Local Government and Transport Committee, 22 Jun 2004

Meeting date: Tuesday, June 22, 2004

Official Report 207KB pdf

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Budget Process 2005-06

The third item on our agenda is the budget process. We will receive a briefing from the Convention of Scottish Local Authorities on the submission that it has made to the Scottish Executive as part of the spending review 2004. I welcome back to the committee Councillor Pat Watters of COSLA—perhaps he should have a season ticket to the committee. I also welcome Della Thomas and Brenda Campbell from COSLA. I thank Pat Watters for supplying members with an advance copy of his briefing, which will have helped them to prepare for today's meeting. I invite him to make some introductory comments on the submission that COSLA has made to the Executive, which will be followed by questions.

Thank you, convener. I appreciate the opportunity to come back to speak to the committee, particularly about the spending review.

First, I want to clarify that our initial submission to the committee was a draft copy, but the submission that we have distributed today is the final document. Nothing in the final document differs from the draft document, which has simply been tidied up for presentation purposes—there should be no significant changes.

I will run through some items in our submission and consider the process, principles and approach that underpin it, details of the provisional budget for 2005-06 and our bids for the spending review.

On the process, we tried to be fully inclusive in consulting our professional associations. We tried to ascertain information about the different service areas not once but several times. The process was overseen by the various political forums in which we are involved. We also had two rounds of meetings with the portfolio ministers in order to identify their policy priorities so that we could consider how those priorities would fit in with our spending review proposals. That greatly contributed to a co-ordinated approach between the priorities of Executive spending departments and local government priorities. Such an approach is important.

We considered cost pressures under three categories: areas arising from the partnership agreement and elsewhere; specific pay and price pressures; and areas in which we believe there was significant underfunding in the previous spending review. Securing a base budget underpinned the principles and we have made significant progress in that area. I thank the committee for recommending that preparation for a base budget for local government was important.

We worked closely with the Executive and we agreed a number of elements. However, a number of elements are outstanding and work will continue between now and September to try to reach agreement on them, which is why we have referred to a "provisional budget". We have done so not because we do not believe that what was submitted was the most up-to-date information possible, but because there are elements that we want to discuss further with the Executive in order to find out whether we can reach agreement on how to progress matters. For example, we and the Executive know that an element will be built into the budget for supporting people, but we do not know what it will be. Therefore, simply to pull a figure out of the sky would be wrong at this point if we are really talking about a base budget for local government. We are trying to work closely in such areas.

We thank the Executive and Executive officers. This is the second time that we have gone through the process and the co-operation that we have received from the Executive and the civil servants who have been involved has been excellent—there has been a vast improvement since the last time we were involved. Obviously, people improve with practice. Perhaps we will get things absolutely right next time.

Those are some of the issues that we have discussed. We have prepared support and information and built that into the document's appendices. There is something on each line of our bid so that people can identify exactly what happened.

The provisional budget will deliver the existing service, but does not allow for any additional local priorities within local authorities. In addition to the base budget, we have prepared comprehensive information on the additional bids, which members will see in appendix B of the document. The bid information gives descriptions of the bids, and links with other legislation are given. The outcomes and consequences of our not securing funding in areas that we believe are important are also considered. The Executive confirmed funding to the committee when Tavish Scott said:

"new initiatives should be fully costed and paid for".—[Official Report, Local Government and Transport Committee, 27 April 2004; c 821.]

We have focused our submission on an outcome-based approach. In local government, we recognise that councils are not all the same, as the committee heard from Alastair MacNish. We are different organisations; some have different priorities and some have different ways of delivering services. What is important is outcomes—service delivery to meet local needs and local priorities—and we have concentrated on that.

We continue in our submission to call for a reduction in ring fencing. We accept that tremendous progress has been made on that, but it remains an important issue that needs to be addressed in such a strategic document as our submission to the spending review.

We emphasise the problems that we have when the Executive provides specific funds for short periods. That can create difficulties, especially with staffing, because staff may be employed for a specific time, then let go. When councils let staff go, the services that those staff deliver also stop, but when we start such programmes, we and the Executive believe that it is worth while to develop them in communities. It is important for us to consider how services are delivered throughout local government.

