The Audit Commission today published its Local Government Finance Bulletin This independent analysis confirms that:
- Councils face the most difficult budget-setting context seen for many years with the ongoing impacts of Covid-19, inflation and the cost of living crisis. They will need to continue to make recurring savings and also make increasingly difficult choices with their spending priorities, including, in some cases, potential service reductions.
- Two-thirds of councils intend to use reserves to help bridge the 2022/23 gap between anticipated expenditure and revenue (budget gap) of £0.4 billion but this reliance on non-recurring reserves is not sustainable in the medium to long term.
- An increasing proportion of local government funding is now either formally ring-fenced or provided with the expectation it will be spent on specific services. They calculate this to be 23 per cent of total revenue funding in 2021/22. Ring-fenced and directed funding helps support the delivery of key Scottish Government policies but removes local discretion and flexibility over how these funds can be used by councils.
- Revenue funding from the Scottish Government to the local government between 2013/14 and 2021/22 increased by 6.1 per cent (in real terms) whereas Scottish Government revenue funding to other parts of the Scottish Government budget increased by a significantly higher figure of 27.2 per cent over the same period.
- Total net debt (total debt less cash and investments) has increased across councils by £0.2 billion to £16.4 billion. Fifteen councils have increased their net debt in 2021/22. This compares to eight councils in 2020/21. Councils’ total debt has increased by £0.3 billion to £19 billion; this may be related to the increased need to borrow to fund capital expenditure, with 19 out of 32 councils having increased long-term borrowing from the previous year and 15 councils with increased short-term borrowing compared to the previous year
- The 2022/23 estimated budget gap as a proportion of the 2021/22 net cost of services varied across councils from an anticipated surplus of 0.2 per cent to a gap of 23 per cent.
- Scottish Government revenue funding in 2022/23 decreased by 0.1 per cent in real terms when non-recurring funding elements are excluded and total revenue funding will fall by 2.4 per cent in real terms in 2022/23.
- When Covid-19 funding in 2021/22 is removed from their analysis they find that the Scottish Government budget is set to increase by seven per cent in real terms, as opposed to a real-terms cut in local government funding of 0.1 per cent.