Local Government Finance (Scotland) Amendment Order 2010
When people are having to go without, it would be perverse for anyone to consider the assistance that is being provided and say that because it is insufficient to address the problem entirely it should not be provided at all. Let me make it clear from the outset that Labour will support the order in this afternoon’s vote on that basis. Although we consider that what is on offer is insufficient to meet the needs of local government, the moneys that have been made available by the Scottish National Party Government to fund the council tax freeze are all that is available, and it is better to have the money in the coffers of our local councils than not to have it.
Unison’s research makes the plight of our local authorities abundantly clear. The union has uncovered cuts of more than £300 million across local government, with planned job losses of more than 3,000. Audit Scotland has also confirmed that the SNP Government is responsible for a real-terms cut in council budgets, and the recent budget round provides all the evidence that we need that that is the case. That is why, when councils were considering their budgets this year, East Ayrshire Council looked at cutting the number of community wardens and introducing charges for music tuition in schools; the City of Edinburgh Council looked at cutting funding for community groups; Dumfries and Galloway Council looked at charging disabled drivers for blue badges; East Lothian Council looked at increasing burial charges and raising the price of school meals; and Fife Council looked at increasing charges for community alarms. The litany of decimation goes on.
Dundee City Council tells us that, although it will receive £1.76 million as its share of the £70 million grant for the council tax freeze, it has to find additional cuts of £5.8 million if it is to achieve the freeze. That is the reality of the order. The cuts that will result from it will affect every community in Scotland and will often hit the poorest and most vulnerable people the hardest. It is simply unfair and unjust that schoolchildren and the elderly are being asked to pay for the SNP’s underfunded council tax freeze.
It must also be recognised that, whatever difficult budgets must be delivered in future, this assault on local government budgets is happening despite the fact that the Scottish Government has nearly £1 billion more to spend than it had last year. It is regrettable, therefore, that the SNP prefers to ensure that Alex Salmond and his ministers receive hundreds of pounds of savings on their council tax, while forcing our councils to lose jobs and make service reductions.
The Scottish Government is not responding to the recession. To sustain the discredited concordat, it has not made the necessary changes to local government finance that would enable local government to handle the recession. The SNP got its way with the budget, and the die is cast on the issue. The truth is that the SNP intends to continue to help the wealthy, while cutting services that are used by the poor. That is to the SNP’s eternal shame, but it has not gone unnoticed. We will ensure that the responsibility for the consequences of the Local Government Finance (Scotland) Amendment Order 2010 are made clear, so that the price that must be paid is not just for the poor, the disadvantaged and council workforces but for the SNP, politically, for the damage that it has done.
14:44
We are happy to support the council tax freeze this year, as we have done in previous years. It is welcome for council tax payers up and down the country and stands in pleasant contrast to the significant increases that were made under the previous Administration.
From what we have just heard from Michael McMahon, one might think that thousands are marching on the streets to demand council tax increases. It is clear that the council tax freeze has been a success not just in forcing councils to be more prudent in managing their own resources but—I congratulate the SNP on this—in taking the heat out of the issue of local government finance. The council tax freeze, taken together with the abandonment of the proposals for the discredited local income tax, has brought us to a much more satisfactory position for the funding of local government than we were likely to be in without it.
We know that councils are planning on the basis of a 12 per cent reduction in their expenditure over the next three years, based on what every independent forecaster expects to be the position in Scottish spending regardless of who wins the general election. The pressures that were identified in Michael McMahon’s speech will only get worse. I was interested to see that Unison, which he prayed in aid, has already started spending a lot of its members’ money to campaign against a Conservative Government that has not yet been elected. He might just want to consider the impact of the spending reductions that have happened as a result of the Labour Government in Westminster and how long they will apply, not just to the Scottish Government but to every local authority in Scotland.
As I have said in the chamber previously, the reductions also have an impact on the voluntary sector. In too many local authorities, the voluntary sector seems to be the soft touch: the groups that lose out are not council groups but groups in the voluntary sector. Councils should look long and hard before they put the voluntary sector on the receiving end of the reductions in spending. Some local authorities—Glasgow City Council is a good case in point—have behaved as if voluntary groups are simply dispensable and as if local authorities cannot bear any spending reductions. That cannot be right.