Our submission also refers to the strategic financial concerns of deprivation and poverty, supersparsity and diseconomies of scale. We have commissioned independent work on those matters. We believe that we need additional resources on those matters outwith the spending review so that we can deal with some of the problems that some authorities—they are not common to all—have. Some of the causes are geographical and some are not.

We believe that councils operate efficiently. Since 1997, when best value was introduced, authorities have examined continually not only what services they deliver, but how they deliver those services, which is important. With any savings that they have gleaned from those efficiencies, authorities have aimed to develop local priorities and they have used what is left to meet underfunding of pay and to meet price increases, because those are not totally funded. However, we recognise that since the Scottish Executive was created and we have had our own Parliament, a pay and prices element has at last been built into our budgets, whereas we had previously to find all that money from funding for existing services.

That was a quick run-through of some of how we developed our submission and of its background. We will try to answer any questions; Della Thomas and Brenda Campbell will talk about technical aspects.

I thank Pat Watters for his introduction and for the submission, which sets out COSLA's case comprehensively.

I thank Pat Watters for the submission. When I read through the document, I was struck mostly by the consequences of councils not obtaining funding, to which you have referred. When I read about that, I wondered why authorities would not receive such funding. Is COSLA concerned that some funding might not become available and that the consequences that it highlights might occur?

That relates to funding that is given for a specific period. Some financing from the better neighbourhood services fund is time limited and guaranteed and the Executive and local authorities agree that some of the services that have been developed through that fund, such as neighbourhood wardens, are delivering changes in communities. If that funding is removed at the end of the three-year funding period and we have no money to employ those neighbourhood wardens, how will we maintain them without there being a direct impact on, and a need to cut, another service in order to obtain funding?

Last year, we carried out a bidding process to supply the Executive with central bids for additional funding to Westminster. We received something like £360 million for the supporting people programme. That was three-year funding for authorities, which entered into contracts to deliver certain services to vulnerable people in society. If there is a cut in that funding—there is every indication that there will be because we have not agreed it for next year—it will have a direct impact on service delivery in communities. Many authorities have the staff in place to deliver the services, but if we do not get the funding, we will have to prioritise how we will deliver services. Those are just two examples of direct impacts on delivery of services at local level if we do not receive funding.

I appreciate that fully and I understand every one of the issues that you highlighted; there will be consequences if that funding is not found. However, I am concerned about whether there is a genuine danger that funding will not be found for any of those areas.

There is a danger that there will be a reduction in funding for the supporting people programme. We have no idea at present what the level of reduction will be and, to be fair, I do not think that the Executive knows either.

I want to be absolutely clear that I am referring to the right figures because I have had my pen and paper out trying to add and subtract to get to the provisional budget, the allocated budget, the agreed budget and the subject-to-determination budget totals. When you refer in the document to a provisional budget for 2005-06, are you talking about the total £9.3104 billion?

Yes.

That is your base budget. There is a significant difference between the announced revenue budget from the Scottish Executive of £8.2 billion and the total revenue provisional budget for 2005-06 of £8.9 billion. You state in your document:

"If the Provisional budget for 2005/06 is reduced then Ministers will need to accept public responsibility for the consequences of cuts in local services."

You are referring to the figure of £9.3 billion there. If you do not get £9.3 billion, are you saying that there will be cuts in local services?

I will ask Brenda Campbell to comment in a second. As you say, it is a provisional budget and discussions are on-going. We have discussed with Executive officials the categories in the top part of the provisional budget table in the document and we have reached broad agreement about the level of funding. The bottom part of the table—I think that it is on page 19—contains areas that are still to be discussed. If we can reach agreement on those areas the total budget might change, but it would be a slight change. That is the cost that we are providing at the present time; it does not take account of local priorities that might need to be developed over the next year. If there is a reduction in the budget, we need to go back and look at the services that are to be provided. That would have an impact on the delivery of service and provision in local authorities.

We have made significant progress on the budget. The reason why we say it is provisional is that not everything has been agreed. Only two months ago, we did not have much agreement on the budget, but we have made significant progress in a short period.

The Executive was keen to tell us that, although it recognised the items, it could not make firm commitments at this time because the funding announcements had not been made. That is an important point because the Executive is not saying that it will remove the funding; it is saying, rather, that the figures have not yet been announced.

