Local Government Finance
Good morning. The first item of business this morning is a debate on motion S2M-3795, in the name of John Swinney, on local government finance.
It is always a pleasure to debate with the Deputy Minister for Finance, Public Service Reform and Parliamentary Business on these great occasions. I assume that the Minister for Finance and Public Service Reform is away recalculating the local government finance settlement to ensure that a better solution is brought forward. That would justify his absence.
The debate on local government finance is an annual event of considerable significance for the council tax payers of Scotland, for the people who use and depend on our public services and for the many voluntary organisations that rely on funding from local authorities to deliver essential services. The debate is normally characterised by disputes between the Scottish Executive, which says that local authorities are adequately funded to deliver services, and the local authorities, which say that they are not adequately funded. This year has been no different; the debate has raged on since the publication of the Government's budget and the announcement of the local government settlement.
In the next year, the Government is offering local authorities a real-terms increase in aggregate external finance of 0.2 per cent and, by the following year, a real-terms cut of 0.1 per cent. The Government expects local authorities to make £58 million of efficiency savings, which it has already deducted from the baseline calculations of support for local authorities. That all comes at a time when we, in Parliament, are passing legislation that will increase local authorities' responsibilities for service delivery across a range of areas, not the least of which is the expansion of support for people who have special educational needs. Basically, in the next two years Government financial support for local authorities will, at best, flatline and, at worst, will fall because of the added responsibilities that are being passed to local authorities.
Within the present settlement, the First Minister and the Minister for Finance and Public Service Reform demand that council tax increases be limited to 2.5 per cent. The likelihood of there being only a 2.5 per cent council tax increase was put in context by a Labour Party member who aspires to membership of the Scottish Parliament—Councillor Donald Anderson, the leader of the City of Edinburgh Council, who said:
"It is fanciful to say that we can keep any increase to 2.5%. It is going to be extremely challenging to even keep any increase to four per cent."
Of course, 4 per cent is the level of council tax increase that the deputy minister told the Local Government Committee that he realistically expects.
Does John Swinney recall from what I said to that committee that his quotation is selective? I said that the initial indications from councils were that some of them were thinking of setting council taxes above 4 per cent and that it would not be until we got full information that we would know what the council tax increase would be.
Can I assume that that means that we have a guarantee from the deputy minister that council tax increases will be no higher than 2.5 per cent? That is the question that arises from the supposed clarification that has come from the deputy minister today. A quotation is a quotation.
The latest part of the debate came shortly after Christmas, on 28 December, when the Government issued a press release to show that local authorities had, according to the local government Improvement Service—yet another quango that has been established by this Administration—made £122 million of savings in the current financial year. The inference from that statement is that, if greater efficiency has been delivered, there is no need for any change to the level of funding for local authorities. It is interesting that, despite many inquiries, members have been unable to get hold of the Improvement Service's report. However, I was able to get a copy from the Scottish Parliament information centre this morning. From a cursory glance at it—I got the report only at 10 past 9 this morning—I think that the assumptions on which the figure of £122 million is based are somewhat shaky.
In the executive summary of the report, the Government says that local authorities have saved £122 million on the basis of six case studies across Scotland. It goes on to say:
"We believe that many councils are struggling to effectively measure the performance impact of efficiency gains. … The information gathered as part of this study indicates that many councils are still struggling to define efficiency in terms of service improvement, focusing largely on the ‘savings' element of more efficient working."
Our point is proved. Many of the supposed savings by local authorities are nothing more than the traditional budget cuts to which we have always been accustomed. They are not the service transformation that the minister has promised.
On a point of information, Mr Swinney claims that that information is based on six case studies. In fact, it is based on six case studies and 15 returns from other councils. I congratulate him on his sleuth work this morning in discovering that the report was sitting in SPICe. He is obviously doing a very good job.
We have been asking for the report since Monday and it was apparently published on 28 December. We were told yesterday that it was going to be published in two parts. I presume that the first half must be better or more convenient than the second half. The executive summary of the report states:
"Our analysis involved working closely with six case study councils".
If the minister is saying that those gains have been made, there must now be absolutely no reason for a council tax increase that is greater than 2.5 per cent. If, as the Government says, local authorities have made savings of that scale, it must be irrefutable that there should be no council tax increase beyond 2.5 per cent. However, I am afraid that I am sceptical about that.
On the same day that the figure of £122 million came out, the Convention of Scottish Local Authorities published figures that suggest that there will be a black hole of £400 million in local authority budgets in the next year. The question that members of the public will ask is which side of the argument they should believe—the Scottish Executive's or COSLA's. It would be wise to believe neither of them. The Executive's amendment rests heavily on that figure of £122 million. I am sure that the deputy minister's argument will be that local authorities have made such gains that there will be no need for the additional resources that the Scottish National Party motion calls for.
Amid the clamour and counter-claims of the Executive and COSLA, Parliament should look for good quality and dispassionate information not from COSLA or the Executive, but from the analysis and findings of its own Finance Committee. Just before Christmas, the Finance Committee published a report that examined in detail the local government settlement and the contribution of local authorities to the efficient government programme. After thorough analysis, the committee stated, in paragraph 93 of its report, that
"The Minister has acknowledged that new funding pressures are impacting on local authorities and promised to revisit this next year. That is a positive commitment. However, the Committee remains very concerned that to meet the 2.5% council tax target, the Executive's target for spending leaves a shortfall which the Committee calculates as £84.9m over and above the £58.5m efficiency savings target."
The all-party Finance Committee calculates that, to get to the Government's stated target of a 2.5 per cent council tax increase, £84.9 million in new money must be made available to local authorities. That is the position that we seek to confirm this morning.
I have a quick point of clarification for Mr Swinney. Even if we accepted the £84.9 million funding gap figure that is quoted in the Finance Committee's report—which we do not necessarily accept—we do not accept the report's claim that it would take a 6.6 per cent increase in council tax to fill that gap. Last year, £2 billion was collected in council tax, but 6.6 per cent of that is not £84.9 million.
According to the Finance Committee, the funding gap is £84.9 million. If the minister is going to question the figures in the committee's report, he should tell Parliament and the committee exactly what the funding gap will be.
Unless Parliament takes action to press the Government to close the funding gap, local authorities will face the familiar choice between cutting local authority services and—once again—increasing council tax levels beyond inflation. What does that choice mean for the people of Scotland? For council tax payers, an above-inflation increase will add to the 55 per cent increase in council tax since 1997. Council tax payers have taken enough punishment from this Administration and unless action is taken to expand local authority budgets there will be another above-inflation increase for council tax payers in Scotland this year.
Alternatively, just as they had to do under the Tories' dreadful local authority settlements—which were normally condemned by Labour and the Liberals—councils could try to cut their budgets and thereby start to undermine some of the valuable local services that our communities depend on.
If an independent body—not COSLA or the Scottish Executive but, say, Audit Scotland—found that councils that were threatening to cut front-line services had considerable reserves of £1.6 billion, would John Swinney attack them?
Local authorities have to make prudent judgments on the level of their reserves and provision in the same way that the Scottish Executive has to make judgments about its reserves. I point out to Mr Purvis again that the Scottish Executive has reserves of £1.5 billion sitting in Her Majesty's Treasury. The Executive parties should not lecture local authorities when they have not got their own house in order.
The Executive prides itself on working in communities, closing the opportunity gap, giving dignity to older people and providing the best start for our children. However, as we all know, people in our constituencies fear the damage that might be done if the valuable services that deliver those Government objectives are subjected to cuts. Unless the settlement is improved, some of the Government's valuable aims for our communities will be undermined.
The Government must take action if it is to remain consistent on the objectives in its 2006-07 budget document, which makes it clear that one of the objectives of the local authority settlement is to provide "protection for all services" that are currently provided. If that is a Government objective, it cannot be delivered within the current settlement.
There are two parts to the SNP's proposal on the forthcoming year's local government settlement. The Finance Committee has identified a funding gap of £84.9 million between the current settlement and the Government target of keeping council tax increases to 2.5 per cent. If we want to deliver a real-terms freeze in the council tax, we must go slightly further than that. First, we want to make available to local authorities £93.2 million of new investment to close the funding gap and to give authorities the resources that are required to deliver a real-terms freeze in council tax. That money would be available if we were to allow local authorities to retain the £58.5 million in efficiency savings that they are expected to deliver and that the Executive has already removed from baseline local authority budgets. The remaining £34.7 million should be provided from the £49 million that the pre-budget report has allocated to Scotland over three years. The new investment fund that would be created by such an approach would address the Finance Committee's concerns.
However, the second part of our proposal is that the Executive should offer that money only on the condition that it is used to deliver a real-terms freeze in the council tax. Instead of engaging in its current foghorn diplomacy with local authorities, the Executive should be trying to secure their acceptance of that offer.
Our proposal can be paid for from two sources: the £49 million that has been set out in the pre-budget report, and the balances that the Scottish Executive holds at the Treasury, the unallocated element of which is, as the minister confirmed, close to £500 million. Instead of hoarding taxpayers' money to lavish on its election commitments, the Government should now give short-term relief to Scotland's council tax payers.
If members doubt that the budget contains enough room for manoeuvre to pay for that commitment, I ask them to remember two points. First, on Tuesday, the Deputy First Minister—[Interruption.] I am sorry. I meant the Deputy Minister for Finance, Public Service Reform and Parliamentary Business—heaven help us if he ever became the Deputy First Minister. On Tuesday, he asked the Finance Committee to approve £120 million of new spending on Government projects. When we asked where that money came from, we were told that it came from the central reserve.
Secondly, £70 million of the £120 million of new spending that we approved on Tuesday is being spent on the quangos of Scotland. What does it say about this Government if it can find an extra £70 million to boost the budgets of Scotland's quangos, but cannot find the money to support democratically controlled local authority services and protect ordinary council tax payers from big council tax increases?
Our proposals, which I hope Parliament will support, are designed to provide a short-term fix to the council tax problem that local authorities will face in the coming financial year. However, we also need a long-term solution that will lift the punitive burden that is the council tax and will bring in a system that is fair to everyone in Scotland. That is why the SNP—and, apparently, some members on the Executive parties' benches—support a local income tax that is based on people's ability to pay. Such a system is based on the principle of fairness, which is the essential characteristic of taxation. The poorest people in our society pay a greater share of their income in council tax than the wealthiest people pay. That is unfair. It is also unfair that the income and savings of people on fixed incomes, particularly pensioners, have been hit hard by significant council tax increases over the past eight years.
We also face the prospect of an increase in the council tax burden as a result of revaluation of properties. The Labour Party's submission to the independent review of taxation makes a case for a more regular review of property prices through revaluation. Such regular revaluations will mean that, under Labour, greater council tax burdens will be on the cards for the people of Scotland. I am sure that that will make a great election message in 2007.
We need to rectify that injustice by establishing a system that is based on the ability to pay. The attractions and benefits of a local income tax are clear: pensioners and other people on low incomes would be spared the burden and complexity of the council tax and council tax relief systems and, if we were to retain current national personal taxation allowances, people whose incomes are deemed to be too low to allow them to pay tax would be automatically exempt from paying local income tax.
Much of the debate on the local government settlement rests on the impact of the efficient government programme. Our position is very clear: we support that programme but we feel that it should go further. It is ludicrous that local authorities have been called upon to find efficiency savings to cover 3.4 per cent of their expenditure while central Government departments have been given much lower targets. For example, the target for enterprise and lifelong learning is 0.22 per cent; for environment and rural development, 0.63 per cent; for tourism, culture and sport, 0.86 per cent; for communities, 1.09 per cent; and for transport, 1.44 per cent. It is also ludicrous that the various departments and divisions are able to retain savings to spend on other projects, while savings that are made in local government and the health service are redirected elsewhere. The initiative was supposed to boost—not cut—front-line services.
