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::The next item of business is a debate on motion S6M-20733, in the name of Ivan McKee, on the Local Government Finance (Scotland) Order 2026. I would be grateful if members who wish to speak in the debate could press their request-to-speak button now.
16:57
::The motion for today’s debate on the Local Government Finance (Scotland) Order 2026 seeks the Parliament’s approval of the guaranteed allocations of revenue funding to individual local authorities for 2026-27. It also seeks agreement to the allocation of additional funding for 2025-26, which has been identified since the equivalent order in 2025 was approved on 27 February 2025.
For context, the average real-terms increase in the resource block grant is only 0.5 per cent per annum across the spending review period, which falls far short of what is required in the current fiscal landscape. The capital block grant reduces in real terms by 0.3 per cent by 2029-30. That is simply not enough to change the difficult fiscal position that we face, which means that tough choices on transformation and efficiencies are required to balance demands for public spending within our funding constraints.
The 2026-27 Scottish budget that the Parliament passed yesterday is a budget that delivers opportunity for Scotland by investing in families, public services and the economy while continuing to build a fairer, greener and more prosperous future.
The Scottish budget delivers record funding of £15.7 billion to councils in 2026-27, by providing revenue funding of more than £15 billion and almost £0.7 billion of support for capital expenditure. The 2026-27 local government finance settlement provides a real-terms increase compared with the position in 2025-26, as the Accounts Commission and the Scottish Parliament information centre have confirmed.
Over the longer term, the total local government finance settlement has increased by £5.4 billion, or 52 per cent, between 2016-17 and 2026-27. That is a real-terms increase of almost 10 per cent, despite UK Government austerity measures.
The outcome of the Scottish budget provides clear evidence of our commitment to the fiscal framework between the Scottish Government and local government. More frequent and meaningful budget engagement has been fundamental in making the decisions that underpin the budget, including providing full flexibility for council tax. The budget also baselined a further £773 million of funding, which takes the total funding that has been consolidated into the core general revenue grant since the Verity house agreement was signed in 2023 to almost £2.3 billion.
::What does the cabinet secretary say to the Convention of Scottish Local Authorities, which argues that many of the baselined funds still come with clear requirements to deliver on specific national priorities of the Scottish Government?
::Many of those specific national priorities are exactly the things that we, as ministers, are asked about in the chamber by Craig Hoy, his colleagues and others. That conundrum has members coming here to demand local government flexibility but then asking us about, and holding us to account on, delivery in areas that are the responsibility of local government. However, the direction of travel is towards further baselining of funding, so we jointly published the fiscal framework in October 2025. We continue to work with COSLA to develop the assurance and accountability framework—that goes some way to answering Craig Hoy’s point; it is about assurance but also accountability for delivery, which is critical for further substantive baselining of funding.
It is important to note that the total funding package for local government is already finalised, since the Budget (Scotland) (No 5) Bill was passed yesterday. Today’s debate simply seeks the Parliament’s approval for the distribution of that agreed total funding to individual local authorities.
The Local Government Finance (Scotland) Order 2026 will ensure that funding for local government will increase by 3.4 per cent compared with the equivalent order last year. Those figures are, of course, different from the ones that were outlined in the budget statement, not only as a consequence of the additional £20 million that I confirmed at stage 1 of this year’s budget bill process but due to the additional funding for employer national insurance contributions that was added during the equivalent process last year.
It is important that comparisons of budgets are made on a like-for-like basis. The order for 2026-27 will provide a real-terms increase in the local government finance settlement of 1.1 per cent compared with the position on the order for 2025-26—I am comparing order with order, and not budget with budget, just in case Craig Hoy is not following the detail.
The order that is before the Parliament seeks approval for the distribution and payment of £14.7 billion of the revenue total of £15 billion, with the balance made up mainly of specific grant funding, which is administered separately. That £14.7 billion is the combination of the general revenue grant, which amounts to more than £11.2 billion, and the distributable amount of non-domestic rates income, which has been set at almost £3.5 billion.
A further £104 million of revenue funding remains, which local authorities will be notified about once the distribution has been discussed and agreed with COSLA and included for approval in the local government finance order in 2027. That figure includes the £20 million of additional funding that was announced at stage 1 of this year’s budget bill process. Specific revenue funding of almost £222 million is also paid directly by the relevant policy areas, under separate legislation.
The Local Government Finance (Scotland) Order 2026 also seeks approval for more than £365 million of changes to funding allocations for 2025-26, and the full list of changes can be found in the report on the 2026 order.