We hope to make a lot of progress between now and September on the categories in the bottom part of the table. We must by September identify the amounts that we have not agreed. That will then become our base budget—we cannot continually run with the provisional budget. At this point in time, however, we have made significant progress. I am not saying that we will agree on £9.3 billion—I am sure that we are not at that stage—but we will be a lot closer to the £9.3 billion than we are now.

How does the £8.9 billion that is talked about as a provisional revenue budget for 2005-06 compare with the actual budget for 2004-05?

I do not have that information to hand. I will need to get back to you on that.

You talk about closing the gap between what COSLA argues is the base budget and what the Scottish Executive has agreed so far. We seem to agree that the Scottish Executive has agreed to provide £8.283 billion. It has also agreed to additional funding of £679.5 million, although it has not specified that yet. That takes us up to the figure of £8.9 billion; however, the base budget is £9.3 billion. Is COSLA saying that, if that gap is not filled, £400 million-plus of cuts will have to be implemented?

No. The figure includes the capital grants as well. The revenue and capital together come to £9.3 billion.

If we extract the capital—

It is just the £8.9 billion that we are talking about.

So the provisional base revenue budget for COSLA is about £8.9 billion and the Executive has announced that it will provide around £8.2 billion, but you believe that the other moneys are available although they have not been specified yet. Is that correct?

Yes. I think that we will make some progress in closing the gap on that £679.5 million.

Is the capital element of the budgets agreed as well?

Elements of that are agreed. Page 20 of our submission shows that £287 million of that is agreed and £60 million is not. To be fair, however, the Executive has said that there might be some slippage, which is why that £60 million has not been confirmed yet. I am fairly confident that we will come to a conclusion on that.

So overall the £9.3 billion that you mentioned as your provisional base budget is really only minus £60 million at the moment, which is the capital that has still to be decided.

The £60 million has still to be decided and the figure of £679.5 million has to be firmed up. It would be unfair to say that the matter is resolved; it is still under discussion.

I am anxious to get to that. If the £679.5 million is available but has just not been allocated, that is a positive thing.

Yes. For example, we are saying that the budget for the supporting people programme, which is the big one, should be £432.3 million. However, the Executive may announce an allocation that is £20 million to £30 million short of that. I do not know—that is hypothetical. We still need to have that sort of discussion with the Executive.

Will the total announcement still amount to £679.5 million?

That is our understanding. We believe that the figure should be £679.5 million. However, the Executive might not give us £679.5 million.

That is what I am trying to clarify. I have in the course of this discussion picked up from you a sense that the Executive has agreed a package of £679.5 million although it has not agreed where that money is to be spent. You have, rightly, outlined where you think the money you are asking for from the Executive should be spent. Are you now telling me that that £679.5 million has not been agreed?

The Executive has not agreed the £679.5 million; it has agreed the items—the budget headings. It has agreed that the budget headings for supporting people and the better neighbourhood services fund should be included, but it has not agreed the figures. The figures are what we say they should be.

Has the Executive given you any figures?

No. We still need to have that discussion.

I go back to my original point, which is that there is a significant funding gap between what you say is necessary as a base budget and what has been announced by the Executive so far.

Yes, although we are still in discussions on that.

Perhaps we could clarify one point. It would be premature to talk about cuts at this stage, as you are still in negotiation with the Executive over the detail of the figures. To my mind, that seems to be a normal part of the on-going budget discussion that COSLA would have with the Executive. The fact that you are having that discussion as part of the spending review is not unusual.

No, it is not. We are pleased that we are still in discussions at this stage.

To be fair, we are probably further on. I think that Tommy Sheridan was making the point that everyone agrees that the headings for items 14 to 25 in the table that is entitled, "Areas Recognised by Scottish Executive but Unable to Make any Firm Commitment At This Time for 05/06" are right and that there must be lines in the budget for all those items. The figure that should be attached to those budget lines has not yet been agreed, but no line has been closed down at this stage and no one has been told that we will not get funding for any items in the agreement. To be fair, I do not think that the Executive will have an exact figure for some of the items until it has been able to consider the percentage that comes from Westminster. We agree that the headings are right and that we need to do more work, which is why we have described the budget as a provisional budget, rather than as a base budget.

