The next item of business is a statement by John Swinney on the local government finance settlement 2014-15. The cabinet secretary will take questions at the end of his statement; there should therefore be no interruptions or interventions.
14:41
In my statement I will cover two topics. I will update Parliament on the local government settlement for the current financial year, set out the terms of the provisional settlement for 2014-15 and confirm the overall total figures for 2015-16. I will also update Parliament on the Government’s proposals for business rates in Scotland. Copies of the summary tables that contain the key financial information are available at the back of the chamber.
Local government provides a wide range of services and plays a major role in local partnerships that are essential to the delivery of the outcomes that matter to the people of Scotland. In recognising that, we have maintained our strong partnership with the Convention of Scottish Local Authorities. Recent local government finance settlements have been set following detailed discussion and agreement with COSLA, against a backdrop of the continued financial constraint that the United Kingdom Government has applied in Scotland. In these difficult times, the Scottish Government has remained fully committed to that partnership and has protected local government as much as possible, to shield our local communities from the worst of the cuts.
Between 2007-08 and 2012-13, the resources in the Scottish Government’s control increased by 6.4 per cent; over the same period, local government’s budget increased by 8.9 per cent, which demonstrates that strong financial settlements have been agreed with local government during the period.
That degree of protection has continued. Between 2013-14 and 2015-16 the revenue resources under the Scottish Government’s control, excluding health and local government, will increase by 0.2 per cent in cash terms. Over the same period, local government’s revenue funding will increase by 0.7 per cent in cash terms and its share of total revenue funding within the Scottish Government’s control will have increased.
There can be no argument that while times have been tight local government has been fairly funded. The Scottish figures for 2012 to 2015 resulting from the 2011 spending review resulted in a flat cash settlement on a like-for-like basis, compared with an 8 per cent cash reduction in England over the same period.
I can confirm that additional funding of more than £60 million for the current year, 2013-14, has been discussed and agreed with COSLA since the Parliament approved the allocations back in March. The sum will be partially offset by a recovery of around £41 million from local authorities in respect of committed and uncommitted police reserves that had been returned to local authorities following the winding-up of the police joint boards and the successful establishment of Police Scotland. The £41 million represents the Scottish Government’s share of the outstanding reserves.
The main additional sums are: £27.5 million, previously held back, for the teachers induction scheme; £20 million to top up discretionary housing payments; £4 million funding for second languages; and £2.5 million in respect of the national care home contract.
On a like-with-like basis, the 2014-15 local government finance settlement represents flat cash with additional funding for extra responsibilities. We have also continued to honour our commitment to maintain local government’s share of the overall capital resources within the Scottish budget.
The 2014-15 settlement, which was originally set out as part of the three-year local government finance settlement covering the period 2012 to 2015, has been maintained despite the significant challenges that have been presented by the recent outcome of the various UK budgets and the June 2013 UK spending round, which have resulted in further cuts being imposed on the Scottish budget for 2014-15. None of those reductions in Scotland’s budget, which amounted to £40.6 million in 2013-14 and £126.4 million in 2014-15, has been passed on to local government.
The total support for local government in 2014-15 will amount to almost £10.6 billion, which includes revenue and capital funding along with income raised from business rates. Within the total funding package, revenue funding will amount to £9,805 million, including the funding to deliver a council tax freeze, and capital funding will amount to £773 million. That total includes a further £81 million in 2014-15 to deliver on the Scottish Government’s commitment to fully fund the additional cost of early learning and childcare provision. That represents £51 million for revenue costs and £30 million for capital expenditure. As of August 2014, all three and four-year-olds will be eligible for up to 600 hours of childcare, which is an increase on the 475 hours that are currently available. That package of support will save the average family £707 per year per child. The total revenue figure also includes a number of small changes since the publication of the Scottish draft budget for 2014-15 in September, the main one being the addition of £20 million for discretionary housing payments to alleviate the impact of the bedroom tax.
