‘Intensifying pressures’ on Scottish local authorities mean they must make difficult decisions on service delivery to remain financially sustainable, a watchdog has said.

In a new report, the Accounts Commission has warned that while no Scottish council was at immediate financial risk in 2022-23, there is 'no certainty' this will continue. 

Despite receiving more income in cash terms, councils across the devolved nation saw their funding drop by £619m in real terms in 2022-23 compared to the previous year, the watchdog found.

Its report says more than half of councils were reliant on financial flexibilities, such as the use of savings and reserves, to balance budgets.

The Commission also found that a ‘significant and increasing’ proportion of council funding was either formally ring-fenced or directed towards specific services.

It found that despite more core government funding in 2023-24, there was a significant increase in councils’ total funding gap, in part due to increased demand for services, inflation and the cost of living.

Faced with these issues, councils must ‘innovate at pace and make difficult decisions about cuts to services to remain financially sustainable’, the Commission said.

The resources spokesperson for the Convention of Scottish Local Authorities (COSLA), Katie Hagmann, said: ‘Our reality right now is extremely challenging – years of real-terms cuts to council budgets have been coupled with increasing additional policy commitments and increased ring-fencing.

‘With so much funding still directed, the ability to take local decisions on most of our budget is almost impossible.

‘The picture painted by the Accounts Commission illustrates why COSLA is lobbying hard on the detrimental impact to communities of the draft Scottish Government Budget, currently going through the parliamentary process.

She added: ‘We must seek a solution to these long-term issues in order to protect the essential front-line service of our communities.’