29-10-2024
Significant financial challenges face Scottish councils due to ongoing inflation, wage pressures, and increasing demand for services says a new report by the Chartered Institute of Public Finance and Accountancy (CIPFA) and the Local Government Information Unit (LGIU).
Published today, Balancing Local Government Budgets in Scotland highlights concerns from Chief Finance Officers (CFOs) that the current funding approach is inadequate to meet these pressures. The research reveals that some Scottish local authorities are at risk of not having the capacity to meet their statutory duties and maintain a balanced budget.
CIPFA and LGIU urge policymakers to prioritise long-term financial sustainability over short-term fixes. The report’s four key recommendations include:
- Develop a Long-Term Financial Solution: The Scottish Government, local authorities, Convention of Scottish Local Authorities (COSLA), and other public sector stakeholders can work together to progress a long-term solution that ensures financial stability.
- Support for CFO’s Making difficult Financial Decisions: Council leaders, including senior officers and elected members, must fully understand the difficult fiscal realities facing councils and take responsible, well-informed decisions that support CFOs.
- Agree a Convention: A nationally agreed framework can be introduced for Scottish Government and Local Government should a Council be unable to agree a balanced budget.
- Revisit Key Policy Decisions to Ease Financial Pressure: Reassess policies such as pupil-teacher ratios and Integrated Joint Boards to alleviate financial strain and consider more flexible grant allocations.
The research is based on extensive consultations with CFOs across Scottish councils. It reveals nearly unanimous agreement on the root causes of the financial crisis: flat funding settlements, rising service demands, and restricted revenue-raising powers.
Rather than adopting a Section 114 process like that in England, which forces councils into emergency financial measures, CFOs advocate for proactive policies that prevent councils from reaching that point.
CIPFA Senior Policy Manager, Joanne Pitt:
"Scottish councils are under extraordinary pressure. To avoid financial collapse, we need a strategy that ensures long-term fiscal stability. This report recommends supportive actions, and I urge the Scottish Government and council leaders to act swiftly, to secure the future of local government in Scotland.”
Jonathan Carr West, Chief Executive of the Local Government Information Unit Scotland, said:
"Scottish councils are trying everything in their power to avoid financial catastrophe but rising costs and demand for services means many councils are reaching a point where they simply can't balance the books. The Scottish Government must work with local authorities on a long-term plan so that councils can deliver the services residents are entitled to.”
Notes to editors
- Read the report: Balancing Local Government Budgets in Scotland.
- For more information, please contact press@cipfa.org.
About CIPFA
The Chartered Institute of Public Finance and Accountancy is a UK-based international accountancy membership and standard-setting body. We are the only such body globally dedicated to public financial management.
About LGIU
The LGIU is an independent, not-for-profit membership organisation working to make local democracy around the world collectively stronger, through shared ideas, resources and connections for local government.