Three Scottish councils face running out of general fund reserves within the next three years under current trajectories, according to the spending watchdog for local government.
In its annual financial overview, the Accounts Commission said that a number of authorities north of the border face ‘relatively low levels’ by the end of this financial year.
And it warned that without identifying larger savings, the three would find themselves with no reserves left if they continue spending at the current rate.
The report said that “using general fund reserves at the current rate is not an option for some councils — Clackmannanshire, Moray and North Ayrshire councils would run out of general fund reserves within two to three years if they continued to use them at the level planned for 2017/18”.
Forecasts made by councils in their budgets for 2017-18 indicated the overall local government funding gap will increase to around £350m in 2018-19 and to about £650m in 2019-20, the report said.
In a statement, Moray council leader George Alexander said: “It’s not that we haven’t been making savings — we’ve saved over £35m in the last eight years, but there’s a limit to how long you can go on doing this.
“Salami cutting is one thing, but you can slice until you’re right down to the bone, and we’re getting near that stage.”
A North Ayrshire Council spokesperson said: “The council has clear plans to utilise reserves in support of service initiatives and our transformation programme which will result in a planned reduction over time.
“The council holds a level of un-earmarked reserves, this is currently £6.4m, and is in place to mitigate risks and support medium term financial planning.”
Elaine McPherson, chief executive of Clackmannonshire Council said: “Difficult and important decisions need to be made in order to make sure that the Council meets its legal requirement to set a balanced budget and is able to deliver those services which it is legally required to.
“It is increasingly difficult to find savings which will not impact on individuals and communities.”
The council recently published proposals to slash management posts across the council by 40%, to reduce overtime payments and reduce the length of the working week.
The Accounts Commission report also said that the proportion of council funding directed towards national policies is increasing, a trend that is set to increase.
“This shift,” it said, “increasingly restricts the flexibility councils have in managing their budgets across their full range of services. The Scottish Government and COSLA should assure themselves that the funding formula remains fit for purpose in a changing landscape for local government.”
Overall, net pension liabilities on council balance sheets were approximately £11.5bn at the end of 2016-17, an increase of 51% on the previous year, mainly due to a change in actuarial assumptions used to value future liabilities.
Local Government Pension Scheme (LGPS) investments, increased by almost 22 per cent in Scotland.
