Accounts Commission: Financial pressures push councils to make hard decisions about service cuts

Scotland’s councils are managing their money effectively, increasing reserves, with longer-term financial plans in place. Whilst no council was at immediate financial risk in 2022/23, there is no certainty this will continue, according to spending watchdog Accounts Commission’s latest financial report.

This makes an agreement between the Scottish Government and councils to secure a sustainable, longer-term funding arrangement to deliver local services all the more urgent.   

Effective financial management within councils is crucial as budget gaps increase. Councils continue to rely on savings and reserves to balance budgets. Over half of councils used financial flexibilities in 2022/23. This helps with immediate budget pressures but defers costs to later years and fails to tackle underlying challenges to financial sustainability.

The Accounts Commission’s latest report assesses the financial position of Scotland’s councils during 2022/23 and the outlook for services beyond this.

While councils received more funding and income in cash terms in 2022/23, high inflation means this fell by nearly three per cent in real terms compared to the previous year.

A significant and increasing amount of funding continued to be either formally ringfenced or directed towards specific services and national policy objectives – reducing councils’ flexibility in using money to meet local needs.

Despite more core funding from the Scottish Government for 2023/24, there was a significant increase in councils’ total funding gap, due to pressures including increased demand for services, inflation and the cost-of-living.

Capital budgets were also significantly strained, risking knock-on impacts on the maintenance of key public buildings and infrastructure, for example schools, libraries and roads.

Councils recognise the risks ahead, but they need to innovate at pace and make difficult decisions about cuts to services to remain financially sustainable. Some councils have experienced opposition from within their communities when seeking to reduce services to balance budgets. This reinforces the need for frank consultation and engagement with communities when planning change.

Ronnie Hinds, Interim Chair of the Accounts Commission said:There is intensifying pressures on council finances and services. Given the funding position for councils, there is increasing reliance on reserves and savings to deliver balanced budgets.

“This means councils are already making difficult decisions about future service delivery and the level of service they can afford. Having leadership and a workforce with the right skills will be crucial to deliver on this.

“Local government is the second largest area of Scottish Government spending, but despite rising demand for services, the proportion of funding to councils has reduced over the last decade.

“Urgent progress is needed to agree a funding framework between Scottish and Local Government. This will bring much-needed clarity and certainty of budgets for future years.”

The Accounts Commission’s Local Government in Scotland Financial bulletin for 2022/23 published today (Tuesday) reinforces COSLA’s warnings over the perilous state of Council finances over the last few years.

Commenting, COSLA’s Resources Spokesperson Councillor Katie Hagmann said:  “The Accounts Commission’s Local Government in Scotland Financial bulletin for 2022/23, published today, reinforces what we have been saying about council finances and the really difficult and challenging decisions Councils have had to take in recent years.

“It is vitally important that these concerns, which have been consistently raised by COSLA, are now being backed up by hard facts and evidence presented by the Accounts Commission.

“There is widespread agreement from COSLA on the Accounts Commission’s key messages on the scale and financial challenge facing Scotland’s Councils, as well as the most pressing issues facing councils now.

“Some of these key messages, whilst extremely stark, come as no great surprise to those of us in Local Government:

  • In 2022/23 total revenue funding from all sources fell by £619 million (2.8 per cent) in real terms to £21.3 billion compared to 2021/22.
  • An increasing proportion of funding is ring-fenced or provided with the expectation it will be spent on specific services.
  • There is pressure on capital budgets, and this presents risks to the viability of local government capital programmes, many of which impact on key services (e.g., the construction and maintenance of schools, libraries, roads).
  • Councils are increasingly having to rely on savings and reserves as well as making increasingly difficult decisions to reduce or stop services to help balance budgets.

“Today’s Accounts Commission Bulletin is a true reflection of where we are now.  Our reality right now is extremely challenging – years of real-terms cuts to council budgets have been coupled with increasing additional policy commitments and increased ring-fencing.  With so much funding still directed, the ability to take local decisions on most of our Budget is almost impossible.

Councillor Hagmann concluded: “The picture painted by the Accounts Commission illustrates why COSLA is lobbying hard on the detrimental impact to communities of the Draft Scottish Government Budget, currently going through the Parliamentary process.  

