Good afternoon, everyone. The first item of business is a debate on motion S4M-08916, in the name of John Swinney, on the draft Local Government Finance (Scotland) Order 2014.
The draft finance order that we are considering today seeks agreement on the allocation of revenue funding to local government for 2014-15 to enable local authorities to maintain and improve the vital services on which communities throughout Scotland depend. In addition, it seeks agreement on the allocation of funding since the 2013 orders were discussed and approved by Parliament. As well as seeking Parliament’s approval on the order, I confirm the laying of legislation on business rates and on the council tax exemption for articulating students.
Next year, 2014-15, is the third of the current three-year settlement, and local authorities were advised of the provisional allocations this time last year. I updated that information as part of the annual consultation process and will summarise the changes that have taken place since.
In 2014-15, the Scottish Government will provide councils with a total funding package that is worth more than £10.6 billion. That includes revenue funding of more than £9.8 billion and support for capital expenditure of more than £773 million. The finance order seeks Parliament’s approval for the distribution and payment of £9.3 billion, out of the revenue total of £9.8 billion. The remainder will be paid out as specific grant funding for which separate legislation already exists, or it will be distributed later.
I will lay a second order before Parliament next month to pay the £70 million to compensate all councils that freeze their council tax again in 2014-15, which will be the seventh consecutive year of the freeze. I am pleased that a number of councils have already declared that they will freeze their council tax and I encourage the remainder to follow suit, thereby providing much-needed financial respite to households throughout Scotland.
I will also use the second order to distribute the majority of the council tax reduction scheme funding and any further agreed changes to discretionary housing payments. As the whole Parliament is aware, and as we discussed during yesterday’s budget debate, the United Kingdom Government’s imposition of the spare-room subsidy rules—or bedroom tax—is having a significant impact on some of the most vulnerable in our society.
Legislation constrains our ability to fully mitigate the effects. However, as I confirmed to Parliament in the debate yesterday, we will make available—subject to approval by the UK Government—a further £12 million, thereby bringing the total direct support from the Scottish Government to almost £35 million for 2014-15, to address the implications of that damaging tax. The Government is clear that our preferred route for the distribution of those resources is through discretionary housing payments, which can be made directly to the individuals who are affected.
The most important change to the figures that I announced in December is the inclusion of second-year funding for the Scottish welfare fund. We are coming to the end of its first year of operation and are working jointly with the Convention of Scottish Local Authorities to ensure that vulnerable applicants are provided with the support that they need this year and in future.
For 2014-15 we will again provide councils with £37.9 million. The remaining changes, which amount to £4.2 million, include £4 million for the one-plus-two language policy and £0.2 million for the business gateway website.
The 2014 order also seeks approval for the changes to the net increase of £20.4 million in 2013-14 funding allocations that was either held back from the 2013 order or has been added to fund a number of agreed spending commitments that have arisen since the 2013 order was approved. Those include £27.5 million for the teachers induction scheme; £20 million for discretionary housing payments; £4 million for the one-plus-two language policy; and £2.5 million towards the national care contract.
The total additional funding of £61.3 million has been partially offset by the recovery of £40.9 million of outstanding committed and uncommitted police reserves that were returned to the Scottish Government after Police Scotland was set up.
I should also explain that the total revenue funding to be paid out to councils in 2014-15 but not included in this order includes £86.5 million to be paid directly to criminal justice authorities; £343 million for the council tax reduction scheme; £70 million to freeze the council tax; £27.6 million for the teachers induction scheme; and £7 million for the council tax reduction scheme administration costs.
The £70 million to fund the council tax freeze will be added to the individual local authority settlement totals when I bring forward the local government amendment order in March for those councils that have budgeted to both freeze the council tax in 2014-15 and maintain teacher numbers in line with pupil numbers and secure places for all probationers under the teachers induction scheme.
Since the order was laid, we have announced a further £15 million in 2014-15 to deliver a phased expansion of eligibility for our childcare offer of 600 hours for the most vulnerable two-year-olds, and we will provide an additional £13 million to fund free school meals for all schoolchildren in primaries 1 to 3 from January 2015. We will be working with our local government partners to implement and distribute those additional resources.
Although not part of today’s order, the overall package for local authorities includes support for capital funding in 2014-15 of over £773 million, delivering on our commitment to maintain local government’s share of the overall capital budget.
