Accounts Commission has “underestimated” the pressures faced by councils

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The Accounts Commission has “underestimated” the pressures currently faced by councils, according to local authority finance leaders.

CIPFA’s Local Government Directors of Finance group, comprising of 32 chief financial officers, claim the Commission’s report on council finances, which was released today, doesn’t fully recognise the significance of the immediate pressures councils are under.

The Commission said Scottish local authorities had managed their finances well but “significant challenges” lie ahead.

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Derek Yule, chairman of the CIPFA group, said: “We are pleased that the report appreciates the tremendous cost pressures that Scottish local authorities will have to manage in the future and recognises the strong financial management currently in place.

“But, after years of real term reductions in funding coupled with a rise in demand for core services, councils are already facing significant funding gaps. But unfortunately by claiming that councils are in good financial health, this report does not take into account the current scale of uncertainty.

“Therefore the Scottish Government must do more to support local authorities so they are in the best position to manage future financial pressures. Key to this will be moving from year to year grant settlements that hinder councils from adopting a more long-term approach.”

The report said councils need to change the way they work to deal with financial challenges.

It added: “All councils face future funding gaps that require further savings or a greater use of their reserves. There is variation in how well placed councils are to address these gaps.

“Long-term financial strategies must be in place to ensure council spending is aligned with priorities, and supported by medium term financial plans and budget forecasts.”

The report said councils had remained within their overall budgets, increased their reserves slightly and reduced their debt in 2015/16.

To ensure long-term planning, the local authority finance leaders have urged the Scottish Government to take a more strategic view of service delivery and funding levels.

They strongly recommend this should include a move away from one year grant settlements.

The group also welcome the recognition of strong financial management being deployed by local authorities and agree this will likely become more challenging given significant future pressures.