Submitted by Bill Fernie
12th September 2026
When I was budget leader of Highland council a few years ago I always looked at what was happening to a few other councils budgets both to find out if we were out of line or were there other ideas we could use. A new Audit Scotland report on Glasgow City Council makes uncomfortable reading.
It describes a council facing a £109.7 million budget gap over 2026/27 and 2027/28, before the cost of introducing a new pay and grading structure has been established. At the same time, homelessness costs are rising rapidly, reserves have fallen and Audit Scotland says the council still lacks the detailed medium-term financial plan it needs to show how all these pressures will be managed.
Glasgow is not simply another Scottish council struggling with rising costs.
It is Scotland's largest local authority, serving a population of around 632,000 people, with net service expenditure of about £2.07 billion in 2024/25. Almost half of its data zones are among the 20 per cent most deprived in Scotland.
That scale matters.
So does the combination of problems now facing the council.
The £109.7 million problem
The headline figure is the projected £109.7 million budget gap.
But there is an important qualification. That calculation was made in August 2025 and assumed annual pay awards of 3 per cent. It also assumed a 2.7 per cent increase in Scottish Government funding, no council tax increase and delivery of previously agreed savings.
It did not include the cost of Glasgow's new pay and grading structure.
And that is where the situation becomes particularly uncertain.
Glasgow has already paid more than £750 million settling equal-pay claims since 2019. The council is now working towards a new pay and grading structure which is supposed to be implemented by April 2027.
However, at the time of the audit it still could not put a reliable figure on what the new structure will cost.
The eventual bill could also include backdated pay from October 2023.
Audit Scotland therefore says there is significant financial uncertainty surrounding the whole exercise.
In other words, Glasgow knows that another substantial financial commitment is coming, but does not yet know exactly how large it will be.
That makes the £109.7 million figure less a final deficit than a starting point.
Then there is homelessness
The second major problem is homelessness.
Glasgow reported net homelessness costs of £38.4 million in 2025/26. Its February 2026 budget estimated that these costs could rise to £56 million in 2026/27.
That is an extraordinary increase in a council already struggling to balance its books.
The Scottish Housing Regulator has also described the situation as involving systemic failure, saying the number of people needing help and the level of need have exceeded the capacity of the council and Glasgow's Integration Joint Board.
This is not simply a question of finding another few million pounds.
The council has a statutory responsibility to provide services to people who are homeless. If demand rises faster than the available housing and support system can cope with, the council cannot simply decide to stop providing the service.
That leaves councillors with an increasingly difficult choice: find the money somewhere else or allow pressure to build elsewhere in council services.
The audit report says Glasgow used £14.6 million from its Budget Support Fund in 2024/25 because of increased homelessness demand. The fund was reported as fully utilised during 2025/26.
Reserves are no longer a comfortable cushion
Another warning sign is the council's reserves.
Usable reserves fell by £22.7 million in 2024/25 to £193.6 million, their lowest level since 2018/19.
More importantly, unearmarked reserves were only £26.3 million at March 2025, equivalent to 1.2 per cent of net expenditure. That was below the council's own medium-term target of 2 per cent.
The council subsequently reported an unearmarked reserve of £42 million at March 2026, although that figure is still draft and unaudited.
That improvement is welcome, but it does not remove the underlying problem.
The council also established a £105 million Budget Support Fund in 2022/23. A large part of it was subsequently used to deal with the deficit position and homelessness pressures. By 2025/26 that fund was reported to have been fully used.
The easy reserves are therefore becoming harder to find.
But Glasgow is not simply failing
It would be wrong to read the report as saying that everything at Glasgow City Council is going wrong.
There has been improvement.
The council delivered £42.9 million of savings in 2024/25, achieving 92 per cent of its target. It also moved from a £45.7 million overspend in 2024/25 to a reported £1.1 million underspend in 2025/26, although the latter figure is unaudited.
Audit Scotland also acknowledges improvements in governance and financial management.
The problem is that these improvements are taking place while the council is dealing with several exceptionally large pressures at the same time.
And the auditor has been particularly critical of the absence of a sufficiently detailed medium-term financial plan.
That matters because councils cannot sensibly plan their way out of a crisis one financial year at a time.
So is Glasgow the worst in Scotland?
Not necessarily and in fact, there is a fascinating comparison with Highland Council.
Highland has had very serious financial problems of its own. Audit Scotland previously reported that Highland had the largest budget gap in Scotland, both in cash terms and as a percentage of its revenue budget, for 2024/25.
The gap was £65.6 million, equivalent to 8.5 per cent of its revenue budget.
Highland's problems are partly structural. Providing services across one of Europe's largest local-authority areas, with scattered communities, long roads and relatively small populations in many places is inherently expensive. Audit Scotland has specifically recognised the additional pressures created by Highland's size and rural geography.
But there is a significant difference.
The latest Audit Scotland annual audit of Highland found that the council had effective and appropriate arrangements for financial management, financial sustainability, leadership and governance, and Best Value.
Highland has also been working towards closing its future budget gaps. Its current three-year planning figures show gaps of £16.3 million in 2026/27, £16.2 million in 2027/28 and £14.2 million in 2028/29, although the council has put forward savings, income generation and other measures to deal with these pressures.
That is a very different situation from Glasgow.
Two councils, two very different problems
Glasgow's difficulty is partly the sheer complexity of the problems concentrated within one authority.
It has major deprivation, very high demand for homelessness services, the unresolved financial consequences of equal pay, major transformation programmes and weaknesses in long-term financial planning.
Highland's problem is more structural.
It has a huge geographical area to service, relatively dispersed communities, high transport and service-delivery costs and the particular difficulties of maintaining schools, roads, housing and other services across a rural region.
There is therefore no simple answer to the question of which council is "worst".
Glasgow may currently have the more worrying combination of financial uncertainty and social pressure.
Highland has faced some of the largest budget gaps in Scotland, but its auditors have also found stronger financial-management and Best Value arrangements.
That distinction is important.
The warning for every Scottish council
The Glasgow report ultimately tells us something much bigger than what is happening in one city.
Local government is being squeezed from several directions simultaneously.
Pay costs are rising. Demand for social care and homelessness services is increasing. Infrastructure needs investment. Inflation has increased the cost of contracts and construction. At the same time, councils are being expected to transform how they operate and find substantial savings.
There is only so much efficiency that can be extracted before difficult political choices have to be made.
Glasgow's experience also shows the danger of relying on reserves to postpone those choices.
Once reserves have been spent, the problem does not disappear. The council simply has fewer options available when the next problem arrives.
For Highland, the lesson is equally important. A relatively sound financial-management system does not remove the underlying pressures created by rural geography and a shrinking financial envelope.
For Glasgow, meanwhile, the challenge is more immediate.
The council has to find its way through a £109.7 million projected gap, deal with an unknown future pay bill, confront homelessness costs that could reach £56 million and rebuild its financial reserves, while continuing to provide services to one of Scotland's largest and most deprived populations.
That is a formidable task and perhaps the most worrying sentence in the Audit Scotland report is not the £109.7 million figure at all.
It is the conclusion that Glasgow still needs a detailed medium-term financial plan showing how it will manage these pressures.
Until that plan is in place, councillors, staff and the public know that the financial storm is coming.
They simply do not yet know exactly how large it will be.
Read the Audit Scotland report HERE