Local Government Committee, 05 Sep 2000

Meeting date: Tuesday, September 5, 2000

Official Report 185KB pdf

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Local Government Funding

The next item on the agenda is the spending review submission from COSLA. I welcome Councillor Craig Roberton, who is COSLA's finance spokesperson, Oonagh Aitken, the chief executive, and the finance officer, Brenda Campbell, whom we have not met before.

Thank you, convener. It is a pleasure to be here again.

COSLA's position is that we would like to move forward in partnership with the Executive. After all, we share most of the objectives that the Executive has set on the delivery of local services. We see this as an opportunity to address our common targets.

During our previous visit, we indicated that we were extremely concerned about the position of local government finance in Scotland. Since 1997, there has been a cut of about £500 million in the allocation from the Scottish Office and the Scottish Executive, which has been followed through year on year. As the committee will be aware, this year there is an opportunity to redress that shortfall through the spending review. We hope that, over the three years of the review, some measures will be taken to reinstate local government to the position that it used to enjoy in Scotland. Currently, the local government allocation is 36 per cent of the Scottish block and we hope that that will return to the 40 per cent share that we once enjoyed.

The figures suggest that in each of the next three years the comprehensive spending review will produce more than £1 billion of expenditure in addition to current expenditure. We hope that local government will receive a substantial share of that.

Although the booklet is a bit dense, there is an indication in a table—towards the beginning of the booklet—of our best estimates for likely increases in spending requirements over the next three years. Committee members will see that combined factors total more than £1 billion in next year's spending, £1.384 billion the following year and £1.6 billion in the third year. Those are substantial sums and represent our best estimates of the consequences of various spending decisions and increases in demand that local authorities are about to face. I need only mention various matters such as the McCrone committee recommendations, recommendations on care of the elderly and the landfill tax, which we expect will all sharply increase spending over the next few years. I must admit that those sums far exceed even the funds that are available under the comprehensive spending review. Although we are not unrealistic enough to think that those estimates will be met in full, that is our negotiating position. We hope that the minister will take into account those expected expenditure figures and will do his best to address them. If there are any questions on the document, I could go into detail on it. However, I am content to leave the matter at that for the moment and to reiterate that such an opportunity has not occurred recently and that local government is making the best of it.

I want to focus on the detail of the McCrone committee recommendations. Those recommendations have to be funded, which is a political point that my political colleagues and I will make from here on in. The recommendations have been well received by the teaching profession and are an essential step in the right direction.

However, although I am not decrying your point, I am concerned by the mismatch of figures from McCrone and COSLA. Is there any way of avoiding in future the situation where you say one figure and someone else says another? In my view, that is not clever. I am not blaming COSLA or saying that COSLA is wrong, but I am bothered by that mismatch. Is somebody not doing their homework correctly?

That is always a possibility. However, we have analysed the figures in considerable detail and expect the full implementation of the recommendations to cost £547 million. I understand that there have been discussions between our officers and officers of the McCrone committee, during which they have come to a common position on the figures. I do not believe that there is a serious difference of opinion now. However, Brenda Campbell was party to some of the discussions—perhaps she can answer that question.

A number of costs were initially omitted from the McCrone report, such as employers' costs. The committee made other recommendations that had not been costed at the time. COSLA's position was that all the recommendations should be costed from the initial stages and that there was no point in omitting any costs at those stages. We examined the matter in great detail. We have had a number of officer meetings with the Scottish Executive to try to reach a common position. The Executive's officers now recognise that our costs are more realistic. Sam Galbraith is setting up an implementation group on McCrone later this year and it is hoped that COSLA and the Scottish Executive will have a joint agreement on costs at that stage.

I share many of COSLA's concerns. If local government retains its share—even with the additional resource of £1.14 billion—it will not be enough to meet the McCrone recommendations.

I have a specific question about section 94 consents. I asked Councillor Roberton about those consents when he was previously before the committee. I lodged a question on the subject for the Minister for Finance and I also asked a senior Executive civil servant about section 94 at a Local Government Committee meeting. I also asked COSLA a question about section 94. My concern is that we have received three different answers to it. What progress has been made during the past few months in getting some consistency and consensus regarding the impact of section 94 and its abolition? I share COSLA's view. Does the Executive accept that abolition of section 94 consents for general services would release £360 million, or does it still take the view that abolition would have no impact?

