260817 ARS Board Audit Scotland LGBudgets 2627
Renfrewshire Council · 17 August 2026
Back to Audit, Risk and Scrutiny Board — 17 August 2026 and its agenda
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PUBLIC ___________________________________________________________________ To: Audit, Risk and Scrutiny Board On: 17 August 2026 ___________________________________________________________________ Report by: Director of Finance and Resources ___________________________________________________________________ Heading: Audit Scotland: Local Government Budgets 2026/27 ___________________________________________________________________ 1. Summary 1.1 Audit Scotland published its report Local Government Budgets 2026/27 in June 2026; this is the third such annual report summarising the key issues from their analysis of budgets agreed by Scotland’s 32 councils for 2026/27. This paper provides an overview of that report. ___________________________________________________________________ 2. Recommendations 2.1 It is recommended that members of the Audit, Risk and Scrutiny Board: • Note the contents of this report; • Note that this report will also be provided to the IJB Audit, Risk and Scrutiny Committee for their meeting on 14 September 2026. _________________________________________________________ 3. Background 3.1 This is the third annual Audit Scotland briefing on Local Government Budgets, which provide an analysis of council budgets across Scotland, as well as how councils are addressing the challenges faced in achieving a balanced budget and longer-term financial sustainability.
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PUBLIC Their latest briefing, looking at budgets for 2026/27, also covers the pressures arising from social care demand, and the importance of meaningful consultation with communities as councils consider savings options. 4. Key Findings of the Local Government Budgets 2026/27 Briefing Scottish Government funding to councils 4.1 The Audit Scotland briefing notes a slight increase in real terms funding for Scottish councils in 2026/27 and that the overall settlement for the year is likely to change through the autumn and spring budget revisions, as it has in previous years. Total revenue funding in real terms for the sector rose from £14,686m in 2025/26 to £15,687m this year, whilst total capital funding fell from £783m to £669m. 4.2 The report notes that a number of previously ring-fenced grants have been baselined into the General Revenue Grant (GRG) in recent years, in line with the principles of the Verity House Agreement. The report also states that an increase in non-domestic rates (NDR) has driven the increase. However, the auditors also note that GRG must still be used for a number of existing commitments (such as the allocation for teacher pay) and so are limited in their flexibility. 4.3 Audit Scotland report that the Scottish Spending Review, published alongside the draft 2026/27 Scottish Budget, shows a reduction in revenue funding for local government in 2027/28 and 2028/29, with authors concluding that councils will need to look for additional savings to remain financially sustainable in the face of cost pressures and continued rising demand for services. Capital funding is also set to reduce further. The Spending Review deals with overall spend and does not indicate what future settlements would be for each council. Council budgets 4.4 Almost 60% of council funding comes from the GRG, with most of the remainder coming from Council Tax or non-domestic rates. In 2026/27, almost 1% of funding will be through use of remaining reserves. 4.5 In their report, Audit Scotland note that the allocation of funds to Integration Joint Boards accounts for around 24% of all local government revenue spending in 2026/27. They refer to earlier reports on “the critical financial pressures facing IJB”; the combined savings
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PUBLIC necessary in 2026/27 total £179m, of which £103m is within social care services. The report notes that the total reserves held by IJBs is now less than the combined budget gap. Additional uplifts from partner organisations (councils and health boards) can only provide short-term stability. The report further notes that Perth and Kinross IJB have approved a Financial Recovery Plan and that North Ayrshire Council has moved to a ‘critical only’ threshold for adult social care support as a means of managing financial pressures. 4.6 The Audit Scotland briefing provides a chart showing the scale of budget gaps as a percentage of General Fund Revenue, with only one council (South Lanarkshire) not facing a deficit. Of the remainder, Renfrewshire Council has the second lowest forecast budget gap for 2027/28 as a percentage of the revenue budget; the estimated gap of £5m equates to less than 1% of total revenue. At the other end of the scale, East Dunbartonshire has a potential gap of £23.1m, over 6% of its revenue budget. The cumulative budget gap over the next three years, up to the end of 2028/29 for Scottish local authorities is projected to reach almost £1bn. 4.7 More than one-third of funding to address the budget gaps will come from increases to Council Tax, and a further 27% from recurring savings. Almost 20% will come from use of reserves. In considering the measures to address budget gaps, the auditors stress that non- recurring measures, such as leaving posts vacant or delaying expenditure, do not support long-term sustainability and they believe councils must prioritise recurring measures in order to deliver lasting savings. The report states that the ongoing use of reserves to fund investment or address financial pressures is not sustainable. 4.8 The report notes that the savings measures cumulatively are worth almost £180m, the majority of which are recurring savings. Savings continue to be weighted towards corporate services, environmental services, economic development and culture and leisure in order to protect statutory services like education and social work. 4.9 All 32 councils increased Council Tax in 2026/27 with percentage increases ranging from 4% to 10%. All councils also increased their fees and charges for those services which are chargeable. Seventeen councils also introduced new fees and charges, though three reduced the number of services they charge for. The report states that around 6.7% of council revenue funding is raised from these fees and charges.
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PUBLIC 4.10 Capital expenditure continues to be largely funded by borrowing, and this is also the case for spending from the Housing Revenue Account. 4.11 The report includes a useful diagram setting out some of the factors considered by councils when projecting their future revenue budget gaps, including future pay settlements, expected inflation, and expected levels of demand for services. Consulting with Communities 4.12 The Accounts Commission briefing highlights that as councils continue to make difficult decisions, it is more important than ever that local communities are involved in the decisions that impact their services. 4.13 The briefing notes that 27 councils consulted with residents on their 2026/27 budgets. Most outlined the financial pressures they were facing and sought views on priorities, and/or on possible savings options. Most engagement was conducted online though there were also examples of in-person engagement through community meetings, roadshows and workshops. Renfrewshire Council conducted its Resident Research programme in 2025 and findings were reported to the Leadership Board and are also available on the Council’s website. 4.14 Auditors consider that councils should use a range of methods in their engagement and consultation activity to ensure wider participation and the inclusion of those groups who are less-heard or under-represented. ___________________________________________________________________ Implications of the Report 1. Financial – none, though the report references national trends in relation to local government finance 2. HR & Organisational Development - none 3. Community/Council Planning – none 4. Legal - none 5. Property/Assets – none 6. Information Technology – none
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PUBLIC 7. Equality & Human Rights - the recommendations within this report have not been assessed in relation to their impact on equalities and human rights as the report concerns a national briefing on local government finance and is for noting only. 8. Health & Safety – none 9. Procurement – none 10. Risk – none 11. Privacy Impact – none 12. Climate Risk –not applicable 13. Children’s Rights –not applicable. 14. COSLA Policy Position –not applicable. _______________________________________________________ List of Background Papers None ___________________________________________________________________