Finance Secretary calls for clarity as local authorities set their budgets
The employer National Insurance increase must be fully funded to ensure local authorities have the resources they need to serve their communities, Finance Secretary Shona Robison has said.
Ahead of an appearance before the local government committee next week, Ms Robison again called on the UK Government to provide urgent clarity over the funding to help the Scottish Government and local authorities finalise their budgets.
The Finance Secretary said: “Scotland’s public services face a bill of more than £700 million as a result of the UK Government’s increase in employer National Insurance Contributions.
“There have been indications of likely funding reported in the media, but these fail to take account of the fact that we have a larger public sector per person than other parts of the UK, leaving us some £300 million short.
“It feels like Scotland is now being punished for having decided to employ more people in the public sector and to invest in key public services.
“We know local authorities are already under significant financial pressure. This will only continue to build unless the UK Government reimburses us in full for their tax increase. Councils are in the process of setting their Budgets now, so the sooner we have clarity over this issue the better – this is needed urgently.
“The Scottish Government will continue to work closely with COSLA to press the UK Government to provide the funding needed to support public services in Scotland.”
The First Minister and President of COSLA wrote to the Chancellor on 3 January, supported by 48 public and voluntary sector organisations to raise concerns at the impact of the increase to employer National Insurance contributions and to seek clarity on funding.
COSLA has shared two new documents setting out high-level analysis of the Scottish 2025-26 Budget and what it means for Councils and essential local social care services.
What does the Scottish Budget mean for councils?
Following the Scottish Budget announcement earlier this month, we shared a short briefing setting out high-level analysis on what the Budget means for Scottish Local Government.
Commenting, COSLA’s Resources Spokesperson, Councillor Katie Hagmann, commented: “This Budget is a welcomed step in the right direction for Local Government and provides a small amount of additional uncommitted revenue and capital funding for 2025/26.
“However, due to the unprecedented financial challenges being faced by our councils, this additional funding may not be enough to reverse planned cuts to vital services across our communities.”
What does the Scottish budget mean for social care?
Our councils have increased real terms spend on social care by 29% since 2010/11 at the expense of other preventative, non-statutory services. However, rising operational costs, escalating demand for services, and high inflation mean that the need for greater funding is more urgent than ever.
The level of funding provided in the 2025/26 Budget will not resolve the unprecedented challenges being faced in local social care services.
COSLA’s Health and Social Care Spokesperson, Councillor Paul Kelly, added: “Without additional funding to increase capacity across all of our social care services, there is a very real risk that key services will not be able to transform to the scale that our communities require and deserve.
“COSLA and Local Authorities are ready and willing to work constructively to support improvement and reform in social care that is aligned to local needs and priorities, but this should be backed by the much-needed investment.”
New research from Local Government Information Unit (LGIU) Scotland reveals that 70% of all councils believe they will be unable to pass a balanced budget within the next five years without immediate changes.
The second annual State of Local Government Finance in Scotland, found councils are taking every measure available to balance their budgets including raising council tax, reducing expenditure and increasing fees and charges, sharing services and engaging in commercial activity. However, many councils believe this will still not be enough to prevent the risk of an unbalanced budget.
Nearly every respondent said they believe cuts to services will have a negative impact on quality of life in their council, and over 90% that cuts will increase the risks to vulnerable people.
The report found satisfaction with the Scottish Government is alarmingly poor across the sector. Not a single respondent said they were happy with the Scottish Government’s performance on delivering a sustainable funding system or considering local government in wider policy decisions.
Respondents representing 84% of Scottish councils, made up of council leaders, CEOs and CFOs said times are increasingly hard for local authorities, with ongoing pressure from the cost of living crisis and inflation adding new burdens on top of long-term challenges: demographic change, financing of Scottish Government priorities, and pressures with recruitment and retention of staff.
With councils’ confidence in the sustainability of council finances critically low, the sector is in favour of widespread reform, including multi-year financial settlements, ending ring-fencing, and reform of council tax.
Councils are optimistic about the role that local government, sufficiently funded and empowered, could have to advance the prevention agenda, tackle local and national shared priorities, deliver services and empower communities.
The report recommends an agreed national convention between Scottish Government and local government to cover procedures and actions that would then be needed to set a balanced budget; enshrining in legislation the principles of the Verity House Agreement, and committing to an annual review by Scottish Parliament covering the key principles.