Michael McMahon also said that the council tax freeze has been underfunded. I do not agree: the council tax freeze has been fully funded in every year of its implementation. However—this may be where the issue arises—this Government, like previous Governments, has passed additional responsibilities to local authorities without fully funding them. That has given local authorities the impression that the council tax freeze is underfunded. From memory, I think that the council tax freeze has actually been overfunded—I think that the figure in year one was £56 million rather than £70 million, but the problem is that the Government has loaded local authorities with other responsibilities and failed to fund them.
Usually in these debates, we discuss the allocation methodology by which the Government grant is distributed. There is a serious issue here. With COSLA part of the review process, it is difficult to see how there will ever be a change of any substance in the distribution formula for Government grant, which will lead to many parts of the country wondering when they will ever get any positive change. COSLA must simply be taken out of the process for underwriting the allocation formula if we are to get any change on that issue.
People will not be unhappy that the council tax has been frozen, and nor will they believe that every problem that local authorities face is a result of the freeze. Every part of government is facing difficult times, not just this year but in the years ahead, and it is far better that all of us, including local authorities, face up to that and start planning for it, rather than simply try to blame everyone else.
14:48
The next item of business is a debate on motion S3M-6127, in the name of John Swinney, on the Local Government Finance (Scotland) Amendment Order 2010.
14:34
On 10 February Parliament approved the Local Government Finance (Scotland) Order 2010, which enabled Scotland’s local authorities to set their revenue budgets for the current financial year, including the amount that they needed to raise locally from the council tax.
On 18 February I was delighted to welcome the news that all 32 local authorities had, for the third year in succession, agreed to freeze their council tax levels. Councils were able to take the view that, if they froze council tax for a third year, the Scottish Government would provide them with a share of an extra £70 million of revenue funding to compensate them for the income forgone from not increasing the council tax. All 32 councils set their budgets for 2010-11 on the assumption that the extra funding would be forthcoming, as it has been in each of the past two financial years. The sum of £70 million is the equivalent of an annual increase of just over 3 per cent in council tax rates in all local authorities. If the order is approved by Parliament, the funding will be allocated to all 32 local authorities on a fair and equitable basis, as agreed with the Convention of Scottish Local Authorities. That outcome is another tangible example of the partnership that the Scottish Government has established with local government, which is delivering benefits for people throughout Scotland.
If the motion to approve the order is not successful today, that will have a direct impact on local authorities and the communities that they serve, resulting in a further significant reduction in funding, over and above the £174 million that has already been taken out of local authority plans for 2010-11 as a result of the United Kingdom Government’s £500 million cut in the Scottish Government’s budget.
The council tax freeze has been welcomed by households the length and breadth of Scotland. It shows that the Scottish Government is continuing to do all that it can to support families in these difficult financial times, and it will ease the financial pressures that households face as we move towards economic recovery.
In the cabinet secretary’s press release yesterday, he highlighted the measure as a £420 million tax cut. Any Government initiative of that scale should come with an equality impact assessment. Has one been carried out with regard to how many of the lowest-income families have gained from the council tax freeze over the past three years?
As Mr Purvis will be aware, the Government undertakes equality impact assessments across its budget proposals. Such assessments come under the statement that I have given and form part of the budget process. On the cumulative number in the press statement highlighted by Mr Purvis, each decision that was taken was assessed as part of the annual budget process that the Scottish Government undertakes.
Members of the public will recall the significant burden that the council tax represents for them—we all hear about that from constituents. We recall the great difference in the perspectives of members of the public today: the council tax has remained at absolutely the same level since this Government came to power, in comparison with the significant increases in council tax that members of the public experienced before this Government was elected.
A consequence of these challenging economic times is that councils, like the Government, must live within their means. Councils are already balancing the need to deliver significant efficiencies with the provision of better value for money and improved service quality. They have done so in the expectation that the costs of freezing the council tax will be reimbursed by the Government, following approval of the order by Parliament—and I invite Parliament to approve the measure today.
As Mr Purvis has highlighted, the extension of the council tax freeze means that households in Scotland will have saved a total of £420 million in council tax payments. Putting such a substantial sum back into people’s pockets will have boosted spending in local economies and will have helped to support local businesses.
