The commission welcomes the opportunity to discuss our 2016 overview report with the committee. Scotland’s councils have continued to balance their budgets each year but, with their revenue funding for the current year falling by another 5 per cent in real terms while demand for services continues to grow, they now have to think seriously about greater changes in the way that they do things. They are now working with the national health service through the new health and social care integration joint boards, and the Community Empowerment (Scotland) Act 2015 requires councils to involve local people and communities much more in local decisions, plans and services.
The scale of the challenge in 2016-17 and beyond has significantly increased. Many councils are reporting a budget shortfall—that is, a shortfall between their projected income and their expenditure in future years. Councils have already reduced their spending by making incremental savings to existing services, typically by reducing their workforce or increasing charges. However, set against the scale of challenge that councils face, those solutions are neither sufficient nor sustainable. In making more significant changes, councils must have clear priorities for the longer term and make plans for the next four or five years, not just the next two or three. Political pressures from the upcoming elections might make that all the more difficult.
Last year, the commission said that councils had been dealing with reductions in income largely by cutting the number of employees, and that has continued. However, employee reductions must be made in the context of effective workforce planning so that councils ensure that they retain or develop the capacity, skills and knowledge that will help them to deliver services differently in the future.
Despite the reduction in spending, indicators for 2014-15 show that councils improved their performance in some areas, including educational attainment, housing quality and waste recycling, although customer satisfaction with some services—notably social care—fell. Indicators for 2015-16 have yet to be reported.
The recommendations in our report are directed at senior managers and councillors, whose role continues to be more complex and demanding. Yet again, we highlight councillors’ need for continuing training and development and good information about finance and services, including long-term financial plans.
We also underline the importance of having scrutiny and governance that reflect the changes that councils are making in how they deliver services, including health and social care integration. The public needs to have confidence that their councils’ scrutiny arrangements are transparent, independent and effective. If they are not, the public interest is not met.
We intend our overview report to be a helpful summary of evidence from the wide range of local government audit work that the commission oversees. This year marks a difference in how we report that. We will produce two complementary reports: first, later this autumn we will provide a financial overview based on annual accounts and, secondly, in the spring we will provide a wider overview drawing on all audit work. We are of course always willing to share our work with the committee to help it to fulfil its responsibilities.
My colleagues and I are happy to answer any questions.