I have spent about 10 minutes on the matter—I hope that the convener does not mind—because COSLA's submission says:

"The lack of an agreed budget in previous years has led to a lack of clarity in Scottish Executive funding announcements".

Such announcements do not make it clear whether the Executive is talking about new funding or funding from existing resources in local authorities, which would have a knock-on effect on other funded services. COSLA seems to be arguing that if a base budget can be agreed, future announcements will be clear because they will refer to money that is provided in addition to the agreed figures. Is COSLA saying that if the figure of £9.3 billion is not met there will be cuts in local services?

We have priced services on the basis of current costs and we believe that our figures are right. If the figure is not met, we will have to reconsider the provision of local services, so there might be a reduction in services.

The Local Government and Transport Committee knows from its work on the matter that the advantage of a base budget for us would be that there would be clarity about future announcements. If the Executive were to say, "The money is already in your budget," we would be able to ask where that money was.

Do you agree that if the figure of £9.3 billion is not reached there will be problems?

There is no doubt that there could be an effect on services. Of course, that would depend on where any shortfall was.

I appreciate that.

Does COSLA's submission make an underlying assumption about council tax level within the proposed budgets?

No. We made no assumptions about council tax when we prepared the figures on projected spend. The submission is based on the announcements in the 2002 spending review. That was the starting point for the figures for 2005-06, which is the final year to be covered by the 2002 spending review.

COSLA's provisional budget indicates that you seek funding for a minimum 2.5 per cent pay award for staff. You appear to indicate that that would be essential to prevent any awards to staff from coming out of the base budget. You also indicate that you would meet an increased award. However, your submission also says:

"Price increases have been calculated at 2.7% as per central government's published retail price index figures."

Would COSLA be willing for local government to absorb the extra 0.2 per cent that would be required to bring pay across the sector into line with the retail prices index figure, or do you accept that there would be a decrease in pay in real terms?

I will bring in Brenda Campbell, because the technical aspects are sometimes over my head. Pay in local government is a negotiated element of the budget, as it is anywhere else. We have argued—and to be fair, the Executive has recognised—that until fewer than six years ago every penny of a pay increase had to be met by local government because of previous spending reviews. We acknowledge that the building of an inflationary element into budget provision for local government has alleviated some of the problems that we faced in the past.

We have had discussions with the Minister for Finance and Public Services and will have another meeting with him to consider the entire budget provision. In our discussions with him on pay, he has said that he would work to try to keep to inflation and that—whatever the provision is—he would try to ensure that the relationship between what we agree and what is provided for is better than it is now. He also said that he is working in the dark because he does not know what his figures will be. There has been a general improvement, but what you said is right.

We are currently in consultation and our offer to general local government staff apart from teachers, firefighters and certain others is 2.9 per cent, but the provision for pay awards in our budget this year is 2.5 per cent. Therefore, local authorities will have to find 0.4 per cent in each of the next two years to meet their commitment to the pay award. That money will come from efficiency savings by local authorities. If that happens in the future, we will have to do the same. However, the situation is far better than it was previously, when every time that we made a pay award we had to look for 2.9 per cent, for example.

What does 0.4 per cent represent in pounds?

In pounds, shillings and pence, I think that 0.4 per cent of the local government general pay budget is £8 million.

You could probably confirm that later, but it is in that region.

Yes.

If I can—

You can raise one final point, but then I will bring in other members. I will come back to you.

Okay. I want to ask a follow-up question, but does Brenda Campbell have anything to add first?

No.

I will ask two final questions—perhaps I can be brought in again later if there is time. First, if it is accepted that we are dealing with a figure of 2.7 per cent for the retail prices index, why are you not arguing for 2.7 per cent, instead of 2.5 per cent, to fund a pay award? Secondly, how many extra police does the allocation that has been set aside equate to? I think that the allocation is £6 million, but I am having difficulty finding the information as the figure is in the document that you sent us originally, which refers to different page numbers.

We will have to confirm that. Page 20 of our provisional budget mentions an additional £31.4 million, which takes into account various aspects of the police budget.