Let us draw a direct comparison with what has happened in England. The United Kingdom Government has made great play of the fact that the 1.8 per cent increase in council tax levels in England this year was the lowest since the introduction of the council tax in 1993-94. Since 2007-08, the tax for an average band D property in England has increased by 8.9 per cent, whereas in Scotland it has remained the same. As a result, an average council tax bill for a band D property in England is now more than 25 per cent higher than an average bill in Scotland—£1,439 in England, compared with £1,149 here.
The additional £70 million included in the order that we are considering today takes the Scottish Government’s overall funding to local authorities for 2010-11 to £12 billion. That represents an increase of £279 million, or 2.4 per cent, on a like-with-like comparison with the previous financial year, despite the enormous pressures that are placed on the Scottish Government by the decisions of the UK chancellor. It delivers on our commitment to increase year on year local government’s share of the Scottish budget, which had been in steady decline under the previous Administration. Within the £12 billion total, £11.1 billion is allocated to local authorities as revenue funding that supports vital public services. The revenue package represents an increase of £325 million, or 3 per cent, on a like-for-like comparison with last year.
In summary, approval of the amendment order will authorise the distribution of a further £70 million to local government, to fund the on-going council tax freeze.
I move,
That the Parliament agrees that the Local Government Finance (Scotland) Amendment Order 2010 be approved.
14:40
The Parliament will not block the order today. It is no surprise that there is no flexibility for local authorities—the order is an amendment to the local government funding process, and the money is held back in reserve to make sure that the councils do what the Government wants them to do. It is also no surprise that the Conservatives support the measure—they support the council tax. The surprise is that the SNP is following the freeze without continuing the focus on reforming the system. The system is unfair.
Eighteen months ago, SNP member after SNP member, including Mr FitzPatrick and backed by the cabinet secretary, said that it was impossible to cut tax in a fixed budget in the Scottish Parliament. They said that it could not be done without borrowing because there would be cuts. Yesterday, however, the cabinet secretary issued a press release, which he read out again today, in which he announced £420 million of a tax cut without an indication of where the money has come from. Next year, that will be £700 million of a tax cut. There has been no indication of the cost in a fixed budget. What services have been reduced to pay for the cut? If the SNP is to be consistent with its position of 18 months ago, it should be straightforward and tell us today.
The critical aspect or difficulty is that, because the council tax is a regressive system that is not based on the ability to pay, any freeze disproportionately helps those who are better off. Low-income families in Scotland, especially those on the lowest incomes, currently receive a 100 per cent council tax rebate, so they have gained not one penny from the council tax freeze. Of the £420 million reduction, not one penny has gone to the lowest-income families in Scotland. However, those families who live in a band G property will save £138 over the four years. The better-off—those who live in properties at band G and above are the best off—will receive £138, whereas there is not one penny for those who currently receive council tax rebate because they are on low incomes. The number of such people across Scotland is not small. Of the 130,000 lowest-income households who live in band A properties, the vast share will have received no support from this so-called tax cut, which will amount to £700 million next year. That highlights starkly why the council tax system is unfair.
It is deeply regrettable, therefore, that on 11 February last year the SNP dumped any proposal to reform the council tax system. The system is unfair and regressive. It needs to be scrapped and replaced with a system that is based on ability to pay. When the SNP dumped its local income tax proposals last year, the First Minister’s special adviser described the process as a deck-clearing exercise. Today, we are left with only a regressive tax cut. The Government has shown none of the honesty that it has demanded from other parties by showing what services are being put at risk by the policy, nor has it helped the lowest-income families in Scotland. If we are to have tax cuts, why should they not be fair cuts that help those who are struggling the most during the recession, rather than putting most of the money back into the pockets of those who can most afford to pay?
14:51
In examining the Local Government Finance (Scotland) Amendment Order 2010, it is important to recognise the contribution of the cabinet secretary, who has accelerated the Scottish people’s key priorities in terms of financial outcomes. It is also worth reinforcing the point that the Scottish Government deserves credit for creating a degree of sustainability for local government budgets. The relationship between COSLA and the present Administration has been enhanced by the concordat and remains strong.