“The trends highlighted by the Bulletin are why Scotland’s Council Leaders are so disappointed and furthermore highlights the need to progress the ambitions of our joint Scottish Government and Local Government Verity House agreement. We must seek a solution to these long-term issues in order to protect the essential front-line service of our communities.

“COSLA’s President, Vice President and Political Group Leaders, from all parties have written to the Deputy First Minister requesting that a meaningful negotiation takes place, to protect those who rely on essential services, support our local economies and continue to progress our net zero national ambitions.”

COSLA: ‘Poverty gap in Scotland will continue to grow’

A BUDGET OF MISSED OPPORTUNITIES ON TACKLING POVERTY AND LITTLE FOCUS ON PREVENTION’

COSLA has described the Scottish Government’s Draft Budget as a missed opportunity for the communities of Scotland in relation to tackling poverty.

COSLA also added that Scotland’s Council Leaders, Councillors, the Local Government Workforce and communities should be treated with the respect they deserve demonstrated through investment, not cuts.

COSLA said:  “At a special meeting just before Christmas, there was dismay and frustration from Scotland’s Council Leaders about the way Local Government and the communities we represent had been treated in the Scottish Government’s Draft Budget.  As the Budget currently stands, communities will see and feel a range of negative impacts.

“COSLA’s ‘Councils are Key’ budget lobbying campaign set out the case for fair funding that would allow Local Government to deliver for the people of Scotland, particularly around tackling poverty, one of the three shared priorities laid out in the Verity House Agreement.

“The response from the Scottish Government to our Budget ask is disappointing and will mean that the potential that councils have to prevent problems occurring will be limited severely.

“Specifically on poverty, the Budget should have had a focus on tackling the root causes of poverty, particularly its impacts on children. This would have needed a greater prioritisation of the work councils do in prevention and early support.

“The essential social supports councils provide in homes, schools, hubs and communities that aim to support and empower people will be further eroded – this has been the case for a number of years now, due to poor Local Government settlements that cut core funding.

“Services that support Local Government to Keep the Promise made to Scotland’s care experienced children and young people like family support and youth work, are under threat as a result of the proposed Scottish budget. 

“Tackling poverty in Scotland will continue to be a significant challenge when councils do not have the resources they need to support communities.

“This year’s Budget presented the opportunity prioritise prevention and tackle inequity, to invest in communities and realise our ambitions to end poverty in Scotland.

“It did not deliver. Without a fair settlement for Councils, the poverty gap in Scotland will continue to grow. Investing in Local Government is key to a fairer Scotland.”

“The proposed Council Tax Freeze means that money which could have been invested in tackling poverty upstream – in families, communities and schools – is lost, missing a real opportunity to unlock Councils’ potential.

“COSLA’s President, Vice President and political Group Leaders from all parties have written to the Deputy First Minister and are seeking an urgent meeting.  

Council Leaders will not let this lie, they simply cannot afford to because it will have such a detrimental impact on the communities they represent.”

COSLA: Scottish Budget is a ‘missed opportunity’

COUNCIL LEADERS SEEK URGENT MEETING WITH DEPUTY FIRST MINISTER

COSLA has today (Friday) described the Scottish Government’s Draft Budget as a missed opportunity for the communities of Scotland in relation to transforming our economy and meeting climate targets.

The councils’ umbrella body added that Scotland’s Council Leaders, Councillors, the Local Government Workforce and communities should be treated with the respect they deserve demonstrated through investment, not cuts.

A COSLA spokesperson said: “At a special meeting just before Christmas, there was dismay and frustration from Scotland’s Council Leaders about the way Local Government and the communities we represent had been treated in the Scottish Government’s Draft Budget.

“As the Budget currently stands, communities will see and feel a range of negative impacts.

“COSLA’a budget campaign set out the case for fair funding that would allow LG to deliver for the people of Scotland, particularly around Transforming our Economy through a just transition to deliver net zero, one of the 3 shared priorities laid out in the Verity House Agreement.

“The response from the @scotgov to our Budget ask is disappointing and will mean that the potential that councils have to prevent problems occurring will be limited severely.

“The Budget is bad news for the just transition to a net zero economy. We are still analysing the impact across all services but one notable cut is to the regeneration capital grant fund (RCGF) and the vacant and derelict land improvement programme (VDLIP) .

