Scotland’s councils face a shortfall of more than £550 million in just two years’ time, public spending watchdogs have predicted.
The Accounts Commission forecasts the gap between what local government spends and its income could grow from £87m in 2016/17 to £367m in the next financial year, before rising again to £553m.
By then, analysis suggests more than a third all 32 local authorities will face a funding gap greater than the amount of cash they have in reserves.
The figures appear in a new report from the Accounts Commission which warns councils will “need to make significant savings to address forecast funding gaps”.
The report warns “significant challenges for local government finance lie ahead” and how councils’ budgets are “under increasing pressure from a long-term decline in funding, rising demand for services and increasing costs such as pensions”.
It adds: “Councils need to change the way they work to deal with the financial challenges they face. All councils face future funding gaps that require further savings or a greater use of their reserves.”
Council incomes amounted to £18.9 billion in 2015/16, with £10.9 billion, 57 per cent, of this cash coming from the Scottish Government – a drop of 1.7 per cent in real terms from 2010/11.
When the figures for 2016/17 were taken into account, authorities have seen a real-terms reduction in government funding of 8.4% since 2010/11.
Authorities spent £19.5 billion in 2015/16, with spending increasing on “key services” such as social care “because of rising demand from an ageing population”.
The Accounts Commission said: “Many councils overspent their social-care budgets and this poses a risk to their longer-term financial position.”
Meanwhile, 22 councils “spend 10% or more of their revenue income on servicing their debt,” according to the report.
Councils’ overall debt currently stands at £13.72 billion, costing local authorities about £1.5 billion a year in interest and repayments.
Ronnie Hinds, deputy chair of the Accounts Commission, said: “Pressures continue to increase on a number of fronts at the same time as they face the prospect of further reductions in their funding.”
Councillor Kevin Keenan, finance spokesman for local government body Cosla said: “councils have managed their finances well but significant challenges lie ahead in maintaining this.”
Scottish Conservative local government spokesman Graham Simpson said: “The report rightly warns that worse is to come and we would urge the SNP to come clean on what lies in store for local authorities down the line.”
Scottish Labour deputy leader Alex Rowley said: “Only by investing in our local public services can we give people the skills they need to get on.”