Local Government Settlement 2002-03 and 2003-04
The next item of business is a statement by Andy Kerr, on the local government settlement 2002-03 and 2003-04. The minister will take questions at the end of his statement, so there should be no interventions.
Before I make my statement, I place on record my appreciation and, I hope, that of the chamber, for the work of Angus MacKay, the previous Minister for Finance and Local Government, who laid down solid foundations. I also wish to thank him personally for his assistance since I took up my portfolio.
The Labour and Liberal-Democrat Administration is committed to providing a sound and stable financial platform for local government. For the first time ever, we have announced guaranteed three-year revenue and capital allocations for each local authority in Scotland. In no other part of the United Kingdom do local authorities have the certainty of knowing their central Government funding allocations three years in advance.
We have announced record levels of resources for local government, guaranteeing every local authority an above-inflation increase in revenue grant in each of the three years. Let me be clear about that: every local authority in Scotland is receiving a real-terms increase in grant support, not just for one year, or over three years, but for each of the three years of the current spending review. Those commitments are testament to the benefits of devolution and to the Administration's continuing partnership with and commitment to local government in Scotland.
In total, we have committed well over £1 billion in additional revenue grant support to local government over three years. We have also announced a 40 per cent increase in the allocations for local authority capital investment over three years. Those commitments are already bearing fruit, not just in additional local services and infrastructure, but in improved financial and service planning, laying the foundations for continued and sustained improvements in future years.
I am delighted, as Minister for Finance and Public Services, to announce today further substantial increases to the local government revenue grant support on top of the existing allocations for next year and the year after that. I will also confirm the transfer of resources out of ring-fenced programme grants into unhypothecated general grant provision and I will announce today the provisional national non-domestic rate poundage for 2002-03.
The three-year local government revenue grant allocations that were announced last year committed substantial additional resources to the delivery of key policy priorities. Those include, for example: modernisation of the teaching profession; improved care services for older people; enhanced concessionary travel schemes; extra resources for the police; and increased allocations for local authority capital investment in schools, roads and other infrastructure. We also included, for the first time in recent years, provision for local authority pay and price inflation. Those resources, with the stability of the three-year settlement, provide the perfect platform from which local government can better plan and deliver improvement in service delivery and secure best value.
No one should be in any doubt that I regard local government as a key partner in delivering better public services for all our citizens. I have great confidence in the capacity of local government to deliver, but I always want it to deliver the best. To be able to do so, councils need to benchmark their standards, to learn from one another and from other sectors, to compare and contrast their performance and to plan improvement.
I want every council to provide excellent services and to constantly seek improvement. I believe that the Executive has a key role in working with councils to assist in that process, helping to establish the benchmarks for the best performance and helping to facilitate improvement. In that spirit, we made it clear at the time of the previous settlement that new policy commitments that placed a financial burden on local government would be funded in full.
Today, I am announcing the allocation of an additional £350 million in grant support through the local government settlement next year. Those additional resources build on the real-terms increases that were announced last year. Scottish Executive revenue grant support to local authorities will total £6.7 billion next year, including that additional provision. That is an increase of £650 million, or 10.7 per cent, over the current year—more than four times the projected rate of inflation. I hope that members agree that that increase is remarkable. The revenue grant allocations will increase by a further £375 million, or 5.6 per cent, for the following year—more than twice the projected rate of inflation. Investment on such a scale is unprecedented and demonstrates our commitment to providing better public services for Scotland's citizens and to the continuing vital role that local government plays in delivering those services.
The details of the allocations for individual councils are set out in a finance circular that is being issued today to all local authorities. A summary of the allocations is available from the Scottish Parliament information centre table at the back of the chamber and copies of the full circular have been placed in SPICe. The settlement totals to which I have referred include provision of £125 million that was previously announced to fund personal and nursing care for older people. Those resources are not included yet in the allocations to individual authorities, as distribution arrangements are still to be finalised.
Even excluding the resources of £125 million, the increases for individual local authorities range between 5.5 per cent and 10.5 per cent for next year and between 5 per cent and 8 per cent for the following year. Therefore, all local authorities are receiving a year-on-year increase in grant that is at least twice the projected rate of inflation each year, with further allocations still to be confirmed. The allocations include resources totalling over £150 million over two years for the transfer of responsibility from the Department for Work and Pensions to local authorities for people in residential care homes and nursing homes.
