'Charge more for services' warning as councils face crunched finances

Published on Friday 18 September 2009 22:11

COUNCILS in Scotland must be more radical and creative to maximise revenue if they are to overcome a looming cash crisis, according to a new report.

Local authorities across the UK will have to reduce their costs by up to a quarter if they are to weather a "perfect storm" of increased demands on public services and severe funding constraints, the accountanting firm PricewaterhouseCoopers (PwC) has warned.

PwC says this can be achieved if councils boost revenue by introducing new charges, as well as increasing current charges on discretionary services. This could include charging to hold weddings at museums, selling books in libraries, and charging extra for schools to be used out of hours.

People could also be charged more for library fines, car parking and use of swimming pools.

The report comes a day after the Scottish Government revealed it would rein back spending in 2010-11 by axing the 115 million Glasgow airport rail link and cutting social housing spending.

The PwC report said the council cash crisis was caused by cuts in central government funding and a dramatic increase in social care costs. Local authorities are also being hit hard by loss of revenue from council house sales as property prices continue to fall.

They are under pressure to make cost reductions and efficiency gains and to top up funding of the local government pension scheme.

The report surveyed about 20 chief executives at the largest councils in England and Scotland. One-third of the respondents led Scotland's biggest local authorities.

The SNP has insisted it will push through a council tax freeze, which will see local authorities in Scotland squeezed ever further.

Mike Greig, head of local government at PwC, said most councils had between 300 and 400 areas where they can charge for services.

"In the current economic climate, we predict that local councils across the UK will have to reduce their overall costs by 25 to 30 per cent," he said.

The impact of the recession on the private sector was also highlighted in the survey, with chief executives voicing concerns over the loss of income from business rates, the impact of having to safeguard unoccupied property and the implications of needing to support higher numbers of unemployed workers.

Mr Greig added: "Financial pressure is not new to the sector, but the magnitude of the approaching 'perfect storm' means that local authorities will have to consider radical solutions and challenge ingrained habits."

Meanwhile, another PwC expert predicted yesterday that weak tax receipts would push public borrowing above Treasury forecasts, resulting in the national deficit burden being pushed onto already struggling councils.

Public borrowing figures released yesterday show a budget deficit for April to August of this year of 65.3 billion, compared with 26.1bn in the same period a year ago.