I cannot answer for the Executive regarding its current position on that issue, although I believe that it might now be a little more sympathetic to our view. I understand that the Treasury has also been reviewing the equivalent provisions in England. I am not entirely clear about the relationship between the Executive and the Treasury in this area—the Executive might not be at liberty to take decisions on the matter independently if a Treasury rule is involved.

However, in our view it is a totally needless control because capital expenditure can take place only when the local authorities that are concerned can meet the borrowing requirement, which is controlled under the revenue measures. It seems a bit daft to control capital expenditure under the capital measures and the revenue measures. If capital expenditure were controlled only under revenue, receipts would not count and could be recycled within the local authority, as they would not be capital borrowing.

Information technology is one important area in which there could be spend to save. Local authorities could decide to make savings in one part of their revenue budget in order to accommodate additional debt charges and borrow to introduce IT that would save money in the long run. We have not changed our mind that the abolition of section 94 would be very useful for local authorities; indeed, we can see no justification for its existence. However, I cannot say what the Executive's current position on that is.

I wanted merely to see whether there had been a meeting of minds over recent months and whether there was a common view on how we can move forward.

I think that we are moving towards that.

In many respects this is a very positive document, in which you have made a number of positive suggestions. However, great concerns are also expressed in the document, not least about the £440 million that local authorities might lose as a result of convergence. If there is not the reversal of funding policy that you talked about, might there come a point at which local authorities are unable to meet statutory requirements? Might that happen three, four or five years down the line, or do you think that we will be able to avoid such a crisis? Will the non-statutory areas suffer?

I believe that authorities will always try to meet their statutory obligations, which take priority. Recently, there have been circumstances in which some authorities have found that very difficult. However, we are looking to the future and we must be positive about it. If the Executive accepts our bid for a fair share of the new comprehensive spending review money, the possibility of authorities being unable to meet their statutory obligations should recede. We would then be in a better position to avoid those circumstances.

The document claims that the position in local government finance is "unsustainable", which is why I asked the previous question. I was wondering at what stage it would become unsustainable in actual terms.

That would happen if things continued in the way in which they have been going until now. The major cut that we received four years ago is not our only difficulty. The demand on services increases year on year and inflationary pressures increase every year. By and large, there has been little recognition of those pressures on local government.

The method that all local authorities have adopted to accommodate those difficulties has been to cut one part of their budget to subsidise another. That is unsustainable; if authorities make too many cuts, in the long run they will not be delivering the services that they were elected to deliver. I am full of hope that we are about to turn a corner and that such problems will no longer be an issue.

In your submission, above the table on funding requirements over the spending review period, it is stated: "All figures shown cumulatively". I am not quite sure what that means. My interpretation of the word "cumulatively" might differ from yours. On the line that is labelled "DEMAND", the figure for the first year is £724 million and for the next year £1,044 million. Does that mean that the £1,044 million is over and above the £724 million, or does the £724 million increase by around £300 million to £1,044 million?

Our understanding is that those are the additional requirements year on year.

So in the second year, a new £1,044 is needed?

No—some of that is included in the first year.

So another £300 million or so is needed?

Yes.

Annexe D of your submission refers to a number of new revenue expenditure pressures. I am sure that all the things that you list are desirable; but could you lead us through the ones that are legally essential to keep us all out of the courts, as opposed to the ones that are merely desirable? First you mention McCrone, then you mention school security.

School security is extremely desirable and important, but I am not sure that it is a statutory requirement.

What about the police communications systems and the national road safety targets? Are they also desirable?

Yes.

I understand what you say about pay awards, but what about going for single status employment? Is that a legal commitment?

It will be, in due course. I think that there is a cut-off date for implementing single status; perhaps Oonagh Aitken can give more detail.

I do not know that I can give much detail, but we are meant to implement single status during 2001, so that item on the list is essential.

The next item is price increases, which I understand. What about the increases in superannuation contributions? Are they essential?

That was because of the Chancellor of the Exchequer's abolition of the advance corporation tax.