Some of the medium to long-term recommendations include reconsidering a whole-system approach to funding wider public finances including a review of council tax, the funding formula and increasing the range of revenue-raising options available for councils.
Jonathan Carr-West, Chief Executive, LGIU Scotland, said: “This year’s results make for grim reading about the state of local government finances in Scotland. The message from our second annual State of Local Government Finance in Scotland builds on last year: we are nearing the point of no return. The report paints a picture of a system under continual and significant strain, with the scale of financial pressures increasing from 2023.
“Local government finances in Scotland are hanging by a thread. However, the thread has not yet broken. Today’s report delivers a stark warning that councils are in a precarious financial position and there is not much time until the sector starts to see potentially catastrophic consequences.
“Change is urgently needed. Councils will soon be unable to balance their budgets, meet their statutory duties, or provide for their communities. We need to change course now before it is too late.
“The challenge now is how do we move from the situation we are in now, to one where councils are able to deliver the transformative impact they are confident that they could deliver.
“Reform is necessary, empowerment will be essential, and trust between Scottish Government and local government – in a critically poor state – must be restored.”
The LGIU asked Scotland’s Council Leaders, Chief Executives and Chief Finance Officers about their experiences trying to run councils in the last financial year, and their views on how councils’ financial sustainability could be assured.
COSLA Resources Spokesperson, Councillor Katie Hagmann, commented:“The publication of today’s report by the LGIU highlights the sheer scale of the financial challenges facing our councils.
“The fact that 70% of councils in Scotland may be unable to balance budgets in the near future should serve as a warning to all. Additionally, it emphasises the need for the Scottish Government to provide Local Government with an increased funding settlement which is both fair and flexible in 2025/26.
“COSLA also welcomes the LGIU’s call for a whole system approach to Local Government finance.
“This echoes our asks in our ‘Invest Locally in Scotland’s Future’ budget lobbying campaign. Without a clear focus on prevention and upstream investment, along with local flexibility, our councils will be unable to tackle higher demand, in key areas such as homelessness prevention and social care.
“COSLA is calling for the Scottish Government to provide at least £14.5bn in revenue funding and £872m in capital funding in the 2025/26 Budget.
Meeting this demand would not make up for the cuts councils have faced and felt by our communities in recent years, however it would be a positive step forward in providing fair and flexible funding to meet the challenges outlined in the LGIU report.”
The disclaimed audit opinion from the Comptroller and Auditor General (C&AG), Gareth Davies, on the Whole of Government Accounts (WGA) 2022-23 is the first ever.
The cause is the severe backlogs in English local authority audits, with the consequence that there is inadequate assurance over material amounts throughout the WGA.
The WGA is a vital tool in the management and scrutiny of public spending, as it brings together all public sector assets and liabilities. It is essential that the steps being taken by Government to restore timely and robust local authority audited accounts are effective.
The PAC Chair’s statement can be found here PAC Chair’s statement – WGA.pdf. The link to the WGA 22/23 can be found in the notes to editors.
Backlogs in firms’ audits of England’s 426 local authorities have led to the National Audit Office (NAO) disclaiming the 2022-23 WGA for the first time.
As well as local authority accounts, the WGA combines the accounts of over 10,000 public bodies, such as central government departments, devolved administrations, the NHS, academy schools and public corporations.
Within his audit report, the NAO’s head, Gareth Davies, said he had been “unable to obtain sufficient, appropriate evidence upon which to form an opinion”.
Just over 10% (43) of England’s 426 local authorities submitted reliable data to the WGA.
Of the near 90% of local authorities that failed to submit reliable data, 46% (196) submitted information that hasn’t been audited, and 44% (187) did not submit any data at all.
The Government is taking steps to address the backlog in audited accounts for English local authorities, including the use of fixed dates by which each year’s audits must be completed.
This process is unlikely to allow the disclaimer on WGA to be removed for 2023-24, but it does offer a medium-term solution to the problem.
The WGA is a vital tool in the management and scrutiny of public spending, as it brings together all public sector assets, liabilities, income and expenditure. This means that long-term costs to the public purse such as clinical negligence and nuclear decommissioning are visible to policy makers and Parliamentarians.
Gareth Davies, head of the NAO said:“It is clearly not acceptable that delays in audited accounts for English local authorities have made it impossible for me to provide assurance on the Whole of Government Accounts for 2022-23.
“It is essential that the steps being taken by Government to restore timely and robust local authority audited accounts are effective”.
