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Chamber and committees

Meeting of the Parliament [Draft]

Meeting date: Wednesday, March 1, 2023


Local Government Finance (Scotland) Order 2023

The next item of business is a debate on motion S6M-08007, in the name of Tom Arthur, on the Local Government Finance (Scotland) Order 2023.


The Minister for Public Finance, Planning and Community Wealth (Tom Arthur)

Today’s debate on the Local Government Finance (Scotland) Order 2023 seeks Parliament’s approval for the guaranteed allocations of revenue funding to individual local authorities for 2023-24. It also seeks agreement to the allocation of additional funding for 2022-23 that has been identified since the Local Government Finance (Scotland) Order 2022 was approved on 2 March last year.

We cannot ignore the hugely challenging circumstances in which we have had to agree the Scottish budget this year. Inflation is still running at double digits; in January, it had gone down to 10.1 per cent. At the start of February, the Bank of England raised interest rates to 4 per cent, which is the highest level in 14 years.

Brexit, too, is continuing, and will continue, to cause harm and have an adverse impact on our economy. The International Monetary Fund has forecast that the United Kingdom economy will be the only major economy to shrink in 2023—it expects the UK economy to fall by 0.6 per cent.

Despite that, within the limitations of the devolution settlement, we have used the powers that we have to protect public services, invest in the transition to net zero and take decisive steps towards eradicating child poverty.

The Scottish budget strengthens our social contract with every citizen of Scotland for the wider benefit of society. That means that people in Scotland continue to enjoy many benefits that are not available throughout the UK, including free prescriptions, free access to higher education and the child payment. That also applies at council level. People can access more local services than can be accessed elsewhere in the UK—for example, they can access more fully funded early learning and childcare for all three and four-year-olds; a welfare fund that is delivered locally; and free bus travel for nearly 2 million people, including every child and young person under 22.

The Scottish Government is providing nearly £13.5 billion in the 2023-24 local government finance settlement. That funding includes revenue support of almost £12.6 billion and support for capital expenditure of more than £0.8 billion.

Following the flat cash position that was set out in the resource spending review, we listened to councils and are increasing the resources that will be available next year by £793 million. The 2023-24 local government finance settlement now provides an additional 6.3 per cent, or a real-terms increase of 3 per cent, compared with 2022-23.

As we do every year, to reach that number, we have compared the proposed budget with the allocations that Parliament approved in the previous year. That provides the best like-for-like comparison of available funding.

In addition, individual local authorities will have full flexibility over local council tax rates and the newly devolved empty property relief. The Scottish Government also intends to introduce a local visitor levy bill in Parliament this year, which will, in time, give local authorities a discretionary power to apply a levy on overnight visitor stays in their areas and to utilise that additional funding locally.

It is important to note that the total funding package has already been finalised, following the passing of the Budget (Scotland) (No 2) Bill. Today’s debate seeks Parliament’s approval for the distribution of that approved total funding to individual local authorities.

The order seeks approval for the distribution and payment of almost £11.6 billion of the revenue total of £12.6 billion, with the balance mainly made up of specific grant funding, which is administered separately. The £11.6 billion is a combination of general revenue grant of more than £8.5 billion and the distributable amount of non-domestic rates income, which has been set at just over £3 billion.

The settlement provides continued fiscal certainty through our policy of guaranteeing the combined general revenue grant plus non-domestic rates funding set out in the order. That means that any loss of non-domestic rates income resulting from the impact of Brexit or Covid-19 will be compensated for by increased general revenue grant, unlike the position for councils in, for example, England. That effectively underwrites that critically important revenue stream.

As approved as part of the Scottish budget, the overall funding package for 2023-24 includes £360 million of support for local government pay deals, a £72.5 million increase to the general revenue grant, £105 million to give effect to the devolution of non-domestic rates empty property relief, an extra £50 million capital to help with the expansion of the free school meals policy, additional funding of £100 million to deliver a £10.90 minimum pay settlement for adult social care workers in commissioned services, and consolidation of £30.5 million for the homelessness prevention fund.

