Guest Blog: The State of Local Government Finance in Scotland

In this guest blog ahead of our Scotland Conference 2024, Dr Greg Stride, local government expert, takes a look at the state of council budgets north of the border and its impact on Community Transport – while offering some much-needed hope for the future.

Local governments in Scotland are responsible for a wide range of essential public services – including education, housing and planning, social care, economic development, culture, environmental protection, waste management, and, perhaps most importantly for members of the Community Transport Association, roads and transport.

Together, local government services across Scotland cost over £20 billion annually. These are not marginal services. They are vital to the wellbeing of the vulnerable and to the quality of life of every person in every community across the country.

On the Brink

These services are on the brink of a serious crisis. A combination of inflation, increasing demand (especially in statutory services like adult social care and children’s services), the ring-fencing of local authority budgets and limits placed on council’s ability to raise funds have left councils with few choices.

Every council that responded to our recent survey said they would have to make cuts. Sometimes, even these will not be enough, and around a quarter of respondents said they were at risk of not fulfilling their statutory duties in 2023/2024.

The problem, to cut to the chase, is that councils do not have enough money to provide all the services expected of them. COSLA has estimated that councils across Scotland face a budget shortfall of half a billion pounds in 2024/2025.

Forced to Prioritise Statutory Services

The likely consequences of this, given that it is unlikely that significant new resources will become available for local government, is that councils will be forced to continue to prioritise statutory services and those areas where directives from the Scottish Government bind their actions.

We have already seen this with the distribution of council cuts in recent years, which have tended to fall disproportionately on planning, roads and environmental services (see exhibit one), although the pattern of cuts is likely to change as these services are reduced to their most basic levels.

And councils do not want to make these cuts. I can say with some confidence that no councillor in Scotland is relishing the opportunity to reduce service levels. Councillors are deeply embedded in their communities and kept accountable by the electorate, if they had the choice to improve services, they would. The problem is that increasingly, budget constraints are putting councillors in a position where the only choice they have is what to cut next.

Rising Demand, Increasing Pressures

To make matters worse, many of the greatest pressures on council finances will increase in the coming years. The CTA Manifesto and the LGIU@40 manifesto for the UK General Election shared remarkable similarities in their diagnoses of the upcoming problems facing our respective sectors: the ageing population will increase pressure on services that are already at risk; climate change will force us to make difficult choices to mitigate its worst impacts and serious reforms to meet net zero commitments; and all types of inequalities within and between areas, communities and regions demand solutions. These longer-term challenges will descend (and are already descending) on a sector that is starting on the edge.

One proposal that stands out in the CTA Manifesto is the call for fair, adequate and multi-year funding for community transport. This is exactly the call we have been making for local governments themselves over recent years. It is clear to see how unpredictable and insufficient funding in local government has a knock on effect on the security and sustainability of projects that rely on local government just as much as it imperils local governments’ own vital services.

Reasons for Optimism?

Are there any reasons to be optimistic? The Verity House Agreement, signed back in the summer of 2023 looked like a new start for the relationship between the Scottish Government and local government, and promises made (no surprises on budgets, shared missions on tackling poverty, net zero and person-centred services) were encouraging. But, just a few months later, the then-First Minister announced a surprise council tax freeze, throwing the future of the Agreement into question.

However, all is not lost. The first step in tackling any problem is recognising that there is a problem, and at this point, not only has it been recognised, it is pretty much impossible to argue that local government in Scotland is not facing huge challenges. Although we have not seen councils descend into effective bankruptcy, as has become a regular occurrence in England, senior figures across Scotland are warning that it is only a matter of time.

Growing Consensus

The reason why I am optimistic, even in the face of challenges that may seem insurmountable, is that there is a growing consensus about what needs to happen. Local government’s place in helping to solve the big problems facing the country is starting to be appreciated in both the Scottish Government and at Westminster.

Local governments’ closeness to their communities gives them a perspective that other parts of government lack; a perspective they share with Community Transport initiatives. Empowered and resilient local governments are essential for improving the lives of citizens across Scotland.

Dr Greg Stride is a Senior Researcher at the Local Government Information Unit (LGiU). He recently published a report on local government finance in Scotland, which is available here.

CTA’s Scotland Conference 2024: Funding Summit will take place in Stirling on Monday 9 September. One of the plenary sessions will be focused on working in partnership with local government. Registration is open here.