I turn to council tax, which is set and administered by individual local authorities. We have provided full flexibility in setting rates for 2026-27, as all political leaders in COSLA had asked us to do. We have also provided an additional £253 million of general revenue grant to ensure that restraint on rates setting is affordable, and our means-tested council tax reduction scheme continues to protect household budgets from the impact of the council tax rises.
::[Made a request to intervene.]
::I would be delighted to take an intervention if I could get the time back.
::You can.
::I am sorry—I did not mean to press the button.
::Oh, that is such a shame. I was hoping that there would be an intervention.
I should also stress that council tax is lower in Scotland than everywhere else. Although there are differences between Scotland and England in how council tax works, I note that the average council tax bill in Scotland in 2025-26 was £344 less than the average bill in England.
::If, as the cabinet secretary says, this is a reasonable settlement, why did Scottish National Party-run North Ayrshire Council yesterday propose a 12 per cent increase in council tax?
::To be accurate, the council tax that the council then set was 8.5 per cent.
I am really glad that Craig Hoy intervened, because it gives me the opportunity to draw attention to something. It is of course up to individual local authorities to set council tax, but I note that the only councils so far to set a council tax rate in double figures are—guess what?—Tory-led Aberdeenshire Council and Tory-led Moray Council. Those are the only councils that are in double figures. The Tories come here demanding tax cuts, but some of the highest tax rises happen where they are in power and have responsibility.
::They are rural areas.
::There are other rural authorities that do not have double-figure increases.
I must move on. The Government recognises the financial challenges that local authorities in Scotland—indeed, the whole public sector—are facing. We accept those. The fiscal constraints that we share emphasise the urgent need to focus on improving the delivery of public services that are designed around the needs and interests of the people and communities of Scotland. The budget bill that the Parliament passed yesterday ensures that the total funding from the Scottish Government to local government next year will be increased both in cash terms and in real terms. The order confirms the distribution to individual councils, and the proposals reflect the crucial role that local authorities and their employees continue to play in our communities.
I move,
That the Parliament agrees that the Local Government Finance (Scotland) Order 2026 [draft] be approved.
17:07
::As I rise to speak to this year’s local government finance order, I cannot but reflect on the parlous position that this SNP Government has put councils of all political persuasions in by the decisions that it has taken. Right across Scotland, the financial position that councils face is dire and set to worsen. Red lights are flashing on risk registers right across the country.
The order allocates funding to Scotland’s 32 councils and sets the financial limits within which council services must operate. Unfortunately, given the severity of the financial position that local government faces, we cannot support the order this evening.
::I want to ensure that Craig Hoy understands that, if the order were not to go through—as per the Tories voting against it and, presumably, wanting everyone else to vote against it, too—councils would, as a consequence, be deprived of additional funding in this financial year and the next. Does Craig Hoy really support that position?
::I suspect that Shona Robison’s new-found friends in the Liberal Democrats and Labour will agree to the order, which is why we will abstain on a point of principle.
In the budget that was agreed to yesterday, the Government is yet again putting money in the wrong place. Councils are operating under sustained pressure following a decade of SNP underfunding, ring fencing and a centralised direction from the Scottish Government. Right across Scotland, demand continues to rise across core services while costs remain elevated, particularly in relation to social care, where even the late adjustments to the budget will not go anywhere near meeting the requirements as set out by COSLA.
The gap between what councils are expected to deliver and the resources that are available to them is becoming increasingly difficult to manage, and that will continue in the future. Let us make sure that it is on the record that it is the SNP Government’s political choice to spend more on benefits and to starve local authorities of the resources that they require. Even if, in certain years, there are real-terms increases, the scale of the challenges and the costs that councils face exceed any above-inflation increases, which only rarely occur.
That is why, across Scotland, councils are grappling with the challenge of balancing their books. Take Dumfries and Galloway Council, for example, which has already been forced to make £130 million in savings in the past 15 years and now faces a further £35 million gap over the next three years. That is why, today, that SNP council made a proposal for an 8.5 per cent council tax increase, which was only voted down a matter of a few minutes ago. It is why, in Dumfries and Galloway, an SNP council proposed to remove the entire funding from its citizens advice bureau and remove Alzheimer Scotland’s care services for those with dementia. It is why, in that SNP council’s final draft proposal, there were cuts that would remove funding for campus cops, close small rural nurseries, reduce the number of deputy headteachers and scrap the pool of permanent supply teachers. That is the reality of the effects of SNP Government decisions on an SNP-run council.