I support an efficient government programme that works across the board. I want a major assault on the burgeoning number of quangos in Scotland, I want Government departments to be subjected to the rigour that local authorities have been subjected to and I want the Government to start putting protection of council tax payers before protection of its own departments. Such an approach would command support from the SNP.
This debate provides Parliament with the opportunity to press the Government into action, to acknowledge that there is a problem with the funding of local authority services in the next financial year, and to recognise that we have a chance to protect the council tax payers of Scotland from yet another above-inflation increase. I hope that Parliament will seize that opportunity.
I move,
That the Parliament notes the widespread concern over the inadequacy of the local government finance settlement for 2006-07 and 2007-08; notes the recommendations of the Finance Committee that the Scottish Executive should reconsider the settlement; welcomes the moves to make government more efficient but calls for this process to be applied equitably across national and local government and conducted with greater rigour; calls on the Executive to restore the £58.5 million in efficiency savings to local government baselines and to make available to local authorities £34.7 million from the pre-Budget report consequentials on condition that this is used to deliver a real-terms freeze in council tax, and recognises that these are short-term improvements to the unfair council tax that will only be resolved when the system is abolished and replaced by a local income tax based on the ability to pay.
I welcome the debate; indeed, given that councils currently spend about £17 billion a year on delivering many of our public services, the subject is very important and worthy of debate.
That £17 billion is financed from council tax, fees and charges, non-domestic rates, councils' own reserves, efficiency savings and grants that are provided directly by Executive departments. This year, the Executive's funding for local government will account for more than a third of its budget. In particular, since 1999-2000, the amount of core funding has increased steeply by £2.6 billion or 47 per cent. By 2007-08, the increase will be 55 per cent.
Will the minister give way?
That stands in stark contrast to the "dreadful" settlements that Mr Swinney referred to in his opening speech.
Will the minister give way?
Yes.
I am sorry, Presiding Officer—either my voice is not carrying very far or the minister has not had his ears cleaned this morning.
The minister has just referred to additional core funding. If all that extra money has gone in, why has council tax increased by 55 per cent since the Executive came to power?
Such decisions are made by locally elected councillors. Our track record over that time shows a 55 per cent increase in direct support from the Executive, which I have to tell Mr Davidson is in stark contrast to his party's record in respect of the council tax increases that came about as a result of underfunding when the Conservatives were in power.
I would be interested in the minister's comments on paragraph 77 of the Finance Committee report, which states:
"The Committee also noted that the Aggregate External Finance (AEF) … was only planned to increase by 10% over the current Spending Review cycle, compared with 21% for the Scottish DEL."
How does that square with what he has just said?
I point out to Mr Ballard that, on top of AEF, we have the direct grants from Executive departments to local government. We also have prudential borrowing and supported borrowing, so the subject must be considered in the round. As I said, we have increased our support to local government by 47 per cent since devolution. By 2007-08 the increase will be 55 per cent. Any independent commentator would acknowledge that we have supported local government very well over the period.
I turn to the motion—I will deal with the last part of it first. We all await the report of the special committee under the chairmanship of Sir Peter Burt, which was set up by the coalition Government to investigate the financing of local government. I will not speculate on what that committee might recommend.
On local government finance, let me make it quite clear that, as Scotland's devolved Government, we are committed to excellence in our public services. We have provided, and will continue to provide, local government with the resources that it needs to provide world-class services. Those resources have been used to deliver more and better services, new schools, extra teachers and record numbers of police officers. Those are just some of the outcomes that are delivering real benefits to the people of Scotland.
On 23 November, we announced to Parliament provisional core funding for local government of £8.3 billion in 2006-07 and £8.5 billion in 2007-08, which represents a year-on-year increase of 3.2 per cent in the first year and 2.3 per cent in the second year—a cumulative increase of 5.6 per cent. We also said that, following discussions with COSLA, final figures will shortly be presented to Parliament.
Will the minister give way?
I would like to make a little progress, if Mr Adam does not mind.
In addition, councils have other resources at their disposal. This year, for example, the Executive is providing £1.3 billion in specific revenue grants over and above the core settlement, and £827 million in capital support. In total, Executive support over the three years from 2005-06 to 2007-08 totals £30.8 billion. I do not think that we can be accused of failing to support local government, given the amount of support that is being offered to local authorities over the period. Councils will also get more than £2 billion in council tax and income from fees and charges, and they now also have access to more funds through the prudential borrowing regime, which we made available to them on 1 April 2004.
The minister has talked about the allocation of specific funds and about the funds that are available to local authorities. Will he tell us specifically how much the Executive is making available for equal pay restructuring?
As we have said many times in answer to that question, that is a deal that was negotiated and agreed between the local government representative body, COSLA, and the trade unions. We expect local authorities to have made provision over the years to meet their obligations through prudent management of their finances.
Regardless of where the funding comes from, we expect councils to deliver best value for the taxpayer and for communities, which is why we were pleased to announce last month that the Improvement Service had reported that councils are on course to deliver at least £122 million in efficiency savings in 2005-06. They are to be congratulated on that achievement, which is well above the target that we set and shows that the target was both realistic and achievable. We expect councils to achieve further savings in the future. Those savings will, of course, be available for reinvestment to boost front-line services.
Will the minister clarify two points? First, if further savings are going to be available for reinvestment by local authorities, why has the first tranche of savings—£58 million—not been available for local authorities to reinvest? Secondly, if local authorities are doing so well, why are Government departments being let off the hook?
In answer to the first question, the original money that was deducted at source may well have been reinvested in council support, but we have not put in place the bureaucracy for which the SNP constantly calls to measure all that. That money was available to meet the needs of the Scottish Executive budget.
Ah!
A third of the Executive budget goes to local government, so that money could have gone to local government.
It could not.
It could so. Councils have taken advantage of the generous financial settlements in previous years to build substantial balances.
The minister must substantiate his claim that that money has been reinvested in local authorities. It is a central—
I did not say that.
The minister is now telling me that he did not say that. He had better get on his feet and clarify what he did say, because it is a fundamental point in the debate. If that money has been reinvested in local authorities, the Executive must be able to prove how that has been done. If it cannot prove that, it has not been done.
The point that I made to Mr Swinney was that that efficiency money was freed up and could have been reinvested in a range of things across the Executive's budget, of which local government accounts for a third. The allegation that that money was taken away and reinvested elsewhere does not stand up, but that is the allegation that Mr Swinney has constantly made.
The minister cannot substantiate that.
Mr Swinney cannot substantiate his point.
The level of grant that we have announced, together with all their other income, provides councils with substantial funds. Councils have taken advantage of generous financial settlements in previous years to build substantial balances, some of which are required as a sensible financial precaution against unforeseen circumstances.
Such as equal pay.
Some of that money could now be made available to meet such on-going pressures and, as my colleague Mr Purvis rightly pointed out, the Accounts Commission published figures showing that £1.6 billion of balances were held by local government last year.
We recognise, however, that circumstances can change and that councils are facing a range of emerging pressures that, although they were foreseen at the last spending review, could not be forecast with certainty. In November, the Minister for Finance and Public Service Reform met a cross-party group from COSLA to discuss those financial pressures, and another meeting is planned for later this month. It would be premature to anticipate the outcome of that meeting, but I remind members that the Minister for Finance and Public Service Reform has already said, in his statement to Parliament on 23 November, that he would be prepared to consider the case for further additional resources for 2007-08, provided that local government shows that it is making significant progress towards the efficient government targets. That has always been the Executive's position; it remains our position today.
If the Minister for Finance and Public Service Reform is talking about reconsidering grant aid to local authorities, I would like to impress upon him the need to give the City of Edinburgh Council capital status as regards its financing. Because of the peculiar nature of the services that are provided by the City of Edinburgh Council, it would be only fair to put Edinburgh on a par with the City of Westminster and to allocate £6.5 million to service Edinburgh's particular role in promoting Scotland and in acting as a gateway to Scotland as well as being the capital city.
You have about two minutes, Mr Lyon.
I am sure that that issue will be at the forefront of the discussions between COSLA and the Minister for Finance and Public Service Reform.
As well as engaging with COSLA, we will of course continue to push forward our reform agenda, which will include ways of streamlining bureaucracy to free up more resources that local government will be able to redirect to front-line services. I am in no doubt that councils will have within their grasp the resources to exert downward pressure on council tax rises in 2006-07 if they meet their efficiency targets and take other sensible measures to maximise their income and restrict unnecessary spending. Those measures include further improvements in council tax collection rates, which still lag behind the levels in England.
In conclusion, the funding that we are making available to local government in 2006-07 and 2007-08 builds on historically high levels of investment in local government finance. That record investment is helping to improve the quality of life of the members of our communities, to enhance our children's education through new schools and extra teachers and to provide greater support to pensioners through free personal care and concessionary travel. We remain committed to those goals, which offer stability and security to everyone who lives and works in Scotland.
As I have said, the Executive's position is that we are willing to engage in constructive discussions with COSLA on the continuing pressures that its members face. We have already made it clear that we are willing to consider the provision of some extra resources for 2007-08 and we will report to Parliament on the outcome of our discussions as soon as we can.
I move amendment S2M-3795.4, to leave out from "widespread concern" to end and insert:
"record levels of finance provided to local government by the Scottish Executive which mean that by 2007-08 core funding will have increased by over £3 billion or 55% compared with 1999-2000; welcomes the report from the Local Government Improvement Service which confirms that councils are on course to achieve at least £122 million in efficiency savings in 2005-06; notes that the Executive has given a commitment to consider some further additional resources for 2007-08 subject to local government delivering on their efficiency targets and that the Executive is engaged in an ongoing discussion with local government about the financial pressures councils are facing and the steps local government can take to maintain downward pressure on council tax, and looks forward to the report of the independent committee on local government taxation, which is due later this year."
I apologise if my voice is not as loud as it usually is.
Members will see from my amendment that I have not sought to remove the first part of John Swinney's motion because it is simply a regurgitation of the recommendations of the Finance Committee's report on stage 2 of the budget process, to which all parties—including the Executive parties—signed up. I will leave it to the Conservative member of the Finance Committee to deal with that report in detail. I simply note that it is interesting that, even though all parties signed up to the report, the minister seems to be trying to put it down. The decent thing for him to do would be to make himself available for another session with the Finance Committee so that he could convince its members where they are wrong and why he thinks that they are wrong. If he thinks that they are right, he should have the decency to accept that.
The Executive will respond to the committee's report. We have already indicated that we are willing to engage constructively with the committee and to respond to some of the recommendations that it has made. When we respond to the report, we will set down in writing the query that we had, which relates to the £84.9 million funding gap that is identified in one of the tables. The paragraph below that table suggests that a 6.6 per cent increase in council tax would be required to meet that shortfall, but those figures do not add up—6.6 per cent of £2 billion does not come to £84.9 million.
The minister should go before the committee to convince it.
Over the past few years, Conservative councillors have consistently pursued a real-terms freeze in council tax rises.
John Swinney and I agree on some of the problems that councils face and I am sure that many decent members would agree with us. Although councils differ in matters such as style and management, they broadly agree on the difficulties that they face. It is highly frustrating that once again I could not get the minister to tell us why the 55 per cent increase in funding for local government has had to be matched by a 55 per cent increase in council tax bills. Maybe one day he will come back with an answer on that.