Council tax rates have been frozen by all councils since 2008-09, and additional funding of £70 million has been included in the budget settlement for each year, including 2010-11. Over four years, the council tax freeze will have saved the average council tax payer £240. Each local authority will receive money in addition to its 2010-11 revenue allocations. Most noteworthy is the fact that councils are entitled to a share of the £70 million for maintaining the council tax freeze. The fact that moneys are being made available for the council tax to be maintained at current levels should be welcomed by all members, especially in the current financial downturn.
It must be recognised that local authorities have had on-going problems in levering in capital receipts. The shortfall in capital receipts is a problem for local government, but it is clearly not unusual given the recessionary pressures in the current marketplace. Arguably, a council tax freeze ensures that councils throughout Scotland are required to maintain prudent financial management so that they better manage the additional resources that are being made available by the Government. For example, the total revenue support of £667 million for North Lanarkshire Council is not a sum to be dismissed lightly.
The base budget for my local authority—North Lanarkshire Council—shows that, in the period up to 2010, efficiency savings of £15 million were achieved. Thanks to the present Scottish Government, such efficiency savings are retained by the local authority, unlike previously, when budget settlements clawed back any efficiency savings. The retention of those savings enables further investment in strategic priorities and increased service provision, as deemed necessary by each local authority.
In local government in Scotland, there is an on-going debate, especially when we approach a new financial year or an election, about whether enough money is being made available. There has been much discussion of resource allocation, but it is worth stating that local government expenditure will rise in cash terms by 2.93 per cent in 2010-11, despite a real-terms 1.3 per cent cut to the Scottish budget.
I assert that local authorities need to provide much more clarification on the extent to which risk management procedures are in place. Indeed, I would argue that existing budgets that are already in place should be prioritised, with recourse to take account of best practice.
The argument of many local authorities on the settlement is, to my mind, more about garnering more monetary resources than it is about utilising existing resources better. A number of issues are worth further examination. Performance-related pay in local government is an issue of real concern to me. Scrutiny of the parameters that have been set on PRP suggests an increasingly self-serving approach. In 2008-09, PRP payments in North Lanarkshire totalled £192,000. That issue needs to be addressed, especially if the right tone is to be set against the current financial backdrop. Given that people quite rightly criticised the level of executive pay in the banking sector, as was witnessed in various Treasury Select Committee hearings at Westminster, local government performance management and executive pay merits future analysis and detailed scrutiny. Unfortunately, sometimes perception is reality.
I support the amendment order and look forward to its being approved this evening.
14:56
In the course of the debate, Mr Brownlee raised the issue of the effect on the voluntary sector of local authority funding decisions. For the record, I state once again that the Government has encouraged and facilitated a process of dialogue with COSLA, the Scottish Council for Voluntary Organisations and the Society of Local Authority Chief Executives and Senior Managers to provide a framework for reassurance to voluntary sector organisations, because I recognise some of the sentiments that Mr Brownlee mentioned. I remain fully committed to addressing any concerns of the voluntary sector about that approach, and I encourage members who have concerns about the issue to draw them to the attention of ministers. We will do all that we can to address them.
Mr Brownlee said that the local government finance settlement involved additional burdens, the meeting of which was not funded, but in each of the past three years we have agreed with local authorities a funding settlement that has included funding for the additional duties that this Administration has placed on them.
Mr McMahon made great play of the fact that Audit Scotland had made comments about a real-terms reduction in funding, so I am sure that he will be interested to learn that Audit Scotland stated that it had used out-of-date figures and that it had not performed a like-with-like comparison. In other words, there is no substance to his point.
The final point that I want to cover is about who is benefiting from the council tax freeze. Mr McMahon said that ministers had benefited from it, but I gently point out to him that all ministers have accepted a freeze in their pay for a couple of years. I am not complaining about that—it is entirely appropriate and the right thing to do to set such an example. We should look at matters in the round when we comment.
It is not just ministers who have benefited from the council tax freeze. The other day, I spoke to a retired couple who have a modest occupational pension. They are not entitled to any support with their council tax, which is the largest single item that they have to pay. Like many other people, they appreciate the fact that the council tax has been frozen. Mr Brownlee chided the Labour Party for the increases in the council tax that took place while it was in office, but his party was responsible—if my memory serves me right—for a 40 per cent increase in the council tax. The increase under the Labour Party was 60 per cent. This Government has taken the decision to freeze the council tax and to provide benefits to members of the public. I hope that Parliament will support that process in the vote later this afternoon.