As part of our partnership approach, local government has agreed to deliver a number of priorities for the people of Scotland. Our agreement was described in my letter to COSLA of 11 September, which set out the terms of the local government settlement. As part of the settlement, local authorities will continue to freeze the council tax. That is continuing to help families during tough economic times. They will also maintain teacher numbers in line with pupil numbers and secure places for all probationers under the teacher induction scheme. Councils will also work with their national health service partners towards the full integration of adult health and social care.
As I have mentioned, the partnership working between the Scottish Government and local government remains a hallmark of our approach to public service reform. The Scottish Government has supported the partnership with fair financial settlements in the face of real budgetary pressures as a result of funding settlements from Westminster. As part of the partnership that we have operated since 2007, we have maintained the funding formula that was agreed jointly with COSLA for determining the settlement for individual local authorities. That needs-based formula takes into account issues such as population levels, deprivation and sparsity among the individual local authorities. I have again applied that formula to the settlement that I am setting out today for 2014-15.
At this point, I would normally also have set out the indicative allocations for 2015-16 based on the same formula. However, I was informed on 2 October that COSLA leaders had voted to disregard those arrangements for 2015-16 and to simply roll forward the allocations for 2014-15 into the next financial year. That means that the most up-to-date needs of individual local communities will not be taken into account in calculating the 2015-16 settlement. I have noted the COSLA leaders’ decision and have had preliminary discussions with the COSLA leadership. I am giving the matter due and careful consideration, and my discussions with COSLA will continue. Although I cannot make any further announcement regarding the 2015-16 settlement, as I would normally have wished to do today, I can confirm that the total funding package that is currently available amounts to over £10.6 billion. Councils can, of course, see what their settlement would be under the COSLA proposal by looking at their settlement for 2014-15.
I turn to business rates, which are not only a key issue for Scotland’s business community, but an integral part of local government finance settlements.
In our manifestos in 2007 and 2011 and as part of the Government economic strategy, we made a commitment that, unlike previous Administrations, we would not allow the poundage for business rates to rise above what it is in England during the lifetime of this Parliament.
This Administration acknowledges that business rates play an important part in attracting and retaining businesses in Scotland. That is why in 2008 we introduced the small business bonus scheme, which I am delighted to say has reached a record high with more than 92,000 business properties benefiting.
One of the main beneficiaries of the small business bonus is the retail sector where 63 per cent of shops enjoy zero or substantially reduced business rates bills under our comprehensive package of reliefs available to businesses. This year, an eligible Scottish business in receipt of small business bonus scheme support will be up to £3,080 better off than their competitors in England—and that is even after the chancellor’s announcement last week of a temporary extension to the United Kingdom Government’s equivalent relief.
I am pleased to announce that the Government will go further to expand the small business bonus scheme to help even more small businesses. We will increase the upper threshold for businesses with multiple properties from £25,000 to £35,000, extending the benefit to more than 4,000 additional properties, for the lifetime of this Parliament. That is in addition to our expansion of the fresh start scheme, now adopted in England, which provides a relief to help businesses that take on long-term empty properties and rejuvenate our high streets. Following the successful introduction of the scheme, we will include more premises with higher rateable values and additional types of empty premises, including those previously used as pubs, hotels and restaurants.
In last week’s autumn budget statement, the chancellor announced that the annual increase in the business rates poundage in England and Wales would be capped at 2 per cent. To maintain the competitive advantage enjoyed by Scottish businesses since 2007, I confirm that we will match that cap and restrict the increase in the poundage to 2 per cent.
Extending the small business bonus to help a further 4,000 businesses, expanding the incentives for business to help regenerate our high streets and keeping the cost of business rate increases below inflation deliver on this Government’s commitment to give Scottish businesses a competitive advantage over their UK counterparts and maintain Scotland’s position as the best place to do business.
This marks the start of the normal consultation process with local government on the provisional 2014-15 revenue allocations and, once confirmed, I will bring the final figures to Parliament in the local government finance order 2014 early in the new year. I will also provide Parliament with an update on my further consideration of the allocations for 2015-16.
