Councils will need to make more cuts to services to remain sustainable when they set their budgets this year, according to a financial watchdog.

Audit Scotland, in a new report, said “difficult decisions” are needed and specified cuts as a way of dealing with deficits.

Meanwhile, Cosla, the organisation representing councils said it backs up what it has been saying for years and that “long-term solutions” are needed.

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The Accounts Commission report for Audit Scotland found last year councils faced a growing spending gap, despite more funding from the Scottish Government.

It also said there has been a reduction in the proportion of funding for councils over the last decade.

It stated more demand for services related to the cost of living added to rising inflation and maintenance costs for councils.

The report recognised the pressures remain this year.

Ronnie Hinds, Interim Chair of the Accounts Commission, said: “There is intensifying pressures on council finances and services.

“Given the funding position for councils, there is increasing reliance on reserves and savings to deliver balanced budgets.

“This means councils are already making difficult decisions about future service delivery and the level of service they can afford. Having leadership and a workforce with the right skills will be crucial to deliver on this. 

“Urgent progress is needed to agree a funding framework between Scottish and Local Government. This will bring much-needed clarity and certainty of budgets for future years.” 

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Councils will begin setting their budgets next month.

Cosla said the report recognised that last year total revenue funding from all sources fell by £619 million (2.8 per cent) in real terms to £21.3 billion compared to the previous year.

Resources Spokesperson Councillor Katie Hagmann said: “The picture painted by the Accounts Commission illustrates why COSLA is lobbying hard on the detrimental impact to communities of the Draft Scottish Government Budget, currently going through the Parliamentary process.  

“The trends highlighted by the Bulletin are why Scotland’s Council Leaders are so disappointed and furthermore highlights the need to progress the ambitions of our joint Scottish Government and Local Government Verity House agreement. We must seek a solution to these long-term issues in order to protect the essential front-line service of our communities.”