Scottish councils facing real-terms cut even with tax increase, says think tank
Councils in Scotland would still be facing a real-terms cut to funding even if council tax is increased by 5%, a think tank has said.
Analysis by the Institute for Fiscal Studies (IFS), published on Friday, said local authorities face a 0.8% real-terms cut in budgets for the next year if Government plans are given the go-ahead.
Under the Scottish Government’s budget proposals – which passed the first parliamentary hurdle on Thursday – councils will have full autonomy to set council tax rates, unlike in recent years when a cap was enforced.
The Scottish Government has intimated action will be taken to stop cuts to teacher numbers, although an announcement on what will be put in place is yet to be made, meaning service cuts would likely be targeted elsewhere in council remits.
NEW: Scottish councils may face cuts over the next two years even with 5% council tax increases.
Read @fiscalphillips, @KateOgdenEcon and @lukesibieta's report on council and school funding in Scotland, part of our Scottish Budget 2023–24 analysis: https://t.co/B0MndgqqEb
— Institute for Fiscal Studies (@TheIFS) February 3, 2023
According to a chapter in a new IFS report about the Scottish budget, cuts to councils in Scotland have been less steep than those in England in the past decade, with schools faring particularly well – something the think tank has said could be set to reverse.
IFS associate director David Phillips said: “Scottish councils faced smaller cuts during the 2010s than those south of the border – with schools and early years childcare the biggest beneficiaries of this.
“Indeed, by 2021–22, Scottish pupils were benefiting from around a quarter more spending each than English pupils.
“The Scottish Government will be hoping that this starts to translate into improved educational performance soon, given concerns about Scotland’s decline in international educational rankings.
“Looking ahead though, these trends look set to start to reverse.
“Scottish councils’ funding is likely to fall in real terms over the next two years; at the same time, funding for English councils and schools is set to see a not-insignificant funding boost.
“If Scottish councils are directed to protect social care and schools from cuts, that will intensify the squeeze on other services, which often bore the brunt of earlier rounds of austerity.”
A spokeswoman for the Scottish Government said: “The Scottish Government’s settlements from the UK Government have suffered a decade of austerity with average real-terms cuts of over 5%, equating to a loss of £18 billion.
“Despite this, Scottish ministers have listened to councils and are increasing the resources available to local government in 2023-24 by over £570 million, a real-terms increase of £160.6 million or 1.3%, compared to the 2022-23 budget figures.”
Scottish Conservative local government spokesman Miles Briggs said council budgets had been “deeply damaged by years of savage cuts and systemic underfunding”.
He added: “The fact that local authorities may still face real-term cuts even after a 5% tax increase lays bare just how bad the situation actually is – even if they attempted to hammer hardworking Scots it would not come close to fixing the black hole in their finances.
“The SNP Government has passed the buck on funding decisions on to councils. Now local communities are paying the price with job and services losses.”
Labour’s local government spokesman Mark Griffin said: “This is a damning indictment of the Scottish Government’s most recent budget announcement and its impact on local communities.
“Local government will see their resources strangled under SNP plans, even with increases in council tax.
“Asking taxpayers to pay for SNP Government cuts is not acceptable. The SNP must properly fund the services we all rely on.”
Deputy First Minister John Swinney said: “The Scottish Government recognises the crucial role councils and their employees play in our communities.
“We have protected councils in the most challenging budget since devolution to provide more than £13.2 billion in the 2023-24 Local Government Settlement.
“This represents a cash increase of over £570 million, or 4.5%, which is a real terms rise of £160.6 million, or 1.3%, to reflect the difficult budgetary decision they face at this time of year.
“The Scottish Government and local government are committed to working together to continue to raise attainment and close the poverty-related attainment gap in schools and we welcome the endorsement of this by council leaders today.
“As part of this, the Scottish Government is committed to recruiting more teachers. Indeed, we have provided additional resource to local authorities to do just that.
“Despite this, the latest teacher census showed a small decline in overall teacher numbers. Any further decrease would be wholly unacceptable – as would any reduction in the school week for children and young people.
“We will take steps to ensure that the funding we are providing to councils to maintain increased numbers of teachers delivers that outcome. Further detail will be set out to the Scottish Parliament in the coming days.”