Councils have been warned services are at risk of becoming unsustainable amid ongoing budget cuts unless radical reforms are put in place, a watchdog has found.

Audit Scotland found “unprecedented financial and service demand pressures” have led to an “urgent need” for councils to transform how they operate if they are to “sustainably maintain services”.

Glasgow City Council set a budget this year in the face of a spending gap of more than £100 million over three years.

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Services were cut and job losses including hundreds of teachers planned to deal with the shortfall.

Now in a new report, Audit Scotland said that Scottish Government demands are a barrier to change and state this year Scotland’s 32 councils face more than half a billion pounds shortfall between spending expectations and the income they generate and receive.

Unless councils together with the Scottish Government agree on and adopt major change, the watchdog said services people rely on will become unviable.

The report states: “As financial and service demand challenges continue to deepen, councils know they urgently need to transform how they deliver services. Transformation in local government has been happening for decades, but a step change is now urgently required.

“Councils face barriers to transformation and progress has been slow, but reform is vital and must happen at a greater pace and scale. Not doing so puts the sustainability of vital public services at risk.”

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The report authors found that the Scottish Government imposing national priorities on councils limits their ability to make decisions based on local needs.

They stated: “Funding for children’s services, education and adult social care has been protected and increased due to national policy directives. Remaining services have consequently borne a disproportionate level of spending reductions.”

The organisation does not specify what action councils must take instead notes they are all different.

In Glasgow, it has been suggested previously that the council will not be able to provide some services it traditionally has.

The council is also keen to explore new ways of generating income like a tourist tax or congestion charge.

Audit Scotland states: “We recognise that there is no single, concise definition of transformation in a local government context.

“Transformation means different things for different councils, and individual councils must have the flexibility to transform their service delivery appropriate to the needs of their communities.”