After a long period of rising spending on schools, a more difficult future for Scottish local authority budgets has been laid out in a new report.
Analysis by the Institute for Fiscal Studies (IFS) think tank, published today, shows cuts to council budgets in Scotland have been less severe than those in England over the past decade, particularly in relation to schools, but these trends on either side of the border could flip in the coming years.
The IFS report predicts “a reversal of fortunes for Scottish and English councils and schools”.
The report comes after the Scottish government has indicated that action would be taken to stop cuts to teacher numbers - with an announcement potentially being made by education secretary Shirley-Anne Somerville on Tuesday - meaning that education cuts would have to be found elsewhere.
Under Scottish government Budget proposals - which passed the first parliamentary hurdle yesterday - councils will be given full autonomy to set council tax rates.
However, Scottish councils would still face a real-terms cut to funding even if council tax is increased by 5 per cent, the IFS predicts in its report.
IFS associate director David Phillips 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.”
The report also highlights that real-terms spending on early-years childcare and schools in Scotland is likely to have been around 19 per cent above 2009-10 levels in 2021-22, which “partly reflects a big boost to teachers’ pay in Scotland in 2019-20, as well as...expansion of free early-years childcare”.
Mr Phillips warned, however, that trends in Scotland “look set to start to reverse”.
He added: “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.”
The IFS report shows school spending per pupil aged 3-18 is estimated to have been 17 per cent higher in real terms in Scotland in 2021-22 than in 2009-10; in England, it is estimated to have been 2.5 per cent lower than in 2009-10.
The report states “Turning to the future, it appears that after several years of real-terms increases, Scottish councils’ funding may fall again in real terms. For example, after adjusting for in-year top-ups to council funding in 2022-23 and stripping out funding for new burdens next year, grant funding for Scottish councils is set to fall by around 1 per cent in real terms.
“Even 5 per cent council tax increases would not be enough to fully offset this, and would still leave funding around 0.3 per cent lower in real terms in 2023-24 than in 2022-23.”
The IFS report adds: “Given current plans and forecasts, the next few years are therefore likely to see something of a reversal of fortunes for Scottish and English councils and schools.”
And 2024-25 is “likely to be even tougher”, it states.
The IFS also looks at spending trends during Covid and states: “The pandemic years saw councils in Scotland and England receive substantial additional funding, a significant part of which they have paid into reserves. School spending per pupil started to increase again in England, but not as much as in Scotland, further widening the gap in spending per pupil.”
The report adds: “Looking ahead, the picture is different: Scottish councils and schools look set to see smaller increases in funding between 2022-23 and 2024-25 than their English counterparts.”
A spokesperson for the Scottish government said that its “settlements from the UK government have suffered a decade of austerity with average real-terms cuts of over 5 per cent, equating to a loss of £18 billion”.
The spokesperson added: “Despite this, Scottish ministers have listened to councils and are increasing the resources available to local government in 2023-24 by over £570 million, a real-terms increase of £160.6 million or 1.3 per cent, compared to the 2022-23 budget figures.”
Scottish Conservative local government spokesman, Miles Briggs, said council budgets had been “deeply damaged by years of savage cuts and systemic underfunding”.
He added: “The fact that local authorities may still face real-term cuts, even after a 5 per cent tax increase, lays bare just how bad the situation actually is - even if they attempted to hammer hardworking Scots, it would not come close to fixing the black hole in their finances.”
The IFS report can be read here.
