Scotland faces a £500 million black hole in its government spending

Shelter from the Storm, Loch Stack, Sutherland, ScotlandDougie CunninghamLoch Stack, Sutherland, Scotland

Scotland’s local councils face a funding gap of more than half a billion pounds in only two years’ time unless they make large cuts, according to government analysis.

The Scottish Accounts Commission found that the gap between the amount local councils spend and receive could grow from £87 million in 2016/17 to £553 million by 2018/19.

Local councils receive income from various sources, including Scottish government revenue grants, council tax, and local business taxes. It spends it on education, social work, and interest payments for external debts.

Scotland’s 32 local councils received £18.9 billion in funding last year, over half of which came from government grants. However, the Scottish government has slashed local government funding in recent years, as the UK government tightens its fiscal belt and attempts to regain control of its enormous debts. The reduction in Scottish government spending in real terms between 2010/11 and 2016/17 was 8.4%.

The report said that “councils have experienced a long-term decline in their grant funding from the Scottish government. This is expected to continue to fall in future, putting greater pressure on budgets.”

At the same time, local government spending is increasing in key areas. The report said that costs have risen “noticeably in social care because of rising demand from an ageing population.”

Take a look at what that means for local government finances:

The projections are based on forecasts from the 22 councils who provided financial forecasts for 2017/18 and 2018/19. The key point is the bottom line: Scotland’s councils could be spending £553 million than they receive or have in reserves by 2018/19.

The report says that councils have managed well in light of spending cuts, but says “significant savings” are still needed to address the projected funding gap.

A Scottish Government spokesperson said: “Despite the cuts to the Scottish Budget from the UK Government, the Scottish Government has treated local government very fairly.”

“This report highlights the pressures that councils — like other parts of the public sector — face, but also highlights that they are continuing to improve services. We expect local authorities to continue to use resources as efficiently and effectively as possible to ensure taxpayers get the best possible services and value for money.”

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