I thank the Presiding Officer for her forbearance and apologise to the cabinet secretary for missing the beginning of his statement. I also thank him for advance notice of his statement.
On top of supporting our constituents through the cost of living crisis and the Tory welfare policies, our councils must deal with the reality of the cabinet secretary’s local government settlement. For all his assertions that local government has had a good deal from the SNP, he has presided over the removal of around £100 billion from spending on poverty reduction measures, the long-term impact of the underfunding of the council tax freeze and the loss of more than 34,000 local government jobs.
Today is another nail in the coffin of our broken local government finance because our local authorities are getting austerity plus. We need a local government settlement to protect the most vulnerable in our communities and enable our local government colleagues to do the jobs that they were elected to do.
The Joseph Rowntree Foundation and Unison have commented that the most vulnerable in our communities are the worst hit. Does the cabinet secretary agree with the Joseph Rowntree Foundation that we will see further reductions, rationalisation and residualisation of vital services? What analysis has the Scottish Government carried out on the impact of those service reductions and increases in the cost of charges for services directly on those who are the most vulnerable in our communities?
I am aware of the research that the Joseph Rowntree Foundation has carried out. I would be the first to acknowledge that many individuals in our society face challenges and financial difficulties in the period of austerity that we are having to experience. To a substantial extent, that situation has been created by the impact of the public spending reductions that the United Kingdom Government has applied and of the welfare reform programme. As Sarah Boyack understands, I have to operate within a fixed budget. Ensuring that we provide adequately for public services is at the heart of the decisions that I have announced.
I point out to Sarah Boyack that, as I made clear in my statement, in the period between 2007-08 and 2012-13, the resources under the control of the Scottish Government increased by 6.4 per cent, whereas the local government budget increased by 8.9 per cent, so the local government budget has done better than the Scottish Government budget as a whole, and that will continue in the period between 2013-14 and 2015-16.
I also say to Sarah Boyack, with the greatest respect, that her comments would have more credibility if, at any stage in the budget process, her colleagues had come to me and asked me to increase the amount of money that we give to local government. That has never happened. Indeed, in the Conservative debate that we are about to have, the Labour Party will not propose the allocation of more money to local government for general revenue funding as an alternative to the Government’s budget; it will ask us to extend childcare provision. That is an entirely laudable and understandable proposition, but it would not increase local government finance in general in the way that Sarah Boyack has suggested.
The final point that I will make in relation to the work of the Joseph Rowntree Foundation is that we are going through a process of public service reform that is designed to address the financial climate that we face by ensuring that services in Scotland are delivered in a different way in the future from the way in which they are delivered today. We want to ensure that services are developed in a sustainable fashion that meets the needs of vulnerable individuals in our society and which involves much greater participation by the third sector in the delivery of public services.
This afternoon, while I am in Parliament, the national community planning group will hold a meeting—which I would have attended, had it not been for parliamentary business—involving the health service, local government and the third sector, the aim of which will be to provide further impetus to the reform programme to meet the needs of vulnerable individuals in our society.
I thank the cabinet secretary for advance sight of his statement and welcome the expansion of the small business bonus scheme and his decision to follow the lead of the UK Government in reducing the business rates increase for next year.
What is the total value to business of the extension of the small business bonus scheme? What is the upper threshold for a single property? Is it still £18,000 for the 25 per cent discount?
In relation to the business rates incentivisation scheme, when were the targets for 2013-14 intimated to individual councils?
The total benefit to business of the impact of the extension of the threshold for multiple properties will be in the order of £3.8 million, if my memory serves me correctly—the figure will certainly be less than £4 million. No other thresholds have changed as a consequence of the announcements that I have made today.
In connection with the business rates incentivisation scheme, no further targets have been intimated to local government, because we are waiting to agree with local government the targets for the financial year 2012-13. Local government wanted to have that concluded once the full audited information was available, which I believe will be the case in February 2014. Without having the ability to sign off those targets—they must be signed off jointly with local government, at its request—I cannot confirm any further details of the business rates incentivisation scheme.