Page 22 of the new document states that the police partnership money is £6 million. We will confirm the actual number of extra police—that is an omission from the document. The figure of 2.7 per cent is for the retail prices index or the consumer prices index—it is the index that we have used for our calculation. We used the figure of 2.5 per cent because that is the provision that was made previously. We have made a prudent assumption that is based on the fact that that figure was put in before and that there is potential for it to be put in again.

This is more of a political question. If COSLA accepts that the retail prices index is 2.7 per cent and you are looking for funding for pay increases that match price increases for staff, which is the least that could be expected, why have you not requested 2.7 per cent from the Scottish Executive?

I think that it is a matter of trying to judge what would be available, taking into consideration past performance. We are trying to project what the figure would be and we have opted for 2.5 per cent; we could have on-going discussions if things moved.

On page 45 of your submission, you mention "Young People Leaving Care"; the subject comes up again on page 75, under the headings "Looked After Children" and "New Initiatives". I read through some of the boxes under those two headings. I know from personal experience that Ballikinrain Residential School was trying to set up an initiative involving the many local authorities from whose areas the children at Ballikinrain come to consider linkages between the residential establishment, the home and the school. The initiative was about trying to get children back into their home situation as quickly as possible. I did not see any mention of such schemes in the COSLA submission. The initiative has been put before the Scottish Executive only recently, but it affects quite a few local authorities. Could you comment on that?

Could you also explain page 79 of your submission, which mentions "Upskilling the Workforce". Under the heading "SSSC Registration", the submission says:

"In order for children and adult carers to continue delivering services they must meet the Scottish Social Services Council standards and become registered."

Which children and which adult carers do you mean? Are they within or outwith the local authority system? I am a bit confused about what that sentence means.

I will deal with the final point, and then I will bring in Brenda Campbell on the point relating to page 45 of our submission. Della Thomas will deal with the question about the bids that are mentioned on pages 75 and 79.

The Scottish Social Services Council standard applies from April next year, I think. Those who supply certain elements of child care, such as social workers and other social work staff must be registered with the Scottish Social Services Council. They need certain qualifications to secure that registration, so elements of training need to be undertaken in local authorities.

It is not just the cost of the training that must be taken into account; there is also the cost of releasing and replacing people to allow that training to take place. Furthermore, there is the cost of having workplace assessors come in to ensure that the training and continuing assessment take place. Over five years, the requirements will roll out to the rest of child care, both in the public sector and in the private sector. People will have to register with the Scottish Social Services Council before they can deliver the service. Someone who cannot get registration will not be able to be employed in the sector. The costs are therefore quite significant.

I am au fait with that, but I was asking about the wording, which is not clear. When you refer to "children and adult carers", are you talking about children as carers or children in care?

No, we are not talking about children as carers. We are talking about adult carers continuing to deliver services to the children.

The submission seemed to say that the children deliver the service. I know that there are child carers—

No, that is not what is being referred to. I am sorry—the difficulty is perhaps with the way in which that sentence has been phrased. We can tidy that up.

That is fine.

We are talking about children in care and about the adults who deliver the service to them. Remember that, over the five-year roll-out, the requirements will apply to people working in elderly care as well as to those working in child care.

Della Thomas will be able to comment on the specific bids, but I will add to what is in our submission. COSLA is currently undertaking a body of work, together with representatives from local authorities and professional associations, which started with an examination of the situation of children in residential care. Local authorities came together to address the issue of rising costs in that area and to decide how to deal with it.

As that group came together, some bigger issues arose, including how to deal with 16 and 17-year-olds who are beyond school age. We opened up the remit of the group so that it will have greater scope. Its work is likely to continue for a considerable period of time because the information that has been gathered from councils makes it obvious that it is a big piece of work. The issues cannot be fixed in a short period of time. Initially, we thought that a short-life working group could do the work in about six months, but we have opened that up and the period will be longer. Members will probably see a bigger bid in that area in the next spending review submission, but that will flow on from the information that is in the current submission.

Will you clarify that you are considering not only children who leave care but the promotion of transitions back into the family—where possible—and school? Does the work include those areas as well?

Yes. It also includes secure accommodation. We are examining a wide area.

Will you give further information on the challenges that COSLA and local authorities face in relation to police and firefighter pensions? I notice from bids 17 and 18 on pages 82 and 83 of your submission that COSLA faces significant challenges in those areas. The submission does not elaborate on those challenges, but they have been commented on.

