Councils at risk of "becoming financially unsustainable

•  The Accounts Commission has warned that local authorities in Scotland will have to "stop, reduce, or significantly redesign" services
• They warn this will "have to increasingly affect services people rely on".
• Scotland's councils are facing a collective budget shortfall of about £530m in 2026-27.
• They say a small rise in funding for day-to-day spending was not enough to keep pace with rising costs and demand, particularly on social care.
• Local authorities were forecast to spend £4.3billion on social care over the next year, representing almost a quarter (24%) of their revenue spending.
• The commission found that with government cuts forecast in the coming years, councils risked "becoming financially unsustainable".

Derek Yule, a member of 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."

Over the next 25 years West Lothian is forecast to have the fastest growth in population of pensionable age in Scotland with an increase of 44% - nearly twice the Scottish average. East Lothian at 41% and Midlothian at 38% are the only authorities within 10% of West Lothian and the overall Scottish forecast is just 23%.

The Accounts Commission said while the revenue budget was rising by 2% in the 2026-27 budget, much of it would go towards existing commitments such as increases in teacher pay.

The watchdog said that the gap between councils' (all Scottish councils) predicted spending and the funding and income they receive was £529m - down from £647m in the previous year. The gap represents about 3% of total revenue funding.

The combined capital budget for local authorities, used to build infrastructure and schools, is down by 15% in this financial year.

The commission warned this would lead to councils borrowing more money, increasing their long-term financial risks.

To cope with the funding shortfalls, every local authority in Scotland has increased council tax, but Council Tax makes up less than 20% of a council's budget. However the more income generated via Council Tax, the less savings are required from local services.

Local authorities are planning to make £180m of cuts - amounting to about 1% of their total revenue budgets.

The Accounts Commission has warned this will "have to increasingly affect services people rely on".

Cosla resources spokesman Ricky Bell said the report "quite rightly" expresses grave concern for local government finance over the medium term.

"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," he added.

Due to insufficient funding from the Scottish Government, combined with increasing demand and rising costs, the Council has to deliver the approach agreed in February and secure total savings of £20million over the next two years. Legally, the amount of funding the council spends needs to be equal to the funding we receive, and council must balance its budget.  What we spend needs to match our income. This is what is meant by balancing our budget. However the amount of savings needed over the next two years will likely grow as pressures mount for 2027/28.

West Lothian Council has agreed cost savings measures and has a balanced budget. Later this month, a report is being presented to councillors to set out what progress he council has made in delivering savings that will allow the council to meet their legal requirement to balance the budget.