Local Government’s revenue settlement - provided to help fund local services across Scotland – was £12bn in 2022/23 (£90m of which was one-off funding). On top of that:

• + £140m was added by Scottish Government towards the Local Government pay award this year
• + £32m was added for Whole Family Wellbeing support
• + £115m will be needed to meet a joint commitment to pay the Real Living Wage in Adult Social Care commissioned services for next year

The reality is that “flat-cash” needs to be at least £12.2bn for 2023/24 – but that does not take account of pressures, including pay and inflation.

Years of real terms cuts to Local Government’s funding (whilst Scottish Government’s whole Budget has increased) means it’s a constant struggle to keep pace with rising costs and increasing demand.

• A recent COSLA survey of all 32 councils showed over £600m of pressures for 2023/24 due to inflation, rising energy costs, pay, and increased demand.
• Staff will, quite rightly, have expectations around a pay increase in 2023 - each additional 1% adds around £100m on a recurring basis.
• Councils across Scotland are continuing to welcome and resettle Ukrainians, and provide vital services including early learning, education, housing, and financial inclusion - all of which need funding.
• There is also a pressing need to address climate change and move to Net Zero but it requires investment.
• These pressures result in an estimated funding gap of at least £1bn going into 2023/24 unless more cash is provided for councils.

Directors of Finance across Scotland are sufficiently concerned about the financial sustainability of councils that they have written directly to the Deputy First Minister.

Unless current spending plans change, Councils will be facing significant pressures next year. To put the scale of the £1bn gap into perspective, it is equivalent to:

• The entire budget required to deliver Early Learning and Childcare
• Councils’ total net revenue expenditure on roads, transport, sport and culture
• 17,500 teachers (around 30% of current total) (based on avg salary of £43,878 + on costs = £57,041)
• Significant cuts across most non-statutory services – including youth work, economic development, prevention services like domestic abuse and family support, sports facilities

Councils across Scotland are currently considering options for addressing these gaps – many of these have been reported in the press recently.

Without a change in Scottish Government spending plans, the reality will be a mix of cuts to statutory services, cessation of other services, and job losses.

Similarly, the Scottish Government is planning a “flat cash” budget for the funding that is currently provided to build and maintain schools, homes, roads, bridges and more. Not only has the cost of materials and labour gone up, but any borrowing required for building has been impacted by the hike in interest rates.

The transition to Net Zero requires capital investment across council and partner facilities. And the current rent freeze will impact the resource available to adapt housing to ensure everyone has a warm, affordable home – this means more families will continue to live in poverty.

Investment in Local Government can be the key to our move to Net Zero – it creates a positive ripple effect across communities, business and supply chains. Within 12 months, Scottish Government intends to undertake a review of capital accounting – this could see further reductions in the ability of Councils to fund building and infrastructure projects.