Councils face cash crisis in wake of bedroom tax

Scotland’s councils are facing a funding black hole running into tens of millions of pounds as the impact of the bedroom tax and rising populations take their toll on budgets, MSPs have been told.

Picture: PA

Staff are now facing the prospect of compulsory lay-offs, despite almost 35,000 council jobs having been axed in recent years as the climate of austerity bites across Scotland.

Housing departments are already dealing with thousands of pounds of rent arrears after the “spare room subsidy” was scrapped by the coalition government as part of a welfare overhaul this year. Dubbed the bedroom tax, it means tenants face moving to a smaller home or having their benefits cut.

Holyrood’s finance committee was told that the introduction of Universal Credit – which will combine a number of benefits into one single monthly payment – would put further pressure on local authorities, which have already seen an increase in rent arrears as a result of the bedroom tax.

Kenneth Lawrie, chief executive of Midlothian Council, said: “We are finding additional rent arrears accruing at about £14,000 a week, which is quite a lot for a small council. I think it is a shifting landscape – you need to have money set aside to deal with it as you simply don’t know what the impact will be.”

Commenting on Universal Credit, his colleague Gary Fairley, head of finance and human resources, said: “We would expect a significant increase in arrears and our ability to collect them.”

Budget pressures will also be exacerbated by Midlothian’s growing population, which is expected to increase by 10 per cent by 2035, the committee heard.

In a written submission, the council admitted that its financial settlement would “inevitably mean that services which are provided or subsidised on a universal basis will either be withdrawn or service charges will increase”.

Valerie Watts, chief executive of Aberdeen City Council, told the committee: “Financial pressures are already beginning to materialise within budgets in Aberdeen and it is expected that this will continue to grow with the introduction of Universal Credit.”

She also cited changing demographics – an ageing population combined with increasing school rolls – as a cause for concern.

Bryan Smail, chief finance officer at Falkirk Council, said the local authority projected that it will be hit by a cumulative budget deficit of £35 million over the next three years.

“Self-evidently, that will represent a major challenge for our members in having to make difficult decisions, and that process is under way at the moment,” he said. “We’ve given quite a high target saving for all services across the council, and that is to generate options.”

Pressed on which services would face cuts, Mr Smail added: “There are certain services that councils have to do that are statutory. Just because a service is statutory, that doesn’t mean it is untouchable.”