Plea over £20m council funding crisis

COUNCIL leader Stephen McCabe has delivered a stark warning to the Scottish Government about the funding crisis facing local authorities with an estimated £20 million budget gap looming in Inverclyde alone.

Councillor McCabe has written to deputy first minister John Swinney, also the stand-in finance secretary for Kate Forbes who is on maternity leave, and laid bare the dire financial outlook for councils as he issued an urgent plea for more cash for local government.

In Inverclyde alone, the funding gap is estimated to be in the region of £20m between 2023-25 – or nine per cent of the council’s total budget.

The projected financial shortfall factors in the increasing costs facing the council for things like pay, energy and materials and also takes into account the government’s ‘flat cash’ settlement to cover the 2022-26 period.

The Scottish Government provides around 85 per cent of the council’s funding and Mr McCabe says Inverclyde and other local authorities are facing a ‘financial crisis’ and ‘unprecedented cuts’ unless more money is made available. 

Mr McCabe said: “Times are incredibly tough for everyone dealing with rising costs and having to make ends meet and councils are no different. 

Councillor Stephan McCabe
Councillor Stephen McCabe

“The stark reality for local government is that unless additional funding is made available then the only option is cutting jobs and services and increasing charges and fees and those are incredibly tough decisions none of us should be forced to make and I’m sure ministers at Holyrood wouldn’t feel comfortable if faced with those impossible choices either.

“There really is very little fat, if any, left to trim and unfortunately it will be the people of Inverclyde and indeed across Scotland who will be short-changed and who will suffer if a fairer settlement isn’t forthcoming.

“I urge the deputy first minister and the government to heed the warnings of local government and act now before it is too late.”

Cllr McCabe’s letter to Mr Swinney is in full below.

Dear John


I am writing to you in your role as cover for Kate Forbes while she is on maternity leave.

I have been the Leader of Inverclyde Council for the last 15 years during which time I have raised concerns on many occasions over the level of Local Government Financial Settlements with various Finance Ministers, including yourself. These concerns were nothing when compared to the financial crisis now facing Inverclyde and the other thirty-one Scottish Councils, which has developed over the last 6 to 12 months.

I appreciate that much of the situation is not of the Scottish Government’s making, with a global pandemic, Brexit, a global economic crisis and latterly Russia’s invasion of Ukraine, creating a ‘perfect storm’ for the finances of the UK and Scottish Governments.  The reality however is that the Scottish Government provides approximately 85% of my Council’s funding and as such it is the Scottish Government I must approach at this time.

The flat cash settlement over the period 2022 to 2026 announced in the Resource Spending Review would in normal times have proven to be extremely challenging and resulted in reductions in Council service delivery. Given the levels of inflation now being experienced and the knock on impact this is having on pay award demands, utility costs and many other contractual commitments entered into by Councils, a flat cash settlement over this period is simply unsustainable.  I outline some examples of the pressures faced by my Council as an illustration:

  1. Pay Awards – In line with most other Councils Inverclyde Council made financial provision for a 2 to 2.5% annual pay award over the 2022/25 period.Based on wage demands and finalised settlements it is difficult to see the Local Government pay award for 2022/23 being any less than 5% and indeed to avoid significant industrial action it may have to be greater than this.
  2. Utilities – The Council participates in the Scottish Government Procurement Scotland utilities’ contracts. Between 2021/22 and 2022/23 the cost of gas has increased by over 160%.Given the level of gas usage in our schools and main buildings officers advise me this will cost Inverclyde Council an extra £1.3 million this year and that excludes a £400,000 increase in utilities costs being reported by the local Leisure Trust which is also funded by the Council.When you add increases in fuel for our vehicles (over 40%) and electricity (over 20%) the Council is set to exceed its non-pay inflation allowance by between £1.5-2.0 million this year.
  3. PPP Contracts – As you will be aware most PPP contracts are linked to RPI and in the case of Inverclyde Council Schools’ contract, the Scottish Government provide a fixed annual contribution for the 30 year period of the agreement of around £6.0million.In 2022/23 due to the significant increase in RPI the contractual increase in our PPP contract was over £500,000 and for 2023/24 it is expected to exceed this with an increase of £600,000 to £700,000.This compares to a “normal” annual increase of around £150,000 to £200,000.
  4. General Inflation – In addition you will be aware that the prices of materials required by our front line Council services to repair roads, buildings, etc. have increased significantly as has the cost of food to provide catering for our schools and other essential items such as fertiliser.

The impact of the above issues leaves the Council facing an estimated 2 years funding gap of £20 million over 2023/25, which equates to 9% of the Council budget.  With the current high level of ring fencing/mandated spend, then it is inevitable that these unprecedented cuts will need to fall on areas which are absolutely core to Local Government and our communities. 

Officers are drawing up savings proposals and to date these barely meet the estimated funding gap which the Council faces.  These proposals will include reductions of up to 50% in street cleansing, grounds maintenance, employability and social protection budgets, double figure increases in charges at a time of the cost of living crisis and the closure of leisure, cultural and community facilities when the physical and mental health of our population has never been more important.

I hope this gives you a sense of the seriousness of the situation.

The Council will also need to consider an increase in Council Tax which exceeds by far anything implemented this century. Following many years of Council Tax freezes, the amount which Councils now raise in Council Tax is proportionately a much smaller part of the overall budget and even a 10% increase in Council Tax in 2023/24 would only raise £3million against the estimated £20million funding shortfall.

I am asking that you consider as a matter of urgency finding a significant increase in recurring funding for Local Government to help offset this impending crisis.  It is inevitable that Inverclyde Council, along with many other Councils, will require to implement unpalatable and significant cuts in its service delivery at the same time as increasing charges and Council Tax, however a significant recurring grant intervention from the Scottish Government may stop Scottish Local Government services and our communities being devastated over the next year or two.

I am more than happy to provide further information or to meet to discuss the situation faced by Inverclyde Council in more detail with you and your officials.

May I thank you for your consideration of this matter and wish you well in your interim role and in addressing the extremely significant challenges which you will undoubtedly face.

Yours sincerely

Councillor Stephen McCabe

Leader, Inverclyde Council