We are making available additional money to assist local authorities in providing more literacy and numeracy learning opportunities for adults, to support improved out-of-school care for children and to help authorities to prepare for the new supporting people regime for housing support services. In total, local authorities will receive more than £13 million in additional support for those commitments next year, rising to more than £21 million in the following year. Those allocations reflect our priorities of providing children in Scotland with the best possible start in life and closing the opportunity gap.
There is one transfer out of the local government settlement. The Parliament passed the Regulation of Care (Scotland) Act 2001, which provided for the new Scottish commission for the regulation of care to take over responsibility from local authorities for inspecting care establishments from next April. Resources of £5.6 million will transfer to the commission to reflect that transfer of responsibility.
There has been much discussion of ring fencing in relation to local government funding. Contrary to suggestions that have been made elsewhere, specific grants continue to account for only around 10 per cent of total Scottish Executive support through the general local government settlement. From next year, we are allowing local authorities even more flexibility in how they use resources, with the abolition of certain ring-fenced controls.
However, ring-fenced specific grants have a role. For example, no one would argue that funding for police services should not be protected. In the same way, specific programme funding has allowed us to move from uneven provision of nursery places between local authority areas to a position in which pre-school places are available, where parents wish, for every three or four-year-old in the country. As that aim has been achieved, it is right that the resources should return to general local authority control. Therefore, from next year, £137 million of specific programme funding through the pre-school grant will transfer to unhypothecated general grant. Similarly, resources of £8.8 million for the rough sleepers initiative have helped to develop services for homeless people across Scotland, and annual specific resources of £8.8 million can now transfer to general grant.
Of the other allocations, we have agreed with the recommendations that were made by the care development group and the Parliament's Health and Community Care Committee that, during the initial implementation period, we should monitor local authority expenditure from the £125 million that is being provided for personal and nursing care.
No specific financial conditions are attached to any of the other additional allocations that I am announcing today. We are keen to shift the focus away from resource inputs and on to what we and service users are really interested in—the outcomes that are being achieved in terms of additional and improved services.
Local authorities have been asked to prepare local outcome agreements relating to the additional support that I have announced today for adult literacy and homelessness. Outcome agreements are also being prepared for community care services and social justice. We are working with the Convention of Scottish Local Authorities on pilots to test the wider potential of the outcomes-based approach.
The distribution of the original three-year settlement allocations was established following discussions with COSLA. Those increased allocations are provisional. Following further discussions with COSLA, they will be confirmed in the local government finance order next year. With COSLA we have worked on the establishment of three-year budgets, the implementation of teaching for the 21st century recommendations, the proposals for long-term care for older people and the review of care home fees. We will continue to pursue that joint approach.
Income from non-domestic rates forms part of the total Scottish Executive revenue grant for local government. Today, I announce a provisional non-domestic rate poundage for 2002-03 of 47.8p. That represents an increase of 1.7 per cent on the figure for 2001-02, matching the inflation rate to September 2001, and fulfils, as in the past, our commitment to limit year-on-year increases to growth in the retail price index. We will seek the views of business organisations before confirming the poundage early next year.
The additional allocations that I am announcing today will meet in full the costs arising from new policy commitments and should not impact on local authorities' existing council tax plans. It is, of course, for local authorities to set council tax at the levels that they consider appropriate, following consultation with their electors. All authorities have published provisional council tax changes or upper limits for next year and the year after that—that represents a commitment by councils to local taxpayers. I congratulate councils on the responsible way in which they have handled that new commitment; I recognise that it was a major challenge for them and congratulate them on having risen to that challenge. Council tax payers now have a clear indication of what they can expect to pay and can better judge their councils' actions if and when any variation in tax levels occurs.
The resources that I have announced today, which come on top of the increases that were announced last year, represent a significant investment in local services. It is vital that local authorities make effective use of those resources and work with other local agencies to deliver quality services that put people's needs first. We want to ensure that local authorities have the resources and flexibility to do their jobs and the powers and responsibility to work with other agencies to deliver real and visible improvements in public services.
