SCOTLAND’S cash-strapped local authorities will be forced to cut services even if they raise council tax by 5 per cent for the next two years, a leading thinktank has warned.

The respected Institute for Fiscal Studies (IFS) said adding £140 to the average Band D bill was unlikely to avoid cuts to libraries, leisure centres, roads and waste services.

It said the next two years could see “a reversal of fortunes” for Scottish and English councils. 

Whereas Scottish councils saw smaller cuts than those in England during the 2010s, with  greater spending on schools and early-years childcare, that pattern was set to flip, with councils in England now set for real-term rises in spending, compared to cuts in Scotland. 

Scottish ministers have insisted they are giving councils £570m extra in 2023/24 compared to the current financial year, however most of this is absorbed by inflationary pressures.

Scotland’s 32 councils themselves argue the true figure is closer to £40m in real-terms, once inflation and Scottish Government-directed spending priorities are factored in.

In a new analysis paper, the IFS said rising costs for social care services and the Scottish Government’s ban on cutting teacher numbers meant it was “highly likely” that other areas of council spending would be cut.

The thinktank said council revenue spending was set to fall by 0.8% in real terms in April, and would still be 0.3% down after a 5% hike in council tax.

The outlook for 2024/25 was even “more uncertain”, the IFS said. 

Official Scottish Government and Scottish Fiscal Commission projections suggest the money available for all public services is set to fall by 1.6% in 2024/25. 

If grant funding for councils was cut in line with this, their overall funding would fall by around 0.5% in real terms compared with 2023/24, even if council tax was increased by 5%. 

The fall in overall funding could be “much greater” if grants to councils were cut back more in order to protect spending on the NHS and the transition to net zero, the IFS said.

The thinktank said this was in contrast to south of the border, where recent substantial UK Government top-ups to council funding mean that even if council tax was frozen in cash terms in England, funding for councils and schools there would rise by around 3% in real terms in 2023/24, and by 2% in 2024–25. 

If council tax was increased by 5% a year in England, the funding increases would be 4.5% and 3.7% in these two years, respectively.

The IFS report also looked a Scottish schools spending over the last decade or so

It found that by 2021/22, spending per pupil aged 3–18 was around 17% higher in real terms than in 2009/10. 

Most of the increase reflected recent increases in teachers’ pay and a substantial increase in free childcare hours for children aged 3 and 4, and for some 2-year-olds.

In contrast, spending per pupil in England was still slightly lower in 2021/22 than in 2009/10. 

As a result, overall spending per pupil in Scotland in 2021/22 was around 25% (£1,700) higher than in England, up from around 4% (£300 higher) in 2009/10.

Social care spending by councils also grew in Scotland, up 4% in real terms between 2009/10 and 2019/20.

Accounting for additional transfers from the NHS to pay for care services, and client contributions, the increase in gross expenditure was 11% in real terms.

However, other services saw “big cuts”, including housing support and advice, leisure and cultural services, and central administrative services, similar to cuts in England. 

The IFS said that in the short term, Scottish councils would be able to “cushion cuts” by drawing on their reserves, which almost doubled during the pandemic thanks to extra funding from central government. 

IFS Associate director David Phillips, an author of the report, 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."

Tory local government spokesman Miles Briggs said council budgets had been “deeply damaged by years of savage cuts and systemic underfunding”.

He said: “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 MSP 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.”

Scottish Liberal Democrat MSP Willie Rennie added:  “This is a stark reminder of the mess this government has made. It points to years of serial underfunding at the hands of the Scottish Government- councils and communities are now bearing the brunt of that neglect.  

“This government needs to get its priorities straight urgently, scrap its billion-pound bureaucratic takeover of social care and give communities they support they are crying out for.”  

A Scottish Government spokeswoman 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.”