Three ministers are involved in this sorry saga. First, the First Minister says with great faith that the maximum rise in council tax will be 2.5 per cent. That is fair enough, given that inflation is around 2.4 per cent, and leads us to think that at last the First Minister has caught up with what is going on. Next the Deputy Minister for Finance, Public Service Reform and Parliamentary Business tells Parliament and its committees that the increases will probably be 4 per cent or higher. Then the Minister for Finance and Public Service Reform refuses to tell Parliament what he thinks the rises might be, even though he is the person who makes all the assumptions about where the efficiencies will come from and what councils will be able to do.
The minister said that local authorities were doing better than had been anticipated on efficiency savings. If we follow that logic, we should expect council tax rises to be much less than 2.5 per cent.
Absolutely—our parties agree on that. Perhaps the difference is that some of us have been members of the Finance Committee and can occasionally count.
It is sad when ministers start to talk about assumptions. As the man in charge, the Minister for Finance and Public Service Reform must take a view on where he thinks that efficiency savings in councils will come from. When I asked him about that, there was no answer—the silence was awesome. Even people in COSLA were surprised that he had no notion about where councils would make savings. He is supposed to be giving leadership and guidance.
The usual ministerial answer is that councils are free to set their own levels of council tax and that, as they have been given the money, the rises are all their fault and are nothing to do with the Executive, even though it is piling burden upon burden on local authorities. The Minister for Finance and Public Service Reform's assumption is that the efficiency savings will help to pay for the delivery of what the new burdens require. I am not sure where the deputy minister is coming from when he says that the efficiency savings might be used to improve services. It is his and his team's assumption that those savings will fund the provision of the additional services that are being forced—especially through ring fencing—on councils in Scotland.
I must be extremely naive, but according to the manifestos of the Executive parties at the last election, the coalition itself claimed to be the improvement service for Scotland. Another Improvement Service has now been created, but the Executive does not seem to know what it is saying. I am not quite sure what it is supposed to do, but I always thought that the Government had to take things on the chin. If there is a major problem with a third of the budget, the Government has a responsibility to sort it out by dealing with the right people and coming up with good suggestions.
It appears that no assumptions have been made about what the Government should be doing on efficiency. John Swinney mentioned quangos, but we all know about the situation in the departments. Another case has arisen this week. Have civil servants from the Enterprise, Transport and Lifelong Learning Department gone to work at the new transport agency? I do not think so. What will the civil servants who have departmental responsibility for transport do now that Transport Scotland has been set up? It seems that there is one rule for the Executive and another rule for everyone else in Scotland. As usual, it is the councils and the council tax payers who will pay.
The ministers claim that more money than ever is spent on local government, but they should listen to what people on the street say. They want to know where the improvement in service is. The wheelie bin roll-out in south Aberdeenshire is a nonsense. I have received numerous letters and e-mails from people telling me that although their council tax has gone up, they get only half the number of collections that they got in the past. Is that service improvement?
I will give way to the minister.
The latest statistics show that our extra investment means that there are 3,500 more teachers and 3,900 more policemen on the beat.
The man in the street does not see it that way—perhaps because the bobbies are not actually on the beat.
Several years ago, at the beginning of the first parliamentary debate on local government finance, I said that before we put in place a funding process, we should hold a review of what we want local government to do. We have not done that. We cannot continue to have a system in which accountable councils are not accountable because all that they are doing is acting as agencies to deliver the services that ministers demand. That does not represent local design or local freedom. There is certainly no devolution in that regard.
We cannot support the Scottish National Party's motion for one simple reason—we do not believe that a local income tax is the answer. Roughly 80 per cent of council funding comes from general taxation. That is regressive and in fact represents a form of redistribution; the same is true of council tax benefit. However, we agree that the council tax system will have to be tweaked. It is fair, in that property owners can see the evidence on which it is based, but the bands need to be revalued regularly. That has certainly not happened in the past.
As far as council tax benefit is concerned, it is quite unfairly distributed in Scotland. However, if we were to have a local income tax, we would lose the benefit of that benefit, which would mean that rates would have to go up. So far, we have had no answer to that point.
Ministers have accepted the fact that councils have to do better at collecting council tax. There is no argument whatever on that issue. If councils in Scotland were to collect at the same rate as councils in England collect, another £50 million would come into the system.
No member has said yet how we can cut council tax rates. As we go through and past the Burt committee response, I hope that we can move on to debate realistic methods by which we can cut the council tax that our long-suffering council tax payers in Scotland have to pay.
I move amendment S2M-3795.3 to leave out from "and recognises" to end and insert:
"as many in Scotland are suffering as a result of the 55% rise in council tax since the Labour/Liberal Democrat coalition came to power; believes that a proposed new system of local income tax would be over-complicated, expensive to collect, would remove accountability and transparency from local government and adversely penalise young working households, and notes that the real problem in Scotland is the high level of council taxes charged, not the tax itself."
Two issues are up for debate today: the current council tax settlement; and the future of the council tax. Although I agree with the SNP on the former, I disagree with them on the latter.
Having sat on the Finance Committee for the past few months, I have come to believe that the situation with respect to council funding is clear. Councils are being asked to do more, but with an almost standstill grant. As David Davidson said, the Finance Committee report was agreed to by the entire committee, even with its Executive majority.
Paragraph 83 of the Finance Committee's report says:
"The Executive is still assuming that this 2.1% growth in spending can be funded through a 0.5% growth in AEF; a 2.5% growth in council tax … and £58.5m of efficiency savings".
As the committee goes on to point out in paragraph 85, a total funding shortfall of £84.9 million remains.
In his speech, George Lyon argued that some of the £58.5 million in efficiency savings could—I think that that was the word he used—come back to the local authorities. Again, paragraph 85 of the report shows the additional aggregate external finance at only £38.7 million. Given that the Executive's projected total efficiency savings are £58.5 million, I can see why the minister uses the word "could". There is no way that the total efficiency savings can be realised in that way, given that they are greater than the projected 0.5 per cent increase in AEF. According to page 162 of the draft budget, this miserly 0.5 per cent is enough to deliver
"protection for all services already being provided."
The increase in direct support for this coming year is 3.5 per cent. The member seems to misunderstand the financial figures that he has in front of him.
I wonder whether the minister has included inflation in that figure. According to the figures in the Finance Committee report, the additional AEF is effectively 0.5 per cent. We are looking at an additional spending provision of £178.1 million.
Has Mr Ballard reflected on paragraph 62 of the Finance Committee's report, which says:
"The Executive also reported to the Committee that it could not specify to where the … savings were reallocated".
What does that tell us about the process in which we are engaged?
It tells us that when the minister says "could" he is speculating wildly. The truth is that we are looking at an effective cut for local authorities. There are two ways in which they can deal with that, the first of which is to increase council tax. According to the independent calculations that were presented to the Finance Committee, if all the shortfall were to be passed on in council tax, we could be looking at increases of up to 6.6 per cent. The Finance Committee recognises that that is not what will happen; instead, we will see less substantial increases but real cuts in services.
The member referred earlier to a £84.9 million gap. How did he work out that 6.6 per cent of the £2 billion that was collected in council tax last year comes to that figure? I cannot figure out how he came to it.
I rely on the independent evidence that Professor Arthur Midwinter gives to the Finance Committee. He is one of—I think—three people who understand the way in which the Scottish Executive budget works. I defer to Professor Midwinter on the matter. Perhaps the minister would do well to do so, too.
We should not believe for a minute the flim-flam that we are getting from the Executive on efficiency savings. The Finance Committee heard evidence from Aberdeen City Council that the £58.5 million savings that it is already expected to make are greater than its expenditure on back-office staff. In order to achieve the savings, the council will have to make cuts in front-line services. We are talking about greater efficiency savings and greater cuts.
We can guess which services will be cut, particularly when the minister talks about the need to "restrict unnecessary spending". We know that that means soft targets such as community education, youth work and support for voluntary organisations, which are the sectors in which cash is so desperately needed. In the long term, the effect of cuts in those sectors will mean that, instead of investing in that preventive work, the rest of society and the rest of government will have to pay much more to clear up the problems.
I agree with what John Swinney says in his motion: local authorities are being treated very differently to other government departments. I also agree with a lot of Tommy Sheridan's amendment and the problems that have resulted from the forced reliance on public-private partnership schemes. Local authorities have had effectively to mortgage their future spending with multinationals as a result of being tied into 30-year contracts. I also agree with what the SNP says on the short-term way in which the Executive is dealing with this funding crisis. I further agree that, in the longer term, we need to replace the council tax. The question is: what with?
The Scottish Green Party's policy on the issue is well known. We have made representations along these lines to the independent review of local government finance. We favour the replacement of the council tax and business rates with a form of land value taxation. In common with the present system, LVT is a property tax, but one that is based on land values and not on notional banded property values.
I want to take the opportunity to restate some of the advantages of LVT in support of the amendment in my name.
You will have to be brief, Mr Ballard.
Briefly, we have heard a lot about the problems caused by the council tax, but we need to recognise that there are problems with income tax. By definition, income tax hits those who are income rich but asset poor, in much the same way as Mr Swinney described the council tax as hitting those on fixed incomes, some of whom will be extremely asset rich. Any income tax is a tax on working. I think that that is a good thing and that we should see more of it.
Land is an untaxed factor of production that cannot be created or destroyed. Taxing land cannot distort the economy in the way that income tax can do. Too great a dependence on income tax risks placing all our financial eggs in one basket. We need to widen our tax base; not narrow it—
Will the member give way?
You should be winding up now, Mr Ballard.
I apologise to the member.
The Scottish Executive must support councils properly in the short term, but it must also ensure that it puts in place a sustainable and progressive future for them in the long term. I believe that that would best be done through a single system of land value taxation. That is why I will move the amendment in my name, which keeps the body of the SNP motion on the current crisis and proposes a sustainable solution for local authorities in the long term.
I move amendment S2M-3795.1 to leave out from "local income tax" to end and insert:
"system of land value taxation that recognises that ability to pay is not determined solely by income."
My amendment to the SNP motion is in a number of parts. I look forward to the SNP member who sums up indicating whether the SNP is willing to accept it. I believe that my amendment does not detract from the SNP motion but adds to it.
Today's debate is about the double whammy that faces local authorities across Scotland. Not only is the Executive imposing greater efficiency savings on local authorities compared with those facing other public service departments, but it wishes to decrease the level of funding for local authorities relative to that for other public service departments. In other words, it is looking for more savings from local authorities, but providing less in real and relative terms for local authorities to provide local government jobs and essential services throughout the country.
That double whammy results in COSLA telling us that there is a £400 million gap between what the Executive believes is capable of being achieved in the local authority sector and what the local authorities say that they can deliver. Even if we accept that there will be marginal adjustments to what COSLA is suggesting, there is absolutely no doubt that there is still a huge funding gap in relation to what the Executive says about local authorities defending and expanding service provision while keeping council tax rises down to 2.5 per cent. That is complete tommy-rot; it is impossible for local authorities to work that equation.
We are talking about a double whammy not just for local authorities but for Scottish citizens, who are going to experience a reduction in the level of service that they receive. It is not often that I agree with David Davidson, but the fact remains that ordinary people throughout Scotland believe that they are paying more for local services through council tax but are receiving less from those services. That perception is widespread, because it is close to reality.
Scottish citizens face receiving less from council services while paying more for them, with local authorities talking about average increases of 4 to 6 per cent in council tax, adding to the 55 per cent increase that we have had since the Executive was elected.
If the Executive is so accurate and so honest about the funding packages, and if it has been so generous to local authorities, we have to ask ourselves why local authorities have had to increase council tax by 55 per cent since 1999. The reality is that the Executive has demanded more from local government but provided less in real terms.
