SCOTTISH councils must “stop, reduce, or significantly redesign services” to escape a black hole of almost £1 billion over the next two years, a finance watchdog said today.

The stark warning came in the latest report from the Accounts Commission, which found that in this year alone local authorities are facing a budget gap of £529 million — amounting to 3 per cent of their budget — growing to £975m over two years amid growing pressures.

Increases in council tax averaging at 7.7 per cent in 2026/7 were expected to net councils an extra £248m, but that figure is dwarfed by the soaring cost of social care, now standing at £4.3bn — amounting to 24 per cent of all council spending in Scotland, the commission said.

Warning that there is an increased risk councils will become financially unsustainable, Accounts Commission member Derek Yule said: “As things stand, councils will continue to face increasing financial pressures unless they stop, reduce, or significantly redesign services.

“Savings options are limited and will have to increasingly focus on changes to services people rely on.”

Cosla resources spokesman Councillor Ricky Bell said: “The report quite rightly expresses grave concern for local government finance over the medium-term, spanning from the Scottish spending review.

“We will continue to advocate for fair and flexible funding for our councils moving forward.”

Speaking on BBC Radio Scotland on Thursday, Public Service Reform secretary Ivan McKee insisted: “Demographic changes, an ageing population, the expectation on services and costs, inflation of construction costs and other costs are significant, so all of that puts pressure.

“The way to deal with that is to take forward the public service reform agenda to make sure services are organised in a way that delivers.”