Local Government Finance Allocations
Our first item of business today is the statement by Andy Kerr on local government finance allocations. As usual, there will be questions at the end of the statement, which means that there will be no interventions during it.
The Scottish Executive is committed to improving public services throughout Scotland. Today marks an important step towards fulfilling that commitment, because today we announce the resources that we are making available to each of Scotland's councils for the next three years. A copy of the information has been placed in the Scottish Parliament information centre. We are announcing the resources at the same time as we are introducing important reforms that will strengthen the framework for improving services and give councils more freedom and flexibility to deliver for the people whom they serve.
In September, I announced an additional £1.4 billion for local services over the next three years. That is a major commitment by the Scottish Executive to Scottish local government. Those resources will mean that we can: develop further the highly successful concessionary fares scheme and thus support our elderly and disabled; maintain record levels of police numbers to support our communities; fulfil our commitment to free personal and nursing care for older people and thus support those most in need in our communities; provide additional support for children and families in our communities; and continue the modernisation of the teaching profession so that we support children and teachers throughout Scotland.
We will also secure funding for existing services and allow local authorities the flexibility to deliver improvement in those services. Today, I announce each council's share of the Scottish budget resources that they need to deliver those improvements. That will enable local councils to set their budgets and service plans for the next three years.
At the same time, the Parliament is empowering local councils. We are introducing a new duty to secure continuous improvement in services through best value, a new duty to work with partners to improve services through community planning, a new power to take the initiative to advance the well-being of their areas, and a new power to enable authorities to decide for themselves how much to invest in improving local infrastructure.
Today's announcement must be seen in the context of the reforms that we are making to the framework for delivering local services. The Scottish Executive is working in partnership with local government to deliver for Scotland. The total revenue grant for local authorities will be £7.4 billion in 2003-04. That will rise to £7.7 billion in 2004-05 and will again rise to over £8 billion in 2005-06.
On the day of the Scottish budget announcement, I met council leaders and told them that the budget was a challenging, but reasonable settlement. The Executive recognises the pressures that face local government, but the Government is also required to balance many different pressures and competing priorities. We must be honest about the fact that the public do not want to hear complaints about pressures, but information about what we are doing to improve services and invest in the future.
Today's announcement means that councils will have the resources that they need to deliver the improvements that we are committed to providing and that our citizens want—the people's priorities. In particular, I want to mention our commitment to improving quality of life, by which I mean helping to make our communities more attractive places in which to live, work and invest. Over the next three years, there will be an additional £180 million for initiatives to improve the local environment, tackle graffiti and vandalism, make our streets cleaner and safer and provide additional services to our young people.
The distribution of the funding in the settlement is based on the formula agreed with the Convention of Scottish Local Authorities. The formula is based on the most recent information that is available to us, including the 2001 population census and the 2002 school roll figures. The formula makes allowance for the additional costs associated with deprivation and with serving sparse rural communities. It also contains special provision for the islands. The figures do not include the better neighbourhood services fund, which will provide an additional £120 million to improve services for our most deprived communities.
We have underpinned the formula with a guaranteed minimum grant increase for all councils. That guarantee will be particularly welcome to councils with declining populations, such as Glasgow and the Western Isles. The average increases over the next three years are 8.5 per cent, 4.8 per cent and 3.9 per cent—all of which are above the projected rate of inflation.
Today's settlement puts in more revenue funding overall, directs resources to where they are most needed and protects councils with declining populations from reductions in grant. The settlement will enable councils to announce their council tax plans for the next three years. The increases in grant that have been announced today mean that there will be no pressure on council tax from national initiatives.
Business rates make an important contribution to local services. Next year the poundage for 2003-04 will be frozen at its existing level of 47.8p. The business community has warmly welcomed that measure. Next year also sees the introduction of the small business rates relief scheme, which will reduce the rates bill for small businesses throughout Scotland by up to 50 per cent.
The scheme will be paid for by businesses occupying properties with a rateable value in excess of £25,000. Those businesses will pay a small supplement on the poundage. In September, I said that the supplement would be limited to a maximum of one penny. Many doubted that figure. I am pleased to announce today that the supplement will be 0.6p. The poundage freeze, the small business rates relief scheme and a supplement below the rate of inflation mean that all businesses will benefit from our rating policies in 2003-04.
