SNP under fire as councils poised to 'stop or reduce services' as £529m budget black hole emerges
A stark new report has warned Scottish councils could be forced to cut services or stop providing them altogether as they grapple with a bleak financial picture
Scottish councils are facing a budget black hole of more than £500m this year amid fears local authorities will be forced to stop or cut public services to balance the books.
SNP ministers have been blamed for increased demands on local authorities such as teachers’ pay agreements amid a warning that “communities are paying the price”.
The warning, from the Accounts Commission, revealed in a stark new report, shows that funding for local authorities is failing to keep pace with soaring costs and demands.
The research stresses that councils’ revenue funding from the Scottish government has gone up by two per cent, but has warned that much of it is used to cover existing commitments such as teachers’ pay increases.
The study concludes that, overall, Scotland’s councils face managing a budget gap of around £529m for their 2026/27 daily operating costs - around three per cent of their revenue funding.
Capital funding has been cut by 15 per cent, meaning councils will have to borrow more to build houses and other infrastructure, which heightens long-term financial risk.
Every local authority in Scotland hiked council tax by an average of 7.7 per cent this year, which should raise an extra £248m.
Councils expect to bring in around £1.2bn from fees and other charges, such as for leisure centres and some refuse services. Authorities across the country are also planning to make savings of £180m – around 1 per cent of total revenue budgets.
But the Accounts Commission has warned that these savings will have an increasing impact on frontline services people rely on.
READ MORE: Calls to overhaul 'outdated and broken' council tax system as scale of Scots' debt revealed
Social care makes up a high proportion of council spending and increasing demand for these services is putting major pressure on local budgets, the report warns.
Anticipated reductions in Scottish government funding over the medium term are expected to intensify these pressures and increase the risk of councils becoming financially unsustainable.
Derek Yule, from the Accounts Commission, said: “As things stand, councils will continue to face increasing financial pressures unless they stop, reduce, or significantly redesign services.
“Savings options are limited and will have to increasingly focus on changes to services people rely on. That makes it essential that councils talk to their communities about the difficult decisions they are facing”.
Scottish Labour local government spokesperson, Joe Fagan, said: “Councils have been cut to the bone by the SNP over the years and communities are paying the price.
“This stark report lays bare the impossible choices council are going to have to make to plug the gaps created by SNP underfunding.
“The SNP must work with councils to make sure services are working as they should and start delivering fair funding for local government so Scots don’t keep paying more for less.”
Scottish Conservative local government spokesman, Alexander Burnett, said: “This damning report lays bare the impact of the SNP government’s systemic underfunding of Scotland’s councils over several years.
“That yawning funding gap means that local authorities are struggling to provide core services, even after imposing huge council tax rises.
“John Swinney must finally provide a fair deal to councils – and the way to do that is by reining in the SNP’s ballooning and unsustainable benefits bill, not clobbering hard-pressed households with even more tax rises.”
A Cosla spokesperson said: “The Accounts Commission bulletin highlights the perilous position of Council budgets, with over half a billion identified gap for 2026/27. Of notable concern, the ‘critical financial pressures’ facing our Health and Social Care Partnerships, and real terms reductions in the capital settlement justify and strengthen support for the resourcing COSLA called for through our budget lobbying this year.
“The report quite rightly expresses grave concern for local government finance over the medium term, spanning from the Scottish Spending Review. Whilst councils are being forced into damaging cuts, we are also expediting service transformation, which must be recognised as we begin to consider our role and expectations in Public Service Reform.
“We will continue to advocate for fair and flexible funding for our councils moving forward.”
A Scottish government spokesperson said: “We welcome this confirmation from the Accounts Commission that the 2026-27 budget provides Scotland’s councils with record funding of almost £15.7 billion, building on continued real terms increases in recent years.
“We recognise the pressures facing local authorities, both in Scotland and across the UK as a result of external factors including geopolitical events. Spending decisions in Scotland are directly impacted by decisions taken by the UK government - indeed, we know that the increase in employer national insurance contributions continues to be a challenge for local government.
“Whilst is up to individual local authorities to manage their day-to-day decision-making and allocate the total financial resources available to them, the Scottish government will continue to work in partnership with local government to ensure that the people of Scotland continue to receive the high quality public service that they expect and deserve.”
Comments
Want to join the conversation? Please or to comment on this article.