The problems do not end there. Another section of Scottish citizens is going to suffer—local authority workers themselves. The detail of the settlement shows that the Executive is allowing for 2.2 per cent inflation, despite the fact that the Treasury estimate is of 2.7 per cent inflation. In other words, not only are there going to be fewer services and higher council tax, but local authority workers are going to experience a standstill situation or reductions in their living standards. If the Executive thinks that that is a good deal, it is living on a different planet. The reality is that the money provided to local authorities for the extra responsibilities that the Executive continually imposes on them is inadequate.
The suggestion that local authorities are a mass of inefficient government is simply not true. If we ask what is really inefficient, the answer is that it is the imposition on local authorities of private finance deals that mean that they sometimes pay four or five times more for schools and other facilities than they would if they were allowed to use traditional public procurement methods. It is completely hypocritical for the Executive to talk about efficient government when it imposes inefficient funding mechanisms on local authorities for the delivery of facilities. That has to be addressed.
My colleague Carolyn Leckie will elaborate on another point that we must address. The Executive talks about the need for equal pay restructuring and justice for thousands of workers who have been underpaid for years and who deserve their back pay, yet it is not prepared to dig into its pocket and pay for that restructuring. It talks a good game, but it is not prepared to pay, which is unacceptable. Part of our amendment addresses that situation.
Finally, our amendment keeps the statement in the SNP motion about the need to replace council tax. On 1 February—three weeks from today—every member who believes that it is time to abolish the council tax and replace it with an income-based alternative will have the opportunity to vote for that. Those who refuse to vote for it will be exposed as the political phoneys and fraudsters that they are—I look towards the Liberal Democrat benches in particular. I look forward to seeing on 1 February the voting record on the Council Tax Abolition and Service Tax Introduction (Scotland) Bill, which provides for the replacement of the council tax with an income-based alternative. It is open to others to amend it to provide for different forms of collection, but the general principle on which we will vote on 1 February will be the replacement of the council tax with an income-based alternative. I look forward to that debate with relish. We will see who says one thing before elections and does the opposite after them.
I will address most of my remarks to John Swinney's motion, but I want first to address two issues relating to what Mr Sheridan said. First, I note that Mr Sheridan directs his main criticism at the Liberal Democrats and how they will vote on 1 February. That intrigues me. Does it mean that he has a promise from his sister nationalist party, the SNP, that it will support his bill on 1 February? I look forward to clarification on that.
Secondly, Tommy Sheridan is proposing that local authorities should be fully funded to meet the equal pay obligations. I absolutely agree that they should meet those obligations, but the hypocrisy in his position is that his bill proposes to write off outstanding council tax debt owed to local authorities, which would hamper their ability to give equal pay to those low-paid workers. I hope that his comrade, who will speak later, will address that issue.
The SNP motion can be split into three parts: the local government settlement; the efficiency targets; and local income tax, which Mr Swinney touched on for all of a minute and a half at the end of his speech.
I turn first to the local government settlement, which it would be short-sighted of us to consider without first considering what preceded it. Since the Parliament was established in 1999, funding for local government services has risen by £2.6 billion, or 47 per cent. The increase will be £3 billion by the end of the current spending period.
Many of those additional resources have been allocated to specific priorities of the Parliament, which are often shared by local government, and there have been additional payroll costs. However, the recent period of growth in the local government budget represents a substantial increase in the resources available to local government, which I imagine that most local authorities would not have dared to hope for when the Parliament was established in 1999. The other point that should be made is that that level of sustained additional funding has been possible only through the success of the United Kingdom Labour Government in managing the UK economy.
Of course, nobody would expect the sustained level of increase to continue forever. The levels of increase over the next two years are tighter than they have been in previous years. We have to consider the overall settlement in the context of the increased budget in the past six years.
That brings me on to the efficiency savings. It is unreasonable for any large organisation to say that it cannot re-examine the way in which it delivers its services or manufactures its products.
If it is acceptable for all organisations to consider the way in which they deliver public services, can the member explain why local authorities have been required to find 3.4 per cent of their expenditure in efficiency savings, yet most Scottish Executive departments have to find less than 1 per cent? Where is the equity in that?
Mr Swinney's argument has some validity. The Scottish Executive should examine its departments in that regard and I believe that there probably are departments that should be examining their performance in order to reach higher efficiency targets than have been set. However, I am addressing the specific issue of local government efficiency targets, which I do not believe are unreasonable.
As I was saying, every large organisation in the world, whether in the public or the private sector, should continually examine the efficiency with which it delivers the services that it exists to deliver.
It is not the case that local authorities have been left to meet the efficiency targets on their own. The Scottish Executive has been supporting local authorities through the modernising government fund, which has been in place for many years. Further, as the minister outlined earlier, additional resources are available for local authorities to invest in modernising services through the prudential borrowing regime and many other funding sources.
Will the member give way?
No, I wish to make progress.
The further opportunities to deliver services are not all about cuts. There are many ways in which local authorities can enhance the way in which they deliver services and at the same time deliver them more efficiently. For example, in my area, West Lothian Council, in partnership with the national health service in the Lothians, has developed a community health partnership that delivers care services to elderly and disabled people in West Lothian through a joint organisation that provides a better and more efficient service to people who are in receipt of those services. Many such examples exist.
The final issue that I want to deal with is that of the nationalists' local income tax plans. It is illuminating that John Swinney chose to spend so little time on the policy in an 18-minute speech, particularly when, just before he gave up his position as SNP leader, he said:
"The poll tax finished off the Tories and I'm very confident that the council tax will finish off the Labour party."
If the SNP's policy on this issue is as popular as Mr Swinney thinks it is, I do not know why he did not give it prime billing in his speech this morning. However, the reality is that, when the SNP claim popularity for their policy, it is on the basis of their axe the tax campaign, not on the basis of the higher income tax campaign that hides behind it.
It is hardly surprising that the SNP wants no great scrutiny of its local income tax plans, because its policy paper on the issue is a deeply flawed piece of work. First, the plans assume that, in the calculation of the additional income tax that people in Scotland would pay, existing council tax payment would be transferred to local government. However, at the same time, the SNP completely ignores the issue of council tax benefit in its analysis of who would be a winner or a loser in its income tax bands. It is misleading for the policy document to ignore the fact that more than 400,000 households already receive full council tax benefit and, therefore, pay no council tax and that a further 120,000 households pay only partial council tax.
The second part of the SNP's proposals that misleads is the fact that five out of the eight households that are used as examples of those that would gain or lose are in bands D, F or H. Clearly, that is an attempt to show the policy in the best possible light. However, 64 per cent of Scots live in houses that are in bands A, B and C. If the SNP were honest about the analysis of its policy, it would base its analysis on the real spread of properties that exists in Scotland.
The third flaw in the proposals is that, even by the SNP's estimates, Glasgow would pay the highest income tax rates in the UK. On the SNP's own estimates, the rate would be 4.8 per cent higher than the rate in comparable cities in England. I doubt the SNP's figures—I think that they will be even higher than that—but, even on that basis, we can see that the SNP is proposing a policy that would result in more middle and higher-income earners leaving Glasgow at a time when the city is trying to attract more of them to move to the city.
The SNP's local income tax proposals are deeply flawed. I am not surprised that it does not draw much attention to them and I look forward to the party campaigning with the policy as its number 1 priority in the Scottish Parliament elections, as I am sure that that will result in an even heavier defeat for the party than it has been used to in recent years.
We now move to the open debate. I point out that I have already had to inform four members that they will not be called, so I will keep members to extremely tight six-minute speeches.
The SNP has begun this year by addressing an issue that is of concern to a great number of people in Scotland: the burden that the council tax places on many people in our society, not least our senior citizens and those on fixed incomes.
We know that the council tax has risen substantially since it was introduced by the Tories. The Conservatives increased it substantially and the Labour Government has increased it even more. The impact of that is that, in all but five local authorities in Scotland, the average council tax band—band D—now exceeds £1,000 a year. If we are honest and can leave the political party trenches for a moment, we all know in our heart of hearts that the burden that that places on a huge number of our citizens is, simply, unfair.
In what I thought was a robust and coherent performance this morning, John Swinney focused on the immediate priority of what we would do about the current local government settlement if we were in Government just now. He identified—using figures that have been approved by the Finance Committee—a method by which we can freeze council tax figures now. That is something that people such as Bristow Muldoon should give some credence to.
Will the member give way?
Bristow Muldoon has had his say.
That is what people in Scotland seek from this Parliament and the Scottish Government. More than 10 years ago, Nicky Fairbairn said that Scotland was fortunate not to have a Government. Looking at the performance of the Government that we have, I can begin to understand what he meant.
Will the member give way?
Certainly not.
John Swinney also recognised that, although local authorities are required to make savings of more than 3 per cent, the same requirement does not apply to the Executive. In his response to that point, the minister showed all the poise and assurance of a man overboard floundering in the sea, so I will throw him a lifebelt. Transport Scotland has just been created, which is a new quango. We do not know exactly how many employees it will have but a figure of around 200 has been mentioned—perhaps the minister could give us an accurate figure. Plainly, it is a huge and potentially valuable resource. However, I have a question for the minister. If around 200 or more civil service jobs have been created, how many fewer civil servants will there be in the Enterprise, Transport and Lifelong Learning Department of the Scottish Executive? I safely predict that the minister does not know, although he should do, because he is the Deputy Minister for Finance, Public Service Reform and Parliamentary Business.
Rather than recognising the reality, which is that the council tax is a huge burden on our senior citizens and those on low and fixed incomes and has increased by 55 per cent, the Executive's amendment talks about the steps that local government can take to "maintain downward pressure". If what we have seen—a 55 per cent increase—is downward pressure, goodness knows what it would be like if there were even higher increases.
I was interested to note that, in response to the crucial question of the £85 million gap that the Finance Committee identified, the minister said that he did not necessarily accept the figure. I think that we deserve better from a minister in response to a considered piece of work by a committee of this Parliament that has received advice from Professor Midwinter, which shows that there is a gap of £85 million. Instead, what does the minister say? Does he say, "Yes, there is a gap," or "No, there is no gap"? No. He says: "It ain't necessarily so." Ira Gershwin is a good songwriter, but he should not be writing the script for the Deputy Minister for Finance, Public Service Reform and Parliamentary Business in the Scottish Executive.
When a minister with responsibility for finance comes before this Parliament, he should be able to tell us where the money has gone. It was Deep Throat, in the film, "All the President's Men", who gave Woodward and Bernstein the excellent advice: "Follow the money." We should expect George Lyon to realise that that is advice that it is incumbent on him to take. However, he does not know where the money has gone.
It is awfully sad that we have not heard an acknowledgement that the local income tax policy is a coherent alternative. I know that the Deputy Minister for Finance, Public Service Reform and Parliamentary Business perhaps supports the local income tax policy, as do his Liberal Democrat colleagues, because they tell us so—and we have to take that at face value. However, it remains to be seen whether the support that the Liberal Democrats give to the local income tax policy is as enthusiastic as the support that they give to their leadership. The good news is that we will not have long to wait. Mr Kennedy may have been unfairly voted off in the first round of the political version of the Anne Robinson show, "The Weakest Link". Perhaps, minister, "You are the weakest link."
It would take some kind of twisted genius to devise a method of taxation that was worse than the council tax, which is a basically flawed system of taxation. It is people, not houses, who use services.
On average, since the council tax's inception, a staggering 7.5 per cent of council tax has gone uncollected. How can 150,000 houses be lost like that? It is beyond me. That is the equivalent of losing East Kilbride, Cumbernauld and one or two other places. The authorities cannot find their own houses, yet ministers have the temerity to talk about efficient government initiatives. Let us get back to something a bit more democratic than initiatives of that sort. In Scotland, 40 per cent of people bear the burden of paying for council services, while 60 per cent do not contribute one penny towards them.
