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She spoke out as the council's finance officials confirmed they expect the Capital will have to find savings of £63 million next year, increasing by about £25m each year in the following years.
Funding of £9.6m given as an extra one-off by the government this year has now been made part of the baseline budget, but officials predict it will be eaten up by inflation and pay rises.
Directors have been asked to bring forward options for savings. And a report to the finance committee warned: "Given the extent of the challenge, members will likely need to make increasingly difficult choices about the council’s priorities, including considering service reductions, across all service areas to maintain expenditure in line with available income."
Councillor Watt said: “We're hoping the SNP-Green Scottish Government will have a rethink and we will be campaigning for that. Council staff, for the most part, worked right through the pandemic to provide services as far as Covid allowed and ensure they were not cut. Yet here we are, trying to come out of the pandemic, trying to regenerate the city and the economy, and the government is cutting local government.”
She said the administration would look at proposals brought forward by officers. “We will look very hard at what we can do to keep the damage to the city to a minimum. And we will look to the Scottish Government to give us the revenue-raising powers we need around a tourist levy. They're taking views from industry on that. Anecdotally I've taken views from tourists – none of those I've spoken to would see it as a reason not to visit Edinburgh and they would feel they were contributing to the city they're visiting."
SNP finance spokesman Marco Biagi said the new administration faced “a real challenge” to produce a budget.
He said: “It's really good news that the extra money that was a one-off from the Scottish Government for this year is being made recurring. Unfortunately, although the funding is higher, the costs are also higher. People are going to have to look for ways to make the budget go further than it ever has before and find alternative ways of raising revenue in a fair way that doesn’t make the cost of living crisis harder. I don't envy the finance convener in her task.”
But he defended the Scottish Government, saying it faced similar difficulties to councils. “All parties promise to protect health spending and once you do that there are implications for everything else. The government is not asking local government to do any more difficult financial planning than it does in almost all its areas of responsibility. That's a knock-on from the fact the volume of cash available for public sector spending in Scotland is still ultimately controlled by the Treasury in London.
“The good news is there are usually extra pots of money that become available over and above the starting point and we’re going to have to be asking the government for that cash as much as we can to try to alleviate some of the pressure.”