COSLA has concerns about the pension issues but the real challenge is for the fire and police authorities. At present, as you are aware, police and firefighter pensions are dealt with through revenue, unlike the situation in relation to the rest of local government staff, for whom we have pension funds. That has been a concern for local authorities for quite some time. The Executive recognised that in the previous spending review, and it built in some money, particularly in relation to the police.

We recognise that there is a continuing problem and that problem areas will arise. For example, a big police recruitment drive took place in the 1970s and lots of the people who were recruited then will retire between now and 2010. That will cause a problem and put pressure on the fund. The matter is not just about getting new people into the service—that is easier to do—but about dealing with pensioners who leave the service. People are living for much longer and accessing pensions for longer than they did in years gone by, which puts a burden on the pension schemes. I ask Della Thomas to deal with the point, as she dealt with a lot of the bids.

There is not much that I can add to the points that Councillor Watters covered.

Given that funding will be required not only for pensions but for the recruitment of people to replace staff who retire, there will be a serious crisis from now until 2010. Has the Executive suggested what strategy it will put in place to deal with that?

Police and fire authorities have examined the impact and have local strategies that have been active for some time. For example, we do mass recruitment for the police, which the police boards feed into. There are lots of initiatives to deal with the problem. There are continuing discussions in the committee that involves the Executive and the police conveners. I do not have information about that with me but I can get it for you. There have been discussions about the clearly identified blip in the market that occurs when people retire, and we need to do mass recruitment. We have the authority to recruit more people annually to try to combat the problem.

You will have heard Tommy Sheridan's questions on local government pension funds, and the Accounts Commission published a report that identified that between March 2002 and March 2003 total assets reduced by about £2.4 billion. I note that COSLA's submission to the Executive identifies that there are likely to be increased contributions from local authorities, but they seem relatively modest in relation to the drop in assets. There will be zero additional contributions in 2005-06, £12 million the year after and the same amount the year after that. Does that suggest that the asset value, which reduced, is bouncing back? Was there a surplus in the asset value in the first place that was set against the liabilities?

I had discussions some months ago with local government officers who deal with the pension schemes. The local government pension schemes, particularly the bigger ones, were performing exceptionally well. Even during their troubled period, when investments had real problems, they were still performing exceptionally well. We compared the performance of schemes in Scotland with schemes in England, which we far outstripped. The situation was eased in Scotland because of careful management of the schemes over a number of years and because some of the schemes were big and could buffer—they had assets that they could tap into when things took a dip. I will bring Brenda Campbell in.

It is difficult to comment, because I do not have the report in front of me. However, any information that we have provided is based on information that has been provided by the actuaries, so it is fairly accurate in relation to the contributions that can be made. I will need to come back to you on how that relates to the assets.

Self-financing public sector pay awards have been a long-standing problem. You said that it has been mitigated to some extent by pay and price inflation being in-built, yet alarming spending gaps are appearing. For example, on police and fire, you say that because efficiency savings will take time to work through,

"adequate funding must be provided within this Spending Review to ensure that core fire service provision is not reduced."

The problem is still there, but the emphasis has shifted. Local government is about people. What effect will those spending gaps have on services? Surely they must be affected, unless reparation is made.

We are having on-going discussions with the Executive on the fire issue and on how we deal with the transitional funding that the Executive has accepted it will provide to make up the difference between what was budgeted for pay and what was negotiated for pay. The actual level has not been agreed, but more important is the fact that the Executive has accepted that it will pick up the tab for that transitional funding.

The deal was not just about a pay increase for all firefighters; an equalities issue arose, because whole-time firefighters and retained firefighters had different levels of pay. The cost of resolving that equalities issue was something like £5 million in Scotland—if retained firefighters had taken us to court, they would have won. That represents a bigger percentage than in England and Wales, because we have a higher percentage of retained firefighters as a result of the geographical spread in Scotland.

Modernisation will change how we deliver the fire service. For example, there could be economies of scale. What is important to us is the period for which there is transitional funding. In general terms, local government must find money elsewhere to fill any gap in funding pay awards between what is agreed and what is provided for. However, I must say to Andrew Welsh that probably much of that is within our grasp. We do not have to negotiate beyond what we can afford—we negotiate in the light of circumstances that are outside local government, but we control that process.

