Scottish local authorities could face further cuts of £700m by end of parliament

Union Street, Aberdeen - Image credit: michimaya via Flickr

Scottish councils could be facing further cuts of £700m by the end of this parliament, according to a new report from the Fraser of Allander Institute (FAI).

The report is part one of a two-part commission made by the Scottish Local Government Partnership (SLGP) in October to look at local government funding in Scotland.

Last year Scottish councils saw their revenue funding from the Scottish Government cut by £350m and they will find out what the budget is for next year when the Scottish Government publishes its draft budget on Thursday.

According to the FAI report, the Scottish Government will see its block grant from Westminster shrink by 3.1 per cent or £800m between 2016/17 and 2019/20.

The areas that could be cut are limited by the Scottish Government’s existing spending pledges.

The report says: “In its 2016 manifesto, the SNP made three high-profile spending commitments. “These were: to increase NHS spending by £500m more than inflation by 2021/22; to maintain police spending in real terms; and to significantly expand the provision of free childcare, resulting in an additional £500m spending on childcare by 2020/21.

“Assuming that these commitments translate into actual spending priorities when the Scottish Government publishes its draft budget on 15 December, the implication for remaining ‘unprotected’ portfolios is likely to be substantial.”

While the FAI notes that it will be for the Scottish Government to decide how to allocate resources across portfolios, it suggests that because local government revenue funding accounts for just over half of the Scottish Government’s unprotected portfolio spending, “some degree of real terms cut seems inevitable”.

A 10 per cent cut to the local government resource grant would equate to just under £700m, it calculates.

It also suggests changes may need to be made to the way funding is shared out between local authorities – saying it is “unclear whether it remains fit for purpose” – something the SLGP has been keen to have revised.

Funding is currently allocated on the basis of a local government’s estimated costs of providing public services as well as its revenues from council tax and business rates, and the system has remained largely unchanged since 2008.

“A funding system based on the costs of delivering particular outcomes would almost certainly result in a very different pattern of allocations across local government – but would not be straightforward to develop,” the report says.

Commenting on the Fraser of Allander report, SLGP convener and leader of Aberdeen City Council Jenny Laing said: “The First Minister has tried to pull the wool over the eyes of the Scottish people by claiming that the funding settlements for local authorities have remained roughly the same over the past five years, but this report shows that this simply isn’t true.

“Local government finances are in meltdown as the Scottish Government piles crippling cuts onto councils while expecting us to deliver the same critical services for ordinary hard-working families.

She continued: “The SNP’s policy of waging war on local authority finances is clearly unsustainable and the chickens are coming home to roost as frontline services like health and education start to unravel.

“Scotland’s once proud reputation for education is in disarray despite the hard work of the teaching profession and it is impossible to properly run integrated joint boards with health and social care when NHS budgets are going up and local authority budgets are coming down.

“The First Minister needs to listen to the Fraser of Allander findings and start giving councils the money they need to deliver crucial services.”

The second half of the Fraser of Allander report, ‘Fiscal Issues Facing Local Government in Scotland’, will look at the impact that cuts to council funding have had on services, as well as alternative formulas for council funding, and will be published early next year.