The picture is no better elsewhere. For years, councils have been asked by the Government to do more with less. As I said earlier, yesterday, the SNP-run North Ayrshire Council would have passed a budget forcing a 12 per cent increase in council tax, had numerous councillors not intervened. To go back to the cabinet secretary’s earlier point about why certain rural councils—Conservative and otherwise—are having to look at double-digit increases, it is because the funding formula works against rural local authorities, particularly in relation to social care, and particularly those rural authorities in areas that do not vote for the SNP. In future years, future finance secretaries need to look seriously at not only the funding formula for rural local authorities but the national resource allocation committee—NRAC—formula for funding rural healthcare.
It is not only me who is critical of the Government’s decisions. Professor David Bell has warned that the position of local government in Scotland is severe and will become critical. The Accounts Commission has reached similar conclusions: its recent report projects a combined funding gap of around £1 billion across Scotland’s councils by 2027. That means significantly higher council tax increases in future years or more severe cuts in areas where core services and statutory functions have already been cut to the bone.
Let us not forget that local government’s share of the Scottish Government budget is projected to reduce from 26.4 per cent to 24.8 per cent. That is a continuation of a decades-long trend in which council funding has been sacrificed for SNP Government priorities elsewhere. That is why we will not support this local government finance order.
Ultimately, the budget is about choices. We have said all the way through that we believe that the SNP Government has made the wrong choices. Now, and in the past, it is not living up to the obligations that it put into the Verity house agreement. I recognise that there will be more funds for certain councils in this package, but the package singularly fails to meet the challenges and the costs that councils will face. The Cabinet Secretary for Finance and Local Government delivers services that people across Scotland rely on every day. However, none of this funding will go near touching the sides once all those costs—particularly the labour costs—are met. That is why the Scottish Conservatives will not back this deeply deficient local government settlement. We encourage the Government to finally focus on rewarding local authorities and giving them the fair funding that they deserve and the Scottish Government’s guarantee—which we will put in our manifesto—to deliver in future years.
17:13
::The Local Government Finance (Scotland) Order 2026 may be presented by the Scottish Government as a success, but the reality for local authorities is far more troubling. Yes, the 2026-27 budget offers a modest real-terms uplift, but, in the context of the pressures that councils face after more than a decade of cuts, and financial trouble in the year ahead, the settlement does not meet the challenge that local government faces.
We will support the order tonight in order to make sure that funds reach councils, but COSLA leaders
“agreed that this year’s settlement is a very poor settlement for local government”.
Those are not my words but the words of SNP councillor Ricky Bell. If the SNP Government cannot persuade SNP councillors that this is a good deal for local government, I am not sure why we should believe it either.
COSLA projects a £392 million gap in 2025-26, rising cumulatively to £780 million by 2026-27. The Accounts Commission forecasts a further £528 million budget pressure in 2026-27. Those are structural gaps that threaten the sustainability of essential services. Health and social care partnerships are under severe strain, with funding gaps up 187 per cent since 2022-23. Despite repeated commitments, the Government has not fully funded its own real living wage policy in social care and in early years education. Workforce pressures are compounding the problem. A 1 per cent pay increase for local government costs £132 million, which means that a 3.5 per cent uplift exceeds the entire uncommitted funding in the budget. Councils cannot resolve recruitment challenges, invest in prevention or provide stability for staff under those conditions.
When those pressures are not met, councils are left with no choice but to raise council tax and charges simply to stand still. This is not reform—it is passing risk downwards to local taxpayers, while expecting services to deliver more with less.
The longer-term outlook is equally concerning. As Craig Hoy pointed out, local government’s share of the Scottish budget will fall, from 26.4 per cent to 24.8 per cent, continuing an over-a-decade-long trend of squeezing local council budgets in real terms and deprioritising the services that they provide. The Institute for Fiscal Studies reports an average real-terms reduction of 2.1 per cent per year, which will amount to £472 million in total over the term of the spending review. Flat-cash projections place core services at risk and do not offer the credible assurances for the future that are needed for local government.
The consequences are already visible. If the SNP Government thinks that it is having trouble persuading SNP councillors, it should hear what people are saying on the doorstep right now about the cuts to councils. Continued cuts to non-statutory services, particularly culture and leisure, undermine high-impact investment in health and wellbeing. The housing emergency and rising costs of temporary accommodation add further pressure. That impact is being felt by the most vulnerable—the people who rely on those local services every day—and by communities that see facilities being closed, ignored and abandoned, their roads deteriorate, their parks fall away and their libraries closed. They are talking about that on the doorstep just now when they are considering their vote.
