Prudence will be required from Dumfries and Galloway Council to meet budget commitments over the medium term.

Committee members will hear how the council will need to make estimated total savings of £21 million over the next three financial years – £7.1m in the current year rising to £21.12m by 2025/26.

The report also points to three areas of “potential volatility” that could affect its projections: pay, non-pay inflation and Scottish Government grant funding.

Committee chair, Councillor Ivor Hyslop said: “Faced with a three-year £40m funding gap coming into this year’s Council Budget in late February, our council took some difficult decisions, but still the fiscal situation remains challenging for all local authorities.

“Although these savings estimates are based on the best information we currently have available, they will potentially have to be revised dependent on what the Scottish Government’s grant funding for local government is going to be.”

Annual grant funding from the Scottish Government represents around 83% of the total funding of the council’s net revenue budget, which is £437.45m for the current financial year.

The Scottish Government expects its own budget to grow steadily from £45.26m in 2023/24 to £50.97m by 2027/28, an overall cash increase of 12.6% and a real-term increase of 6.8%.

However, according to research by the Convention of Scottish Local Authorities (COSLA), the local government share of the Scottish Government’s budget has fallen from 34% in 2014 to just 28% today, a real-term cut in local authorities’ core funding of 15.2% over the same period.

“Although funding at a national level is increasing, this does not necessarily result in a boost for council budgets,” said Councillor Hyslop.

The council is currently establishing a programme of service change to support future financial sustainability and prioritisation of services – and meet its funding shortfall.

Committee vice-chair, Councillor Richard Marsh, added: “Although we are by no means alone among local authorities in facing a tightening fiscal position, we will have some hard decisions to make as a council in the coming years. That’s why we are taking a prudent approach.

“We are currently developing a multi-year Change and Savings Programme to ensure balanced budgets on a sustainable basis and that any changes centre on and are aligned to the key principles, themes and strategic outcomes in our new Council Plan.”