“Overall capital regeneration funding to Local Government has been cut by 27%, from £62.5m to £45.8m. This undermines work to regenerate communities, tackle inequalities and to reduce carbon emissions.

“This means the RCGF, which is jointly managed by Local and Scottish Government, now won’t be open to new bids for 2024-25. Our town centres and communities will be worse off due to this decision.

“On a larger scale, cuts to local government revenue and capital funding are completely the wrong things to do if Government is serious about tackling climate change and its impact on society and the economy.

“Given that 82% of all emissions are within the scope of influence of Local Authorities, plans to deliver on the Scottish Government 2030 statutory target must now be in serious doubt a few weeks after Ministers were talking up Scotland at COP 28.

COSLA’s President, Vice President and Political Group Leaders from all parties have written to the DFM and are seeking an urgent meeting. Leaders will not let this lie, they simply cannot afford to because it will have such a detrimental impact on the communities they represent.”

Budget: Local authorities given real terms INCREASE in funding, says Scottish Government

BATTLE LINES DRAWN OVER COUNCIL FUNDING

Councils will receive a record £14 billion funding settlement, according to provisional details published by the Scottish Government last night.

Local authorities have each been allocated a share of £13.9 billion to fund their day-to-day activities, including £6 million to support the expansion of free school meals, £242 million for teacher pay rises and more than £266 million for local government pay deals.

Ministers have also made available a further £144 million to enable local authorities to freeze Council Tax rates at their current levels, equivalent to an above-inflation 5% rise in council tax nationally. The Scottish Government is in talks with COSLA over how this will be allocated.

Deputy First Minister and Cabinet Secretary for Finance Shona Robison said: “In the face of a profoundly challenging financial situation, we are making available record funding of over £14 billion to councils – a real-terms increase of 4.3% on the previous year – should they agree to freeze council tax.

“The £144 million for the council tax freeze would be equivalent to an above-inflation 5% rise in council tax nationally.

“We recognise the crucial role councils play in their communities, which is why we have increased their overall share of the Scottish Budget.

“We have made no secret of the tough choices that have been required to balance our Budget, after an Autumn Statement that failed to provide the funding Scotland needs for its public services. While I know councils had sought more funding, the settlement confirmed today represents a fair and sustainable offer.

“We have chosen to invest in our people and public services. This is a Budget that reflects our shared values as a nation and speaks to the kind of Scotland that we want to be with a record settlement for local councils at its heart.”

The Deputy First Minister’s comments are a response to a statement made on Thursday by local authority umbrella body COSLA. Scotland’s council leaders argue that their funding has been CUT.

The Scottish Government has delivered a major blow to communities and has put councils at financial risk with a cash cut to Local Government in its draft Budget (published on 19th December) and no provision for inflation or pay increases, COSLA said.

COSLA Leaders described the draft Budget as not only leaving councils at real and significant financial risk for the coming year, but as it stands, it will mean cuts in every community in Scotland and job losses across Scottish Local Government.

Following a full meeting of Council Leaders on Thursday COSLA said that whatever way the Government presents the figures, the reality is that once again the people in our communities have been left at the end of the queue.  That is why we are calling for urgent discussions with Scottish government to ensure a meaningful negotiation on the budget takes place before the final budget is presented to Parliament.

COSLA’s President Councillor Shona Morrison said:  “COSLA’s initial analysis, shows a real terms cut to our revenue and capital spending power which will leave Council services at breaking point, with some having to stop altogether.  

“The Budget in its current form could result in service cuts, job losses and an inevitable shift to providing statutory services only. This means potentially losing Libraries, leisure centres and all the things that improve our lives.

“COSLA’s initial analysis of the Budget is that the Council Tax freeze is not fully funded. Leaders from across Scotland agreed today that decisions on Council Tax can only be made by each full Council, and it is for each individual Council to determine their own level of Council Tax.  With any sort of shortfall in core funding, the £144m revenue offered for the freeze is immediately worth less.”

COSLA Vice President Steven Heddle said:  “Despite the Verity House Agreement rhetoric about working together on shared priorities it is the same outcome at Budget time for Local Government in reality.  

“The Scottish Government is claiming to protect public services, but are not protecting the essential public services provided by councils– Scotland’s councils are key, they deliver your homecare, schools, road maintenance, street lighting, leisure and waste services and have been locked out again.