I turn now to business rates, which are a key issue for Scotland’s business community. To maintain the competitive advantage that has been enjoyed by Scottish businesses since 2007, last December I announced that we will cap the annual increase in the business rates poundage to 2 per cent in 2014-15. Today, I have provided additional certainty for small businesses across Scotland by legislating for the small business bonus scheme for the next two financial years, meeting our manifesto commitment to maintain the scheme for the lifetime of this parliamentary session. Last December, I announced that I would go even further than that manifesto commitment, and legislation has been laid today that extends the small business bonus scheme to a further 4,000 eligible properties.
The Scottish Government recognises the importance of town centres in supporting local economies. That is why the Minister for Local Government and Planning has today laid legislation to extend the fresh start relief scheme. In addition, he announced on 15 January a summit to discuss payday lending and gambling shops on Scotland’s high streets. Ahead of that summit, I can announce today that legislation has been laid to ensure that, from 1 April, payday lenders will no longer be eligible for business rates reliefs.
By delivering on our manifesto commitments to maintain parity with English poundage rates and confirming the small business bonus scheme thresholds and expanding the scheme, I have underlined the Government’s commitment to maintain Scotland’s position as the best place to do business, with a business rates relief package that is estimated to be worth over £590 million in 2014-15.
In line with our commitment to widen access to higher education by removing potential barriers to participation, I am pleased to announce today, too, that following our recent public consultation we will shortly lay legislation to implement our commitment to exempt articulating students from council tax. That legislation will extend the existing exemption from council tax that is available to those who meet the criteria defining a student for council tax purposes so that it includes articulating students: those progressing from higher national certificate or higher national diploma study at college to second or third year of first degree-level study at university. This support for alternative progression routes will help us to widen access to education for all, increasing opportunities for our young people to develop the learning and skills that will equip them for the future.
In summary, the total funding from the Scottish Government to local government next year amounts to over £10.6 billion. By working constructively with our local government partners, we have agreed an overall funding settlement and package of measures to help maintain and evolve the services on which the people of Scotland and the businesses of Scotland depend.
I move,
That the Parliament agrees that the Local Government Finance (Scotland) Order 2014 [draft] be approved.
14:39
Yesterday’s debate on the budget resulted in Labour and the Scottish National Party agreeing that we would bin the bedroom tax. I warmly welcome that. In the debate last year, I asked the SNP to work with us when we debated local government finance. The bedroom tax is a policy based on Tory ideology, with no understanding of the reality of the lives of the thousands of tenants who live in council and housing association properties. There are simply not enough affordable houses for people who need them. The policy ignores the realities of families—for example, children having needs because they are studying for exams, carers looking after a relative and people with disabilities. Last year, I knew from talking to Labour councils across the country that they were worried that the bedroom tax was pushing into debt tenants who had never been in debt and destabilising council and housing association budgets.
We can take pride from yesterday, when we worked as the Parliament that we were set up to be and used our powers to protect people. Today’s debate is about our councils’ capacity to do the same—to use the increasingly scarce resources that they are allocated, to work with the increasingly centralist policy framework that they have been given and to try to plan ahead to address challenges such as the care of older people and climate change. Those are no longer challenges for the future; they are with us now. We look to local government to deliver better-quality environments, well-planned housing for communities, local economic action to support local jobs and training, and the high-quality education and social care services that give us all not just the best start in life but the best support and care throughout our lives when we need it.
We do not see today as a complete cause for celebration because, although extra resource is being put in to tackle the bedroom tax, the overall financial settlement for local government is not good news. It is a story of cuts, of centralisation and of impacts on front-line services resulting from the SNP’s financial straitjacket. Every MSP will know of the tough decisions that our council colleagues are making. The SNP has broken local government finance, with nearly 35,000 jobs being cut from local government since 2008. As Audit Scotland rightly documents, the challenge of delivering health and social care under the budget settlement will add to the pressures on care workers and the families who rely on their services. We need committed care staff who are paid a decent wage and are well trained and motivated. The loss of local authority jobs is bad for local economies, too, especially in economically fragile areas, as it has a negative impact on local economic activity and businesses.