The disclaiming of the WGA is in relation to local authority audit omissions and unaudited returns. The impact of this impact is so large and pervasive that the Comptroller and Auditor General is unable to give any opinion on the WGA at all. The C&AG continues to provide assurance over all central government departments via their statutory departmental accounts on an annual basis, and the disclaimer of the WGA does not impact upon the opinions he gives on those accounts.
The winners of the only national awards to celebrate the vital work of councillors across Scotland were revealed last night at the 2024 LGIU and CCLA Cllr Awards.
Winners were announced at a ceremony at Edinburgh’s City Chambers, showcasing the best of local government.
Top prize of the evening, Leader of the Year, went to Cllr Emma Macdonald, Leader of Shetland Islands Council.
Cllr Annette Christie of Glasgow City Council was this year’s Innovator of the Year and Cllr Katie Pragnell from East Renfrewshire Council walked away with Young Councillor of the Year. Another East Renfrewshire councillor, Cllr Betty Cunningham was crowned Lifetime Legend and the coveted Community Champion award went to Glasgow City Council’s Cllr Elaine McSporran.
The five categories reflect the varied contributions made by a wide range of councillors, and winners were chosen from more than 100 nominations. All too often the work of councillors can go unrecognised and the purpose of the Cllr Awards is to champion what councillors do for their local communities.
Winners were chosen by a judging panel comprised of senior councillors and leading stakeholders from across the sector. These important Awards – a staple in the local government calendar – are made possible thanks to the generous support of founding partners CCLA.
Jonathan Carr-West, Chief Executive, Local Government Information Unit (LGIU) said: “Councillors across Scotland do incredible work day in and day out to support their communities, make local areas better places to live, and ensure the voices of residents are heard across council decision making.
“At LGIU, we are determined to celebrate these remarkable achievements, which genuinely improve residents’ lives and the well-being of our communities. I want to congratulate all of our very worthy Cllr Awards winners this evening.
“Their dedication and service represent the very best of local government.”
Kelly Watson, Head of Public Sector Relationships, CCLA said: “Local councillors are at the heart of communities and nights like this are an opportunity to showcase the contributions and real world impact made by those unsung heroes striving for a better world. The work undertaken by councillors positively impacts people’s lives in countless ways.
“As councils are facing unprecedented challenging times, these Awards remind us of how important and vital the work of local councillors and councils is.”
Industrial action looming across Scotland paused as members vote
GMB Scotland today suspended looming industrial action in Scotland’s local authorities after receiving a revised pay offer.
The union, one of the biggest in Scotland’s local authorities, paused eight days of strikes in waste and cleansing, due to start on Wednesday, to allow members to vote on the new terms.
GMB Scotland’s local government committee met this morning to discuss the offer from Cosla, representing Scots councils, involving a 3.6% increase for all grades with a rise of £1,292 for the lowest paid, equivalent to 5.6%.
Keir Greenaway, GMB Scotland senior organiser in public services, said: “This offer is a significant improvement on what came before but our members will decide if it is acceptable.
“It is better than that offered to council staff in England and Wales, would mean every worker receives a rise higher than the Retail Price Index and, importantly, is weighted to ensure frontline workers gain most.
“As a gesture of goodwill, we will suspend action until our members can vote on the offer.
“It should never have got to this stage, however, and Scotland’s council leaders have again shown an absolute lack of urgency or sense of realism.
“For months, we have been forced to waste time discussing a series of low-ball offers when it was already clear the Scottish Government needed to be at the table.
“The obvious reluctance of some council leaders to approach ministers has only caused needless uncertainty and threatened disruption.
“That is no way to run a railroad or conduct serious pay negotiations.”
UNITE has also called off imminent strike action and UNISON are expected to announce their position later this afternoon.
Council leaders reconvened from recess yesterday (24th July) for a special meeting to discuss the ongoing pay negotiations with Scottish Joint Council (SJC) Unions.
COSLA Resources Spokesperson, Councillor Katie Hagmann, commented following the meeting: “We are disappointed that the Scottish Joint Council (SJC) Trade Unions have chosen to reject the revised pay offer made on 18th July.
“We have been consistently clear that this offer of 3.2% over 12 months is at the absolute limit of affordability for councils, given the extremely challenging financial situation Local Government is facing. We believe this offer, which is above inflation, is fair, strong and credible. There is no more money available within existing council budgets to fund an increased offer without unacceptable and damaging cuts to jobs and services.