There remains a further £330 million of revenue funding that will be notified to local authorities once the distribution has been discussed and agreed with COSLA. That will be included for approval in the 2024 order.

There is specific revenue funding that is paid directly by the relevant policy areas under separate legislation, which amounts to almost £776 million.

The 2023 order seeks approval for almost £371 million of changes to funding allocations for 2022-23. The full list of changes can be found in the report to the 2023 order.

This Government recognises the financial challenges that local authorities across Scotland—and, indeed, the whole public sector—are facing. We acknowledge the importance of providing more fiscal flexibility and more revenue-raising powers for local government.

The fiscal constraints that we share emphasise the need to focus urgently on improving delivery of sustainable public services, designed around the needs and interests of the people and communities of Scotland. We must also continue to press the UK Government for additional funding for our shared priorities and pressures, and I would welcome support from across the Parliament in that respect.

The Budget (Scotland) (No 2) Bill, which Parliament passed last week, ensured that total funding from the Scottish Government to local government next year increased not only in cash terms but in real terms. The order confirms the distribution to individual councils and the proposals reflect the crucial role that local authorities and their employees continue to play in our communities.

I move,

That the Parliament agrees that the Local Government Finance (Scotland) Order 2023 [draft] be approved.


Miles Briggs (Lothian) (Con)

Across the world, Governments are meeting, as we are today, to discuss and approve budgets. I was disappointed that the minister did not touch on what has destabilised the whole process, which is President Putin’s illegal invasion of Ukraine. Ministers across the Scottish Government need to start recognising that and including it in their considerations of where we are. It is not just Brexit or Covid-19 but illegal war that is having a real impact on driving up prices and the inflation rate.

I thank all those who work in our local authorities across Scotland for their hard work and commitment to our communities, especially during the Covid-19 pandemic. I also thank them for the work that they are undertaking to deliver recovery for our communities—that is something that we should very much recognise. The work that my council in Edinburgh and the council in Glasgow are doing to support Ukrainians and Ukrainian families in Scotland is tremendous. My council has highlighted to ministers pressures around education and housing support that have not been addressed in the budget. We need to make sure that ministers recognise councils’ lasting and on-going support.

The order before us allocates funding for each of Scotland’s 32 local authorities. We do not intend to oppose it, but we continue to raise serious concerns about the overall allocation of resources to local authorities across Scotland and the need for reform of how they are delivered. Council finance chiefs have warned Scottish National Party and Green ministers that Scotland’s local authorities are now facing unprecedented financial pressures. Let us not forget that the Scottish Government’s budget is the largest in devolution history, thanks to additional UK Government funding being allocated during and after the budget process.

The exercise of tracking funding allocations over the past decade points to SNP ministers not passing on to local government the additional resources that they have received. I hope to highlight that today, because, although we have this debate annually, we are not finding the solutions that local government needs. Councils have been left having to find savings and cut local services at the same time. This year, we are witnessing councils taking those difficult decisions and coming together, through COSLA, to condemn, again, their financial settlement.

It is clear that we need a new approach and a new conversation about how we take forward the budget process. The acting finance secretary, John Swinney, in his speech in last week’s stage 3 budget debate, said that the Scottish Government wants a new deal with local government. I agree that there should be a new deal, but it should not be set by just the Scottish Government; the Parliament and all local authorities should be part of the conversation. Ministers need to consider how finances will be properly delivered in the future. I hope that SNP and Green ministers are genuinely able, following this year’s budget process, to pause and reflect on the difficulties that councils say that a similar budget would present them with in the future.

We need the financial relationship between the Scottish Government and local government to be reset. We need a new partnership to be developed that accords respect to our local authorities and gives them the powers and funding that they need to deliver the vital public services on which we all rely.

The minister pointed towards a potential additional tax, which I think that only two councils are considering taking forward.

