Scottish councils’ ‘rainy day’ funds to drop below £1bn

20 Jun 19

Scottish councils have defended their use of funds set aside for emergencies to pay for essential services after new figures showed general fund reserves would dip below £1bn next year.

The latest data from the Scottish Government, released on Tuesday, shows that all but three of Scotland’s 32 authorities were forced to use reserves to pay for everyday spending in 2018-19, with the total falling by £0.157bn, or 9.7%, to £1.026bn.

In 2019-20, reserves are expected to be depleted by a further 6.9%, or £0.114bn, bringing the total down to £0.955bn.

Provisional outturn and budget estimates published last week also show net revenue expenditure increasing by 2.4% in 2018-19 and 4.1 per cent the year after to reach a total of £12.635bn, with the proportion of spending allocated to the largest two areas - education and social work - increasing from 69% to 71%.

The area hardest hit by spending cuts is planning and development, which saw a 3.6% reduction in 2018-19 and a further 8.3% reduction this year.

The figures also suggest that councils are becoming increasingly reliant on business rates revenue, with the proportion of expenditure financed through non-domestic rates up 2% to 23% this year, while the contribution from government grants is expected to fall by 1% to 57%.   

A spokesman for the Convention of Scottish Local Authorities said the use of reserves was a matter for local determination by individual councils based on local need and circumstance.

“However, reductions in the overall pot of funding coming to local government for our essential services are forcing councils to reassess their use of reserves and make often uncomfortable decisions,” he said.

The growing use of reserves to plug gaps in expenditure budgets, which had led to fears that a number of authorities were at risk of depleting their reserves within two to three years, was found by the Accounts Commission last year to no longer pose a risk to the financial sustainability of the sector.  

Although it said that eighteen of Scotland’s 32 authorities ended 2017-18 with lower levels of usable reserves than they had at the start of the year, total usable reserves had fallen by £18m, a “relatively small” amount.

“I am pleased that this year, although overall reserves have continued to reduce, no council is using its reserves at a level that risks their financial sustainability in the next two to three years,” said commission chair Graham Sharp.

“We will continue to have an interest in how councils set their reserves policy and utilise reserves as funding pressures continue in the coming years.”

Did you enjoy this article?