Auditors warn city faces tough times after May election

A report by Audit Scotland said more employees would lose their jobs to balance the books and there was a risk the local authority’s borrowing was not “affordable and sustainable”.

Outlining the key risks the council faces, it also warned of a potential overspend on the £776 million tram project, highlighted likely losses due to the statutory repair scandal and questioned whether projected savings will materialise after abandoning privatisation plans.

Council chiefs today insisted it had measures in place to manage its borrowing.

The Audit Scotland report said the council was on track to balance its budget in 2011-12 and had approved a balanced budget for 2012-13, but currently faced a projected funding gap of £40.7m by 2014-15.

And it said the debt level at March 31 last year was £1.3 billion, an increase of £160m, or 14 per cent, since 2009.

It said: “The savings required mean the council will need to review its service levels.

“With likely restrictions in future financial settlements from the Scottish Government, including its plan to freeze council tax for five years, there is a risk the council will be unable to manage their budget pressures from within available resources thereby impacting on the provision of services.”

Half the council’s £1bn budget is currently spent on the workforce. Audit Scotland said: “The council realises that to manage the funding gap it will be required to reduce its workforce costs.”

On the tram project, Audit Scotland said while a risk factor had been built into the council’s calculations, unplanned costs remained a possibility.

Ricky Henderson, finance spokesman for Labour, said: “It is going to be more difficult to borrow against projects of the future, for a new high school it’s going to be harder to justify adding it on to the debt we’ve got already. The current administration has basically maxed out the credit card.”

Allan Jackson, theTory convener of the council’s audit committee, said: “The council does face risks and unplanned costs and Audit Scotland is outlining these. The big areas of risk are going to be property repairs and the tram financing.”

Finance leader Councillor Phil Wheeler said: “Any organisation of our size and complexity will have risks. We will work with Audit Scotland on its plan.”