Many among that 40 per cent are senior citizens. If the load was spread more evenly across the 100 per cent, current senior citizen band F council tax payers would have a payment of £40 a week reduced to £16 a week and the people who are not currently paying tax would be contributing a fair share. That is called basic democracy. We have been dancing on the head of a financial pin for the past couple of hours and getting nowhere, bandying figures about that half the people in the chamber do not even understand—and that includes some ministers, I might add. The whole basis is totally flawed.
Ministers are reluctant to change the system because at the next election they do not want to offend 60 per cent of the electorate—who might think that they will have to put their hands in their pockets and contribute to local taxation—and they would not wish to do that, whatever else they do. Of course, they could always approach number 10, where they would probably be advised to establish a council tax tsar, as we have tsars for everything in this country nowadays.
I will give an example to illustrate the reality of the situation. A pensioner approached me yesterday to discuss the fact that she had been pursued for non-payment of council tax by South Lanarkshire Council. That was quite right—the council must chase people up. She panicked—she was in a bit of a state. It is not nice for people who have been in the habit of paying all their bills timeously to get threatened with legal action for non-payment of council tax. She checked out her receipts and went to the council's office. It turned out that she owed £8, which she paid immediately. What a victory that was for South Lanarkshire Council's legal department and for the people who chase up council tax payments.
Has no one here ever heard of joined-up government? We have a very efficient method of taxation collection in this country. It is called pay as you earn, and the Inland Revenue does it for us. Bill Aitken is always going on about the fact that 50 per cent of fines imposed in courts are never collected. Why do the courts not just get the PAYE people to adjust the criminals' code number and reimburse the country by the amount of the fine? Why is the very same thing not done with the council tax? If we were to do away with council tax and had a fairer local income tax, we would have a much better system.
It is well documented that 80 per cent of local authority income is centrally funded and that the other 20 per cent comes from council tax. In effect, authorities lose houses all over the place and cannot collect all of the tax. If we went to a system of collection through income tax, and if the whole 100 per cent of council expenditure was centrally funded, the electorate would judge local authorities' accountability not on how they raise their funds but on the efficiency with which they use them.
The accountability argument that is sometimes made can rest on claims like, "Look how low we're keeping the council tax," but let me give members some facts—and they are frightening to see. It is a fact that, in 1993, a pensioner in a band F house in South Lanarkshire had to pay £782 in council tax, with water charges of £108. It is a fact that, in 2005, the council tax charge for the same house had risen to £1,502. That is a 91.9 per cent increase. It is a fact that the water charges for that house had risen to £502, which is a 363 per cent increase. It is a fact that the combined council tax and water rates over that 12-year period rose from £891 to £2,005, which is an increase of 124 per cent.
I only wish to God that pensions had risen by a commensurate amount. Sadly, pensions have not been increased by anything like that amount. Senior citizens, as well as others on fixed incomes, are continuing to have their living standards eroded. We must have change and we must have democracy. We must get rid of the council tax and adopt a fairer local income tax. Ministers must stop playing at being politicians. They need to look after the people. They should look after the elderly, and they should get their act together.
This is an annual event in the Scottish Parliament. We discuss the local government settlement, and it is as predictable as the Burns dinner in January or February every year. The hypocrisy from the SNP is also pretty predictable. I remind SNP members that if they introduced a local income tax, we would not have these debates in future, because the decisions would be taken centrally and local government would not be involved in them. We would not hear from COSLA or council leaders about the local government settlement, because the Parliament would decide the local income tax. SNP members might seek to portray themselves as representing councils throughout Scotland, but I remind them that they would not represent them but would take the decisions under the SNP's proposals.
I will respond to the points that David Davidson made about the man in the street. In the spirit of David Cameron's new style, will David Davidson ask him to apologise to the man in the street in Glasgow for the council tax increases that occurred during the Tory years? I remind him that, in 1996-97, there was a 21.9 per cent increase. Will he apologise for the increase in 1998-99 of 9.3 per cent?
I congratulate my new colleague, Charlie Gordon, on what he delivered for Glasgow in 2000. After the Scottish Parliament was formed, there was a 0 per cent increase in council tax. In every year following that, there have been only inflationary increases.
I am a bit puzzled by the member's reference to a local income tax. I presume that he was not referring to the socialists' service tax. The whole point about a local income tax is that the rate is set locally, not nationally.
From looking on the SNP's website for details about the process for setting the local income tax, I think that much work has to be done. I give Tommy Sheridan credit for making his proposal to Parliament and allowing us to interrogate it. That cannot be said of the SNP's proposal, which was set out only in a manifesto. If the SNP introduces a bill, we will scrutinise its proposals for collecting a local income tax.
The Parliament has on many occasions shown great pity for those who live in deprived areas. We talk about league tables. Our civil servants are obsessed with presenting in glossy documents and on websites the terrible statistics on what faces Glasgow. We spend a lifetime on providing league tables that show the educational attainment challenges that face Glasgow and we talk about the health statistics that face Glasgow and many other local authority areas. However, we do not talk about how the local government settlement should attack those deprivation figures, so I call on COSLA's leader, who I know is considering the matter, to examine the proposals that Charlie Gordon made to COSLA in his former capacity with Glasgow City Council and the case that other local authorities have made for deprivation figures to be taken into account in the allocation of local government funding. The challenges that face not only Glasgow City Council, but other local authorities, should be considered at the same time.
Of course, tackling deprivation costs money. If we are serious about tackling educational attainment figures in Glasgow that are not at the levels that they should be, we need money. That is why I am willing to consider whether efficiency savings, if they can be recovered, should be redirected to deal with deprivation. We might not allocate such funds through the local government settlement, but we might be able to tackle deprivation in other ways by using the budget that is available to the Scottish Executive. I would commend the Executive if it used the efficiency savings from local government to tackle deprivation in other ways. We talk about siphoning off funds, but I would commend the Executive for redirecting funds to tackle deprivation. I would also commend local government leaders throughout Scotland if they were willing to make efficiency savings to tackle deprivation.
Tommy Sheridan's amendment refers to
"uneconomic public private partnership deals".
We talk about the man in the street, whom David Davidson mentioned. All five secondary schools in my constituency have been rebuilt or refurbished under PPP schemes. Not one teacher, constituent or pupil has complained about a public-private partnership. Every head teacher involved in a partnership has commended the programme. Time will tell whether the partnerships have been economic, but the man in the street supports the proposals and commends us for the improvements in schools as a result of public-private partnerships.
There is a "Groundhog Day" inevitability to debates such as today's, but in one respect the debate has been different, because it is unprecedented in the Parliament's history for a committee and a minister to be at such variance, not on policy—that is to be accepted and expected—but on the basic facts and the basic arithmetic.
Having gone into considerable detail, the Finance Committee estimates an £84.9 million shortfall in the proposed funding for local government expenditure. I listened to George Lyon—I accept that the fault is not his, as he came on to the park somewhat late—and I found his arguments less than convincing. However, I give him credit for at least turning up. Three Labour members of the Finance Committee—Des McNulty, Wendy Alexander and Frank McAveety, all of whom we know are assiduous members—have not turned up. The clear reason for that is that they are not prepared to attempt to explain away the situation. Andrew Arbuckle is present and I look forward to hearing whether he helps George Lyon out of a hole that I admit is not of his making.
I will give way after pursuing my point.
We have three viewpoints: what the First Minister has said, what the Minister for Finance and Public Service Reform has said and what George Lyon has said. However, what cannot be gainsaid is the fact that the minister's figures are completely wrong—for example, he says that inflation is 2.2 per cent, but it is 2.7 per cent. The figure of £84.9 million simply cannot be disputed.
I give way to Mr Ballard.
The point in question—
Minister, it is Mark Ballard who has been called.
Is Bill Aitken aware that, in addition to the Finance Committee report that the additional AEF is 0.5 per cent in real terms, the minister contradicts page 5 of the SPICe briefing, which says that the change in revenue support grant is 0.6 per cent? The minister contradicts not just the Finance Committee and the members who are present, but SPICe.
The minister is in splendid and insecure isolation. The suggestion is that everybody but our George is out of step, but we are not swallowing that.
I have made two points. First, I said to Mr Ballard that the increase was 3.2 per cent in cash terms; I accept that it is 0.5 per cent in real terms. Secondly, I questioned the assumptions that the committee used to calculate the £84.9 million gap. We do not recognise the committee's figure of 6.6 per cent to fill that gap and we do not understand how that calculation can be made when £2.2 billion is collected in council tax.
The minister's problem is that he does not recognise economic figures when he sees them—that has been behind the dispute this morning.
The SNP's proposal is unacceptable. Do SNP members want an average family of, for example, one of the invisible police officers and a nurse, who respectively earn £27,191 and £22,038 and who live in a band D house, to pay £428 extra a year? That is basically what the SNP is saying. Its argument in favour of its proposal is one of fairness. I listened with interest to John Swinburne, but he and the SNP fail to recognise that a high proportion of households—and 40 per cent of pensioner households—receive council tax benefit. The pensioner take-up of that benefit would be much higher if the Labour Government had not made the forms that must be completed more or less incomprehensible; people require a Philadelphia lawyer's skills to understand them.
That would make the number of people who do not pay council tax much higher than the 60 per cent that I talked about. The number who pay, which is 40 per cent, would be lower, and more freeloading on those who pay would occur.
Pensioners who are not in acute poverty would certainly be very much worse off.
It is interesting that Fergus Ewing has left the chamber. If the SNP's proposal were implemented, what would be the result of the lost income from second homes in the Highlands? That has not been apparent. What would be the impact on affordable housing? People would be unable to afford homes.
I must refer to a point that Paul Martin made. David Cameron has no intention of apologising for the fact that, in their last years in office, Paul Martin's colleagues in Strathclyde Regional Council budgeted for a deficit. Neither David Cameron nor any Conservative MSP requires to apologise for the fact that Glasgow City Council implemented cash limits that Gordon Brown set in the Labour Government's first two years.
Frankly, the SNP's proposal is not workable. I have no doubt that it will be debated again.
As the only member with current experience of local government, I know that councils are undergoing a major exercise to try to get the two ends of the 2006-07 budget to meet. The minister is correct to state that record levels of funding have gone into local government in the past six years. The year-on-year increase even in this year—in which there are issues about how councils will cope—is 3.2 per cent. It is important to point out that if the SNP's proposals were agreed to, there would be a 4.2 per cent rise in funding for local councils. So much for claims of SNP financial prudence.
Some people in local government and some members believe that councils were harshly dealt with in this year's Executive settlement, but many in the private sector would be quite happy with an above-inflation settlement. The next 24 months in local government will be extremely challenging. In that period, deals will be struck on equal pay so that years of inequality are cancelled out, and millions of pounds will be added to the expenditure side of local authority budgets.
We expect local authorities to come up with single-status agreements, which would not only insert long-needed fairness into employment, but would add big pressures on councils' budgets. The business cliché that such financial pressures will help to produce innovative solutions is appropriate. I know many people who work in local government who would like to be free of management shackles that may have been appropriate in the early years of the previous century.
In my council area, financial controls are tight and council tax collection rates are in the top bracket. Auditors have rightly praised Fife Council's financial control. However, there can still be improvement in some areas. We have, for example, little positive management of our physical assets. Last year, our balance sheet showed surplus assets of £30 million. Many local authorities face such situations.
I agree with five words of Tommy Sheridan's amendment. Too much has been spent on
"the use of expensive consultants".
