FIFE COUNCIL are looking at a “significant” budget gap of £16 million with councillors warned that “further challenges” could lie ahead. 

They have long known that money troubles are on the horizon - albeit the local authority set a balanced budget for the current financial year, but executive finance director Eileen Rowand has warned of a sizeable shortfall in 2025-26. 

As national pressures mount, she will inform the cabinet committee meeting on Thursday about future challenges. 

Nationally, Prime Minister Keir Starmer has said October’s UK budget will be “painful” with “difficult decisions” to be made. 

Scottish First Minister John Swinney has also warned of a bleak outlook on the financial front. 

Back in August, after committing funds to avert the looming bin strikes, he warned that the Scottish Government did “not have any spare money sitting about”. 

In order to fund the pay increase for Scotland’s lowest-paid council workers, Holyrood will need to make approximately £77.5m in cuts from other budgets and services. 

“We will have to make reductions in other programmes to enable this offer to be made because things are so tight and so tough within the public finances,” he stated. 

Fife Council have long anticipated this budget gap for 2025-26, but Ms Rowand is now warning that national challenges could point towards “potential further challenges to local government budgets" in the current and future years. 

“There is a great deal of uncertainty for local government funding given the wider economic situation, the continuing effect of inflation, and the unknown scale of future UK and Scottish governments budget decisions,” her report states. 

“Although the local government line increased over time, the Scottish Government is facing an overall shortfall, and that shortfall could be partly met from the local government outlook.” 

Going forward, the council are assuming an annual increase of three per cent in council tax. 

Although Ms Rowand acknowledged that council tax increases are “ultimately a political decision”, she highlighted that each one per cent increase would generate approximately £1.9m in additional income for the council.

She also warned: “The financial outlook continues to be extremely challenging and significant change will be needed to safeguard the financial sustainability of the council."

The financial challenge that the council faces in the coming years has increased given there is little scope to close the budget gap using a more corporate approach.

Work is continuing to provide a sustainable response to the challenge.