Councils are falling hundreds of millions into red

Originally published in The Herald, 11/11/2008

THE global economic crisis has left Scotland's councils with shortfalls running into hundreds of millions of pounds, with the country's biggest authority warning today that it needs to find additional savings of more than £3m a month.

Glasgow, Edinburgh, and Aberdeen alone face a combined deficit in the current financial year of more than £150m.

Describing the convergence of the downturn and rising inflation as "the perfect storm", Glasgow City Council will use £144m generated and saved during the construction boom to meet shortfalls over the next three years and ensure planned projects go ahead.

The council has already identified savings this year of £40m, but needs to find an extra £15.5m by the end of the financial year in March, citing a fall in planning revenue of £1m a month, the drying-up of other streams such as parking fines, rising fuel costs and increases in this year's staff pay award.

Projected savings between 2009 and 2011 are also being revised upwards, from £50m to £53m, although this will be re-examined in light of the economic situation.

Within the next two weeks, senior executives will bring forward proposals on where cuts could be made. Several senior officials are expected to be made redundant, but the council insists no staff will be forced out.

Officials also say that, unless there is a significant upturn in the economy within the next three years, using its capital receipts "silver bullet" now could leave it vulnerable by 2012.

Among the key elements of the massive building programme due for completion by or around that date are 2014 Commonwealth Games venues, the M74 extension, the East End Regeneration Route and a large number of care homes and primary schools. Without the injection of capital savings, officials argue, even such high-profile projects could be in jeopardy.

The details come less than a fortnight after Glasgow City Council leader, Steven Purcell, demanded a review of the concordat between the Scottish Government and local authorities and said the SNP administration at Holyrood must provide more money or cut the number of policies they expect to be executed.

At least 12 councils say they do not have enough money to implement all of the concordat, which involves the government giving authorities greater autonomy and a higher cash allowance in return for freezing council tax and implementing policies on free school meals, class sizes and additional police officers.

In Edinburgh the downturn in the construction and property sectors has cut projected income by £20m across 2008-09, and Aberdeen needs cuts of £70m, up from the previous £50m. North Lanarkshire has £12m in additional cost pressure, Borders faces an £8m deficit; and Highland expects a £19.6m shortfall.

Last night, Mr Purcell again urged the government to "look again" at the financial settlement and to "redirect all efforts to supporting businesses and maintaining core public services".

The authority has frozen council tax for the past three years but, if it were to break the concordat, the loss of central funding as a result would force it to increase the levy by a minimum of 3.2%.

Glasgow city treasurer Stephen Curran added: "The perfect storm of inflation added to the credit crunch means there are significant pressures on our budgets which we will have to deal with. Over recent years we have taken difficult decisions which have allowed us to put money in the bank for a rainy day and it's certainly raining now."

Finance Secretary John Swinney told MSPs yesterday that councils had been given more than adequate resources to cover any pressures on budgets from the council tax freeze and national policies such as free school meals and smaller class sizes.