Wider discussion of local government reform is needed. We need a new fiscal framework for councils, and we need the powers that local authorities currently have to be respected. In that regard, debates about, for example, the national care service, also need to consider reform. To date there has been little scope for reform or discussion of reform, but I hope that an opportunity for that will be presented outside this budget process. Our having a new First Minister, a new finance secretary and new local government ministers will present an opportunity to build a new relationship and have positive discussions about a new funding settlement. Currently, there seems to be a stalemate when it comes to opening up discussions about that important issue, but reform is critical if we are to protect and enhance our local councils and communities.

I do not doubt that councils will continue to face difficult decisions in the coming weeks, months and years. From meeting and speaking to councillors across Scotland, not just from my party but from all parties, I cannot see where councils can find flexibility. In many areas, they have used the sticking plasters that they had to get this budget across the line; there is nothing else for them to cut without resorting to delivering core services and nothing else.

I hope that we can consider that backdrop and the financial pressures, which we all recognise, ahead of next year’s budget. I hope that SNP and Green ministers will reset their approach to how local councils are funded and to the local priorities of each local authority, whether it is rural or urban. I hope that all members of this Parliament will play a role in that. More important, we must ensure that our local authorities are able to deliver for our local communities.


Mark Griffin (Central Scotland) (Lab)

We will not oppose the order today, because we know that it is necessary to get funding allocated to councils. However, as we indicated during stages 1 and 3 of the budget process, we do not support the 2023-24 budget because it is laced with yet more cuts and could lead to rocketing council tax bills and up to 7,000 jobs going from local government.

Councillors in all 32 local authorities and from every political party, including the SNP, are having to make heartbreaking decisions—decisions that are of this Government’s making. Some £6 billion has been cut from services since 2013, but the Government seems to look the other way.

Roads are crumbling, libraries are closing and bins are overflowing. Staff have been left with no option but to strike, which has left schools closed across the country. Now, it is left to councillors to take tough decisions to balance the books. There have been council tax increases of 5 per cent, 6 per cent, 7 per cent and up to 10 per cent across the country.

Not only has the Government passed the buck during a cost of living crisis when food, utility and housing bills are soaring, but the public will have to pay for worse services and foot the bill for the SNP’s neglect of local councils and communities.

In my region, SNP-led Falkirk Council asked its executive to green light a plan to put 133 buildings up for sale. School pools, Grangemouth stadium, sports halls, gyms, park buildings and village and community halls were all flogged to fill a deficit, and with them went 200 jobs. SNP-led Aberdeen City Council’s review could result in swathes of its services, including social work, its welfare fund, council tax collection, health and safety enforcement and free school meals being put up as options for outsourcing.

The smoke and mirrors, political spin and, at times, what verges on dishonest presentation of the budget figures and their impact meant that there was no real debate about the budget; there was only game playing and spin that defied and denied reality. At the time, ministers complained about changes to their budget in real terms, but they talked in the same breath about changes to local government budgets in cash terms.

We spent hours in the chamber, demanding an honest discussion about where we would spend additional funding and where we would cut, but the truth is that, with no honest starting point, we never had a conversation. When the Government claimed during the initial allocation in the budget process that there would be an uplift of £570 million to local government, where was the honest conversation? How could we possibly have an honest starting point when that was the Government claim? Even if that was true and realistic, it was still only half of what the Convention of Scottish Local Authorities had asked for to protect essential services. Even that figure did not make it to the end of the day, because the true number was £71 million once existing policy commitments were taken into account.

The Fraser of Allander Institute set the record straight, making it clear that the Government’s funding proposal would represent a real-terms cut to local government budgets. Even the £223 million that was announced at stage 3 was committed spend; it was not additional funding for councils to spend on protecting services. Councils have been left to continue to make cuts. Like every other year, the SNP said that there was no more money, and then we got to stage 3 and it allocated additional funding at the very last minute.

At that point, some councils had already had their budget meetings and some had already set their budgets. When the Government comes to the chamber on the final day of the stage 3 process to announce additional funding, it shows absolute contempt for its so-called partners in local government.

Will Mark Griffin give way?

Please be as brief as possible, minister.