That is a problem for a number of local authorities. With a tightening economic situation, it is likely that the exercise that is currently being carried out to set council tax levels will provide long-term benefits only if it introduces better and tighter management.
The SNP's proposals are wrong on a number of counts. Does the SNP mean to spread the additional cash among all local authorities? Some local authorities' plans for the coming year are now well progressed. If they receive additional cash now, should they revert to the status quo and divert themselves away from the radical thinking that now goes on in local authorities?
Proposals have been made in my area that could lead to different structures for some services and to questioning whether some inherited parts of council work are still appropriate and still needed in the first decade of the 21st century. Front-line services need not be affected, but radical changes behind the scenes are required.
Back in December, I spoke to a prominent member of an SNP council on the east coast. He admitted to me that the settlement was challenging and was causing major rethinks in his authority, but he believed that aims could be achieved without front-line services being affected. Where does that leave the SNP's motion?
Much of the pressure in today's debate has been directed at central Government's contribution to local authorities' funding.
Will the member taken an intervention?
Any intervention should be brief because time is tight. The member is in his final minute.
I have never heard anybody more out of touch with local government than the member is. Any cash that is freed up will be diverted to save core services. That was the only reason for the council tax being increased. From personal experience in one of the most efficient councils, I know—
You were supposed to make your intervention brief, Mr Welsh.
Andrew Welsh claims proximity to local government, but I am still in local government and know what is happening.
In my final minute, I was going to point out that the council tax system is wrong and that it is time to consider a better local taxation system. In particular, the Liberal Democrats await the findings of the Burt committee, which I am sure will propose that a local income tax would meet most of the requirements for local taxation—namely, that such taxation should be fair and based on the ability to pay, and that there should be accountability and transparency. Therefore, we may look forward to a better system in the future. I am sure that the SNP will agree that the introduction of a local income tax would remove many of the current problems. I also hoped that it would have converted the Greens to its local income tax ideas after their festive love-in.
When he put forward his tax proposals, Tommy Sheridan questioned the Liberal Democrats' position.
You must finish now, Mr Arbuckle.
I want to respond to what Tommy Sheridan said. He went over the time that he was allowed.
I would like you to finish now.
I simply point out that Tommy Sheridan's proposed tax would involve no local accountability and would cost councils many millions of pounds.
I will confine my remarks to the unfairness of the council tax system and the benefits of a local income tax. What I will say follows on from what the member who spoke prior to me said.
It is trite but true to say that taxation should be fair and collectable, but council tax fails on both principles. Council tax is difficult to collect and is not based on the ability to pay. The elderly and the vulnerable—those on low pay—are most disadvantaged by the system. That is not only my view but the view of pensioners throughout Scotland and the view of Citizens Advice Scotland, which has said:
"Scotland's system of local government taxation causes significant hardship."
It has pointed out that bureaux in Scotland dealt with 14,000 new cases relating to council tax benefit last year and that a further 3,500 cases concerned council tax debt. We are talking about very vulnerable people.
As has been said, council tax has risen by 55 per cent since 1997. As John Swinburne rightly said, pensions have not kept pace with the increases. If we consider also rising fuel costs—people cannot restrict such costs, unless they sit in cold homes—we see that the vulnerable and poor are being squeezed. Although it is difficult for us to do anything about fuel costs, there is something that we can do: we can substitute a local income tax for the unjust council tax.
The council tax benefit system is a nightmare. Forget the complexities of the pension tax credit system, which I remember demonstrating in the chamber when I brought in a 68-page form and asked somebody to complete it during the debate. Doing so was impossible. The council tax benefit system is equally complex. I have looked at the Help the Aged website, which has pages on collecting council tax benefits. The website mentions the alternative maximum council tax benefit, which I had not even heard of. Working examples are given.
There are administration costs and costs in human lives. In fact, 48 per cent of pensioners who are entitled to claim council tax benefit do not claim it. One in four of those on low incomes does not claim it because the system is so nightmarish.
I agree that the council tax benefit system is overbureaucratic and difficult, but will the SNP tell us how it would fill the gap that would be left by the entire removal of that system from the economy with the introduction of a local income tax?
We would simply not need such a system because people would pay for their local services according to their ability to pay. Such a system would be clean and clear. Everybody would understand it. Nobody likes paying tax, but people understand income tax. Twelve of the countries in the European Union have a local income tax system. Such a system is already being used—there are models throughout Europe. I am thankful that the Liberal Democrats support such a reasonable system, which everybody understands. The Deputy Minister for Finance, Public Service Reform and Parliamentary Business would support such a system.
I want to make progress. I will let the minister in later if I have enough time to do so.
Other members have dealt with the figures, but what is happening on the ground? We all know what is happening. There are case studies in members' in-trays. There are cuts in the laudable care in the community programme. There are no social workers or district nurses to go out and there is no support. Aids and adaptations are delayed because there is no local authority funding to provide them. The knock-on effect is that people stay in hospital. They are assessed for discharge but cannot come out of hospital because the support system does not exist because there is no money for it. They are institutionalised, they decline and they are reassessed. There is a mess that need not exist and that would not exist if there was appropriate funding. Members have laudable principles relating to care in the community and to residential homes for people who need to be fully supported, but there is not enough money for such homes and they are therefore closing.
I will take a simple example from the Borders: shopping. People used to have somebody to take them out to do their shopping once a week or to get their shopping for them, but such services have been cut in order to save peanuts. That is what local authorities are doing. They are impinging on people's human dignity and independence at a basic level.
There is not even enough funding to allow schools to meet the presumption that children with special needs will be educated in mainstream schooling. Small rural schools are closing in order to save money and so that the properties can be sold off.
Those are the cases in my in-tray. The elderly, people on low incomes and the disadvantaged, who have to pay council tax although they cannot afford to do so, are the very people whose services are being cut. They are also the very people who cannot afford to pay for their fuel and are sitting in cold homes. Yet the deputy minister stands there and defends the council tax system. He defends cuts at the basic level. He should be ashamed of himself, but I have a feeling that he will not be in the job for much longer.
To a greater or lesser extent, each of the Opposition parties in the debate claims that it wants enough money for local councils, partially or wholly funded by a new and more popular type of local taxation. I have news for them: there is never enough money and people never like paying taxes. Those are just two of the lessons that I have learned during years of trying to make sense of the byzantine complexity of local government finance.
For me, the learning curve has been steep and long. Alas, like some here I could mention, I cannot claim to have run away from the circus as a boy to join a firm of chartered accountants. On being elected to Strathclyde Regional Council in 1987, I found finance dry and boring. I found service issues such as transport and education to be sexier. When I became Strathclyde's transport convener in 1994, it was quite a shock to have to fight to retain my £0.5 billion budget in a tough, competitive, corporate budget round. The first lesson that I learned was that all services, sexy or otherwise, have to be paid for from a balanced budget.
However, I suspect that most politicians do not like to talk about finance. Many do not like to think about it and too many still do not understand it. I know that I did not feel confident in 1997 as deputy leader of Glasgow City Council, when my leader, Frank McAveety, asked me to take control of Glasgow's £2 billion budget. I sent for the director of finance—the legendary Jimmy Andrews, who gave 50 years of service to Glasgow. I pointed at a pile of budget papers on my desk that was too heavy to lift and I asked a technical question: "Jimmy, what's the answer to this dead hard sum?" "What answer would you like, councillor?" he replied. I felt a great weight lift from my shoulders. I was not alone. Budgeting was not a science, but an art. That was another lesson learned.
Years ago in the United States of America, a persistent bank robber was serving his last and longest jail term when he was visited by a young sociologist—I see that Des McNulty has left, which is a pity because he is a sociologist—for a research interview. The first question was, "Why do you rob banks?" The answer came, "Because that is where the money is."
Behind such obscure jargon as aggregate external finance and revenue support grant, it is all about money. That is a fact for me and every other member, for councils, for the Executive and for the Government. If we had more money, we could do more things with it. If the money is under the control of elected councillors, they are directly accountable to their electorate for the services they specify and the taxes that they levy.
John Swinney's motion calls for the national taxpayers of Scotland to give an extra £93.2 million to local councils on the condition that there is a real-terms freeze in council tax. Let us leave to one side the plain fact that to the man on the Sauchiehall Street omnibus, a council tax freeze means a zero increase, which the SNP's obfuscation would not deliver. Let us explore the SNP's condition or, as it is called in the jargon, ring fencing. Imposing that condition is wrong in practice because it removes the choices that having more money could bring to councils. It is also wrong in principle because it usurps the role of elected councillors. Perhaps John Swinney is a centraliser by inclination; it is a species that is represented in every part of the chamber after all. If so, I wonder what he would do if councillors used the cash for other things and ignored his condition. Would he make the cap fit, so to speak?
In 1996, the Tories' botched reorganisation of local government removed £400 million from Scotland and £50 million from Glasgow. In the three years after that, Glasgow's council tax rose by 50.5 per cent but, in the seven subsequent budgets, there were no above-inflation increases. Glasgow's gross tax increase in the past five years has been 10.9 per cent against a Scottish average of 23.5 per cent.
The SNP has a brass neck today because it has resisted every one of Glasgow's attempts to reform the local finance system.
Time is short in the debate, so this speech will have to be foreshortened. Obviously, the Burt committee has its work cut out. We need reform not abolition of the council tax. Also, if we reform the grant system, we had better remember that it is a zero-sum game and there will be winners and losers. Burt and his colleagues have much straining to do; let us hope that their straining produces more than a mouse.
We have certainly heard a lot of talk about efficiency today. The people to whom we should look for lessons on being efficient are local authority workers, who go above and beyond every single day. They certainly work beyond the salaries that they receive. If we need to learn any lessons on efficiency, we should look to them; the Government does not make it easy for them.
George Lyon talks about efficiency but, as Fergus Ewing pointed out, he cannot even produce the figures to tell us where the money has gone that local authorities have saved through those efficiencies. Paul Martin lectures us about efficiency, but he sticks up for the private finance initiative, which is the most inefficient way on the planet of financing anything. It is not PFI or public-private partnership—or whatever euphemism we want to use—that people support. People support schools, but they do not support the long-term consequences for future generations and the cuts in services that PPP and PFI indubitably lead to.
I will concentrate on equal pay. The Deputy Minister for Communities, Johann Lamont, has described the failure of employers to implement equal pay as inefficient. That means that the local government finance settlement is inefficient and the Executive's response to resolving the problem of equal pay is inefficient. This is a moral question not just a financial one. There should be no need for any choices to have to be made about women's right to equal pay, which was long fought for and has been enshrined in legislation for almost 40 years. There should not be a choice between jobs and services and the cutting or freezing of council tax. That is an immoral choice that is being forced on councils by the Executive's failure to put its money where its mouth is. It talks about equal pay, but it does not deliver the money.
That is why we have to consider the whole system of local authority taxation and why we need the Executive to look at the legacy of the failure to implement equal pay. The Executive is quite happy to set aside a slush fund, which is exactly what is sitting there in Westminster. It talks about releasing some of that money in 2007 and 2008. Could that be anything to do with a Scottish Parliament election in 2007? That is a cynical manipulation of money when the consequences of the failure to implement equal pay are hitting our local authorities and communities now. This is not an abstract discussion.
At the moment, Glasgow City Council is consulting on redundancies and cuts in core services that make a difference to people's lives. Falkirk Council is considering charging for special uplift for refuse collection and it is preparing to cut emergency home care. The cuts in Glasgow involve the closure of at least two children's homes and a home for the elderly, cuts to home support services as well as swingeing cuts in the education budget. This is not abstract; it is real and it is happening now. The Executive should hang its head in shame because it is prepared to save up money for an election and put political expediency ahead of saving services and jobs and delivering on equal pay.