I recognise that this statement is very important and that many members wish to ask questions; in fact, I see that 13 wish to do so. To allow me to get through as many as possible, I remind members to ask one brief question and would also be grateful for brief answers from the cabinet secretary.
How would the local government settlement be affected in future years if there were, as suggested by the Holtham commission, which has the support of all three unionist parties, a £4 billion cut to Scotland’s budget?
As I indicated in my statement, the Scottish budget has been reduced by £40 million in-year in 2013-14 and by £126 million in advance of the start of 2014-15. The Government has decided not to pass on to local government any of the implications of those decisions, but if our budget were to be reduced by £4 billion there is no question but that we would be unable to protect local government funding and services from the impact. If that happened, it would have a very serious impact on public services in Scotland and particularly within our local authorities.
As a result of last week’s autumn statement, Mr Swinney will receive £300 million in Barnett consequentials over the next two years. As we know, childcare is devolved. Given that increasing childcare was such a big priority for the SNP Government a fortnight ago, how much of that £300 million will Mr Swinney give to local authorities to provide more childcare to Scotland’s two-year-olds?
First of all, I must sound a note of caution to Mr Bibby about that £308 million: £75 million of it is in what are now called financial transactions and so cannot be deployed on routine public expenditure to provide the childcare services to which Mr Bibby has just referred. In short, it would literally be a practical and financial impossibility for me to use that £75 million out of the £308 million for that purpose.
As Mr Bibby will be aware, the only decision that I have set out to Parliament with regard to utilisation of consequentials from the UK autumn statement has been in relation to business rates. The Government will in due course make further announcements to Parliament about how the consequentials will be used and, in the process, will consider all relevant and significant policy priorities.
As the cabinet secretary knows, the preventative spend agenda is of great importance, and part of that is about ensuring that every child has a good start in life. As a result, the additional £81 million for early learning and childcare is very welcome. What steps have local authorities taken to prepare for the extension of early years education, and what support and encouragement will the Scottish Government provide to help them to deliver that?
The Government has—principally through my colleague Aileen Campbell, the Minister for Children and Young People—been involved in extensive discussions with local government in preparation for implementation of the legislation that Parliament is currently considering and which will extend the provision in question. That work is going well; in fact, to be frank, I think that it is a very good example of partnership working between the Scottish Government and local authorities on taking forward a policy agenda that we both support. It is clearly up to individual local authorities to deploy the resources that are being allocated today to fulfil the legislative requirement that will be put in place as a consequence of the Children and Young People (Scotland) Bill, and that work is progressing well in advance of implementation in August 2014.
I thank the cabinet secretary for advance sight of his statement, but I have to say that I was disappointed to notice that, once again, Aberdeen is losing out on funding. He previously promised to ensure that funding for the city would not fall below 85 per cent of the national average, but the figures at the back of his statement show that he has failed to meet that commitment yet again. Next year, Aberdeen will, as it was this year, be £20 million short, which equates to £88 per person. Is the cabinet secretary prepared to take any steps to make good his promise from two years ago?
My having to answer Mr Rennie’s questions is a bit like having déjà vu. I have explained to him on previous occasions that at the outset of a spending review we calculate the 85 per cent floor. We did that; it has resulted in a benefit to Aberdeen city of £3 million, followed by £1.9 million and then £2.1 million, which the city would not have if the Government had not applied the 85 per cent floor. At the outset of a spending review, we make the calculation, provide that guarantee to the relevant local authorities, and deliver on that for the duration of the three-year spending review period.
Mr Rennie’s calculations ignore the removal from the local government settlement of the direct costs of paying for police provision through the amalgamation of those costs under Police Scotland’s budget. The Government has put in place that contribution—I gently point out to Mr Rennie that the Administration of which he was a supporter never did that—in order to give Aberdeen City Council more resources than it had before. I also point out to Mr Rennie that Aberdeen City Council’s revenue funding has increased from £311.163 million to £313.653 million as a consequence of the decisions that I have announced today.
