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Council / SIC had largest funding gap in Scotland in 2022/23

SHETLAND Islands Council (SIC) had the highest percentage funding gap of all Scottish local authorities when setting its 2022/23 budget, according to a new report.

The Accounts Commission report on local authority finances said the SIC had a budget gap of 23.7 per cent when it came to the cost of services.

This is the gap between the income it receives, and the amount it spends.

The 23.7 per cent gap is more than double that of Orkney, which was second highest on the list with 10.9 per cent.

The figures are included in a new report called Local government in Scotland: Financial bulletin 2022/23, published today (Tuesday) by the Accounts Commission and prepared by Audit Scotland.

Audit Scotland said councils received more funding from the Scottish Government in real terms in both 2022/23 and 2023/24, “but some of that is directed towards certain policies”.

“And increasing demand for services, inflation and the cost of living crisis means that the financial outlook for councils is extremely challenging,” the organisation said.

Audit Scotland this has resulted in councils having to make “difficult decisions” about services.

SIC leader Emma Macdonald said figures showing the large funding gap in Shetland was “no surprise”.

“We know our services cost more to deliver than we get allocated,” she said.

“The cost of delivering services in more remote and rural locations are increasingly becoming challenging within the financial envelope that local government has available.”

The SIC dips into its reserves – which are invested to generate returns – to fund financial shortfalls, but many councils do not have this luxury.

When setting the 2023/24 budget the SIC warned of budget challenges, and this time around it has spoken up about the problems with recruiting staff and how this may result in some services needing to be redesigned.

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The new report highlights how councils need to work with local communities and be open about the need for change.

“Given the funding position for councils, there is increasing reliance on reserves and savings to deliver balanced budgets,” interim chair of the Accounts Commission Ronnie Hinds said.

“This means councils are already making difficult decisions about future service delivery and the level of service they can afford.”

Resources spokesperson at Scottish local government body COSLA councillor Katie Hagmann said the new report “reinforces what we have been saying about council finances and the really difficult and challenging decisions councils have had to take in recent years”.

A spokesperson said the Scottish Government recognised the financial challenges that the public sector is facing, noting that local authorities and their employees “play a pivotal role in our communities”.

“In the face of a profoundly challenging financial situation, we are making available record funding of over £14 billion to councils – a real-terms increase of 4.3% compared with the 2023-24 budget,” they added.

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