We should look at the Executive's commitment to equal pay. I believe that Malcolm Chisholm, the Minister for Communities, is committed to achieving equal pay. However, the £150,000 that has been spent on the close the gap initiative between 2001 and 2005 is absolutely nothing—it is a spit in the puddle in comparison with the money that is needed to deliver equal pay and to compensate women for subsidising public services for years through their low pay. It is estimated that it may cost up to £700 million to plug the gap of the pay that women have not received. That is not silly money and this is not an abstract discussion—it is very real.
Is the Executive prepared to say to local authorities that it will back them up? It says that it is prepared to meet local authorities to discuss the issue. It is ignorant of the Deputy Minister for Finance, Public Service Reform and Parliamentary Business—the Minister for Finance and Public Service Reform is not even here—to carry on a discussion when I am putting direct questions to him, to which I hope he will be able to respond in his speech. The deputy minister says that he will consider approaches from COSLA, but how much money will be made available? Will he force local authorities to choose between the principle of equal pay, jobs and services and the level of council tax? Why does he not act now, before redundancies and cuts in service plans by Glasgow City Council, for example, proceed? It is right that he should do so. Why does he not put what is right ahead of what he considers to be in his political interest? Is it not the case that the deputy minister is happy with the perks of achieving ministerial status but is not prepared to take responsibility or to put his money where his mouth is in order to achieve equal pay?
I want to refer to the SNP motion, because this is a serious discussion. It is estimated that £700 million will be needed to achieve justice for the underpayment of women over many years. If they take equal pay claims to employment tribunals—which they are entitled to do—their cases are almost 100 per cent watertight. Would the SNP fund a settlement? How does the SNP propose that equal pay be paid for and delivered? The motion refers only to the Finance Committee's recommendations for plugging the gap, which do not plug the gap on equal pay. Would the SNP deliver equal pay?
I ask members to support our amendment. Not to support it is to agree with and to perpetuate inequality for women.
We are considerably behind the clock. I ask members to keep within the time limits.
Mark Ballard's opening speech reflected on the dual nature of the debate. There is a debate about the current settlement and the circumstances in which local government finds itself. There is also a debate about the longer-term future of local government finance.
I will try to address my remarks to both crucial issues. I begin by acknowledging the impressive performance of John Swinney in his opening speech, in which he urged the Executive to seize the opportunity to address both issues. Not only did he highlight the current situation and the possibility of substantial council tax increases in the short term, but he argued clearly and strongly for replacement of the council tax. Mr Swinney's exchange with George Lyon was an absolute joy to behold. Some observers may have been taken aback by some of Mr Lyon's attempts at verbal gymnastics, even if he wobbled off the mat once or twice, but Mr Swinney cut through that and exposed clearly the inadequacy of the list of could-haves and might-have-beens that we heard.
As a stranger to finance debates in the chamber, I am happy to admit freely that the blizzard of statistics one way and the other holds little attraction for me. However, there have been moments of clarity between those exchanges. It seems clear that, over recent years, more resources have been made available to local authorities, but that those have not been sufficient to take account of the dramatic rise in the number of duties and the increased workload that we are placing on local authorities. They are also not enough to prevent the dramatic rises in council tax that many members anticipate.
David Davidson's remarks were largely a defence of the council tax system, which he would like to continue, albeit with a few tweaks. However, many members have addressed the substantial injustice that is associated with the existing system. Tommy Sheridan spoke about the constraints on local authorities—not only the new duties that they must carry out but the pressure to make cuts and efficiency savings, to restrain council tax and to use systems such as the dire PPP funding arrangements. I have no doubt that, in the long run, PPP will be judged a wildly expensive folly. It is very sad that the Executive remains wedded to it.
Fergus Ewing's contribution was entertaining. He quoted from a range of sources such as Ira Gershwin, Deep Throat and Anne Robinson. However, he used his quotes from Mr Lyon most effectively. He made it clear, as Mr Swinney did, that a could-have-been—even a should-have-been—is not enough to satisfy us that money saved through efficiency savings has been available to local authority budgets and has been spent on more and better services.
Bristow Muldoon devoted many of his remarks to the virtues of efficiency. On one level, I agree with his repeated assertion that there is no organisation in the world that cannot improve what it does and the way in which it does that by becoming more efficient and saving money. However, he acknowledged implicitly that the reality will involve some cuts in services. When he said that efficiency saving is not all about cuts, he sounded a little defensive.
Will the member get round to commenting on his colleague's amendment and Green party policy? If he does so, will he be able to tell the chamber whether some of the poorest people in my constituency—tenant farmers in the valleys, who would be penalised by a system of land value taxation—would be excluded from that system or whether they would be taxed on both their properties and the land on which they work?
I do not have time to provide a full explanation, but I will come on to Mark Ballard's speech and LVT in a moment.
Andrew Arbuckle suggested that the dialogue between the SNP and the Greens—which at this stage I would call enjoyable flirting rather than a full-blown "love-in"—might have led to our adopting the SNP's policy, but I draw his attention to Alex Neil's very favourable remarks on LVT in the chamber yesterday. I also draw Andrew Arbuckle's attention to his colleague Donald Gorrie's recent pamphlet on planning, which endorsed LVT. I suggest that the marriage bed of Labour and the Liberal Democrats may be experiencing something of a seven-year itch and that Andrew Arbuckle should not throw around terms such as "love-in" at this point.
Finally, I turn to Mark Ballard's speech. There are good reasons for continuing to tax wealth, not just income. Land cannot be taken abroad and land value tax cannot be avoided. However, there are mechanisms that we can introduce to ensure that that happens in a socially just way that does not impose unfair burdens on those who are least able to pay. I encourage Andrew Arbuckle to speak to the many Liberal Democrats who still accept that position.
A few weeks ago, I was discussing the issue of the council tax with a pensioners group in my constituency. As I expected, clear problems with the current system were highlighted. However, what amazed me was one of the answers that I received when I asked what members of the group thought should be done to address those problems and what better system could be introduced to replace the council tax. One pensioner proclaimed loudly that he favoured the poll tax. I was stunned by that and asked him why. He said that he favoured the poll tax because it had been abolished.
We would all like to pay our taxes with a smile but, unfortunately, we have to pay them with cash. No one likes to pay taxes, but everyone knows that they are a necessary evil. For that reason, politicians should never attempt to con the public into believing that they have a simple solution to the problems of taxation. Crude slogans such as "axe the tax" merely hide the reality of what is proposed—that one unpopular system should be replaced with another. It ill behoves the Scottish Socialist Party to lecture anyone on coming up with money for local authorities to fund equal pay legislation. SSP members are the people who said, "Don't pay your taxes. Don't give local authorities the money that they need to meet their expenses." The SSP created a culture of non-payment that has produced a black hole of £1.2 billion, which would easily meet the bills for which those members ask.
From the SSP point of view, the non-payment of poll tax was 100 per cent correct. Does the member agree that overpaid politicians such as he and I should pay more for local services so that low-paid workers and pensioners pay less?
Tommy Sheridan is wrong on the first point and right on the second.
The SNP has said nothing this morning about having a coherent solution for local government taxation, although it evidently admires the problem. SNP members spent little time attempting to outline tax reform and they have not suggested a single coherent proposal for spending reform.
No one in the debate has attempted to hide the fact that there are concerns about local government finance. However, it is not enough for SNP members to say that more money should be found without saying where it would come from; to say that efficiency savings are good things without offering an incentive to produce them; or to say that local income tax should replace the council tax without explaining why they would turn a loophole into a noose.
According to its own figures, the SNP proposals are to increase income tax by 4.3p in the pound. I doubt whether that would be the true level of increase because of the increased bureaucracy involved and I have no doubt that its proposals would hit ordinary working families the hardest. Will SNP members tell ordinary working people what the true cost would be? In the 18-minute speech that Mr Swinney made, he spent less than one minute speaking about that. If his party makes a proposal of such magnitude, that is not good enough.
Why does Mr Swinney not tell double-income families that they would be the biggest losers? Why does he not tell nurses in training and students who supplement their income that they would lose out if they went over the threshold? Why does he not tell single people living alone that they would lose their current discount?
The fact is that the proposed local income tax would be more complex and expensive to collect than the current council tax and it would be less stable than property-based tax because the yield from income tax is less predictable. Income tax is paid by only about 60 per cent of people, so almost one third of adults would make no direct payment towards the cost of local services.
The SNP and others do not want to axe the tax; they want to extend the tax and introduce punitive levels of local income tax. Far from offering tax cuts, the net effect of an income-related change is that those on average incomes would pay more. Two individuals who earn average incomes would be unaffected but, if they lived together, their combined income would be well above the threshold laid down by the SNP, and indeed that proposed by the Liberals. Therefore, it is true to say that hard-working families would pay more under that scheme.
What about the SNP's proposed freeze on council tax? That would result in £89 million of lost income for local authorities this year alone. Continuing that freeze would cost a further £141 million and £196 million respectively in the following two years, totalling £426 million over the three years of the spending review period without any commitment from the SNP that it would deliver on services. Who would cover that shortfall, or does the SNP even realise that it is arguing for cuts in services elsewhere? We are left to assume that a freeze on council tax would shift the burden of funding local services from council tax payers to general taxpayers to cover that shortfall. The Executive would have to cover the shortfall and that would mean cuts to health, education and transport. It does not matter how the SNP dresses it up, the money has to be taken from somewhere to be given to local authorities.
The council tax can be redesigned to be fairer and more representative. We need to and can have a fairer council tax banding system that is more representative of house values in Scotland and we need to extend the range of upper council tax bands in particular.
The SNP's proposals would do nothing for local authorities. They would do nothing to aid the drive for efficiency and they would mislead taxpayers about the way forward. For those reasons, they do not deserve the support of the Parliament today.
We have heard many interesting points today. We should all bear in mind the comments from many Labour members about the unpopularity of any system of local government finance.
As we have heard, the level of council tax in Scotland has increased by 55 per cent since 1997. However, that masks the huge range in increases throughout the country and many areas have suffered much more significant increases than the headline figure would suggest.
The problem is the level of council tax, which is a huge concern to people throughout the country, and there is no sign of improvement. The SNP motion talks about a "real-terms freeze". That would only contain the problem, not solve it, yet that proposal is being portrayed as ambitious. We need to be realistic and to get a grip on the overall level of council tax.
Ministers cannot pretend that the problem has nothing to do with them. As long as the Executive provides more than 80 per cent of councils' finances, it will have a huge impact on the level of council tax that is set.
The Executive amendment talks about
"record levels of finance provided to local government".
That is correct. However, to match the record levels of finance and council tax, we also have record levels of spending. That the Executive has increased its absolute level of funding is almost irrelevant, because of the additional commitments that are being loaded on to councils. Unless the Executive can tell us how much those burdens are for each council we will not have proper accountability. Council tax payers in individual areas do not know whether council tax rises are due to inefficient councils, the Executive squeezing councils or because new services are provided or mandated. Knowing that is crucial.
Will the member clarify whether it is the position of the Conservatives that overall public spending in Scotland should be reduced in total? That is what every Conservative spokesman says when they stand up in this chamber. If that is the case, there would be a reduction in both central and local services.
I notice that the member did not refer to the reduction in Executive support for the supporting people fund, which hits local councils, including that in his constituency. We will address the level of proposed public spending in Scotland during the election, as will all parties, including the member's own.
There is nothing inherently wrong with councils being forced to provide services by the Executive, if they are fully resourced. However, local accountability is an important concern. We have to be clear about the role of local government and whether people expect it to be merely the local agent of the Executive, or to provide a genuinely local service.