We believe that the Scottish National Party Government is on pause and is more concerned about independence than about the reality of people’s lives. More could be done. For example, we could create flexibility for councils to benefit financially from tourism and to build local renewables and heat and power infrastructure to keep people warm and keep energy affordable. At present, only a few councils are able to do that given their scale. My colleague Richard Baker will talk about the need to give businesses more support and to give local authorities the support that they need to do that.
Local government costs have risen by 10 per cent since 2007 but, with this budget, £637 million has been cut since 2008-09. The SNP’s white paper talks grandly about life post-2016, but it does not address the realities of the cost-of-living crisis for people now. The SNP is proud of its underfunded council tax freeze—we heard that again today—but it hits hardest those people on low and modest incomes, or the people whom the SNP says it is meant to help.
The Labour Party issued leaflets in Dunfermline and Cowdenbeath saying that it backed the freeze and would continue to do so. Did it run them past the member before it put them out?
Absolutely. When we look at the budgets that are being set across the country, we see that the choice between keeping the council tax freeze or losing even more money is not a palatable one for our councils. The point that I am making is that the council tax freeze is predicated on tackling the cost-of-living crisis, yet the people it hits directly in their pockets are those on the lowest incomes, who most deserve our support.
For example, the council tax freeze most benefits those with the largest houses. This year, the annual benefit for people in band F, G and H houses is more than £300, but for those in band A houses it is under £100. Then there is the increase in charges for services across the country. In 2003, income from charges equated to 40 per cent of the money raised by the council tax. Today, the figure is nearly 60 per cent.
The finances are crucial. The real-terms funding cuts at a time of increased demand and the impact of Tory austerity policies mean that something has to give. The Joseph Rowntree Foundation told us last year that local government cuts have the severest impact on poorer communities, that we will see local councils withdraw from front-line services and reduce and ration services and that the most vulnerable will be hardest hit—we have debated that in the chamber before. This is a tough settlement for local government.
I welcome some of the announcements that the cabinet secretary made today, especially on payday loans. We have been constructive over the past year. For example, we supported the increase in planning fees to ensure a degree of cost recovery and last year we proposed working jointly to mitigate the bedroom tax.
This settlement will be a challenge to local government. Last year, the cabinet secretary described his deal as a flat cash settlement but it was not, because local authorities had to make cuts to balance the books. We received the figures for today’s budget only at 5 past 2 and will examine them in more detail after the debate.
You should be drawing to a close, please.
Last year, we warned about the removal of local control of policing and this year we have seen cuts without consultation in police counters and control rooms. That move is not in line with the Scottish Government’s town centre-first policy and does not support local employment strategies.
Good things are being done, but they are happening against the tough budget settlement that our councils face. Councils want and are ambitious to do more, but they need the ability to do that and the Scottish Government is not doing enough to help them.
Although we will vote for the motion at decision time, we will do so with a heavy heart. Our communities deserve better.
14:45
With the Parliament’s approval of the Scottish Government’s budget yesterday evening, I can confirm that the Scottish Conservatives will support the order, as it addresses the distribution of the £10.5 billion of local government moneys that have already been agreed. However, the debate provides a useful opportunity to consider the broader issues that surround the funding of our local authorities, particularly the transparency of the process.
We face challenging times as a consequence of the necessary action to deal with the deficit and, although welcome signs of strong economic growth are coming through, the Local Government and Regeneration Committee heard much evidence of the financial pressures on all local authorities. Scottish Conservative support was crucial in bringing about the council tax freeze and we have supported its retention to date, as it has proved a lifeline for many hard-pressed and struggling families. That said, a burden has been placed on councils to maintain both the freeze and the front-line services for which they are responsible and, given such circumstances, there is an even greater need for full and frank disclosure of local authority spending priorities. Councils must be accountable to taxpayers.
The committee heard evidence that councils are already balancing the delivery of so-called statutory services and discretionary services. However, the cabinet secretary rightly made the point that, instead of choosing which services to deliver, we should be examining how we deliver them. That said, it is critical that decisions on prioritising services are completely transparent.
In that respect, there is room for improvement. As the body that represents local authorities, COSLA should be leading by example, which is why its lack of engagement with the committee on its budget discussions was so regrettable. We need to have a dialogue with the organisation if we are to get the fullest picture of what is actually happening on the ground.