This settlement does not empower local government—it leaves it exposed. Councils need proper investment in social care, workforce funding that matches pay commitments, sustainable capital support and a spending review that recognises local government as an equal partner in delivering national priorities and not as an area to squeeze every year. Until that happens, local government will continue to be asked to do the impossible—to protect front-line services while absorbing cuts. Scotland’s communities deserve much better than managed decline.
17:18
::The order may look technical, but it goes to the heart of whether councils can keep schools open, social care running, bins collected and community facilities functioning. Independent scrutiny has been clear that, even with the £15 billion of support and higher income from council tax and charges, councils face substantial and widening budget gaps. They are increasingly relying on reserves and one-off savings that cannot be repeated. Senior local government figures question whether the current model is sustainable.
The order provides the legal authority to distribute the general revenue grant and non-domestic rates, and it reflects some welcome progress, a modest real-terms uplift, more baseline funding and slightly less rigid ring fencing. However, it does not resolve the long-term pressures or the structural weaknesses of the system.
Two principles are central for the Scottish Greens—a genuine real-terms increase in flexible core funding, not managed decline, and far greater fiscal autonomy with a wider range of locally controlled taxes and charges to empower communities and sustain climate and nature spending. We recognise positive steps such as the visitor levy and higher council tax on second and holiday homes, which raise revenue and ease housing pressures from tourism and in rural areas but, taken together, they remain a patchwork of add-ons and not the coherent and modern local tax system that Scotland requires.
The deeper problem is the heavy dependence on the central block grant. We describe councils as local government but, fiscally, they operate as delivery arms for decisions that are taken elsewhere. Our vision is for councils that raise more of their own income, shape the local economy and environmental outcomes and are clearly accountable to voters for their tax and spending choices.
That requires confronting the outdated council tax. Based on early 1990s valuations, the tax is widely recognised as being unfair. We need revaluation and a transition to a replacement that better reflects property values and, over time, land values, so that unearned gains feed back into the public services that make communities liveable.
We also need to have an honest debate about non-domestic rates. Although they are branded as a local tax, they are largely controlled nationally. If councils are to lead on a greener and more resilient economy, they must have the fiscal levers to reward low-carbon investment, deter pollution and support community enterprise.
These issues are not abstract. Decisions that are made in council chambers mean shorter library hours, reduced leisure and cultural provision, fewer youth workers and more stretched social care, yet all those services tackle inequality and underpin climate and nature action. Councils are told to transform simply to remain viable, but they cannot plan and invest properly on insecure year-to-year settlements.
The budget offers a small real-terms increase and some extra flexibility, but the warning is clear that, without structural reform, councils will remain under strain and struggle to invest in decarbonising buildings, modernising transport and reorganising and restoring our local environments. Approving the order will keep the system running for another year but will not fix it.
We will support the measures that protect the core grant, reduce unnecessary ring fencing and expand local revenue powers, but we will continue to press for deeper change, a fairer and greener replacement for council tax, genuine local control over business rates and a fiscal framework that moves Scotland closer to the European norm of empowered, largely self-financing local government.
Our constituents deserve councils that can plan beyond the next budget cycle, invest in prevention and lead on climate and nature, not institutions that are forced to manage decline. What must change is not the fabric of local services but the outdated way in which we fund them.
17:23
::I am going to stick to facts and figures today rather than some of the politics of local government funding, and I say that as a member of the Public Audit Committee. Last month, the Accounts Commission produced a report on wider local government financing that identified a £500 million budget gap in 2024. Essentially, that is the gap between what councils are spending and the funding settlement—[Interruption.] I am sorry—there is quite a lot of noise in the chamber; I wonder whether members would mind.
By 2025, that gap had risen to £640 million, and by 2027, it is expected to reach more than £1 billion. I suspect that the prospect looks even worse further down the road. The reduction in capital funding has led to many councils filling the gap through borrowing. It costs money to keep things running and to repair roads and buildings, and if the cash is not there, things will fall apart. Councils have therefore been using the powers that are available to them, which has led to an increase in debt of more than £2.5 billion in a single year alone. The current debt is more than £25 billion.
The problem is that councils are spending more than £1 billion a year simply to service the debt, when we would surely all agree that that money could be better spent on delivering front-line services. I mention that because Audit Scotland is clear in warning that councils risk becoming financially unsustainable, and we, in Parliament, should take that warning seriously, because that problem cannot be fixed in a single-year budget cycle.
