South Ayrshire Council has warned that council tax could increase and services may be cut should the funding freeze revealed by the Scottish Government come to pass.
Last week’s Holyrood spending review provided an indicative view of the way it plans its priorities over the next five years.
And it would see a council funding freeze for much of that period.
Much of the local authority's funding is tied to specific policies – meaning that councils only have freedom to spend a fraction of their total income.
The freeze, said a council spokesperson, would effectively be a major real terms fall in spending and, if the current restrictions on what it can choose to spend money on continue, would require tough decisions to be taken.
With rising inflation and other costs associated with Brexit and Covid, councils are in need of significant additional funds to simply maintain current spending.
However, the spending review has indicated that Scotland’s 32 councils will share core funding of £10.616 billion each year up until 2026/27, with an indicative figure of £10.716bn.
This block funding forms around 85 per cent of council income and is made up of a grant calculated on the historic spending and need; a share of business rates and specific grants that are tied in with putting specific policies into action.
Council tax income makes up the remainder of local authorities' income.
In South Ayrshire, the block funding from the Scottish Government had risen by around £42 million since 2017/18 – equating roughly to a 20 per cent increase.
Over this period, savings still had to be made by the council.
A South Ayrshire Council spokesperson said: “The council is still considering the detail of the Scottish Government spending review.
“However, the headline statement, that local government funding is being frozen for the next few years, is a significant challenge for local councils.
“Not only is pay inflation continuing to rise considerably compared to recent years but inflation in general is running at levels not seen for many decades.
“A freeze on funding will be, in reality, a significant real terms cut for local government.
“This will inevitably have an impact of the level of services that the council can provide going forward.
“If a significant proportion of our funding remains fixed, and our costs continue to rise, either the burden of this funding gap will fall to be met by the local council taxpayer or services will need to contract within the funding available.”
Over the course of the previous term, funding from the Scottish Government rose from £195.65m in 2017/18 to £224m in 2021/22 and £238m for this financial year.
The Fraser of Allander Institute estimate that maintaining the level of funding will see council budgets decline by seven per cent in real terms.
It added: “Meanwhile, universities and colleges (including student grant support), the police authority, prisons, fire and rescue services and the legal aid budget, amongst other areas, see real terms declines in their allocations of eight per cent over the period.”
Health service budgets will increase by £2bn over five years, while social security will increase by more than £6bn.
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