Indeed, significant shifts are already taking place in councils’ use of fees and charges to fund services. That was not immediately clear from published data, and it took last year’s Accounts Commission for Scotland report to disclose the increasing use of charges as a cash generator. The report revealed that income raised in that way equated to more than half that raised through council tax and was worth £1.3 billion last year. However, the committee found that councils were using net expenditure data, which did not include details on revenue raised from charges and fees. That is neither acceptable nor good practice. We must have clarity on that point and the Government must ensure that councils report fully on where their income is coming from.
We also need transparency if we are to monitor local authority progress in growing the income base and encouraging business. I welcome the projected 8.3 per cent real-terms increase in non-domestic rates income, which has been helped in no small measure by the UK Government setting the pace in support for businesses by capping the increase in business rates at 2 per cent. That move has undoubtedly forced the Scottish Government’s hand; indeed, it raises the question of what could be achieved if the Scottish Government were to commit to more of a business growth agenda.
That brings us to the business rates incentivisation scheme, which I have to say is an incentivisation scheme like no other for the simple fact that it is bereft of any incentives. Mr Swinney regularly tells us that his hands are bound by COSLA and the local authorities, although one suspects that it might be a bond of convenience. Given that the 2012-13 targets are still to be revised and the 2013-14 targets have yet to be published, the goalposts have been not so much shifted as locked away in the changing rooms.
Although we support the order this afternoon, we also seek action from local authorities and the Scottish Government to improve accountability in and transparency of future funding.
14:49
The leader of the Opposition has been using the term “real world” quite a lot of late, but I think that, sometimes, the Opposition sees the real world as some kind of fantasy land.
We heard Sarah Boyack talking about the SNP’s financial straitjacket. The reality is that we work with a fixed budget that is set by Westminster. Her Labour colleagues created the economic shambles that we all must deal with, and the Tory and Liberal coalition is adding to the woes by continuing with austerity. We must recognise what has happened and why there is a financial straitjacket, which is of not this Government’s making but the making of Governments past and present at Westminster.
Let us look at how the fixed amount of money that we get is being divvied out. Between 2007-08 and 2012-13 the Scottish budget increased by 6.4 per cent, but local government’s budget increased by 8.9 per cent—higher than the increase in the budget as a whole. Surely no one can deny that fact.
We have heard again today an attack on the council tax freeze yet, as my colleague Mark McDonald rightly pointed out, when it comes to elections the Labour Party is all too keen to support the council tax freeze. It is about time it told the people of Scotland the truth about what it would do with council tax if it was in power.
We would be equally keen to hear what the SNP is going to do to make local government finance fairer. It promised to do that in its past two manifestos, but we will be waiting until after 2016, I think.
I will tell Sarah Boyack how we could make almost everything fairer—by voting for an independent Scotland on September 18. That is the reality of the situation. We do not have to put up with Labour Governments that trash the economy and Tory and Liberal coalitions that continue austerity programmes. What we need in Scotland is control over our own affairs so that we can deal with things fairly—and the sooner, the better.
I want to give the lie to this concept of a fixed budget. I believe that in 1997 the Scottish people voted for tax powers. The power to vary income tax by up to 3p in the pound lies in the SNP’s hands. Why has it not used it?
The last thing that one would want to do to the people of this country at this moment would be to raise the basic rate of income tax. If we had control over other taxation levers, the situation might be different. Let us face facts: Alex Johnstone and his party want to decrease the amount of money that this Government has to spend. His leader has called for a decrease in that rate of taxation, which would mean even less for local government and other public services, so I will take no lessons from Mr Johnstone in that regard.
Let us look at the things that this Government is having to mitigate with moneys that could go into other public services. The bedroom tax mitigation, which is most welcome, the Scottish welfare fund and the council tax reduction scheme are all things that this Government is implementing to mitigate the effect of the nonsense that the Tory-Liberal coalition is putting forward. That £0.25 billion over the next few years could do much to provide front-line services, but no, we have to provide a safety net for the poor because the Tory-Liberal coalition will not.
I urge Parliament to support this settlement.
14:53
That was a rather excited contribution from Kevin Stewart. It takes a Fifer to point out that not once did Kevin Stewart mention the fact that his finance secretary has not funded Aberdeen City Council to the level that he promised before the election.