I know that there has been some stuff in the courts concerning primary head teachers' equal pay claims. Do you have to deal with that to stay out of jail?

It depends. That matter is sub judice at the moment.

So if a case goes a particular way, you might just have to pay. Thank you—you have clarified things for me.

You must excuse me, convener—I am still trying to get my head round some of the statistics. My question is almost identical to Donald Gorrie's, although perhaps it is a bit more specific. I want to ask about pay awards—specifically, the table that does not include teachers' pay and the information about equal pay claims for primary head teachers. If I have understood correctly, the total in the third column of table C in annexe D of your submission is not a cumulative total and the total figure over the three-year period is, therefore, £210 million, not the £420 million that you would get from adding the three columns together.

That is right.

Does that mean that, for the primary head teachers' equal pay claims, there is no increase in 2002-03?

I think that that is just a one-off payment.

It is a bit confusing that some columns have cumulative totals and others do not. It is not obvious how the tables should be read across the columns.

The difficulty is that the figures are not yet settled. The £70 million in the first column is a guess, as is the £210 million in the third.

I am sorry—I have been looking at the tables when perhaps I should have been listening.

Sylvia!

Sorry about that.

My question is very similar to Donald Gorrie's. If you think that you have already answered it, please say so, councillor.

Sylvia was not listening, so she would not know.

I am trying to get the big picture. Are you suggesting that changes should be made and that deprivation and other key criteria should be used when deciding on distribution and so on? I hope that things will get started on that side of the matter, as we have agreed that that is necessary.

We do not have enough money to do everything that has been listed if we take into account the comprehensive spending review, obviously. I assume that one way round that problem is to do some things in phases—some things are perhaps more urgent than others. I think that Donald Gorrie was trying to find out what we have to do.

Can you gaze into your crystal ball and tell us how you think things might pan out—or how you think things should pan out—assuming that you will get some money from the comprehensive spending review?

The major expenditure lies in implementation of the McCrone report. If the Executive's view is that the McCrone report is a positive contribution to education, our view would be that its implementation would be very expensive and that the Executive should undertake to fund that. It would require a total of £546 million over two or three years.

Every local authority is suffering considerable pressure with regard to care for the elderly, which comes to roughly £195 million. We would like there to be recognition of the inflationary pressures on local authorities—that has not been a feature of the settlement. To cover such inflationary pressures, every local authority has had, in effect, to make cuts in existing services. We need to come to an agreement with the Executive in getting some recognition of that, although I cannot quantify it at this stage.

Capital is a major matter that requires to be dealt with. Very little expenditure has been accorded in several important areas. Two examples are school buildings, which we estimate require £1.3 billion of remedial work, and roads and bridges, work on which is evaluated at £1.2 billion.

Those are the big numbers. Capital could be spread over several years—it is not necessarily a question of having a hit-all allocation in one year. However, the areas that I have mentioned have for many years been ignored in local government expenditure. During the past 15 or 20 years, priority has always been given to revenue costs at the expense of capital. Those areas can no longer be ignored and in many areas extremely dangerous situations have arisen that we must address.

To sum up, on the capital side we must address schools and roads and on the revenue side we must address the McCrone report's recommendations, care of the elderly and paying prices that are affected by inflation.

I thank you again for coming along, Craig. I am sure that I speak on behalf of every member of the committee when I say that local government finance—which has been at the core of many of the committee's deliberations since it formed—is a complex area and I would not pretend to know all the issues from beginning to end.

Nor would I.

Those of us who have been involved in or worked in local government know that there comes a point when we cannot do any more—when councils cannot pay back any more than they have been paying. I feel that the committee is sympathetic to that.

You said that you hoped that you were turning the corner in COSLA's relationship with the Executive. I am sure that you appreciate that the set-up is different now and that the Executive is listening. I hope that it will produce the goods.

As you know, the committee will keep an eye on things and will carry out its own independent review of local government finance. However, I have one plea: could somebody press the button on the COSLA computer that numbers your documents' pages?

Meeting adjourned.

On resuming—

Welcome back, comrades. I see that Kenny Gibson is going to interrupt me.

Before we start, I want to say that I would like, when we get to them, to make a comment about the statutory instruments.

My goodness, Kenny. I will write that down in my book.