Tom Arthur

I recognise that the timing can sometimes be suboptimal, to put it mildly, but does Mark Griffin recognise that, ultimately, we have to operate in the wider fiscal UK framework and under Treasury rules? That includes late notification of supplementary estimates within financial years, which can have a cascading and knock-on effect.

You should be winding up now, Mr Griffin.

Mark Griffin

I appreciate the impact of the timing of the allocation from the UK Government, but this is a recurring theme. It is a pattern every year in local government budgets: the Government comes to the chamber, tells members that there is no more money left, asks us to identify cuts and, at the very last minute, announces extra money from the back of the sofa or out of a hat. That is treating local council colleagues with contempt.

We will vote for the order to allow councils to get the money that has been allocated to them, but it is clear that it will result in more pain and misery for local communities.


Alex Cole-Hamilton (Edinburgh Western) (LD)

I apologise to members for my late arrival. I was caught up in a broadcast interview that overran.

The tone of Tom Arthur’s remarks is striking. It is completely at odds with what I am hearing from Liberal Democrat councillors who are at the sharp end of the situation. Members on the Government benches must hear it, too, so I am surprised that Green and SNP members are happy to go along with it.

I am relieved that, in Edinburgh—thanks to the Liberal Democrats—more than £5 million-worth of school cuts have been prevented. We promised to stop the assault on education and we have delivered on that. However, that is not to say that putting Edinburgh’s budget together was not incredibly difficult, because the Scottish Government is still cutting that budget by a staggering £76 million. It is figures of that sort that mean that, elsewhere, there are cuts in the numbers of school librarians, community wardens and early years staff and to the provision of music tuition and outreach in some of the most deprived communities in the country.

I have listened to members on the Government benches during the past few weeks, and it is clear that they have disengaged with the fact that local government is in crisis. Local government budgets have been eroded—squeezed until the pips squeak—year after year by SNP and Green ministers. The consequences of that can be seen from the failure to close the poverty-related attainment gap to the pot-holes in our road.

Tom Arthur

What I am inferring—and what I think the member is implying—is that there has to be strategic realignment of funding priorities in Government to give local government more money. That would necessitate significant reductions elsewhere. We have a budget process to go through next year and in subsequent years, so does Mr Cole-Hamilton have a place from which he wants to take that money?

Alex Cole-Hamilton

I told you exactly where I would take that money from; for a start, I would get rid of the vast and unnecessary bureaucracy that is the ministerial takeover of social care.

I point the Government to its own words. In its local elections manifesto, it said that it would

“improve and protect your local services”

and give local councils

“greater control and influence over decisions”.

The SNP promised those things last May, and the Greens were at it, too. They promised

“fair funding for public services”


“devolved decision-making”.

Those were the words of the Greens.

It took only 26 days after making big promises at those council elections last May for Kate Forbes and her Green colleagues to unveil their plans for more savage cuts in the spending review.

Last month, the Cabinet Secretary for Education and Skills introduced a fresh sanctions regime for local government. If it did not do what the SNP-Green Government ordered, it would face penalties. The education secretary is treating councils like an enemy that is determined to cut teacher numbers. That is nobody’s wish; nobody is talking about that as a way forward. The way to protect teacher numbers is to adequately fund our local authorities.

The pattern goes back to 2007, which we can see from a recently released cabinet paper showing that John Swinney threatened to

“centralise the delivery of school education ... to play hardball with Cosla”.

None of that demonstrates the collaboration and partnership that we were promised. It puts local government and education in a headlock.

The Greens should listen to Andy Wightman—their former, respected member—who wrote in Holyrood magazine last month:

“The Scottish Government’s enfeebling of local councils is an attack on democracy.”

He also, rightly, suggested that we imagine that the boot were on the other foot and that the UK Government threatened financial penalties if Scottish ministers did not follow the Tory Government’s manifesto.

Local authorities need a fair deal from the Government and a power surge that recognises the importance of the work that they do. That means giving them more powers over economic development, planning and transport and ending the SNP power grabs that I have defined. They need new hope and not another ministerial takeover of social care, with a vast and unnecessary bureaucracy that would asset strip and trample over services once again.