“We needed increased funding to cope with inflation, but have been given less instead. The cut to Revenue funding we have been given is a devastating blow and the cut to our Capital funding means that we will be unable to meet our targets in terms of a move towards Net Zero and mitigating climate change targets.”

COSLA’s Resources Spokesperson Councillor Katie Hagmann said:  “The Scottish Government has disappointingly failed to recognise that investment in Councils is investment in cities, towns and villages across Scotland.

“As it stands, this is not a good Budget for our communities or the people who deliver our essential front-line services.  This is a Budget which will mean job losses – real jobs that support families, and deliver vital services that make a positive difference to people’s lives. 

“Sadly, the budget as it stands, leaves nothing for meaningful pay rises in 24/25 so we would call on the Scottish Government to look again, so that our workforce can get the pay rise they deserve next year.”

So much for the Season of Goodwill …

A recently updated (21.12.23) factual document from COSLA entitled ‘Budget Reality’ can be downloaded here.

Budget 2024- 25: Council Tax freeze MUST be fully funded, warns COSLA

COSLA Vice President Councillor Steven Heddle has sent a strong warning to the Scottish Government that any Council Tax Freeze must be fully funded.

COSLA’s message is a response to comments made to the media by Deputy First Minister Shona Robison on Sunday.

Councillor Heddle said: “There were a few things in the comments made by the Deputy First Minister yesterday (Sunday) that I am uncomfortable with on behalf of COSLA, our member councils and the communities that we represent.

“Firstly, the Deputy First Minister cannot decide or unilaterally say that the ‘Council Tax freeze to stay’- it’s up to 32 individual council to decide if they have a council tax freeze or not, not her government.

“Secondly, unless it is funded with additional money for each council that allows them to fund their planned Council Tax increases, then it is not fully funded, and it will be our service users who will suffer as a consequence.

“The funding for the freeze needs to be transparently additional and consolidated into our Budgets for future years.”

“The DFM also mentioned the ‘Changing shape of public sector workforce’.  Local Government’s workforce has already changed shape drastically. Between 2006 and 2018, the Local Government workforce reduced by 15% (35,000 FTE) before Scottish Government policies such as Early Learning and Childcare added staff back in from 2019.

“The Scottish Government workforce has nearly doubled since 2006; staffing in non-departmental bodies has also doubled and in Scottish Government agencies, staffing has grown by 15%.  These increases have added more than 7,000 FTE staff in just over 15 years.

“The Verity House Agreement was designed to ensure positive working between Scottish Local Government and The Scottish Government, and a focus on better outcomes and person-centred services.

“The VHA has three priorities – to tackle poverty, particularly child poverty; to transform our economy through a just transition to deliver net zero, recognising climate change as one of the biggest threats to communities across Scotland; and deliver sustainable person-centred public services.  

Local Government will be unable to contribute to these if underfunded.

“COSLA knows that Scottish Government is under pressure financially around this Budget. However, the Council Tax freeze came out of the blue and has serious financial implications.

“And any suggestions that Local Government’s workforce needs cut further will have serious consequences for communities.”

Alleviating poverty in Scotland requires investment in local government, says COSLA

COSLA: COUNCILS ARE KEY

Alleviating Poverty in Scotland requires investment in Local Government COSLA said today (Monday).

Commenting ahead of the Scottish Budget announcement tomorrow, Councillor Tony Buchanan, COSLA’s Children and Young People Spokesperson said: “If Scotland is to make progress towards alleviating and eradicating poverty, this year’s Scottish Budget must focus on tackling the root causes, with a greater prioritisation of local prevention and early-intervention work – and Councils are key to this.

“This means investment in the essential social supports provided everyday by Councils, in schools, in local community hubs, at the right place, at the right time.

“If the core services aimed at supporting and empowering people to reach their full potential are eroded, as they have been over the last few years as a result of cuts to our core Budgets, then tackling poverty in Scotland will continue to be a significant challenge.

“Action to address poverty and deprivation was noted as a key priority for Scotland in the concluding report on children’s services reform research published by CELCIS last week and reinforces the importance of the shared priority within the Verity House Agreement.

“For too long now, the financial settlement for Local Government has meant that Councils have had to cut spend to services which are needed to tackle poverty – whether they are youth work, social work support or breakfast clubs

This year’s Budget presents the opportunity to reverse this trend, to invest in communities and realise our ambitions to tackle poverty in Scotland.

