SCOTLAND'S councils should brace themselves for cuts of £700million in the next few years, one of the country's leading economic think tanks has warned.

The Fraser of Allander Institute said a combination of a reduction in Scotland's block grant from Westminster and the cost of SNP key priorities meant local government cash would go down by 10 per cent in real terms between next year and 2020.

In a new report released in advance of this week's Scottish Budget, the Institute said: "In the context of the local government resource grant, a cut of 10 per cent is equivalent to just under £700m."

The claims come as Scotland's biggest local government body makes a renewed appeal to ministers not to slice further funding from councils. which last year saw their revenue grant reduced by around £350m.

Cosla said that while cuts to councils were too often "seen in the abstract", the reality on the ground meant reductions in teaching assistants, "in levels of care for all our elderly relatives, the homeless as a freezing winter starts to bite, and cuts to gritting of the roads at a time of freezing temperatures".

Ministers have in recent days pointed to Audit Scotland report which claimed local government funding reflected the budget cuts imposed on the Scottish Government by Westminster and that councils had been treated fairly.

In its report, commissioned by the country's four breakaway Labour-led councils to looks at the Government's funding formula for allocating cash to local authorities, Fraser of Allander said the burden facing town halls during the life of the current parliament would be as severe as recent years.

The Scottish Local Government Partnership said the report "blows a hole in Nicola Sturgeon’s claim that local authority grant settlements have remained broadly the same".

The group has also accused the Scottish Government of "piling on more

statutory responsibilities without giving councils any additional cash".

The report states that over the period from 2016/17 to 2019/20, the Scottish Government’s block grant from Westminster would fall by 3.1 per cent, the equivalent of £800m.

But with the SNP needing to keep its 2016 manifesto commitments to increase NHS spending by £500m more than inflation over five years, maintain police spending in real terms, and significantly expand the provision of free childcare by an additional £500m, councils were in the firing line for cuts.

It said: "Assuming that these commitments translate into actual spending priorities when the Scottish Government publishes its draft budget on 15th December, the implication for remaining ‘unprotected’ portfolios is likely to be substantial.

"Within the context of a budget that is falling by three per cent in real terms, these policy commitments will imply that unprotected portfolios will face cuts of 10 per cent (3.5 per cent per annum) on average.

"In the context of the local government resource grant, a cut of 10 per cent is equivalent to just under £700m.

"Of course it will be for the Scottish Government to decide how to allocate any remaining resources over remaining portfolios. But given that local government accounts for the lion’s share of unprotected portfolios, some degree of real terms cut seems inevitable."

On the funding formula it adds: “The system has remained largely unchanged since 2008 – as has the pattern of allocations – and it is unclear whether it remains fit for purpose in a substantially different funding environment."

SLGP convener Jenny Laing said: “The First Minister has tried to pull the wool over the eyes of the Scottish people by claiming that the funding settlements for local authorities have remained roughly the same over the past five years, but this report shows that this simply isn’t true.

“Local government finances are in meltdown as the Scottish Government piles crippling cuts onto councils while expecting us to deliver the same critical services for ordinary hard-working families.

“Furthermore, ministers are using a funding formula which hasn’t changed since 2008. With all the drastic reductions, it’s clear that this system is not fit for purpose and needs to be reviewed urgently.

“The SNP Budget this week will heap more pain on to local government – but it’s the ordinary folk of Scotland who will ultimately suffer.”

A Scottish Government spokeswoman said: “Audit Scotland last week published their independent report into council finances and found that local government had experienced the same reduction in funding as was imposed on the Scottish Government by Westminster. It is therefore clear that local government has been treated very fairly despite the cuts to the Scottish Budget from the UK Government.

“Local government finance settlements were maintained in Scotland on a like for like basis over the period 2012-16 with extra money for new responsibilities resulting in total settlements of £10.8 billion in 2014-15 and of over £10.85 billion in 2015-16.

“Taking into account the addition of the £250 million to support the integration of health and social care, the overall reduction in 2016-17 funding equates to less than one per cent of Local Government’s total estimated expenditure in 2016-17. We remain committed to engaging COSLA in further dialogue on a range of issues.

“The Finance Secretary will publish the Scottish Draft Budget later this week that will support our economy, tackle inequality and provide high-quality public services for all.”