A report on council finances in Scotland finds that notwithstanding all the cuts councils have made, and continue to make, their costs exceed the available funding.
This means the local authorities who provide frontline services are no longer sustainable, in the medium term, as funding lags behind increased costs and demand.
In the latest report on councils and their financial situations, the Accounts Commission say that there will be a £1 billion gap by 2027. At present the budget gap in this year is expected to be £647 million.
Council debt in Scotland has risen by 13.5% since 2023/24, and is now £21.9 billion.
Last year councils met 90% of their savings targets, but reported an overspend on services. This is the first collective overspend in six years. The Accounts Commission say that many councils rely on their savings or reserves, and income does not keep up, despite increases in council charges. Reserves in all 32 councils have fallen by 7% between 2023/24 and 2025/26. And 16 councils made unplanned use of these reserves last year.
As government funding falls for capital projects, there is a need for more borrowing for local projects such as schools and housing.
Derek Yule, member of the Accounts Commission, said: “Despite increased funding and income, councils are struggling to cope with the financial pressures they face. A growing gap between costs to deliver services and funding available is risking the financial sustainability of councils.
“We’re already seeing the impact on services – the pace of improvement is slowing, some services are being cut or are harder to access and there are growing levels of dissatisfaction from communities. Councils must fundamentally reconfigure how they operate and deliver services.”
The report recommends that councils “should take action to progress significant outstanding recommendations from previous years around the transparency of financial reporting”. There are also suggestions that councils make timely and clear reports on their borrowing and long-term financial plans.
All reports by the Accounts Commission and Auditor General published since 2000 are available at www.audit.scot
UNISON Scotland’s local government lead John Mooney said: “Costs are rising while councils continue to bear the brunt of cuts.
“Council workers are being asked to do more with less year after year, and communities feel the impact as services become harder to access.
“Financial sustainability cannot be achieved by endlessly stretching staff further. Workers see the consequences on the ground, with increasing workloads and growing pressure across services.
“Councils provide the services we all rely on, and the growing gap between funding and the real cost of delivering quality local services must be addressed. The Scottish government needs to fund local government properly.
“These are the workers who keep our streets clean, who care for vulnerable loved ones, support children in schools and deliver so much more. Failing to invest in local government is failing to invest in our communities and we all end up paying the cost. Our communities and local government workers deserve better.”
The Accounts Commission is the public spending watchdog for local government. It holds councils and various joint boards and committees in Scotland to account and help them improve. It operates impartially and independently of councils and of the Scottish Government, and meets and reports in public.
· Audit Scotland is a statutory body set up in April 2000, under the Public Finance and Accountability (Scotland) Act 2000. It provides services to the Auditor General for Scotland and the Accounts Commission for Scotland