We have always argued that our funding from the Executive should at least match the rate of inflation, and we have largely met that aim on most occasions. I think that Tommy Sheridan pointed out that we might have fallen short of that now, but we have tried to get that level of support. As I said, we control the rest of the process. If inflation is at 2 per cent and we negotiate 3.5 per cent, we know that we are 1.5 per cent short before we start, so we must manage the system sensitively during the negotiation period. If we have to agree a figure above the inflation rate, we must accept that we will probably have to deal with the consequences and consider how to find the additional funding.

I presume that the funding gap would mean heading towards local financing from the council tax.

That would be a matter for individual local authorities.

In evidence to the committee, Tavish Scott said:

"We have agreed with COSLA that any new initiatives should be fully costed and paid for in order to prevent local authorities from having to take on additional burdens."—[Official Report, Local Government and Transport Committee, 27 April 2004; c 821.]

Has that been delivered?

We might have arguments about whether that has been delivered in certain areas. Moreover, the deputy minister did not make that promise to COSLA; he made it to this committee.

Perhaps you could remind him of what he said the next time that you talk together.

I have a quick question on capital programmes and on the bid category "Demonstrable of Underfunding from Spending Review 2002", on page 77 of the COSLA submission. I want to clarify, primarily in relation to areas such as roads maintenance and other capital schemes such as flood prevention, whether that is a bid for revenue spending in such areas or whether it is a bid for revenue support for prudential borrowing.

It is a bid to support revenue spending to fund existing capital programmes. We put it in the bid category of underfunding from the most recent review period because there are many problems in roads maintenance. The issue is not about developing a new roads infrastructure, but about the maintenance of existing carriageways.

The committee has taken evidence from the Society of Chief Officers of Transportation in Scotland, whose survey suggests that the figure for dealing with the backlog of roads maintenance is well over £1 billion and that £60 million a year will not make much of a dent in that. Is COSLA perhaps being a little overcautious in its bid? Should it ask for more?

When we first got the bids together, we saw that they amounted to just over £1 billion. I believe that it would have been unrealistic to put those bids in. We had two rounds of meetings with the spending departments to consider what the priorities were. We tried to ensure that we were pushing at an open door. From speaking to the Minister for Transport, Nicol Stephen, we know that he is keen for additional moneys to be put in to support roads maintenance. We are trying to mirror that in our bid.

For too long there has been an underfunding of roads maintenance. For example, my local authority spends twice as much as it gets in revenue grant on roads maintenance. That money comes from elsewhere in the budget that is allocated to us. We do that because we believe that it is a priority in our community to maintain not only the roads at a better level than we get finance for, but the pavements. In rural areas particularly, lighting and pavements are important. If we had the same level of funding as is given for the maintenance of trunk roads, we would not have such a problem. The Scottish Executive funds trunk road maintenance at seven times the amount that it gives to us for our roads maintenance.

I know that COSLA is not in favour of ring fencing resources. However, when the committee was considering local roads funding, one issue that came up was that, although some local authorities, such as yours, Glasgow City Council and the City of Edinburgh Council, are spending more than their allocation on investment in local roads, some local authorities are spending as little as half their allocation on local roads. Even if we all agreed that the improvement of Scotland's non-trunk roads network was a priority, how would we translate an additional allocation to local authorities into investment in the roads? Would there not still be a danger that some of those local authorities that are not giving the same priority to roads as your local authority is might pocket the money and spend it on another service area?

When money is ring fenced, we have no option but to spend it on whatever it is being ring fenced for—this might sound flippant and I do not mean it to—whether it is needed in that particular area or not. We argue that there has to be flexibility at a local level to develop local services in response to the needs of local communities. There is a difference between ring fencing money and sitting down and agreeing on a joint priority. If we agree on a joint priority, that is different from ring fencing, because we agree on a priority area on which money needs to be spent.

Sylvia Jackson touched on a matter that is troubling all local authorities—how do we provide services to young people who need them when we cannot provide them from within the authority but have to buy them in from outside? If you looked at that budget in any local authority, you would find that it does not meet those needs. That is particularly the case in the large rural authorities, which do not have the population base that would allow the local provision of such services. There is a need to consider that sort of thing, which would be a shared priority.