The finance secretary most certainly did that. There have been changes in the three-year settlement, as Mr Rennie knows. However, let me ask Mr Rennie—
Is this a speech or an intervention?
Will Mr Rennie support me in calling on Aberdeen City Council’s leaders to ask COSLA for a change to the funding formula to take account of population changes, which would allow Aberdeen to get much more money than it currently does?
I will intervene on Kevin Stewart’s intervention so that I can devote some of my four minutes to what I hoped I would be able to say.
That was a long-way-round way of saying that John Swinney did not fulfil the commitment that he made that the floor funding amount would be 85 per cent of the Scottish average. Aberdeen is at about 80 per cent—79 per cent, in fact—of the average. John Swinney may come up with all the excuses under the sun about fire and police, but the commitment was to Aberdeen City Council, not to the police or the fire services.
My calculation is that Aberdeen citizens are being short-changed by £89 for every man, woman and child. John Swinney said that that would not happen. He will come up with a long and complicated explanation—as he normally does on such occasions—about how it is a three-year settlement and it has to be agreed at the beginning, but the commitment was for the full term and he was not able to follow through and fulfil it. People in Aberdeen will ask Kevin Stewart why he did not raise that in the chamber when he had an opportunity to stand up for his city instead of standing up for his Government.
However, I welcome the extra contributions that local government is receiving for nursery education and free school meals; we supported the budget yesterday on that basis. We argued for the nursery education measure before Christmas, so we are delighted that it is now being implemented. The task force that I have been invited to join to ensure that it is implemented effectively will be good; I hope that it will ensure roll-out to two-year-olds from vulnerable and workless households. People throughout Scotland will welcome that.
I will remark again on Kevin Stewart’s outstanding speech—it was as if the world had not changed in the past two years. He forgot to mention that 130,000 extra jobs are being created because of the Con-Dem coalition, as he would describe it. He said that that plan would not work but it has, and it is delivering. We need to do more, but without Kevin Stewart’s advice.
14:56
Although, in many ways, Parliament’s consideration of the local government finance order is something of a formality, it is important to mark the extent of the funding problems that Scotland’s local authorities face.
I do not pretend for a moment that Mr Swinney has not had to deal with cuts in his budget, but time and again ministers have passed on the pain to local government—a move that has been exacerbated by a council tax freeze that is now completely underfunded by the Scottish Government. That has, inevitably, resulted in reduced local services and the loss of more than 30,000 jobs in our councils.
In written evidence to the Local Government and Regeneration Committee, Unison told us:
“No one disputes that the Scottish Government has to manage a difficult budget imposed by Westminster. But within that budget there are choices to be made and councils are clearly the losers.”
That is borne out by the figures, with £637 million having been cut from the local government budget since 2008-09.
In my region—North East Scotland—the impact of the settlement is acute. Willie Rennie was right to point out the particular difficulties that Aberdeen City Council faces, given its underfunding situation.
Will Richard Baker give way?
If I have time later, I will give way to Mr McDonald, although I might not have time.
From a dwindling pot, Aberdeen City Council and Aberdeenshire Council receive shares of funding that are among the lowest in Scotland. That greatly restricts what our councils can do to provide services and invest in the local economy.
Will Richard Baker give way?
I will give way if I have time later.
That second point—on investing in the local economy—is pertinent to the debate because the cabinet secretary promised in 2011 to introduce a business rates incentivisation scheme, under which councils would retain a proportion of the business rates that they collected above the target that was set by ministers. Mr Buchanan rightly referred to that in his speech.
That announcement was welcomed in North East Scotland—a region whose economy is, of course, crucial to the whole country. However, ministers have, in effect, reneged on the promise. They have moved the goalposts by revising the targets so that councils will receive a fraction of what they would have received under the original scheme.
Will Richard Baker give way?
I will take a brief intervention from Mr Stewart.
If memory serves me well, the Labour Party in Aberdeen rejected the business rates incentivisation scheme when the Government first proposed it, just as it rejected tax incremental financing. Unless it has proposed a thing, it is not happy about it. Has the council changed its mind on the business rates incentivisation scheme and on TIF?
Mr Stewart tries to blame the councils, as Mr Swinney did yesterday. I will come on to exactly why that is wrong.
