploring options to recover around two-thirds of the unspent Covid-19 money held in reserves.
Across Scotland, IJBs have a combined projected funding gap of £124 million for 2022/23.
To be financially sustainable in the longer-term, IJBs must reduce their reliance on reserves. All IJBs must put in place detailed plans that clearly show how they will achieve the needed ongoing savings on a recurring basis and support urgently needed service transformation.
William Moyes, Chair of the Accounts Commission said: “Change is needed now – it cannot wait for a National Care Service. Action is needed to tackle funding pressures, which are under increasing stress from rising demand and cost pressures.
“The workforce challenges are considerable, with mounting unmet need.
“We need to see services focus on prevention, with appropriate funding in place to transform the way services are delivered and to improve lives. “
Local government organisation COSLA agrees.
COSLA Health & Social Care Spokesperson, Councillor Paul Kelly, said: “Today’s report from Audit Scotland is concerning and highlights the enormous pressure our health and social care infrastructure is under.
“People across Scotland rely on vital health & social care services every day, and it is critical that there is meaningful investment in the system which ensures their long-term capacity.
“We must ensure focus remains on front-line service improvement and sustainability, rather than the bureaucratic structural change presented through the National Care Service Bill.”
Many people are waiting longer for housing benefit claims to be processed as services across Scotland’s councils face rising workloads, fewer staff and high sickness absence levels.
The Accounts Commission, the independent body that holds councils to account, says councils need to better manage staffing levels and workloads, and put in place contingency arrangements.
Council benefit teams are operating with greatly reduced staffing levels, often with a deficit of ten per cent or more, and sickness absences are persistently higher than the national average. Flexible location working arrangements are now prevalent in council benefit services.
Whilst there has been a drop in the amount of short-term sick leave, it is also taking longer to process benefit claims. As people claiming housing benefit are often in urgent need of financial support, councils must better understand the impact of flexible location working arrangements on the delivery of the service.
Councils are implementing some improvements to service delivery and people’s experience, through new technologies such as robotics and automation. This will help improve access to benefit services, increase response times and reduce the number of days taken to process claims.
William Moyes, Chair of the Accounts Commission, said: “Clients needing housing benefit are often in urgent need. It is vital that councils have sufficient resources, alongside experienced staff, to manage increased workloads and staff absences. This will help ensure services are delivered more efficiently and effectively.
“It is positive that councils have continued to invest in different technologies, helping achieve some improvements. But the level of staff absence is a significant concern, and it is vital that councils understand the potential impacts of flexible location working arrangements on the performance of the service they provide.”
Councils across Scotland faced significant financial challenges during 2021/22 and are now entering the most difficult budget setting context seen for many years. Increasingly difficult choices about spending priorities will need to be made.
The Accounts Commission, the independent body that holds councils to account, said that even with additional Covid-19 funding during 2021-22, councils had to make significant savings last year to balance their budgets.
Many councils have also used reserves to bridge funding gaps and fund vital services. This is expected to be the case in 2022/23. The £570 million of additional funding for 2023/24, announced in the December budget, will help councils address upcoming cost challenges, but further change and reform across all councils is required to ensure longer-term financial sustainability.
When compared to the 2013/14 Scottish Government revenue funding position to local government, 2021-22 represented the first real-terms increase in six years (excluding one-off Covid-19 money). But an increasing amount of council funding is either formally ringfenced or provided on the expectation it will be spent on specific services and national policy objectives. This supports the delivery of key Scottish Government policies yet removes local discretion and flexibility over how these funds can be used by councils.
William Moyes, Chair of the Accounts Commission, said: “It’s clear the financial situation of councils is increasingly fragile. Councils are having to deal with the effects of inflation, the increasingly desperate cost of living impacts and rising demand for services, whilst at the same time delivering vital day to day services to their communities.
“To be financially sustainable, councils must deliver savings and reduce reliance on non-recurring reserves to fill budget gaps.
“If they are to find a safe path through the difficult times ahead, councils need to focus more on service reform, alongside meaningful engagement with their communities, about what services can be provided given the financial pressures they are facing.”