If we were to discuss how we were going to deal with roads and ensure that the money was going to be put into the improvement of the infrastructure nationally, the Executive and local government could agree on a shared priority without the Executive forcing ring fencing on the local authorities. I believe that there are ways of achieving that without ring fencing.

I have a small point to make in relation to the timescale and the form of the settlement. You have taken a lot of time in coming here to present your case to us under appropriate budget headings. Will you make sure that the settlement is presented in that way so that it is transparent and clear? What is the timescale for the settlement?

I do not think that it will be presented in that way. The Executive has certain formats in which it needs to present the information. We have said to the Executive that we would like to agree a format and, even if the documentation is not published, we would like to have some written agreement between us and the Executive that we can circulate within local government to enable people to understand the figures. That will provide some transparency, even if that format is not adopted in the published documents that reach a wider audience. On the timescale for the settlement, the Executive has said that it will make the big spending review announcements in mid-September and the individual local authority announcements in December.

Forgive me, but earlier you told us that you had worked with the Executive to agree certain budget headings, which I think you said are on page 20 of your submission. Why is it that we cannot read the settlement based on those budget headings?

My understanding is that the Executive will not prepare the settlement using those specific headings because the annual evaluation report is prepared using ministerial portfolios. We have to reconcile that document with our submission. I do not think that that will change in the short term. A longer period of change will be required for the Executive to present the figures in the way in which we want them to be presented.

I am confused, because when you talked about agreed budget headings, I thought that the Executive had also agreed to them and that, if the Executive had agreed to them, they would show X amount of money for a particular budget heading.

The issue is partly the way in which the Scottish Executive works. It does not work solely to a local government budget, whereas we are trying to promote the idea that it should work towards preparing a local government budget. That is also what the committee recommended. We have made a great deal of progress towards that, but publications are still presented to the public under ministerial portfolios across the Executive. That relates partly to the extent to which there is joined-up government in the Executive.

In fairness, these are questions that would be directed more correctly at the Executive, rather than at COSLA.

My final point relates to the concessionary fares scheme, which seems to have been a mess. In your submission, you talk about what you expect to spend in the 14 or 16 schemes that already exist and what the Executive expected to spend. Has COSLA done any work on producing a unified, multimodal, non-time-restricted scheme similar to that which exists in Wales? Wales has a scheme that is multimodal, is not time restricted and works. Has COSLA been involved at a policy level in trying to develop a better scheme than the one that we currently have?

My knowledge of that issue is limited, although I have had discussions with the COSLA officer who deals with it. I know that last week the Executive announced the establishment of a strategic transport agency. It envisages that the agency will take control of the concessionary fares scheme, because a whole-Scotland scheme is run better by a strategic organisation than from 14 individual bases. You asked whether the scheme was properly funded. The answer to that question is probably no, as the take-up for the scheme was underestimated.

We need to consider whether usage reflects the claims of usage. I was involved with Strathclyde Regional Council when it was one of the concessionary fares scheme operators. Every time that we examined the matter, we found that we could save money on concessionary fares, because there was over-claiming by operators. I am not suggesting that that is happening at the moment, but it would be worth our investigating how the scheme is being delivered. The scheme in Wales was suggested not by the Welsh Local Government Association but by the Welsh Assembly Government. Last week's announcement by Nicol Stephen may be a first step on the road towards creating such a scheme—I do not know. However, I can supply the committee with information on discussions that we have had with the Executive, through our officers.

Do you agree that whenever one moves from charging for a service or good to having no charging it can be difficult to predict exactly what the overall cost of uptake will be? To some extent, it was inevitable that there would need to be a review of the cost to local government of providing the service.

Absolutely. If one moves from a funded scheme to a free scheme, one can never estimate what the uptake will be. There has been a tremendous surge in uptake. We need to consider what the uptake is and how the scheme is being used. There is discussion about expanding it further to include other groups in society. We need to have a clear idea of how the scheme will develop. I have no idea whether last week's announcement will provide that.

We have reached the end of questioning, so I thank the COSLA team of Pat Watters, Della Thomas and Brenda Campbell both for the paper that they submitted to us and for their evidence this afternoon.