250317 ARS Board Audit Scotland LG Financial Bulletin 2324
Renfrewshire Council · 17 March 2025
Back to Audit, Risk and Scrutiny Board — 17 March 2025 and its agenda
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___________________________________________________________________ To: Audit, Risk and Scrutiny Board On: 17 March 2025 ___________________________________________________________________ Report by: Director of Finance and Resources ___________________________________________________________________ Heading: Audit Scotland Local Government Financial Bulletin 2023/24 ___________________________________________________________________ 1. Summary 1.1 Each year, Audit Scotland prepare a Local Government in Scotland Financial Bulletin on behalf of the Accounts Commission. These provide a high-level analysis of the financial position of Scottish councils. The latest bulletin, covering the financial year 2023/24 was published in January 2025. This report provides an overview of that latest bulletin. 1.2 As in previous years, the bulletin sets out what it believes are the challenges facing local government finances and assesses the sustainability of funding. 1.3 The report has a strong focus on budget gaps, and the work that the Accounts Commission believe is required in relation to medium and longer-term transformation in order to address these gaps. The bulletin makes reference to a recent Audit Scotland publication on transformation, and a paper on that report was presented to the Audit, Risk and Scrutiny Board in January 2025. ___________________________________________________________________ 2. Recommendations 2.1 It is recommended that members of the Audit, Risk and Scrutiny Board:
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• Note the contents of this report. _________________________________________________________ 3. Background 3.1 Audit Scotland bases these annual bulletins on the annual accounts submitted by each local authority. For this year’s bulletin, they have reviewed the accounts of 30 councils. 3.2 These annual bulletins are intended to provide a sense of broad trends within the local government finance sphere. 4. Key Findings of the Accounts Commission Report Council Funding and Budgets 4.1 The bulletin provides details of financial settlements in recent years, and notes that the 2023/24 settlement was lower in real terms than pre-pandemic, though it adds that 2024/25 reflected a real increase. Scottish Government funding to local government in 2023/24 was £13.7 billion, plus an additional £1.6 billion at the autumn revision specifically for teacher salaries and to support transfer of duties from other government portfolios. 4.2 The Accounts Commission calculated that ring-fenced and directed funding accounted for 21% of the total. They note this was a reduction and was due to the Verity House Agreement; a number of previously ring-fenced items were moved to the general revenue grant including monies for early learning and childcare, free personal and nursing care, social care living wage funding, and free school meals. 4.3 The Accounts Commission looked at the budget gaps of 29 local authorities and found a collective gap of at least £459 million for 2023/24. Exhibit 2 within the Accounts Commission report shows how each council intended to bridge that gap. 4.4 The bulletin notes the real terms reduction in capital funding, partly due to the completion of the capital element of early years expansion. As a consequence, councils are more reliant on borrowing or on transfers from revenue budgets to fund capital spend. Financial Performance
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4.5 Section 2 of the bulletin covers the financial performance of local authorities. It notes a real terms decrease in the level of funding once sources of income other than the grant are considered. The Accounts Commission states that increases in income have not kept pace with inflation and that total funding and income in 2023/24 had fallen back to 2019/20 levels. 4.6 The bulletin also notes that the proportion of income raised from Council Tax has been static for the last five years at around 13% of total income. Income from fees, charges and other customer elements fell during the pandemic and has not yet recovered to pre-pandemic levels. The Accounts Commission state that several councils identified the limited capacity to increase income generation as a risk to their financial sustainability. 4.7 Nine councils reported an overspend in their revenue budget in 2023/24, with workforce issues and income identified as contributing factors. Exhibit 4 in the Accounts Commission report sets out common areas of underspend and overspend. 4.8 The collective savings to be delivered in 2023/24 are given as £362 million, and the report notes that 11 councils achieved or exceeded their full savings target, 13 achieved at least 80% of their target amount, four achieved less than 80% of their target, and 2 had no savings target. The diagram below, taken from the bulletin, shows the proportion of savings achieved in each council area. 4.9 The Accounts Commission highlight that in their previous financial bulletin, they had recommended councils prioritise recurring savings, and in this year’s bulletin they state that it is difficult to determine the extent to which this has been achieved, due to what they say is “a lack of detail and transparency in reporting on savings performance”. They also found that not all councils include progress with savings in their commentary within annual accounts. It is the view of the Accounts Commission that council reporting should be more transparent about the nature of savings and the potential impact on services. 4.10 In relation to capital spend, it is noted that this was lower than planned in 25 council areas. The reasons included supply chain issues, contract and legal negotiations, and unexpected issues arising during the course of works.
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Proportion of savings achieved, 2023/24 4.11 The Accounts Commission highlight two general issues in relation to school estates; firstly the need for councils to borrow to fund new schools and secondly, a number of Private Finance Initiative (PFI) schools are nearing the end of their contracted terms. Financial Position and Outlook 4.12 The report notes that usable reserves in the whole sector decreased by 5% in 2023/24, although they are higher than before the pandemic. The use of financial flexibilities (e.g. reprofiling debt) has been given as a key reason for this. The Accounts Commission states that the use of reserves to support service spend is not sustainable. 4.13 Recent changes within the Strathclyde Pension Fund have resulted in a short- term boost to finances for the 12 council members (including Renfrewshire) of
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the scheme, with employer contributions temporarily reduced from 19.3% to 6.5% in 2024/25 and 2025/26, and to 17.5% in 2026/27. Other pension funds have made smaller reductions to the contribution. 4.14 As in previous reports on local government finance, the Accounts Commission highlight demographic changes as a challenge for local government. Renfrewshire’s population has increased significantly since the 2011 census, rising from 174,908 to 183,874. This represents a 5.1% increase on 2011, which is well above the national increase of 2.7%. In line with the national picture, Renfrewshire has an ageing population and the impact of this can be seen in other census trends – the increasing number of single-person households, decreasing populations in particular areas, and a growing proportion of the population which is retired. The population change is being driven by net inward migration (people moving to Renfrewshire from other parts of Scotland) rather than increased birth rates. The latest census also identified that a higher proportion of Renfrewshire residents describe their health as ‘bad or very bad’ compared with the national average. Consideration of the latest population data will continue to inform strategic and operational planning across the Council. 4.15 The Accounts Commission consider changing demographics to be one of the drivers of increased demand for local services, which has a consequent impact on the level of spend required. They also highlight new policy areas requiring significant investment, uncertainty on future funding and inflationary pressures as continuing challenges for councils. They continue to state the importance of larger scale and faster delivery of transformation plans to support financial sustainability. ___________________________________________________________________ Implications of the Report 1. Financial – none, though the report references national trends in relation to local government finance and provides local context. 2. HR & Organisational Development - none 3. Community/Council Planning – none 4. Legal - none 5. Property/Assets – none
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6. Information Technology – none 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 bulletin 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 ___________________________________________________________________ Author: Lisa Fingland, Policy Manager, lisa.fingland@renfrewshire.gov.uk