Today's announcement also marks the beginning of a radical change to the framework for capital investment by local authorities. The new framework will give local councils the freedom, the incentive and the support to increase investment in services. The Local Government in Scotland Bill will give councils the power to decide for themselves how much to invest, within a prudential framework. The settlement will give councils the resources to use that power to good effect.
From 2004-05, when we expect the prudential regime to take effect, councils will be required to work out how much they can afford to invest, taking into account their income from all sources including, clearly, the Scottish Executive. We expect that local authorities will make prudent, hard-headed decisions about their investment and that those decisions will be based upon affordable, long-term plans, made in consultation with their communities, and will satisfy external financial monitoring.
Within that framework, the Executive will continue to support local authority investment. Councils will be able to use the revenue grant that I am announcing today to support borrowing for capital investment. The Executive will also provide support through new capital grants. From 2004-05, those will support £270 million of investment in public transport, housing improvement, police and fire services, flood prevention, piers and harbours, dealing with contaminated land and improving air quality. On top of that central Government support, councils will be able to add capital receipts, revenue savings and other resources to increase their investment. They will be able to choose the combination of borrowing, grant funding and public-private partnerships that is right for them.
Councils will have a new toolkit available to them, with new freedoms and responsibilities, and more resources. It will be up to them how they use those tools, but they have enormous potential to increase investment in local infrastructure. The potential is there for every council in Scotland. If councils spend just £25 million of the revenue grant that I have announced today to support borrowing, they can achieve a near 70 per cent increase in capital investment. Across Scotland that would mean up to £350 million of additional investment in schools, roads, transport facilities and other infrastructure. That increase could pay for 125 primary schools or 23 secondary schools.
This statement means that councils will be able to invest more in improving services for the people of Scotland. This announcement should be welcomed by the Parliament, by local authorities and by the people of Scotland. It puts in place the resources that we promised to use to improve services at every local authority level in Scotland. The resources go hand in hand with the reforms to require and encourage year-on-year improvement. We are giving councils the resources, and we are giving them the freedom to deliver. I am confident that the partnership that we have developed with local government will deliver for the people of Scotland.
I thank the minister for his courtesy in ensuring that I had an advance copy of the statement, but I am even more grateful to Radio Scotland for reporting this morning the minister's view that the settlement will ensure that there will be only modest rises in council tax.
Is the minister aware that a COSLA briefing claims that the Executive spending review directs resources at initiatives rather than core services and that, in total over the three years, core services are being underfunded by £440 million? COSLA went on to claim that the underfunding indicates the prospect of difficult budget decisions for councils.
Is the minister aware that, according to COSLA, the funding gap following last year's settlement impacted on the provision of services for children, special educational needs and social work services? Has the minister assured COSLA, and can he assure the chamber, that sufficient resources have been made available to councils to ensure a modest rise in council tax, that core services to the most vulnerable will not be affected, and that free personal care will be delivered when those who are eligible need it?
I have told COSLA that I do not consider the alleged funding gap to be a real funding gap, because it relates to the gap between COSLA's aspirations and the settlement. I have told local government that every minister round the Cabinet table, and everything that we do in the Scottish budget, seeks to ensure maximum output for the money that they put in. I want to maintain pressure on resources in all parts of the Executive—in local government and elsewhere—to ensure that we achieve value for money.
The aspirational gap is £440 million over three years. Just a year ago, the figure was £1.5 billion for one year. Is the Scottish National Party telling me that in that mythical future when it has a finance minister—I do not foresee it—all that COSLA's leader will have to do is walk in the door and say, "I'm sorry, we're £1.5 billion short," and the SNP's minister will provide the money? I do not believe that that is sensible government.
We have supported national initiatives in full. We have supported the increased national insurance costs, allowed for pay and price inflation, abolished capital controls, reduced ring fencing, made no call on local council tax increases and made provision for quality-of-life initiatives to make a difference in our communities. That was the shopping list with which COSLA approached the Executive and to which I agreed through discussion with COSLA.
We should get the local government context right. That involves best value and getting rid of compulsory competitive tendering, using the power of well-being in our communities, council tax benefit subsidy limitation, using our money better in Scottish local government and demanding that Scottish local government delivers for local communities, which it wants to do.