The Parliament will have the opportunity to debate the final allocations for 2002-03 when it considers the local government finance order next year. Early next year, I will confirm the final rate poundage for 2002-03.
I hope that all members will join me in welcoming the substantial additional support that the Labour and Liberal Democrat Administration is committing to local government for the next two years, on top of the significant increases that have been provided for the current year. In anyone's book, a year-on-year increase in grant support of nearly 11 per cent, with further increases in the following year, represents a substantial investment in local services and a vote of confidence in the continuing role of local government in delivering those services to all Scotland's citizens.
I am taking the place of my colleague Tricia Marwick, who is unwell and unable to be with us.
I welcome the minister's statement as the first of what I hope will be many statements in the coming months. Ministerial statements are becoming as rare as snow on Christmas day. I remind the minister that it is the convention for ministers to supply their statements to the SNP and Tory front benches an hour, not 20 minutes, before they are made.
In evidence to the Local Government Committee on 13 March, George Black, director of finance at Glasgow City Council, stated:
"in real terms, the level of aggregate external finance for Glasgow at the end of 2003-04 will be about £50 million less than in 1996-97. The impact of that reduction is well documented. We have had council tax increases of 19 per cent, 22 per cent and 9.4 per cent in the three years since 1996-97."
Mr Gibson, what you are saying must contain at least the hint of a question.
I am leading up to one.
Mr Black went on to say:
"We have had about 4,500 council job losses. We had what is commonly termed a double whammy; we had to reduce services while dramatically increasing council tax."—[Official Report, Local Government Committee, 13 March 2001; c 1665.]
Mr Black also made it clear that, over the same period, Glasgow's share of aggregate external finance had fallen from 15.7 per cent to 14.7 per cent of the Scottish total.
I am still waiting for a question, Mr Gibson. I am being very patient.
Given that Glasgow contains 79 per cent of Scotland's most disadvantaged enumeration districts and more than half of the poorest 10 per cent of districts, will the minister say by what date he will have restored fully, in real terms, Glasgow's level of aggregate external finance to what it was before new Labour came to power, excluding new burdens?
Mr Kerr made welcome comments on the additional flexibility that councils will have over their finances to allow them to govern, rather than to administer locally, thus reducing the high level of hypothecation and ring fencing that the Executive imposed. However, is not it the case that most of the new moneys that the minister announced are to fund personal and nursing care and the transfer to councils of responsibility for people in residential care homes and nursing homes?
Will the minister confirm that the rate poundage that he announced will still mean that Scotland has a rate poundage that is 10 per cent higher than that in England? Finally, will Mr Kerr advise us why specific grants for social work training, mental illness, and in-service training for teachers will remain at a standstill from 2002-03 to 2003-04, forcing local authorities to pick up the tab for those areas?
I recall Kenny Gibson's leader saying that we should take the SNP seriously in our joint approach to government. If that is all that the SNP can offer on the announcement, it has a lot to learn.
Kenny Gibson referred to ranked grant AEF per capita. Glasgow is sitting at the top of that table, with a per capita rate of £1,571, which is 25 per cent higher than the average. Glasgow will receive record levels of revenue grant in the next two years, reaching over £1 billion in 2003-04. That is higher than any figure under the Tories in cash or real terms. Glasgow City Council is also receiving the per-head-of-population figure that I mentioned. In addition, the better neighbourhood services fund will support the deprived communities of Glasgow.
By anyone's reckoning, Glasgow requires assistance—that is why the Executive is committed to providing it. We do not live in the land in which Kenny Gibson lives, where money is plucked off trees. I expect our money to be spent wisely. We will monitor that spending and that is how we will run the Executive. We have every confidence that Glasgow City Council and other councils will deliver services.
I apologise for the lateness with which members received copies of my statement, but I think that they received them a lot longer than 20 minutes ago. I will investigate that later.
I announced the reduction of hypothecation and ring fencing in accordance with the requests of colleagues in local government. Could not Kenny Gibson even muster up some welcome for that announcement? We are funding in full the other policy initiatives that we are driving forward.
I welcome Andy Kerr as the Executive's new minister for smoke and mirrors and I thank him for the prior delivery—albeit late—of the statement.
