Scots braced for council tax hikes as local government set for 'largest' cut
Kate Forbes, the Deputy First Minister, insisted there is “no need” for substantial council tax rises
Scots are braced for council tax hikes after experts warned funding for local government could fall by almost £500 million over four years.
The Scottish Fiscal Commission (SFC) said local authorities will see the “largest reduction in real-terms spending” over the period 2025/26 to 2028/29, compared with other funding areas.
It came as Kate Forbes, the Deputy First Minister, insisted there is “no need” for substantial council tax rises this April.
Ms Forbes said the Scottish Budget, published on Tuesday, contains a “very fair settlement for local government”, and urged councils to recognise the ongoing cost-of-living crisis.
The Conservatives accused her of being “completely disconnected from the reality facing cash-strapped councils across Scotland”, and warned many local authorities will now feel they have little choice but to impose “more inflation-busting council tax hikes”.
A senior local authority source estimated average council tax rises of between 7 and 9 per cent across Scotland.
Cosla, the council umbrella body, has already warned the allocated funding falls short. Council leaders are due to meet on Thursday afternoon to consider their response to the Budget.
The source said there would “certainly” be increases, but they would likely not be as high as last year, when there were average rises of 9.5 per cent across Scotland. This is partly due to political sensitivities ahead of the upcoming Holyrood election in May.
Another council figure said: “There was a hope and an expectation that there would be more funding [in the Budget]”
While real-terms funding for health and social care is expected to increase by more than £1.1 billion over the period to 2028/29, the SFC said local government could expect to see a fall of £472 million.
SFC chairman Professor Graeme Roy said the Scottish Government’s “limited funding” for day-to-day spending was “primarily being pushed towards health and social care, so into the NHS” as well as into social security.
Social security spending is forecast to increase from £7.4 billion in 2026/27 to £9.2 billion in 2030/31, the SFC stated.
“Other areas are seeing much less growth or actually cuts in real-terms over the period,” Prof Roy told journalists. “The biggest one being local government.”
Dr Eleanor Ryan of the SFC said: “Local government funding is falling in real terms. It is also falling as a share of the overall day-to-day funding. And, yes, that will mean there will need to be a combination of savings and local government looking at its other funding sources.”
Councils are due to receive 26.1 per cent of the Scottish government’s resource budget in 2026/27, down from 26.4 per cent this current year. However, by 2028/29, the share going to local government could be less than a quarter (24.8 per cent) of the overall day-to-day spending pot.
On Tuesday, Finance Secretary Shona Robison said funding for local government will increase by 2 per cent in real terms in the next financial year. However, the Institute for Fiscal Studies (IFS) said this was “misleading” and the real rise is just 0.3 per cent.
David Phillips of the IFS said funding is due to be cut by more than 2 per cent a year in real terms in 2027/28 and 2028/29, and council tax increases of 8 per cent a year would be needed “just to offset this”.
Speaking to journalists after a business event in Edinburgh, hosted by Scottish Financial Enterprise and True North Advisors, Ms Forbes said: “I think local government should recognise that households are struggling, that council tax is a way for them to provide support to households, and it is a fair settlement, and so there does not need to be a significant increase in council tax.”
Conservative MSP Craig Hoy, his party’s finance spokesman, said: “Kate Forbes has shown she is completely disconnected from the reality facing cash-strapped councils across Scotland.
“For all of the SNP’s spin the funding for local councils in this year’s Budget falls way short of what they require, and councils have been put in an impossible position.
“They will now feel that they have little choice but to impose more inflation-busting council tax hikes on Scots already struggling with rising bills. Instead of this patronising put down, the Deputy First Minister should apologise to councils for short-changing them once again.”
Cosla said it had asked for £16 billion in revenue funding, including an additional £750 million for social care, but the Budget provided £15 billion. A spokesperson said: "Ahead of the Budget, we called for an additional £750m to meet pressures in social care which this Budget does not deliver.”
Ms Robison previously described the settlement for councils as “fair”, arguing it “recognises the important role of local government in the delivery of key services”.
She said: “Decisions on council tax rates will, of course, be taken locally. However, this is a reasonable deal and, given the cost-of-living pressures that we all recognise, I urge local authorities to translate this settlement into reasonable decisions on council tax.”
She also announced a so-called “mansion tax”, with two new council tax bands planned for those living in homes worth more than £1 million by April 2028.
Cosla said it was “vital that councils, as the rate setters and collectors of council tax, are involved in shaping any policy relating to council tax”.
Comments
Want to join the conversation? Please or to comment on this article.