Tag: Accounts Commission

Councils struggle to cope with funding restraints

“Our evidence tells us that councils are finding the financial pressures increasingly difficult to manage” – Ronnie Hinds, Accounts Commission

Councils are showing increasing signs of financial stress and face even tougher challenges ahead, says the Accounts Commission. In its annual financial overview published today the local authority watchdog says funding has reduced while costs and demands have increased, and more councils are using reserves to fund services.

The Scottish Government provides around two thirds of council budgets. This fell by 5.2 per cent in 2016/17 to £9.7 billion.

2016/17 was also the last year of the council tax freeze.  Council tax provides just 14 per cent of councils’ income. The report notes that if all councils chose to raise council tax by three per cent, it would yield an estimated £68 million – broadly comparable to a one per cent pay rise for staff.

Overall council debt rose by £800 million in 2016/17 as councils took advantage of low interest rates to fund projects. While not posing an immediate problem some councils are concerned about longer term affordability.

The report highlights a number of financial pressures. A rising proportion of council funding directed towards national priorities such as educational initiatives means councils have to look at deeper cuts in other services. For example, resources for culture, planning and development, and roads have seen the sharpest falls in funding over the last three years.

The report also looks at the current financial year (2017/18) where councils have approved £317 million of savings and use of £105 million in reserves. Some councils could risk running out of general fund reserves within two or three years if they continue to draw on them at current levels.

The report aims to help councils plan ahead for setting their 2018/19 budgets.

Ronnie Hinds, deputy chair of the Accounts Commission, said: “Our evidence tells us that councils are finding the financial pressures increasingly difficult to manage. The elections in May this year brought in major changes in council administrations across Scotland. Councils that have demonstrated effective leadership and robust planning will be in a better position to deal with the challenges that lie ahead.”

Testing times ahead for new councillors

New councillors elected in May face major challenges and need to focus on improving long-term planning, says the Accounts Commission.

In its 2017 overview published today, the local government spending watchdog outlines a long-term decline in Scottish Government real terms funding which makes up around 60 per cent of council income.

At the same time, there continue to be increasing pressures on services, particularly in social care and education which together account for over 70 per cent of council spending.

The report says councils overall have maintained or improved their performance in the face of these challenges. However, public satisfaction is declining and complaints are increasing. Looking ahead, they need to better involve their communities in service design and deliver.

There are wide variations between councils. Some have grasped the nettle in finding new ways to provide services more efficiently. Others have been slower off the mark. Councils have made savings by cutting jobs but half of them still don’t have organisation-wide workforce plans.

Councils must learn more from each other and collaborate better to improve services and reduce costs.

Councillors elected in May must have the necessary training and tools to do an increasingly complex job determining local priorities, overseeing delivery of essential services and working in partnership with other public bodies to improve outcomes for communities and individuals.

Ronnie Hinds, deputy chair of the Accounts Commission, said: “New councillors will require time to settle in and develop skills to make strategic plans, consider options for service delivery and scrutinise how well this is happening in practice.

“But they have four years ahead of them, and they need to plan effectively for the longer term, work with their communities to decide key priorities and then make that plan happen.

“We hope our report is helpful to councillors and officers as they strive to maintain or improve services for the public with reduced resources.”

The report: nr_170307_local_government_performance

The Scottish Greens have commented on the report. Andy Wightman, the Scottish Greens’ local government spokesperson, said:

“Audit Scotland is right to highlight these challenges. The Scottish Greens are committed to strengthening local democracy in Scotland and that’s why we led a debate on the subject only a few months ago. We will also be publishing proposals later this week on a fiscal framework that details how the financial relationship between Holyrood and local government can be improved.

“The six Green MSPs, who were elected on a manifesto pledge to campaign to devolve decisions and budgets to a more local level, will continue to call for councils to have more powers to implement new structures for local democratic participation.”