Scottish councils risk bankruptcy, Cosla claims

Councils in Scotland could fall into bankruptcy without better funding, leaders claim.

In a pre-Budget warning, councils body Cosla has said councils need £14.4bn in 2024-25 just to "stand still" and there is a "risk" that some will suffer the same funding crises as seen in England.

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

The Section 114 notices issued by the public bodies prevent new spending to protect core services.

In a new briefing paper, Cosla stated: "There is risk this becomes the reality for Scottish councils if the funding by Scottish Government does not match growing cost pressures."

It claims the council tax freeze announced by the Scottish Government may put "even further pressure" on town halls, and will mean ministers are "taking public funds from elsewhere, ultimately reducing everyone's budget".

The freeze was announced by First Minister Humza Yousaf at the SNP's autumn conference without prior notice for council leaders. The Scottish Government has said the freeze will be fully funded but details of this have not yet been revealed.

Cosla said the policy could cost £300m and inflation will put another £632m onto local government costs at a time when staff shortages and an ageing population are increasing the strain on services.

Its president Shona Morrison said: "We all see the headlines in our local and national press about the difficult financial choices councils need to make, deciding whether to reduce or even cut vital services and ending funding for essential charity and community partners.  

 "Unfortunately councils have no choice but to protect core statutory services, especially with the unprecedented financial challenges we are all experiencing. Budgets are tight, creating risks to many other local services our communities rely on, such as programmes supporting children and young people, sports and leisure facilities and public transport."

The Scottish Budget will be announced on 19 December.

A spokesperson for the Scottish Government said: "Scotland is facing the most challenging budget settlement since devolution as a result of sustained high inflation and a UK Government autumn statement that failed to deliver the investment needed in Scotland's public services.

"The Scottish Government has increased the resources available to local government in 2023-24 by more than £793m, a real-terms increase of £376m or three per cent, compared to the 2022-23 Budget figures.

"Work is also ongoing with Cosla to establish a new fiscal framework for councils through the Verity House Agreement, a landmark agreement that is forging stronger partnership between the Scottish Government and local councils through the spirit of collaboration and engagement.

"Decisions on local government budget allocations for future years are subject to the outcome of negotiations with Cosla, the results of which will be confirmed in future Scottish budgets."