I was pleased to hear the minister's comments about ring fencing and I hope that he takes the issue on board. I am a little concerned that COSLA still believes that the figure is 20 per cent, whereas the minister has just stated that it is 10 per cent. Perhaps the minister will tell us precisely why he is at variance with his colleagues in COSLA.
I am also a bit concerned that, although the statement gave credit to local government for the way in which it is handling council tax rises, the Executive retains capping sanctions. Will the minister explain how that will work—will he make any changes to the sanctions?
My third point is that the minister mentioned taking Sutherland out of the local government settlement and quoted a figure of £125 million. Will he clarify for the people of Scotland exactly what definition he has used to come up with a price of £125 million? Will any other burdens be forced on local governments to implement the policy?
I thank the member for welcoming me to my portfolio; I appreciate that. Again, I offer my apologies for the delay in getting the statement to him. That will be investigated.
Only 9 per cent of the allocations that I announced will be provided through specific grants, which is less than in the current year. We have removed ring fencing from £145 million of grant funding for next year and there is potential for further flexibility, where appropriate. The figure to which the member referred also includes police grant and I have not yet heard any arguments in favour of removing ring fencing from such grants. I would argue that the authorities are not taking that position.
Capping is a reserved power, which we have no intention of using. Our colleagues in local government are spending their money wisely. I do not anticipate needing to use that mechanism.
On personal nursing care, we are doing what the care development group wanted us to do. We are fully funding personal nursing care. The amount of money is what is required and what the care development group requested. We will give local authorities that money when we have agreed the distribution formula with our colleagues in local government.
I welcome the minister's statement. The significant headline increases that he announced suggest that new burdens have been fully funded. Will the minister confirm that no extra pressure on councils will arise from those burdens and that council tax payers can expect council tax levels to remain at the rates that councils set for the three-year period?
I am happy to receive the member's question. The smoke and mirrors to which Mr Davidson referred allow me to answer the member's question more fully. We should consider the figures. In anyone's terms, an increase in total revenue grant of nearly 11 per cent is substantial. Next year, the increase will be 5.6 per cent.
Every council will receive increases in grant that are at least twice the projected rate of inflation. The allocations also take into account general pay and price inflation and—to answer Trish Godman's question directly—full support for the new policies and commitments that the Executive has driven forward as part of the partnership agreement for government. The Executive places no extra pressure on local council budgets. Funding is at a record level. I am glad that Trish Godman welcomes that; it is a pity that others cannot.
I welcome the minister to his new post, although he seems to have retained the same speech writer that his predecessor had.
I will ask about council tax, because I do not think that we received the answer that Trish Godman sought. Given all the extra burdens on councils, not only from this place, but from Westminster—the aggregates tax, the climate change levy and the superannuation knock-on of the Railtrack fiasco—by how much does the minister expect council taxes in Scotland to rise? I ask what figure he expects, because I know that he does not set council tax levels. How much higher than inflation will that figure be?
How much of the pension increase that the minister's colleague in Westminster announced recently does he expect a pensioner to pay in increased council tax payments?
Will the minister confirm that an increase at the rate of inflation for non-domestic rates will mean that Scotland retains the highest non-domestic rates in the UK and that our businesses continue to be the most heavily taxed in the UK, at a rate that is about 5p more than that south of the border?
I expect councils throughout Scotland to act responsibly. Therefore, in accordance with subsidiarity, I do not wish to express views about their decisions, which they must take locally and account for to local citizens. That is what local government is about.
Local councils announced indicative council tax increases for the next two years. The all-Scotland average projected increase is less than 5 per cent for each year. We will fund in full any commitments from the Executive, so there is no reason for those matters to impact on councils' budgets.
Scottish businesses do not pay more than English businesses pay in non-domestic rates. As Alasdair Morgan knows, rateable values in Scotland tend to be lower than those in England. Small businesses in Scotland receive a 2p discount that is unavailable in England, so Alasdair Morgan's case is inaccurate and untrue.
I welcome the minister's announcement that money for pre-school education will move into the unhypothecated general grant. Will the minister give more details about the continuing discussions on other ring-fenced allocations?