Four things are true: councils’ debts are increasing, their reserves are dwindling, costs are spiralling and demand is also rising. There are only three logical ways out of that mess. One is for central Government to rise to the challenge. We heard from the front bench that the Government is adamant that it is doing that, to the tune of more than £15 billion in the new financial year. That is claimed to be a 2 per cent real-terms increase, but COSLA has argued otherwise. I would like to see more information, but I am not in charge of the country’s finances.
The second way to deal with the situation is that demand might fall, but that seems impossible. Some councils that are seeing depopulation have reasonably healthy working families and have businesses that pay business rates, but many councils are seeing soaring rises in complex care needs and growing demand from elderly populations, and that is particularly true of rural and island communities, where the cost of maintaining services is far higher
The third way to solve the problem is the unholy of holies, which is to increase council tax. I will mention something that is an important part of the wider context: the £144 million that was given to councils in the 2024 budget to meet the council tax freeze was a one-off, but that followed 10 years of council tax freezes. That was a central Government policy. There was, in effect, a political decision to have a giveaway—members can call it whatever they like. The Government sold it as a huge tax break and something that many families would benefit from, as I am sure many did, but COSLA and others sold it as a massive funding cut. Councils are still paying the price for that lengthy freeze, which is why huge council tax hikes that none of us wanted have occurred in recent years.
In the short time that I have, I will address the bigger problem that we must grapple with. We must be honest in saying that the council tax system is broken. Everybody knows it, but no one has had the guts to fix it, because there will be winners and losers if we move on from the 1991 valuations. Reform was promised two decades ago, not two years ago, but which Government in its right mind would tax people out of voting for it? Margaret Thatcher learned that the hard way in Scotland.
Funding for local government is not nice to have—it is a must have. When councils cut things, people feel that in their communities. Such cuts lead to a feeling of decline and to failure, because cuts equal anger and anger leads to apathy. Most folk that we meet on the doorstep do not really care about the budget macroeconomics that we debate, and they do not care who funds which service. They just want things to work, and, when things do not work, they turn towards angry politics.
The antidote to that is the proper funding of local services. If we do not support the motion, councils will be forced to manage their budgets based on last year’s settlement, which I think would be irresponsible of us, but there is a long-term problem that needs to be fixed and that will need a grown-up conversation in the next session of Parliament. The question is whether the next Parliament will be up to that challenge. Only time will tell.
::I call the minister to wind up the debate.
17:28
::The Local Government Finance (Scotland) Order 2026, which is before us for parliamentary approval today, means that, next year, the Scottish Government will provide local authorities with a total funding package that is worth more than £15.7 billion, delivering a real-terms increase despite the challenging circumstances that were outlined in the cabinet secretary’s opening statement.
There is also further Scottish Government support of more than £795 million outwith the local government finance settlement. That figure includes the attainment Scotland fund, the schools for the future programme, area-based schemes, regeneration programmes and city deal funds that are paid to local authorities, which bring the Scottish Government’s total investment to almost £16.5 billion.
SPICe articulated that very clearly. It said that the 2026-27 local government revenue settlement
“sees a real terms increase of … 2.9%”.
Likewise, the Accounts Commission said that the revenue funding of around £15 billion represents a real-terms increase of 3 per cent.
The Scottish Government has listened to the requests made by COSLA and others and has acknowledged that a council’s decision on tax provides important financial and administrative accountability to the local electorate. As well as accounting for local needs, we expect councils to consider the impact of council tax rises on local people and their household finances.
We heard some interesting contributions to the debate. From Ariane Burgess and Jamie Greene, we heard some considered thinking about the challenges that we face and what the future might hold in addressing them. The Government certainly recognises the fiscal constraints and will continue to work with COSLA and others to implement our public service reform strategy, focusing on a shift to prevention and integration of service delivery at a local level while driving further efficiency.
However, we heard Craig Hoy clutching at straws and calling for changes to the funding formula, which is, of course, agreed with COSLA on behalf of all 32 local authorities. The Scottish Government is always open to proposals to change the formula, but they must come through COSLA first.
Bearing in mind that the overall quantum was confirmed when the Budget (Scotland) (No 5) Bill was passed by Parliament, Opposition members should note that, as the cabinet secretary pointed out, failure to approve the order would result in Scotland’s local authorities and, as a consequence, all our local communities being deprived of additional funding in this financial year and next year. Conservative members should bear that in mind when they decide how to vote this evening.
I encourage the Parliament to unanimously support the Local Government Finance (Scotland) Order 2026.
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