In its financial overview published today, the local government spending watchdog said councils had remained within their overall budgets, increased their reserves slightly and reduced their debt in 2015/16.

Each council has its own particular challenges but all councils face financial shortfalls requiring further savings or using reserves. They need to change the way they work if they are to make the savings needed.

The Scottish Government provides around 60 per cent of councils’ total income). Over the past six years, up to and including 2016/17, Scottish Government funding (revenue and capital) for councils fell by 8.4 per cent in real terms.

The report warns that further reductions are expected while demand on key services, particularly social care, continues to rise. Councils also face increased cost pressures in areas such as pension provision.

Ronnie Hinds, deputy chair of the Accounts Commission, said: “Councils are generally doing a good job with their finances in difficult circumstances. But pressures continue to increase on a number of fronts at the same time as they face the prospect of further reductions in their funding.

“It’s vital that councillors and officers set medium and long-term financial plans based on clear priorities for the services they provide to their communities.”

A spokeswoman for the Scottish Government insisted that local government had been treated “very fairly” by the Holyrood administration, “despite cuts to the Scottish Government from the UK government”.

She added: “This report highlights the pressures that councils - like other parts of the public sector - face, but also highlights that they are continuing to improve services.

“We expect local authorities to continue to use resources as efficiently and effectively as possible to ensure taxpayers get the best possible services and value for money.

“The report makes a number of recommendations aimed at helping councils to meet future challenges. We welcome the report, and would expect all councillors to consider and take any necessary action to implement its recommendations.”

Scottish Conservative local government spokesman Graham Simpson said: “The report rightly warns that worse is to come, and we would urge the SNP to come clean on what lies in store for local authorities down the line.

“The funding pressures put on councils will undoubtedly see some increase in council tax next year.”

Scottish Labour’s deputy leader Alex Rowley added: “The SNP shouldn’t use the Scottish Parliament as a conveyor belt for Tory austerity. We should use the tax powers of the parliament to invest in public services and give everybody a fair chance in life.”

Andy Wightman MSP, the Scottish Greens’ local government spokesperson, said reductions in funding “will inevitably have an impact on local services”.

He added: “It is clear we now need to dedicate as much time and energy on negotiating a fiscal framework for local government to set the ground rules for future funding and to increase fiscal autonomy and democracy. The Scottish Greens will be leading a parliamentary debate this week highlighting the need to improve local democracy.”

Scottish Liberal Democrat leader Willie Rennie said: “The figures published today paint a very concerning picture for local services like schools and social care. These local services are lifelines for local communities and, as such, must be funded properly.”