Let me turn to council tax reform. Tom Arthur said that that is a key priority, but we know what that means. Like other key priorities before it, the SNP will make no reforms throughout the entirety of this parliamentary session; it has made it explicit that nothing will be rolled out before 2026. The Greens still cannot see that they have gone into Government on the promise of talks about talks—a working group, then a citizens’ assembly—and that, at the end of all that, we are being promised options. Tom Arthur says that those options could be anything from relatively minor to significant and fundamental—talk about kicking something into the long grass. Members do not have to take my word for it; Robin Harper, the former leader of the Greens, agrees.

There is no escaping the harm that this local government settlement will deliver to communities in every corner of Scotland, and the Liberal Democrats will oppose it this evening.


Tom Arthur

I thank colleagues for their contributions. On Alex Cole-Hamilton’s final remark, I appreciate that he might disagree with the distribution and the allocation but, if he wants to distribute money to local authorities, he needs to vote for the order, or at least not oppose it.

Secondly, if I recall correctly—I will check the Official Report—he said that I had been explicit or made clear that there would be no changes to council tax by the end of this parliamentary session. That is not what I said. I gave a specific commitment that was misreported—or, at least, reported with a particular tone that suggested that my intention was other than what it was. I want to be clear about this: my intention is that the pace with which we move on council tax reform will be determined by the outcome of engagement with COSLA and through a deliberative process. I think that members will recognise that, in the spirit of working in partnership with local authorities and respecting them, we should not seek to impose a form of local taxation on them but should, instead, seek to reach agreement and consensus in partnership.

Alex Cole-Hamilton

If I have misrepresented the minister, I apologise. Will he clarify for the chamber—I will correct the record if this is the case—whether council tax will be reformed by the end of this session of Parliament? Yes or no?

Tom Arthur

If the member had listened to what I was saying before he intervened, he would understand that the pace of council tax reform is not a matter for Government or this Parliament alone; it is about reaching consensus and agreement with local government and communities, through a deliberative process. Mr Cole-Hamilton might think that the job of the Parliament is to impose a form of local taxation on local government, but we respect local government and will work with it in partnership to ensure that we deliver a kind of reform for which there is consensus.

Mr Briggs touched on the issue of Ukraine. I agree whole-heartedly with him that Russia’s illegal and barbaric invasion has had a significant impact on not only the Scottish and UK economy but the global economy. I recognise that other members take that view, too. However, I note that, when my colleague Jenny Gilruth was highlighting the need for the reconsideration of timetables around the dualling of the arterial trunk roads—clearly a major capital project—and cited the war in Ukraine as one of a range of reasons for that, one of Mr Briggs’s colleagues said that she had a nerve to blame Vladimir Putin’s invasion of Ukraine. It is important that, if we are going to be adducing the invasion of Ukraine and the impact that it has had on the global economy as a consideration in relation to the UK Government’s funding of the Scottish Government, which has knock-on effects for our capacity to fund public services in Scotland, we have to apply that approach with some consistency.

We are in straitened financial circumstances. We have seen inflation at rates that are certainly unprecedented in my lifetime. This is not an ideal circumstance in which to be delivering a budget, but we have set out key priorities around the just transition to net zero, sustainable public services and the eradication of child poverty. What this local government finance settlement does is provide a real-terms increase to local government for the next financial year. However, I reiterate the point that I have made to Alex Cole-Hamilton and others: if there is a desire for a significant and strategic shift in the Scottish budget to significantly increase the resources that are available to local government, it is incumbent on members to identify where that resource should come from. We can go round in circles every year in these debates, but unless there is a willingness to engage—

Will the member take an intervention?

Tom Arthur

I am afraid that I am out of time, Mr Briggs.

I am happy to have those conversations, but they have to be serious, grown-up conversations. If we are talking about a strategic shift in how the budget is deployed, it is incumbent on members to engage with that seriously.

Again, in the interests of local government and the provision of fiscal stability, I urge members to support the resolution this evening.