I do not recognise the funding gap. We all have aspirations for local authority services. I do not doubt that local government could probably do better with more money, but we have tough decisions to make, as have local authorities.
I, too, thank the minister for early sight of his statement. Given this week's reports that more than £1 billion of council tax is uncollected, does he acknowledge that an improvement in tax collection rates, even to the same levels as in England, would allow for a substantial reduction in council tax levels? After this week's revelations that council tax in England might have to rise by 16 per cent—despite what was supposed to be a good settlement down there—why should we believe that the increases in Scotland will be only slightly above inflation?
The minister acknowledged in his statement the pressures that face local government. As Tricia Marwick said, there is no doubt that a funding gap exists. Are we to believe that the minister is content for councils not to be accountable to their electorates, but to deliver the Executive's agenda, in return for which all that they can do is to decide on cuts, not spending?
Having worked in local government when the Tories were in power, I take that with a large pinch of salt. Scottish council tax collection rates are improving. Good measures of best practice are out there. I visited West Lothian Council yesterday to open the Strathbrock Partnership Centre and I had time to discuss with the council leader his council's improving performance on council tax collection. The Executive recently announced £5 million of additional resources to assist local government in improving council tax collection.
As for our joint agenda with local government, we must make it clear that we work in partnership with local government. Concessionary travel is enormously popular in our communities and is not a burden. It is a community facility that people use effectively. Free personal and nursing care is another service that is provided to our communities.
I will talk about how we reach our conclusions about resources. We do not simply say, "Here is our policy—you must implement it." We sit down around the table. For instance, a joint McCrone implementation group dealt with the modernisation of the teaching profession. The joint care development group discussed free personal and nursing care and joint discussions were held with COSLA on concessionary travel. The joint future group discussed home-based care for older people and we held joint discussions with COSLA on the better neighbourhood services fund. The joint learning disability review group discussed learning disability and the Association of Directors of Social Work was consulted on the Mental Health (Scotland) Bill. The joint national review group also discussed care home fees.
When the Executive seeks to develop and roll out its policies throughout Scotland using the best appropriate mechanism through which to deliver those services—local government—we sit down, consult and agree how best to do that. I do not consider those matters to be a burden or an imposition. They are high-quality public services for our communities.
The minister's statement contains much to welcome. The settlement will never meet the full aspirations of local government—if I were still a local government councillor, I do not doubt that I would criticise it for not doing so—but it will go a long way towards improving the situation for many local authorities. I particularly welcome the statement on the support from 2004-05 for the new prudential capital funding scheme. Local authorities have been calling for that for many years, and the scheme will provide real benefits for local government.
Will the minister confirm that the measures in his statement provide full support for such national priorities as the McCrone settlement for teachers, free care for the elderly, concessionary travel and the additional cost of national insurance contributions? Does the minister's statement mark an increase or decrease in ring fencing?
I can assure the member that the Executive covers the full cost of the implementation of Executive initiatives. We then agree with COSLA the route for implementation and consider the distribution of resources.
I have consistently acted to reduce the degree of ring fencing with regard to local government expenditure. However, some SNP MSPs are confused about the subject. Nicola Sturgeon has called for more ring fencing. She said that she could understand the financial pressures that councils operate under, but that the Government should take action to ring fence cash and ensure that it is spent on the elderly. On the other hand, Sandra White eloquently demanded:
"For goodness' sake, give us less interference from central Government, less ring fencing, and less Executive talk about pushing through its policies and priorities at the cost of local needs and local people."—[Official Report, 31 January 2002; c 6023.]
The Executive is committed to discussing with local government at an early stage of policy development the allocation of resources; how best to contribute to the vibrancy of local services; and signing up to national priorities around popular issues such as long-term care for the elderly, the concessionary travel scheme and all the other initiatives that the Executive has managed to deliver through our partners in local government. There is an absolute commitment to reduce ring fencing. We do that year on year. There is also an absolute commitment to remain in contact and in dialogue with our local authority partners.
I welcome the minister's statement, which is good news for councils such as Midlothian Council. Can the minister assure me that the measures contained in his statement will provide small councils such as Midlothian with the resources to invest in social housing?
