Scottish Government Claims Record Funding For Councils - While True in Cash Terms Inflation Eats it Back Cuts to Come

15th January 2026

A record cash settlement for councils hides the reality. In real terms the result means Scottish councils are likely still to make cuts in services.

Headline Funding vs. Real Terms
Record cash settlement: The Scottish Government says councils will receive £14.9 billion in 2026-27, the highest ever in cash terms.

Inflation impact: The increase is largely explained by inflation and pay pressures. In real terms, the uplift is much smaller, meaning councils don't actually gain much new spending power.

Council warnings: COSLA (Convention of Scottish Local Authorities) has already warned that despite the "record" figure, councils face "unprecedented financial challenges" and will still need to make cuts.

What Councils Are Saying
Deficits remain: Many councils project multi-million-pound shortfalls even after the settlement.

Cuts to services: Libraries, leisure centres, and social care are among the areas most at risk.

Council tax pressure: Councils may be forced to raise council tax or introduce new charges to plug gaps.

The Reality
The government's claim of "record funding" is technically true in cash terms, but once inflation is factored in, councils are still struggling. The settlement doesn't eliminate deficits, and local authorities are warning of service reductions and financial instability.

Highland Council is forecasting a £16.3 million budget gap in 2026/27, despite the Scottish Government's claim of "record" funding for councils. Inflation and rising costs mean the headline settlement does not prevent deficits, and Highland is among those warning of cuts to services.

Council Deficits Across Scotland
Highland Council: Forecasts a £16.3m gap in 2026/27, £16.2m in 2027/28, and £14.2m in 2028/29.

National picture: COSLA has warned that councils across Scotland face "unprecedented financial challenges" even with the record cash settlement.

Audit Scotland findings: Reports highlight that councils are struggling to balance budgets, with cumulative gaps projected into the late 2020s.

Government vs. Council Perspectives

Scottish Government £14.9bn for councils in 2026-27, "record funding"
True in cash terms, but eroded by inflation
Councils

(e.g. Highland)
Facing multi-million deficits despite settlement Cuts to services and tax rises likely

Audit Scotland
Notes structural financial pressures
Long-term sustainability concerns

Risks & Trade-offs
Service reductions: Libraries, leisure centres, and social care are at risk.

Council tax pressure: Councils may raise local taxes or introduce charges.

Geographic impact: Highland's vast rural area (9,906 square miles, population 236,000) makes service delivery costly.

The Scottish Government’s “record funding” claim is accurate in cash terms, but real-terms spending power is flat or falling. Highland Council exemplifies the problem: despite headline increases, it still faces £16m+ deficits and warns of service cuts.