Funding for councils is failing to keep pace with rising costs and demand despite a small real terms increase in funding.
Councils’ revenue funding from the Scottish Government has gone up by two per cent. However, much of it is used to cover existing commitments such as teachers’ pay increases. Overall, Scotland’s councils face managing a budget gap of around £529 million for their 2026/27 daily operating costs – around three per cent of their revenue funding. Capital funding is down by 15 per cent.
That means councils will have to borrow more to build houses and other infrastructure, which heightens long-term financial risk.
Every local authority increased council tax by an average of 7.7 per cent for 2026/27, which should raise an extra £248 million. Councils expect to bring in around £1.2 billion from fees and other charges, such as for leisure centres and some refuse services. They are also planning to make savings of £180 million – around 1 per cent of councils’ total revenue budget. But these savings will have to increasingly affect services people rely on.
Social care makes up a high proportion of council spending and increasing demand for these services is putting major pressure on local budgets.
Anticipated reductions in Scottish Government funding over the medium term are expected to intensify these pressures and increase the risk of councils becoming financially unsustainable.
Derek Yule, a member of the Accounts Commission, said: “As things stand, councils will continue to face increasing financial pressures unless they stop, reduce, or significantly redesign services.
“Savings options are limited and will have to increasingly focus on changes to services people rely on. That makes it essential that councils talk to their communities about the difficult decisions they are facing.”
COSLA has responded to the Accounts Commission report on Local Government budgets 2026/27.
Read the full comment from Cllr Ricky Bell, COSLA Resources Spokesperson here:
