IFS - Scottish councils may face cuts over the next two years even with 5% council tax increases

6 Feb 2023 04:14 PM

Even if Scottish councils were to increase council tax by 5% a year in each of the next two years they may face real-terms cuts to their funding.

New analysis by IFS researchers finds that even if Scottish councils were to increase council tax by 5% a year in each of the next two years (adding around £140 to the average band D tax bill), they may face real-terms cuts to their funding. Rising costs for social care services and a mooted Scottish Government moratorium on cuts to teacher numbers mean that cuts to the other services councils provide – such as housing support, libraries, leisure centres, local road maintenance and waste collection – are highly likely, even if a cut to overall funding is avoided.

Cuts to grant funding seem likely

This contrasts to the outlook for funding for English councils’ and schools. Substantial top-ups to council funding (targeted at social care) in the Autumn Statement mean that even if council tax is frozen in cash terms in England, funding for councils and schools south of the border will increase by around 3% in real terms in 2023–24, and by 2% in 2024–25. If council tax was instead increased by 5% a year, the increases would be 4.5% and 3.7% in these two years, respectively.

The next two years could therefore see a reversal of the fortunes of Scottish and English councils, compared with the last decade or so. Scottish councils saw smaller cuts than those in England during the 2010s, overall, and were able to substantially increase spending on schools and early-years childcare.

These are among the key findings of Chapter 4 of the inaugural IFS Scottish Budget Report, which focuses on Scottish councils’ funding and spending, including their spending on schools.

The report also looks at how Scottish councils’ spending has evolved since 2009–10.

Scottish schools spending

Spending on other council services

David Phillips, an associate director at the IFS, and an author of the report said:

‘Scottish councils faced smaller cuts during the 2010s than those south of the border – with schools and early-years childcare the biggest beneficiaries of this. Indeed, by 2021–22, Scottish pupils were benefiting from around a quarter more spending each than English pupils. The Scottish Government will be hoping that this starts to translate into improved educational performance soon, given concerns about Scotland’s decline in international educational rankings.  

Looking ahead though, these trends look set to start to reverse. Scottish councils’ funding is likely to fall in real terms over the next two years; at the same time, funding for English councils and schools is set to see a not insignificant funding boost. If Scottish councils are directed to protect social care and schools from cuts, that will intensify the squeeze on other services, which often bore the brunt of earlier rounds of austerity.’    

Council and school funding