The fact is that ministers have moved the target. In Aberdeen, that means that, rather than receiving £5.8 million, the city is now scheduled to receive only £300,000 from the scheme under the revised targets. That is a massive difference.
It is ridiculous for Mr Stewart to try to blame COSLA for lack of progress, as John Swinney did yesterday, because if councils had agreed to proceed with the current proposition, it would mean that they would forsake millions of pounds that should be going to local authorities. Ministers have said that it would mean an unjustified windfall for councils, but they are quite happy to secure that windfall for their own budget.
It is particularly important for North East Scotland that ministers finally make good their pledge on this scheme. I hope that they will, because the current arrangements mean that the region is losing out, despite its importance to the Scottish economy. On council funding, funding for health services, public sector jobs and, most recently, plans to close Aberdeen’s fire and police control rooms, North East Scotland is getting a raw deal.
Yet, even as ministers asset-strip the region of its key services, their proposition is that North East Scotland will, through its oil and gas industry, foot the bill for separation. No wonder that argument is not winning favour in North East Scotland. I ask ministers to think again on all those issues. In particular, I ask Mr Swinney to assure us today that he will work collaboratively and constructively with COSLA to make progress and at least alleviate the impact of a settlement that is bad for North East Scotland, as I have said, and for councils across the country.
15:01
I am glad that Cameron Buchanan is on the Conservative front bench today, because we heard an eminently more sensible contribution and stance than usual. I hope that that does not destroy Mr Buchanan’s recently developed career in Parliament. I welcome the Conservatives coming to support the Local Government Finance (Scotland) Order 2014, even if they were unable to support the budget yesterday, which is a matter of deep regret. I agree with Mr Buchanan about the importance of transparency around the information on local authority spending, and it is important that that spending be properly and fully scrutinised.
I am not going to try to rehearse all the arguments to Mr Rennie. We have been round the houses a couple of times about Aberdeen. However I will correct one thing that he said, by informing him that Mr Stewart, the member for Aberdeen Central, stands up for Aberdeen city on every possible occasion, as he did in what I thought was a spirited and emphatic contribution to the debate this afternoon.
On the funding floor of 85 per cent of the average and Aberdeen, let me tell Mr Rennie and Mr Baker that, because of this Government’s decisions, Aberdeen City Council is receiving £7 million over three years that it would not be receiving had the needs-based formula been applied.
The funding floor is 85 per cent.
Yes, Mr Rennie, it is 85 per cent, because we have gone through the basis of the calculation that is undertaken in all of these approaches.
Mr Baker has a brass neck to come here and complain about local authority funding in Aberdeen, given that the Labour Administration—in fact it was, I say to Mr Rennie, a Labour-Liberal Democrat Administration—did not lift a finger in eight years to sort out Aberdeen City Council’s financial issues. He has a second layer of brass neck because the Labour Party was shoving out leaflets in the Glasgow North East by-election that complained about all the money that was being spent in Aberdeen at Glasgow’s expense. He should be careful what he wishes for, when the Labour Party issues leaflets in Glasgow complaining about funding for Aberdeen. The fact is that this Administration has put in place financial support for Aberdeen City Council that it has never had before.
Sarah Boyack and Richard Baker voted for the budget yesterday. I therefore find many of their remarks today a bit on the odd side. They appear not to realise the financial constraints within which we operate. Sarah Boyack said that there has been a £637 million reduction in local government funding. That might have something to do with the fact that police and fire expenditure is no longer part of the local government financial settlement and is, in fact, paid directly by the Government. That arrangement is a result of legislative change that—if my memory serves me right—the Labour Party voted for in Parliament.
My final point is on the business rates incentivisation scheme. I read to Parliament the letter that was sent to me by Councillor Kevin Keenan, of COSLA, in June 2013. The issue with the business rates targets is that the pattern of appeals decisions in relation to the business rates revaluation meant that local government would have had a windfall gain in one year and the Government would have had a loss the next year. We do not have to be mathematicians to work out that, although local government might have been prepared to take the windfall gain in one year, it would not have been prepared to contribute to that loss the next year because of the exceptional change in the statistics. Anybody occupying the seat that I occupy would have arrived at exactly the decisions that I have arrived at.
We will present material to Parliament when we have agreement with COSLA. We continue to seek that agreement and will do so in good faith.
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