SCOTTISH councils face an “uncertain” financial future with “significant challenges ahead” as authorities attempt to spark a recovery from the pandemic, a spending watchdog has warned.

A stark report published by the Accounts Commission revealed there had been a 4.2 per cent real terms reduction in funding form the SNP Government between 2013-14 and 2020-21 when all Covid-19 related funding is removed.

The document stressed that councils in Scotland would have to face the impacts of the pandemic as well as issues which pre-date it, such as poverty, in the future.

Local government funding is announced annually by SNP ministers, which the Accounts Commission said “makes it challenging for councils to plan and budget effectively for the medium and longer term and creates uncertainty over future funding”.

The report added: “The long-term funding position for councils remains uncertain, with significant challenges ahead as councils continue to manage and respond to the impact of Covid-19 on their services, finances and communities.

“In the longer term, uncertainty creates challenges for councils as they seek to address cost and demand pressures that existed before the impact of Covid-19, as well as develop long-term plans with their partners to address complex issues such as child poverty and inequalities, to improve economic growth and to deliver Scotland’s net-zero ambitions.”

Auditors have warned that all 32 of Scotland’s local authorities will have to revise their medium term financial strategies to take into account the impact of the pandemic.

William Moyes, chairman of the Accounts Commission, said: “Councils face serious challenges, driven by financial constraints, increasing demands on service and resource.

“Alongside these longer-term issues are the financial uncertainties caused by the impacts of Covid-19, including loss of income and additional costs.

“Now, as we look ahead and beyond council elections in May, councillors must determine how to restart services, deliver differently, save money and empower communities.vThey must do so alongside focusing on national priorities, including climate change.

“Whilst councils must address longer-term financial planning, having in place funding certainty – beyond a one-year settlement from the Scottish Government – remains a critical issue.”

Previous calls have been made for the Scottish Government to set out multiple-year spending plans to allow for local authorities and other services to plan ahead.

Scottish Conservative local government spokesman, Miles Briggs, said the report “paints a stark picture” of the challenges faced by councils.

“A 4.2% real-terms cut is completely unsustainable – and when increasing areas of funding are ring-fenced by the SNP, councils are being forced to slash spending in other areas,” he said.

Mr Briggs added: “The SNP-Green coalition have cynically passed the buck to local authorities to either cut services or raise council tax to make ends meet because they are unwilling to give them the resources they need.

“The Scottish Conservatives are committed to a fair funding deal for councils, which would address the uncertainty over future funding for local authorities, which the Accounts Commission also highlight as a serious problem.”

Labour’s local government spokesperson, Mark Griffin, said: “This sobering report lays bare the scale of the damage the SNP have inflicted on local government over the years.

“Years of neglect under the SNP have left bins overflowing, roads in disrepair and libraries closing, and, with an uncertain financial future, things are set to get worse.

“Essential services are at breaking point and our economic recovery hangs in the balance."

A Scottish Government spokesperson said: “Despite the challenging financial position of recent years, local government has been treated very fairly.

"The Scottish Government is committed to protecting the Health Budget which has a direct impact on all other areas of the Scottish Budget, including local government. Despite this, local authority revenue funding increased by 3.6% in cash terms between 2013-14 and 2019-20.

“The overall local government 2022-23 funding package of almost £12.7 billion represents an increase of more almost £1.1 billion, or 6.3% in real terms, compared with 2021-22. This comes against a cut to the Scottish Government’s overall budget of 5.2% in real terms, due primarily to UK Government funding reductions.

“We are developing multi-year spending plans and will publish the findings of the Resource Spending Review in May 2022. This will include a review of all ring-fenced funding. While ring-fenced funding is for increased investment in services such as our schools and nurseries, local authorities have autonomy to allocate almost 93 per cent - £11.8 billion - of the funding we provide in 2022-23, plus all locally raised income.

“Our shared vision and outcomes for Covid Recovery have been agreed with Local Government. Together, with business and the third sector. Work is being co-ordinated to change the way we think about services so that they are focused on meeting the needs of individuals, and working differently across boundaries to achieve our priority outcomes for recovery.”