‘Only a matter of time’ until first Scottish council goes bankrupt, ministers warned

Scottish ministers have been warned that it is “only a matter of time” before the first council declares bankruptcy after a survey found a quarter were worried they would not be able to balance their budgets next year. 

A survey by the Local Government Information Unit (LGIU) Scotland found all councils anticipate making cuts next year, with two-thirds saying spending would fall in education, parks and leisure, and business support. 

At the same time, almost all were expecting to increase charges and fees, while nine in ten said they would be using spending reserves. 

LGIU Scotland chief Jonathan Carr-West said: “Councils in Scotland are raising a red flag that council finances are completely unsustainable. 

“With nearly a quarter of councils warning they may be unable to fulfil their statutory duties, it is only a matter of time before we see the first council in Scotland declare effective bankruptcy.” 

The warning comes days ahead of the Scottish budget, to be delivered by finance secretary Shona Robison next Tuesday. 

It is expected to include details of how a planned freeze on council tax, announced by Humza Yousaf in October, will be funded.

That followed concerns by council umbrella group Cosla that it will lead to cuts to local services.

Earlier this month, Cosla also warned of possible bankruptcies if the Scottish Government did not meet “growing cost pressures” with cash.

Birmingham and Nottingham, two of the largest councils south of the border, have this year effectively declared themselves bankrupt. 

The LGIU survey found every council had planned to raise council tax prior to the first minister’s announcement. 

The state of the economy and rising inflation was considered the main problem facing councils, following by increasing demand due to the cost-of-living crisis. 

Other factors include ring-fencing, staff recruitment and demographic changes. 

The survey received responses from more than three-quarters of Scottish councils, including from chief executives and council leaders.