“Without a fair settlement for Councils in tomorrow’s Budget, the poverty gap in Scotland will continue to grow.

“Investing in Local Government is key to a fairer Scotland.”

Update on a new Fiscal Framework for Local Government

Details of progress towards a new fiscal framework between the Scottish Government and Local Government have been published.

The Verity House Agreement committed the Scottish Government and COSLA to establish a new framework, which will govern how councils’ funding is negotiated and agreed.

It is intended to give councils greater flexibility over their budgets to deliver our shared priorities and meet local needs.

Publishing the update together with COSLA, Deputy First Minister Shona Robison said: “We have made good progress on the new fiscal framework, which is an important plank of the Verity House Agreement and our commitment to better partnership working with local government.

“Already many of the principles we have agreed together are being put into practice, such as improved engagement ahead of the publication of the Scottish Budget and joint working to consider new local tax powers.

“We will continue to work closely with COSLA to progress the next phase of work and continue the positive discussions we’ve had with them on behalf of local councils across Scotland.”

COSLA Resources Spokesperson Councillor Katie Hagmann said: “I welcome this update on progress towards the new fiscal framework – getting this framework in place is a priority for Local Government.

“The new framework should, when complete, give councils greater flexibility over our budgets and enable us to deliver our shared priorities and meet local needs. It will also see much earlier budget engagement.

“The Verity House Agreement commits both spheres of Government to establish a new framework, and it is positive that we have made progress this year but there is more to do, which Ms Robison and I both acknowledge.”

Progress report on the fiscal framework between the Scottish Government and local government

The Verity House Agreement

Shona Robison will lay out the Scottish Government’s 2024-25 Budget tomorrow

Primary Schools: Attainment at a record high, says Curriculum for Excellence report

Latest statistics show widespread improvement

The proportions of pupils in primary achieving expected levels of literacy and numeracy have reached record highs for children from both the most and least deprived areas, according to official statistics.

Overall, the Achievement of Curriculum for Excellence Levels (ACEL) 2022/23 show:

  • for numeracy, a total of 79.6% of pupils reached the levels expected in 2022/23, a rise of 0.5 percentage points compared to the previous high (79.1% in 2018/19).
  • for literacy a rise to 72.7%, up on the previous high of 72.3% in 2018/19

The gap between the proportion of primary pupils from the most and least deprived areas achieving expected levels in literacy has also decreased to the lowest on record in 2022/23.

The figures also show improvements at secondary level compared to 2021/22, with increases in attainment across the board and the gap between those from most and least deprived areas has reduced.

Education Secretary Jenny Gilruth said: “These figures show record levels of attainment across primary school level and significant improvements in secondary. I congratulate our pupils and teachers for their hard work over the last year.

“These findings are the most up to date statistics on attainment and are comprehensive across all publicly funded schools in Scotland, demonstrating a clear rise in standards above pre-pandemic levels among primary school pupils. Along with this year’s SQA results, they point to widespread rises in attainment.

“I recognise that there is no room for complacency and our programme of reform across the education and skills system will help identify where further improvements can be made and will look to drive enhanced attainment to ensure all young people meet their full potential.”

COSLA’s Children and Young People Spokesperson Cllr Tony Buchanan said: “Today’s Achievement of Curriculum for Excellence Levels publication shows increasing attainment and the attainment gap narrowing reflecting the work and dedication of schools, councils, and partners to improving children’s outcomes. Mainly, it demonstrates the efforts of children and young people themselves and this should be celebrated.

“The improvements are made despite the backdrop of severe and increasing pressure on local budgets and recruitment challenges in specific subjects and areas of the country. Earlier this year we set out clearly to the Scottish Government that additional core funding is crucial to enabling further improvement in the attainment, health and wellbeing of children and young people, as opposed to financial penalties relating to school staffing numbers.

This was particularly important in the context of falling school rolls, changes to Scottish Attainment Challenge funding and the ending of additional resource for councils to support Ukrainian refugees. We are clear that Local Government needs flexibility to provide the right support within and outwith schools, drawing on the expertise of a range of professionals.

“Councils have continued to demonstrate their ambition to further improve outcomes for children and young people across Scotland. In line with the Verity House Agreement, we will seek to engage constructively with the Scottish Government to work collectively towards this shared aim, including on further education reform in line with recent reports on the curriculum, qualifications and new national education bodies.”

Legislation passed on council tax on second and empty homes

Increasing housing availability using the tax system

New powers enabling councils to charge up to double the full rate of council tax on second homes have been agreed by the Scottish Parliament. Councils will be able to increase the charges from 1 April 2024, with rates for the first year being based on those from 2023-24.

The change brings second homes into line with council tax policy on long-term empty homes and aims to increase housing availability by encouraging more homes to be used for living in.

New owners of properties that have previously been empty for more than twelve months will now have a six-month grace period, during which they will be protected from paying double the full council tax rate, with the potential for the six months to be extended by councils. This is subject to evidence that renovations or repairs are being undertaken by the owner with a view to the building being brought back into use.

Public Finance Minister Tom Arthur said: “I’m pleased Parliament has backed this important legislation. These changes to council tax were a commitment made in our Programme for Government and aim to make sure the tax system works as an incentive to prioritise homes for living in.

“A majority of those who responded to our consultation earlier this year supported councils being able to charge a council tax premium on top of regular rates for second homes.

“By protecting those renovating an empty home from paying the empty home premium, we are incentivising new ownership and giving them time to organise and undertaken the work necessary to bring it back into use.”

Councillor Katie Hagmann, COSLA’s Resources Spokesperson, said: “I am delighted that this important legislation has now been given Parliamentary approval. COSLA very much welcomes the ability for councils to take the decision to increase the premium on second homes in their areas.

“This supports our long-standing position that councillors who are closest to their communities should be empowered to take the decisions about what best works in their local communities, demonstrating the value of the Verity House Agreement.”  

The Council Tax (Variation for Unoccupied Dwellings) (Scotland) Amendment Regulations 2023

A second home is classed as any home that is not used as someone’s primary residence but that is occupied for at least 25 days in a year.

Latest figures show that at the end of September 2022, there were 24,287 second homes in Scotland.

Second homes are currently subject to a default 50% discount on council tax. However, local councils can vary council tax charges and the majority already charge second home-owners the full of council tax, the maximum currently allowed.

Tackling violence against women and girls

Equally Safe strategy refreshed

A national strategy to prevent and address all forms of violence against women and girls has been renewed to build on recent progress.

Equally Safe, a joint strategy with COSLA, was first published in 2014, and is backed by the Delivering Equally Safe Fund that is providing £19m per year to support 121 projects from 112 organisations.

One significant milestone reached, supported by the strategy’s aims, saw the Domestic Abuse Act passed by Parliament in 2018, which created a specific offence of domestic abuse that covers physical and psychological abuse as well as coercive and controlling behaviour.

Published today during 16 Days of Activism Against Gender-based Violence, the refreshed strategy is focussed on increasing collaboration across sectors to tackle the attitudes and values that result in violence against women and girls.

A delivery strategy will be published next Spring and will set out further actions to achieve that goal.

Victims Minister Siobhian Brown said: “Violence against women and girls has no place in our society. The impact of violence is wide-ranging and can have a long-term lasting effect on the lives of those affected, their families and communities. 

“This refreshed strategy builds on progress made to date in raising awareness of the prevalence and harmful effects of violence against women and girls, strengthening the law, and providing support and resources to public and third sector workers helping those affected. 

“Our Delivering Equally Safe Fund focusses on early intervention and prevention, as well as support services and I am pleased that around 32,000 adults and children benefitted last year.

“There remains work to do and sustained action is needed. That is why our future vision focuses on finding opportunities to work collaboratively and constructively whenever possible to stamp out violence wherever we see it and preventing it happening in the first place.” 

COSLA’s Community Wellbeing Spokesperson, Councillor Maureen Chalmers said:  “For nearly a decade, COSLA and the Scottish Government have worked in partnership to eradicate violence, abuse and exploitation of women and girls from Scotland.

“Our collaborative efforts have been undertaken with specialist services, public sector organisations, and local authorities. These have propelled us forward in building a more equal and safer Scotland for everyone.

“These firm foundations have allowed us to refresh the Equally Safe Strategy. It emphasises the importance of prevention, collaborative leadership, and reaffirms the unwavering commitment from both local and Scottish governments to achieve our shared goals.”

 The refreshed Equally Safe strategy