I have met COSLA and will continue to meet COSLA to discuss those matters. I intend to go down the road of providing further unhypothecated resources to local government, because I believe strongly that local government is local. As Minister for Finance and Public Services, I intend to continue discussions with COSLA to ensure that we continue to reduce hypothecation of resources for local authorities. That is how I want the situation to develop and I am sure that the rest of the Executive wants that too.
On behalf of the Liberal Democrats, I welcome one of the most positive statements in support of local government that I have heard since the Parliament was formed. The minister announced a substantial increase. I particularly welcome the news that some of our hard-pressed rural authorities, such as Aberdeenshire Council, Argyll and Bute Council, Perth and Kinross Council and Scottish Borders Council will receive some of the largest increases. That is welcome news for those areas.
Will the minister confirm that the Scottish Executive will fund the full cost of free personal care that will fall on local authorities?
I am under no illusion about that. I say to Iain Smith, in a straightforward manner, that the Executive will fund fully the decisions that were made by the care development group. That is why the sum of £125 million has been set aside to fund fully the whole package.
Iain Smith welcomed me to my post. I also welcome what Iain Smith said—it is a sign of maturity that people welcome real money being put into real services. It is a sadness that some people cannot rise to the occasion and acknowledge that fact. Excluding the fiscal black hole that would exist under the SNP because the price of oil is falling at the moment, what would local government get from the SNP? Very little.
I note from the minister's statement that the increase in non-domestic rates is limited to 1.7 per cent. However, that results in a projected average of 47.8p in the pound. Notwithstanding the minister's answer to Mr Morgan, why is it appropriate, at a time of threatened recession and increased business competition, for Scots firms—even if we accept that they get a 2p rebate—to pay significantly more than English firms in a comparable position? Scots firms are left in a non-competitive situation that will impinge on employment prospects.
First, the increase is low and, as I said earlier, the figure of 1.7 per cent is in line with inflation. I remind Bill Aitken that rateable values in Scotland are less than are those in England, which means that the actual take from business is lower. Bill Aitken mentioned the 2p discount. That is not available in England. I look forward to my discussions with the business community in Scotland. I have had many such discussions in the past and, as Minister for Finance and Public Services, I will continue to listen to business. I doubt the facts that Bill Aitken presented today.
I welcome the minister's statement. However, will he give more thought to how the national settlement might be better fine-tuned to reflect the realities of local government services in individual council areas? This morning, Dundee City Council informed me that the settlement makes no provision for the £2.5 million that it spends every year on secure residential care for children. The council also informed me that the McCrone settlement in the city will be underfunded by more than £4 million over the next three years because McCrone was based on pupil numbers rather than on Dundee's higher staffing levels.
The local government settlement can be described in the Scottish Parliament as the "perfect platform" and yet be met with disappointment by individual councils, who tell their MSPs that it is not good enough. Does the minister accept that that is a problem?
I met the leader, the convener of the finance committee and the director of finance of Dundee City Council and we examined the matters that John McAllion has raised. I will continue to seek solutions. One of the issues that was raised in Dundee was mismatched funding. In preparing for the next three-year settlement, we will look again, with COSLA, at the distribution arrangements. That said, any change must demand a general level of support amongst all local authorities.
The issue of deprivation was also raised in Dundee. Last year, the deprivation distribution system was the subject of a COSLA joint review. As a result of that review, an additional £16 million was allocated to tackle deprivation. The better neighbourhood services fund is providing £90 million to improve services to Scotland's most deprived neighbourhoods. We should examine the current allocation system to reflect specific circumstances, but let us not forget that we are trying to ameliorate the worst effects of the situation that is to be found in Dundee and other cities in Scotland.
Given the factional fighting and bruised egos on the Labour seats in the chamber following the reshuffle, I caution the minister, when he is answering questions, against reading out notes that are passed to him from his colleagues. He never knows what time bombs may be ticking in those notes. With respect to the note—[Members: "Question."] If members examine what I said, they will see that all of it was a question.
With respect to the note and, given the minister's position on business rates, will he confirm that—in addition to the SNP—the Forum of Private Business, the Federation of Small Businesses, the Confederation of British Industry and every other business lobby in Scotland believe that business rates in Scotland are higher than for comparable businesses in England? Will the minister undertake to provide a full explanation of what on earth he is talking about when he suggests that that is not the case?
