Austerity is over, but the cuts keep on coming

Councils are legally required to set a balanced budget. This means that deficits must be addressed, either through increasing revenue, cutting costs or raiding the piggy bank by using reserves. Funding from Scottish Government for councils is now increasing, but so is demand for services, the need to meet government priorities, annual pay deals and the ongoing impact of inflation.

Huge swathes of Scotland’s public services are delivered locally either by councils directly or in partnership with health boards through Integrated Joint Boards (IJBs). Many services are now commissioned from third sector organisations by councils and IJBs with public money. 

Local Authority services have been on the receiving end of consistent reductions in funding for roughly a decade and half now. Many years of budgetary restraint and cuts have left Local Authorities and IJBs with impossible choices and previously unthinkable decisions for local services in Scotland. While IJBs also have NHS funding, and there can be disputes about how much NHS or councils should contribute, council budgets still have a huge impact on the resources of delegated services.

This year we have seen Aberdeen City Council propose a reduction in its contracted hours for most employees from 37 to 35 hours as a cost saving measure. SASW members in Aberdeen have been clear that this proposal has the potential to put people at risk and will make the already significant recruitment and retention issues in the workforce worse. More cannot be done with less resource when systems have been trimmed to the point of collapse. 

Another example is the drastic measures being taken by Edinburgh IJB where almost all mental health services provided by Thrive Collective have been cut. The Thrive Collective supported almost 4500 people last year. Early support and prevention services, and not the services mandated by statute, are where the axe falls first.

Children’s services are the second most impacted by council budget cuts according to the same Audit Scotland report, with cost savings of £58 million being made across Scotland. We can all anticipate what impact this will have on the ability of already strained services to protect and support children and young people. 

The evidence tells us that reducing early support drives people into crisis and feeds increasing demand for more intensive and expensive statutory interventions. The cost is human too. People who cannot access early support must suffer the trauma of a crisis before services can help, and the teams of workers who witness this face almost endless moral injury. No one enters social work or any similar role to tell people they need to be worse before they can get help. This reality is feeding the crisis in recruitment and retention in the social work profession. 

What we are seeing in Edinburgh and other places is the reduction in services which provide early support and intervention to save money. However, the cost saving generated by early support is documented by Audit Scotland in their 2025 report. A section on how councils are using innovative measures to reduce costs highlights that ‘East Ayrshire Council is also progressing its £40 million Early Intervention Fund which supports projects that reduce dependency on council services.”

Reports the previous year showed Scottish Government funding for councils had increased by 5.7%. However, council finances remained constrained as most of the increase was restricted funding to deliver on Scottish Government priorities or agreed pay deals.

Most councils decided to raise additional funds by increasing the council tax to balance budgets and minimise cuts swiftly followed by a Scottish Government funded freeze on council tax. However, 11 councils said the money from the Scottish Government would not ‘fully fund’ the freeze. There were also warnings from some that freezing the council tax now only delays addressing a fundamental funding problem with the cumulative effect of inflation and increasing costs meaning that even larger rises would be needed in future to catch-up. 

Last year councils collectively faced a £585 million funding gap, an estimated 3.5% of the annual revenue budget for all Scottish councils. This was anticipated to rise to £780 million by next year, reaching 5% of the overall budget. Budget deficits are expected to continue to be challenging with a cumulative budget gap of almost a billion pounds expected over the next two years. 

This year, 2025/26, there was an increase of 6% in Scottish Government funding from just under £15.1 billion to £15.2 billion, which has proven to be insufficient, with inflation, increasing demand and pay deals continuing to outpace funding increases. 

There was no council tax freeze either this year and councils leapt to increase this local tax to cover the gaps in their budgets. The average council tax rise in 2025 was 9.5% with increases varying from 6% to 15.6%. However, council tax only accounts for around 19% of the local authority revenue source, with the rest coming from rates, fees and the majority from the Scottish Government grant.

These increases garnered huge media attention when they were announced which added to a mismatch between what people in Scotland expect in terms of improved services, and the harsh reality that these large increases in local tax are only reducing the level of cuts that are needed to balance budgets. This could be a dangerous cycle, fuelling the frustration and distrust which feeds populist narratives. National polling in Scotland shows that the public are disillusioned with the parties in power. Scotland’s Governments would do well to take these issues seriously. 

Rethinking local government resourcing and the funding of community services is urgently needed. As a nation, we must bite a bullet to invest in early support and preventative services to reduce the demand and increasing cost, both financial and human, of crisis management. Scotland has the tools to make many of these changes but needs bold and visionary leadership to change this trajectory.

SASW will be calling for a rethink of how Scotland funds local government and community services in our manifesto for the 2026 Scottish Elections. We aim to publish this later in the Summer. 

By George Hannah – Senior Communications and Public Affairs Officer