Thank you, convener. On behalf of the Accounts Commission, I welcome the opportunity to discuss our 2017-18 local government financial overview report. Our findings are similar to those of last year. Scotland’s councils have continued to manage their budgets well while facing an increasingly complex range of challenges and continuing pressure on finances.
In 2017-18, revenue funding to councils reduced by 2.3 per cent in real terms and 0.6 per cent in cash terms. However, that reduction was largely offset by increases in council tax and in fees and charges. Councils used savings and reserves to manage budgeted funding gaps of £0.5 billion, or 4 per cent of net expenditure.
The impact across services has varied, and increased spending in education and social work has been balanced by reductions in other services. Councils are having to make hard choices about services. The position varies from council to council, but overall it is clear that there is a continuing need to make major changes to how services are provided.
Last year, we highlighted the risks for councils that were planning to use significant amounts of their reserves to manage funding gaps. I am pleased that this year, although overall reserves have continued to reduce, no council is planning to use its reserves at a level that risks its financial sustainability in the next two to three years.
Scottish Government revenue funding for 2018-19 has increased by 0.2 per cent in real terms, and councils expect to manage smaller funding gaps of £0.3 billion over that period. However, “Scotland’s Fiscal Outlook: The Scottish Government’s Five Year Financial Strategy”, which was published in May 2018, identifies greater future uncertainty and indicates likely further reductions in funding.
Another significant challenge for councils concerns the financial issues that are associated with integration joint boards. Our report notes that, while funding to the IJBs increased by 3 per cent in 2017-18, which included additional funding from the national health service, the majority of IJBs have underlying financial sustainability issues. Without year-end support from both the NHS and council partners, 20 of the 30 IJBs would have reported deficits. Last month, we published a report entitled “Health and social care integration: Update on progress”, which highlights areas for improvement that include financial management and financial planning.
My colleagues and I are happy to answer questions.