The statement gives all councils the opportunity to invest in local services. Midlothian Council has an above-inflation increase in grant of 10.3 per cent for 2003-04. That is very high compared with the average increase, and the figure increases by 5.6 per cent the following year and by about 4 per cent the year after that. In addition, £2.8 million will be made available to Midlothian through the quality-of-life initiative.
More important, as the potential for local authorities to harness their resources locally now exists, Midlothian's potential capital spending power rises by 74 per cent in 2004-05, using the prudential regime. That presents an enormous opportunity for local authorities to make a real difference in their communities through investment in infrastructure—which could include the matters that the member raises.
It is a good settlement, and I have said that it is a challenging one. That is, of course, what I would expect of the relationship between the Scottish Government and Scottish councils. Indeed, a council must challenge its own departments to ensure that they are delivering value for money.
I have four short questions for the minister. First, will he confirm that councils will now fully utilise both non-housing and housing capital receipts? Clarification on that matter is long overdue. Secondly, under the settlement, will Glasgow City Council be able to use the extra £80 million that it raises in rates revenue—which is currently used to subsidise the rest of Scotland—to spend in Glasgow? Thirdly, what is the percentage increase in local authority funding for Glasgow in comparison with other mainland councils? Fourthly, will the much-anticipated cities review be allowed to recommend and release more funding for the city of Glasgow if, as many people expect, it concludes that Glasgow is seriously underfunded?
An announcement on Tommy Sheridan's last point is expected in due course. That will be a matter for the minister involved.
Glasgow City Council will receive £1,799 per head of population in revenue grant support for 2003-04, rising to £1,933 per head of population by 2005-06. As in many previous years, that is the highest per-head allocation of any mainland council in Scotland. It is about 25 per cent above the mainland council average and 47 per cent above the lowest per-head allocation in Scotland. Total support to Glasgow City Council will rise to £1 billion, and it receives approximately £27 million assistance above the floor, because the Executive protects councils that are losing population and whose services require support. That shows that the Executive has given Glasgow a lot of support, especially considering its declining population.
Quality-of-life resources total £23.2 million over the years covered by the announcement. The prudential regime will offer Glasgow City Council the opportunity to increase its capital infrastructure spend by 93 per cent. There is great scope for Glasgow City Council to spend locally. The allocation will increase by 6.8 per cent, 4 per cent and 3.4 per cent in the years up to 2005-06. Non-domestic rates income is collected centrally and distributed to local authorities in accordance with previously agreed formulae and distribution mechanisms. There is no intention to change that system of distribution of resources at the moment.
I say to Glasgow City Council and every other local authority in Scotland that the Executive is listening. We are looking after our cities—I am sure that the cities review will back that up—and the required resources are being made available locally to deliver effective services. The yearly increases of 6.8 per cent, 4 per cent and 3.4 per cent, when Glasgow's population is declining, are a measure of the support that the Executive is giving to Glasgow.
Will the minister confirm that the statement includes full provision for inflationary pay increases, and will he detail the percentage increases included for pay? Furthermore, following strikes, or threats of strikes, by almost every service in local government during the Labour Executive's term in office, does he agree that the policy of self-financing pay awards should be abandoned? According to COSLA, which has been much vaunted today, that system has stripped some £800 million from local government budgets and is fatally flawed.
Local authorities have not had to self-finance pay settlements in the past three years, and today's announcement continues that positive trend. We support local pay and price inflation to the tune of 2 per cent. We are putting in significant resources in these times of relatively low inflation. That good practice has been in place for three years, so the member is simply wrong on that point.
I was pleased to receive the COSLA press release, which opens by saying that
"whilst it is a tight settlement it would be wrong of local government not to recognise the positives to come out of the local government finance settlement unveiled by the Finance Minister today."
I suggest that that accurately represents the true position of the Executive working in partnership with local government. We recognise that it is a challenging settlement for local government, as it is for the Minister for Environment and Rural Development and the Minister for Enterprise, Transport and Lifelong Learning. The Executive challenges people to spend money wisely, make the most of it and ensure that it makes a difference. Clearly, COSLA agrees with me about that.
