Scottish Government pledges to do ‘all it can’ as councils warn of bankruptcy risk

Local government body Cosla sounded the alarm ahead of the Scottish Budget on December 19

Scottish ministers have pledged to do “all that we can within our powers” after council leaders warned there was a risk of bankruptcy for local authorities.

Local government body Cosla made the comment after Birmingham and Nottingham city councils effectively declared themselves bankrupt. Both authorities have issued section 114 notices, which prevent spending on virtually everything apart from statutory services.

In a briefing paper published ahead of the Scottish Budget on December 19, Cosla said: “There is a risk this becomes the reality for Scottish councils if the funding by Scottish Government does not match growing cost pressures.”

Joe FitzPatrick. Picture: Fraser Bremner/Daily Mail/PA Wire

To deal with the impact of inflation and the council tax freeze – announced by First Minister Humza Yousaf without first informing local authority leaders – Cosla said councils need almost £14.4 billion in the 2024/25 budget to “stand still”.

The body said: “Last year, councils faced a £1bn funding gap just to keep services going. This year there have been increased costs and greater demand on services, meaning councils have had to prioritise spend, away from libraries, community and leisure centres.”

Speaking in Holyrood, Labour MSP Mark Griffin asked the Scottish Government “what steps it is taking to protect local authorities from the risk of bankruptcy”.

Joe FitzPatrick, the minister for local government empowerment and planning, said Scotland was facing the most challenging Budget since devolution. He accused Chancellor Jeremy Hunt of delivering a real-terms cut to vital public services.

Mr FitzPatrick said: “This Government will do all that we can within our powers to ensure public finances are on a sustainable path.” He said decisions would be confirmed in the Budget document.

Mr Griffin asked what bankruptcy would mean for a local authority and whether the Scottish Government would step in.

Mr FitzPatrick accused the Labour MSP of “getting ahead of things” and insisted councils in Scotland had a different framework to the rest of the UK. However, he said “difficult choices” would have to be made.