John Swinney made the valid point that we should be wary of placing too much weight on either the Executive's or COSLA's figures for local government. Unsurprisingly, he commended the Finance Committee's report. Unsurprisingly, as a fellow member of that committee, I agree with that.
The minister said that he does not necessarily accept the figures in the Finance Committee's report. The £85 million shortfall is based on only four figures in the table in paragraph 85 of the report. Perhaps the minister will tell us which of the figures he does not accept? There are only four of them that he has to get his head round. Does he not accept the Executive's figure of £178 million for new spending? Does he not accept the Executive's figure of £38.7 million for aggregate external finance? Does he not accept the Executive's figure for efficiency savings or its figure for inflation? If he accepts all those, he cannot possibly dispute the Finance Committee's report. Perhaps he will tell us. Or Mr Swinney will tell us.
In the absence of an intervention from the minister to correct Mr Brownlee—I have no wish to correct him—I will answer one of the minister's earlier questions. He could not understand how we calculated that a 6.6 per cent increase in council tax was required. If we add £84.9 million to the £52 million that the Government expects to raise from a 2.5 per cent increase in council tax, Mr Brownlee will not be surprised to realise that that total equates to 6.6 per cent.
And he is not even a deputy minister. I thank Mr Swinney for his explanation.
The minister seemed to suggest that if councils were feeling under pressure they should borrow more money or raid their reserves. Perhaps he will tell us the appropriate share of council spending that that reserve should form for every council. Perhaps he will give us some guidance on what his proposals might be to mandate an adequate level of reserve, because that is another vital part of the financial settlement.
I am sure that everyone here welcomes efficiency in local government. The minister talks about improving collection rates for the council tax, and those rates could indeed be improved, but the pattern is not the same in all council areas. To assume that all councils can make the same improvement would be naive; some councils have a lot more scope for improvement than others—and we are all aware of the councils that are performing poorly.
We have heard about some alternatives to the council tax but we will not be supporting the SNP on local income tax. That will come as no great surprise to anyone. We have real concerns about the burdens that a local income tax could place not only on taxpayers but on employers. We will not support that, although we support much of what Mr Swinney said.
I call George Lyon to close for the Executive. Minister, I can give you only six minutes.
We have had an extensive debate with informed and considered speeches on this important subject. I do not doubt that there are concerns on all sides of the chamber about the level of funding that is available to local government. We want excellence in our public services and, to achieve that, we have invested record amounts in local government to ensure that we can deliver excellent services throughout Scotland. We remain committed to further improvements in public services delivered by local government.
Local government is now spending almost £17 billion each year and, by the end of the current spending review period in 2007-08, core funding from the Executive will have increased by more than £3 billion. That is up by almost 55 per cent on the figure for 1999-2000. There can be no doubt that local government has experienced an unprecedented rise in funding since this devolved Government came to power in 1999. As Mr Swinney pointed out, that is in stark contrast to the year-on-year cuts that local government experienced in the 1990s under the Tory Government. We want to ensure that local government spends its resources to greatest effect. That aim underlies our best-value reforms and our efficient government programme, as well as the further reforms that we are developing to modernise the public sector as a whole.
Some have argued that local government is being asked to make a disproportionate contribution to our efficient government programme. However, although local government accounts for more than a third of the total Scottish Executive spend, it has been asked to make less than a quarter of our efficiency savings. Local government is not only on track to meet our targets for this year but is likely to go substantially beyond them—as is highlighted in the report from the local government improvement service. That report is endorsed by the Institute of Public Finance and it uses statistical methods to provide a robust estimate of total efficiency savings. That is very important.
I notice that the report from the local government improvement service is not endorsed by Audit Scotland, which is the statutory body with responsibility for guaranteeing these points. On further reading of the executive summary this morning, I noticed that the report says that many councils are looking for efficiencies in order to close funding gaps and not in order to reinvest in front-line services. Does that not reinforce the point that we have been making, and does it not contradict the Government's argument that its initiatives invest in front-line services?
I do not think that it does. Our initiatives free up resources. If Mr Swinney reads the report in detail he will see the huge range of achievements of individual councils. As they implement the reform agenda, I believe that they will free up not only the resources that have already been identified but further resources too. We will get full reports from every council.
Let me turn briefly to some of the issues raised this morning. Mr Davidson seemed to believe that the Parliament should be responsible for wheelie bins, and it was a bit rich for the Conservatives to criticise the Executive for underfunding local councils, given the contribution of his party's Government to the underfunding of councils while it was in power.
Paul Martin made a very important point: five new schools have been built under public-private partnerships in his constituency, and no parent, teacher or constituent has come to Paul to complain about the new schools. They certainly do not want to go back to the old school system. PPP is delivering substantial improvements to public services throughout Scotland.
Will the minister take an intervention on that point?
I want to make some progress because we are short of time.
I turn to the SNP motion. After endless years of making spending pledges, the SNP has decided that it did not mean them and would prefer tax cuts. Perhaps that is because Mr Swinney has become the party's finance spokesman. The real gap that we should discuss is the credibility gap in the SNP's promises. Adam Ingram promised £1 billion for child care; Tricia Marwick promised extra police; and Kenny MacAskill promised a special ring-fenced fund for road maintenance. They were the last of the big spenders; all those promises have been forgotten.
The SNP wants a council tax freeze instead. Its motion says that the provision of extra money would be on condition that councils limit council tax rises. That opens up a dramatic new policy for the SNP, does it not? As Charlie Gordon rightly pointed out, the SNP will adopt centralised and nationalised control of council tax. Agreeing to the SNP's motion would disfranchise the 1,200 local councillors who decide the levels of council tax in their areas. By giving money to the councils that are proposing the highest tax increases, the SNP would punish the prudent. The SNP is proposing the sort of authoritarian national control that we last saw under the Conservatives in the 1980s and 1990s. Even the Tories have abandoned that policy.
In conclusion, we are providing record funding to local government—a fact that everyone recognises. However, we recognise the pressures that councils face. We said to COSLA last year that if councils delivered on the targets that we set them, we would consider what more might be provided for the 2007-08 financial year. That is still our position. The Minister for Finance and Public Service Reform is in on-going discussions with COSLA on that very issue, and he intends to meet COSLA again in the near future. The accusation that this devolved Government is failing to support councils does not stand up to scrutiny, given the record sums of money that we have made available to them.
The SNP motion asks us to centralise and nationalise council tax decisions, thereby undermining the role of locally elected councillors and punishing prudent councils. We reject that approach and I call on Parliament to do the same by supporting the amendment in my name.
I agree with Charlie Gordon: people do not like paying taxes. But what they like even less—and with good reason—is paying a tax that increases by 55 per cent over eight years when inflation increased by only 13 per cent.
The Executive would have us believe that the problem is nothing to do with the council tax—or with the Executive, for that matter—but is all down to the local authorities. The Executive says that local authorities have proved that they can save money and are now just scaremongering and that if local authorities do not succeed it is because they are not trying hard enough.
We are asked to suspend our disbelief and to ignore the lessons of the past few years—or the lessons of as many years as we care to go back. This year, apparently, is going to be different. This year the council tax rise will not be much greater than inflation. Services will not be cut, they will just be delivered more efficiently. So, let us just ignore what the all-party Finance Committee of the Parliament says; let us ignore what COSLA says; and let us ignore what every local authority in the country says, whether it is run by Labour, the SNP, the independents, the Liberals or even the Tories. There is a local authority that is being run by the Tories, for a short while. The message from everyone is the same, and it is a lesson that comes from the experience of all council tax payers: the council tax will go up by more than inflation this year and, into the bargain, services will suffer.
As John Swinney said, successive burdens have been placed on councils as a result of primary or secondary legislation from this Parliament and elsewhere. One has only to look at the financial memorandums that come to the Finance Committee to see that the new burdens are not fully funded.
Revaluation and rebanding have been mentioned several times in the debate; they are part of Labour's submission to the current review and David Davidson for the Tories said that they were needed. They are presented as a way of solving the problems with council tax. With the council tax, revaluations are logically necessary. For example, we cannot keep on—as we do just now—valuing new houses at what they would have been worth had they been built in 1991. However, revaluation and rebanding could be of assistance to people who are hard pressed—and we agree that many people are—only if there were a strong link between the value of their property and their ability to pay the tax. The hard fact is that there is not necessarily a sufficient connection between the two.
I am sorry that Michael McMahon did not get a chance to tell us how the revaluation and rebanding that he proposes would exempt the hard-working families that he is so concerned about. In fact, revaluation may exacerbate unfairness if the current value of a house bears no relation to a person's ability to pay. The changes in property values that lead to a revaluation have absolutely nothing to do with a person's income level, particularly if they have been living in a property for some time.
Does Alasdair Morgan agree that revaluation in Wales created more losers than winners? Perhaps that is why Michael McMahon did not spend much time explaining his proposals.
Twenty-five per cent of properties in Wales went up by one band and five per cent went up by two bands. The message of that exercise is that it would be very sensible not to live on a fixed income, not to live on an income that increases only by inflation and not to continue to live in one's family home if it happens to be in an area in which house prices are increasing by more than the average. The message is that it would be a good idea to sell up and move to a smaller house in an area in which house prices are lower. The message to pensioners is, "We are sorry if you have come to like the family home that you have lived in all your life and which you have spent your money furnishing and decorating, but continuing to live there does not fit in with the Government's view of how local government finance should work. You'd better move on."
I turn to the Executive—
I am sorry, Mr Purvis, but I cannot take your intervention.
I turn to the Executive amendment, which has two parts. The first part trots out—as the minister did in his opening speech—the usual figures on how much the Executive is spending and how much it is saving. However, it is not really saving money; it is just spending it somewhere else. The Executive ignores the problem of the levels of council tax, which is a problem that everyone seems to recognise, including the chancellor—when electoral calculations loom before him. It was interesting to hear the minister say that the 2007-08 settlement for local authorities will be revisited. It has not escaped anyone's attention that next year is an election year. Everyone in the chamber knows that, some time in the next year, the Minister for Finance and Public Service Reform will say to the chamber, "The local authorities have done very well on the efficiency front, so I have managed to find some extra money for them to make next year's council tax rise acceptable." That decision will not be driven by the precise measurement, or any measurement, of efficiency—Mr Lyon is the expert on that—it will be driven by political expediency.
Will Alasdair Morgan clarify how much of the figures in the SNP motion he intends to hand out in year 1?
The figures in our motion are the year 1 figures. I wish that George Lyon had read the motion—although perhaps he should read his own documents first, as he clearly does not understand them either.
I will speak briefly about the other amendments. I was very interested in the Conservatives' amendment because, as far as I can see, it failed to address the problem, which is the structure of the council tax. Perhaps they intend to visit on us the solution that their former colleague, Mr Monteith, puts forward in a magazine that arrived on my desk today—a sales tax. Perhaps that was a secret weapon that they were going to release on us later, had Mr Monteith not blown the gaff.
It is now time for action. We cannot continue to postpone decisions on these matters. The Liberal Democrats do not believe in the council tax, so they should stop using the excuse of a review that will report at some time and which might be decided on at some time and which might result in something happening at some time. If they believe that, they might believe that pigs can fly. They should stop using that excuse to paper over the cracks in the coalition. Surely this is one subject on which even the Liberals cannot face in two directions at the same time.
I say to the Labour Party that if Gordon Brown thought that the council tax was a problem in England last year, the same logic means that it is a problem in Scotland this year. People have real problems paying for council services and with the level of service that they receive. Our motion offers a solution to those problems, and I urge the chamber to support it.