I too welcome the statement. The minister will be aware of continuing concerns in the Highlands about whether the council has sufficient funds to cover key priorities. Will he confirm whether he believes that the settlement will allow the council to make progress on implementing those priorities, such as the McCrone agreement?
Yes, I do. We will continue to make progress on matters such as the effect of McCrone, particularly in the Highlands. We try to reflect some of the unique aspects of the Highlands through flexibility in the budget and in some of the funds that we have distributed. The distribution formula also tries to reflect sparcity issues, such as school sizes, and our support for Gaelic education.
Highland Council will receive above-inflation increases of 7.9 per cent in the first year, 5 per cent the following year and 4.8 per cent the year after that. The quality-of-life initiative will bring in £8.1 million over the three years, which will again create scope for the delivery of local services. COSLA makes representations to us on how our distribution formulae are working, and we have continued to review and discuss with COSLA how best to ensure that our money works for the people of Scotland. That discussion will continue and will take cognisance of the matter that the member raises.
I should point out that the economy is in some difficulty at the moment. Why has the minister failed to take this opportunity to restore the uniform business rate in Scotland and remove that competitive disadvantage with our neighbours?
We have the uniform business rate in Scotland; the issue is the revaluation that was carried out. Although we have a different rate poundage, the tax take from the business rate is exactly the same as it is elsewhere in the UK.
David Davidson failed to point out that I have had many meetings with the business community, which has warmly welcomed our approach to business support, such as our achievements with business rates, including freezing them. In relative terms, the tax take from business has not changed since 1979. We have continued to support Scottish business and have ensured that it grows and prospers, because we know that such an approach creates the opportunity within our communities to develop all our other policies and services. I simply do not recognise the landscape in which David Davidson is working. Indeed, if he had read the business pages recently, he would not recognise it himself.
I join Rhona Brankin and my colleague on the Local Government Committee, Iain Smith, in welcoming the statement, particularly the flexibility that the prudential framework allows and the announcement of capital investment, which will obviously be used for non-trunk roads, among other things. I have gone on about that issue for a long time. However, investment will not begin until 2004-05. As far as 2003-04 is concerned, I seek the minister's assurance that he will still seriously examine the survey of the Society of Chief Officers of Transportation in Scotland when it is produced early in the new year.
Short of going out to fill the potholes myself, I do not think that I will ever satisfy the member's concerns about local roads. However, having enjoyed myself immensely on the front line of local government services previously, I might entertain the prospect. [Interruption.] I say to John Swinney that that is not a commitment. I know how fond he is of making commitments.
With the prudential regime, we will be able massively to widen local authorities' scope to deal with such matters. As far as timing is concerned, we want to get things in place as quickly as possible; however, I expect that the regime will be introduced on the date the member mentioned. Of course, the £3.1 million quality-of-life allocation to Stirling Council will go some way towards filling some of the potholes and dealing with some of the issues about local roads that she raises.
In light of Arthur Midwinter's report, will the minister give us some guidance on whether the claims of various local authorities—including Aberdeen City Council—about mismatched funding after local government reorganisation will be addressed? Furthermore, what proportion of the increase that he has announced today will go towards national initiatives, whether they are dealt with jointly or otherwise? That should give us an idea of how much funding is truly available for local decision making, rather than how much is available to deliver the national Government's priorities.
Most of the Executive's funding is for local decision making, which is why allocations are hypothecated. Local choices are available to local people.
As far as mismatched funding is concerned, £130 million was provided at the time of reorganisation. Since reorganisation, every single council has benefited from substantial grant increases. Indeed, today's announcement continues that progress. Councils that have claimed mismatched funding have asked me for an additional £51.6 million for 2005-06. In fact, the councils' grant allocation will total £382 million. Although I respect and acknowledge the concerns of authorities about mismatched funding, I should point out that local government has moved a long way since reorganisation. I do not believe that the Executive is responsible for the decisions that were made by councils back then. That said, we have dealt more than adequately with the total funding that would be required to address mismatched funding. Aberdeen City Council, which has sought an additional £6.7 million to deal with mismatched funding, will receive £40 million from the settlement that I have announced today. The Executive is showing its commitment to local authorities with pounds and pence, and with statutory and legislative support.