“COSLA remains committed to continuing our negotiations towards finding a solution as quickly as possible, seeking to do all we can to avoid industrial action and its damaging impact on our communities.
“In response to calls from Trade Unions, COSLA Leaders agreed today (24th July) to raise the matter of local government finance and local government pay with the Scottish Government. As no decisions can be taken until these discussions have taken place, we request that the trade unions pause their industrial action.
“COSLA are in the process of contacting the Trade Unions and Scottish Government on this. Council Leaders value the Local Government workforce and their essential work across our communities and remain committed to reaching an agreeable solution as quickly as possible.”
COSLA has made a new pay offer for the Scottish Joint Council (SJC) Workforce.The offer, a 3.2% uplift on all Spinal Column Points, covers the period 1st April 2024 to 31st March 2025.
This ‘competitive’ offer is:
Worth more than the first year of the Scottish Government’s current Public Sector Pay Policy.
Higher than current inflation (CPI).
At the very limit of affordability for councils in the current challenging financial circumstances.
Is a strong, fair and credible pay offer, reflecting the high value council Leaders place on the Local Government workforce and the invaluable work they do every day serving communities across Scotland.
COSLA has requested that our trade unions seek their members’ views on this improved offer and that they suspend plans for industrial action whilst this is considered.
COSLA’s Resources Spokesperson, Councillor Katie Hagmann, said: “Following ongoing and constructive engagement with our Scottish Joint Council (SJC) Trade Unions, COSLA has today (18th July) written formally to the Trade Unions with a revised pay offer for the SJC Local Government workforce.
“This is for a 3.2% pay uplift at all pay points, for a one-year period of 1st April 2024 to 31st March 2025, in line with the current SJC pay year. After listening to our Trade Union colleagues, the offer does not propose a change in the pay settlement date, which featured in our earlier offer. It is important to stress that this revised, fair offer is at the absolute limit of affordability for councils, given the severe financial constraints Local Government is facing.
“This strong offer is worth more than the first year of the Scottish Government’s current Public Sector Pay Policy. It is a strong, fair and credible pay offer, reflecting the high value council Leaders place on the Local Government workforce and the invaluable work they do every day serving communities across Scotland.
“We value the collective bargaining process with our Trade Union partners and remain committed to reaching a speedy and mutually agreeable resolution to pay discussions. We request that our Trade Union colleagues seek their members’ views on this improved offer and that they suspend any plans for industrial action whilst this is considered.”
Scotland’s councils faced a collective gap of up to £585 million between the money needed to deliver services and the money available when setting their budgets this year. This is estimated to increase to £780 million by 2026/27. Ever tougher decisions must be made to ensure councils are financially sustainable.
Councils are addressing this most commonly by making ongoing savings, using reserves and raising money through charging citizens for some services.
An Accounts Commission report on the budgets set by councils for 2024/25 says that a near six per cent increase in Scottish Government revenue funding to councils – totalling £13.25 billion – masks significant underlying financial challenges and strain. Almost all the increases in funding have been ring-fenced for policies and to cover the costs of pay increases in 2023/24.
Whilst councils received £147 million of government funding to mitigate the impacts of this year’s council tax freeze, there are longer-term financial consequences as future rises will provide less income for councils. Also, a third of councils say the government funding does not fully-fund the freeze.
The full impact of proposed savings by councils on service delivery and communities is unclear. There has been significant public opposition in some council areas to cuts to services, with new and increased charges also affecting people.
We will continue to monitor this area closely, as councils must meet savings in full this year. Failing to do so will intensify and exacerbate the impacts on services in future years, as further savings will be needed.
Councils must look to the future as they make increasingly difficult decisions to deliver savings, at scale, to address projected budget gaps. Planning and delivering on transformational change are vital if councils are to be financially sustainable.
Derek Yule, Member of the Accounts Commission said: “It’s getting harder for councils to do more with less. They have to find and then deliver significant levels of savings to address budget gaps.
“Fully engaging with local people and being clear about the different and difficult budget choices is vital, whilst understanding the impacts on the most vulnerable.
“Councils need to improve the way in which they present financial information, and do this in a clear, consistent and accessible way.
“The Accounts Commission calls on councils to increase the accessibility and transparency of publicly available budget information. This will allow for improved comparison between councils, particularly around key information including actions to tackle existing and future budget gaps, as well as savings plans.”