Given that the minister sets 80 per cent of the average council budget, does he take any responsibility for the level of council taxes in Scotland? Why are declining services, rising taxes and the highest taxed businesses in Scotland all happening under Labour?
All the organisations that the member mentioned are against independence and separation. If that is the endorsement that the member is giving me, I thank him very much; I will take it. With regard to notes being passed, I will take no lectures about teamwork from the SNP—I have seen the SNP in action for too long.
These are important issues, which I have said that I will discuss with the business community, as I have done already through the Parliament. We will consider those matters, but we have said that the inflationary increase will be 1.7 per cent, that the 2p discount exists in Scotland, that Scottish businesses—small, medium and large—continue to thrive and that we are still attracting investment. If we were to go down the road of division, separation and the fiscal black hole that the SNP wants us to go down, where would business be then? That would be the end of business as we know it. Through the partnership in the Scottish Executive, we will continue to deliver for local government and to improve services by allocating more money for local authorities to deliver services and allow businesses to thrive.
If the minister genuinely believes that local government is local, when will he announce the abolition of the capital receipt clawback rule and introduce rate retention and setting for local authorities? Last week, Charlie Gordon, the leader of the Labour-led council in Glasgow, said:
"We have had four and a half years of Labour government and we are getting grant assistance for Glasgow that is pound for pound less than under the last Tory government."
Will the minister apologise to the people of Glasgow for the shameful neglect of that city and give me an assurance that the settlement will make up for the lost funding in the past four years of Labour Government?
There is no need to apologise for anything with regard to Glasgow City Council. At £1,571 per capita rate, Glasgow is 25 per cent above the average.
With regard to the distribution formula, we recognise the unique role that our cities play in Scotland. As I have said, Glasgow receives the highest grant allocation per head: 25 per cent above the mainland average and 50 per cent higher than the allocations for neighbouring authorities. The distribution formula takes into account a range of factors that are specific to Glasgow: the urban centre; the need for expenditure-based allowances, such as tourism, museums and planning; and deprivation allowances, to which I have already referred.
I look forward to meeting Glasgow City Council. I was born and brought up in East Kilbride and have worked in Glasgow and used its services for many years. There is a desire on the Executive's part to ensure that, through the cities review, in the hands of my colleague Iain Gray, we address those issues.
With regard to the set-aside arrangements, COSLA has expressed its views to me on the use of the 75 per cent of income from council house sales to redeem debt, with particular reference to those authorities with relatively low levels of housing debt. We continue to discuss those matters with COSLA; indeed, that is a matter for the Minister for Social Justice to consider further.
I welcome Andy Kerr to his new role and welcome the tone and content of his statement.
Much work has been done recently to identify why the indicators that are used to calculate need do not pick up rural deprivation or small pockets of deprivation that are scattered through broadly prosperous areas. Will the minister confirm that, as those tools improve, they are being used to refine existing distribution models? Can he say what work is being done to check that the uplift is being calculated in a way that does not perpetuate a bias against historically low-spending councils such as Aberdeenshire?
Work is continuing with regard to rural deprivation. A report is available, which we are considering. Through COSLA, which is the primary organisation for determining such matters, we discuss those matters continuously with our colleagues in local government. The better neighbourhood services fund that I mentioned earlier applies to rural areas in some instances, therefore we could also seek some resources from there.
In overall terms, I welcome the minister's announcement. However, unlike my colleague Sylvia Jackson, I have concerns regarding the removal of ring fencing for pre-school education. Given the growth in that sector, what assurance can the minister give that he and the Minister for Education and Young People will monitor that area to ensure the continuation of quality provision for our young people?
We will continue to analyse the outcome and output of all public services in Scotland, rather than the inputs, which people tend to dwell on too much. We want to focus on the services that matter to people, such as primary and pre-school education. I am sure that the Minister for Education and Young People takes a great interest in such matters. In addition, other organisations and bodies look into education and report to us.
The removal of hypothecation and the reduction of ring fencing are to be generally welcomed. Maturity, responsibility and trust exist between the Executive and local authorities to ensure that there is no diminution of the services that Margaret Jamieson mentioned.