Scottish Government funding for local authorities has dropped by 8.4 per cent in the past six years

Money - Photo credit: Holyrood 

Scottish Government funding for councils has fallen by 8.4 per cent over the past six years, according to the local government spending watchdog.

However, the Accounts Commission financial overview report, published today, said the funding drop was approximately the same as the reduction in the Scottish Government’s total budget over the same period.

The Government provides around 60 per cent of councils' total income.

The Commission said Scottish local authorities had managed their finances well but “significant challenges” lie ahead.

The report stated: “Councils’ budgets are under increasing pressure from a long-term decline in funding, rising demand for services and increasing costs, such as pensions.

“Councils need to change the way they work to deal with the financial challenges they face. All councils face future funding gaps that require further savings or a greater use of their reserves. There is variation in how well placed councils are to address these gaps.

“Long-term financial strategies must be in place to ensure council spending is aligned with priorities, and supported by medium term financial plans and budget forecasts.”

It added that councils had remained within their overall budgets, increased their reserves slightly and reduced their debt in 2015/16.

However, the Commission warned that local authorities need to change the way they work if they are to make the savings required. 

Ronnie Hinds, deputy chairman of the Accounts Commission, said councils are “generally doing a good job with their finances in difficult circumstances”.

“But pressures continue to increase on a number of fronts at the same time as they face the prospect of further reductions in their funding.

"It's vital that councillors and officers set medium and long-term financial plans based on clear priorities for the services they provide to their communities,” he added.

The report warned that further reductions are expected while demand on key services, particularly social care, continues to rise.

Councils also face increased cost pressures in areas such as pension provision.

In a recent interview with Holyrood, Deputy First Minister and former Finance Secretary John Swinney said: “Local government has been substantially protected from the effects of UK Government austerity by decisions I took.

“If local authorities in Scotland were to go and compare their financial position with the financial position of their counterparts south of the border, they would see very clearly they have been substantially protected.”

The Scottish Greens’ recently published a report revealing the scale of long-term debt being held by Scotland's 32 local authorities - a total of £11.5bn.

Andy Wightman MSP, the Scottish Greens’ local government spokesperson, said: “Much time and effort has been spent negotiating the financial relationship between Holyrood and Westminster and what powers should be controlled by the Scottish Parliament.

“It is clear we now need to dedicate as much time and energy on negotiating a fiscal framework for local government to set the ground rules for future funding and to increase fiscal autonomy and democracy. The Scottish Greens will be leading a parliamentary debate this week highlighting the need to improve local democracy.”