The cabinet secretary will be aware that those of us who represent Aberdeen have long argued for the Convention of Scottish Local Authorities to change its funding formula. He has previously indicated that he is willing to discuss such matters with COSLA. Has COSLA made any approaches to him in that regard?
What I am not clear about from the position that COSLA leaders have arrived at on the proposal to roll forward the distribution arrangements for 2014-15 into 2015-16 is whether that signals a desire by COSLA essentially to open up those questions for wider review. One of the consequences of rolling forward the 2014-15 allocations into 2015-16 is, of course, that if the distribution formula were then to be run as it currently stands for 2016-17, the volatility for individual local authorities would be quite significant. Obviously, that is one of the issues that I am considering as part of the process.
We all know that the council tax is regressive, but fees and charges are more so. In the absence of local government taxation reform, how long will it be, on current trends, before fees and charges represent a larger proportion of local government income than council tax does?
That is clearly a matter for, and entirely within the competence of individual local authorities. I think that Mr Harvie will be aware that charging practices vary from local authority to local authority.
Will the cabinet secretary confirm that the settlement will mean that Labour councils will continue to see greater spending reductions than SNP councils, and will he confirm that this settlement means that Renfrewshire Council will continue to languish at or near the bottom of the funding table?
I had thought that Mr Henry would have known the point that I am about to make, because he was previously a minister. Perhaps he paid absolutely no attention to the point when he was a minister in the Government for many years—which might not surprise many of us in the chamber—but I thought that he would have known that the distribution formula is driven by about 100 different indicators. Many of those indicators are to do with population, and some are to do with deprivation; there is a wide variety. Therefore, the issue has nothing to do with politics and everything to do with the indicators.
I turn to Mr Henry’s point that Renfrewshire is languishing at the bottom of the table. On funding per head, Renfrewshire Council is higher than Perth and Kinross Council—an area that I happen to represent—which rather makes a mockery of the nonsensical point that Mr Henry just raised.
Is the cabinet secretary confident that the business rates scheme will continue to ensure that we have the most competitive rates regime in the UK?
One of the points that I made in my statement is that small businesses stand this year to be over £3,000 a year better off as a consequence of operating within the small business bonus scheme that we have in place here in Scotland. Of course, that has been in place since the Scottish Government introduced it in 2008-09.
Here we are again: another year on and another step backwards. Since 2008, the Scottish Government has dumped the biggest burden of cuts on local government and has at the same time increased demands. Services are suffering and charges are increasing. That double whammy is most severely felt by the most vulnerable people—should it therefore be a triple whammy?—because they are also the people who get least benefit from the underfunded council tax freeze.
Can we just get a question, Mr Pentland?
As the recent Joseph Rowntree Foundation report points out—
Mr Pentland, I really—
—it is areas of high deprivation that suffer—
Mr Pentland, sit down, please. We need a question from you now.
Motherwell and Wishaw suffer from high social deprivation. Can the cabinet secretary—[Interruption.]
Order.
Can the cabinet secretary and his Government tell me when they are going to address that?
The first point is that the Administration of which Mr Pentland was a supporter reduced the share of funding to local government from 36.6 per cent in 2002-03 to 34.7 per cent in the year in which we came to office. I do not really think that Mr Pentland is in a particularly strong position to say anything to me about what this Government has done, given that—as I indicated in my statement—the resources that are under the Government’s control increased by only 6.4 per cent from 2007-08 to 2012-13, while the resources that are commanded by local government increased by 8.9 per cent during the same time.
Let me conclude with reference to the remarks of the chairman of the Local Government Association in England, Sir Merrick Cockell, who said:
“Every year I meet my opposite numbers in Scotland ... and they listen to us in wide-eyed disbelief at the budget cuts we are enduring and they are not.”
That rather sums it up; we have protected local government and we will continue to do so.
My sincere apologies to the many members who have not been called. I need to move on in order to protect the next item of business.
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