Meeting of the Parliament (Hybrid)

Meeting date: Wednesday, March 2, 2022

Official Report 1177KB pdf

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Local Government Finance (Scotland) Order 2022 [Draft]

The next item of business is a debate on motion S6M-03394, in the name of Tom Arthur, on the Local Government Finance (Scotland) Order 2022.

16:08  

The purpose of the debate is to seek the Parliament’s approval for the guaranteed allocations of revenue funding to individual local authorities for 2022-23. Agreement is also sought for the allocation of additional funding for 2021-22, which has been identified since the 2021 order was approved on 18 March last year.

First, to put the local government settlement in the context of the overall Scottish budget, it should be noted that the independent Scottish Fiscal Commission concluded that the overall Scottish budget in 2022-23 is 2.6 per cent lower than in 2021-22. After accounting for inflation, the reduction is 5.2 per cent.

Despite that reduction, the 2022-23 local government finance settlement provides an additional 9.2 per cent, or a real-terms increase of 6.3 per cent, when compared to 2021-22.

For the avoidance of doubt, that increase does not include the £280 million, which the Cabinet Secretary for Finance and the Economy announced during stage 3 of the Budget (Scotland) Bill debate on 10 February, and will enable local authorities to make cost of living awards of £150 to their most-vulnerable council tax payers.

Will the minister give way?

Do I have time, Presiding Officer?

Yes, if it is a brief intervention, Mr Cole-Hamilton.

I am grateful to the minister for giving way. He is doing a grand job of spinning the settlement, but I wonder whether he has spoken to his fellow ministers, Lorna Slater and Ben Macpherson, who were utterly eviscerated at Friday’s conference of the Convention of Scottish Local Authorities for the reality of what the settlement means for local cuts.

I repeat that the context is that we are facing a 5.2 per cent reduction in our overall budget.

If am wrong, I am sure that Alex Cole-Hamilton will correct me later in the debate, but I do not recall him identifying budget lines for reduction and reallocation to local government. Perhaps he would like to reflect on that and, come the next budget process for the next financial year, he will be able to make a constructive contribution.

The settlement builds on the 2021-22 local government finance settlement, which provided an increase in local government day-to-day spending of £375.6 million compared with the previous year. In 2022-23, including the additional £120 million of general uplift that was announced at stage 1 of the Budget (Scotland) Bill, the Scottish Government will provide councils with a total funding package worth almost £12.7 billion. That includes revenue funding of £12 billion and support for capital expenditure of almost £0.7 billion.

It is important to note that the total of the funding package was finalised by the passing of the Budget (Scotland) Bill. Today’s debate seeks the Parliament’s approval for the distribution of the approved total funding to individual local authorities.

The order seeks approval for the distribution and payment of £11.4 billion out of the revenue total of £12 billion, with the balance being mainly made up of specific grant funding, which is administered separately. The £11.4 billion is a combination of general revenue grant of almost £8.4 billion, and the distributable amount of non-domestic rates income that has been set at almost £2.8 billion. In addition, the 2022 order includes £250 million of the cost of living funding mentioned earlier, with a further £30 million to be included for approval in the 2023 order, subject to final reconciliation of the actual payments made by local authorities.

The settlement provides local authorities with not only an additional £1 billion for vital day-to-day services and the flexibility to increase council tax rates as appropriate for their local authority area, but continued fiscal certainty, which does not exist in England, through our policy of guaranteeing the combined general revenue grant plus non-domestic rates funding set out in the order. That means that any loss of non-domestic rate income resulting from the impact of Brexit or Covid-19 will be compensated for by increased general revenue grant—unlike the position for councils in England—effectively underwriting that critically important revenue stream.

As approved as part of the Scottish budget, the overall funding package for 2022-23 includes: real-terms growth to the overall settlement; an increase of £120 million in the core budget in cash terms; £353.9 million previously announced for health and social care integration; an additional £200 million to support investment in health and social care; £145 million for additional teachers and support staff; £68.2 million for child bridging payments; maintained funding for 100-day commitments, including scrapping curriculum and music tuition charges and expanding the school clothing grant; and an extra £64 million revenue and £30 million of capital funding to support the expansion of free school meals.

Although not explicitly within the settlement itself, agreeing to the order will also ensure that the funding to protect against increases in the cost of living finds its way into the pockets of households the length and breadth of Scotland.

A further £124 million of revenue funding will be distributed once the necessary information becomes available and it will be included for approval in the 2023 order.

In addition to the revenue funding contained within today’s order, specific revenue funding amounting to almost £785 million is paid directly by the relevant policy areas under separate legislation.

The 2022 order also seeks approval for £840.7 million of changes to funding allocations for 2021-22. The full list of changes can be found in the report to the 2022 order.

The funding includes almost £256 million to address Covid-19 pressures. Taken together with the additional £259 million included in the funding approved by the Parliament on 18 March last year, and the £1.2 billion provided in the previous financial year, that brings the value of the overall Covid-19 support package for councils up to more than £1.7 billion, over and above their regular grant payments.

The Scottish Government has also replaced almost £1.7 billion of non-domestic rates income for the cost of Covid reliefs, with additional general revenue grant since the start of Covid.

In summary, the Budget (Scotland) Bill ensured that total funding from the Scottish Government to local government next year amounts to almost £12.7 billion, which represents an increase of more than £1 billion or 9.2 per cent in cash terms. That is a real-terms increase of 6.3 per cent compared with 2021-22.

The order before us confirms the distribution to individual councils and the proposals reflect the key role that local government will play as we focus on how we can lift children out of poverty, invest in social care and tackle climate change. The Scottish Government will continue to work in partnership with local government to improve outcomes and ensure that our communities receive the lifeline support and services that they expect and deserve.

I move,

That the Parliament agrees that the Local Government Finance (Scotland) Order 2022 [draft] be approved.

16:15  

This is an important debate, not just a technical one. I thank all those who work in our local authorities across Scotland for their hard work, especially for going the extra mile during the pandemic.

The Local Government Finance (Scotland) Order 2022 comes at the tail end of the budget process. Given that we have spent weeks debating the Scottish National Party and Green Government’s tax and spending choices, it might seem at this point that there is little more to add. Nevertheless, it is important that today’s parliamentary process gives us all an opportunity to highlight what needs to change.

The order allocates funding to each of Scotland’s 32 local authorities. We do not intend to oppose it, as that would simply deprive local government of much-needed resources for the coming year, but we have serious concerns about the overall allocation of resources to local councils across Scotland.

As has already been mentioned, I attended the COSLA conference on Friday, alongside other spokespeople, including Alex Cole-Hamilton. It is fair to say that SNP and Green ministers were left in no doubt about how council leaders and councillors across the country feel about the settlement.

Yet again, councils have been left in a situation in which they have to find savings or cut local services. It is a simple fact that SNP and Green ministers have cut next year’s local council budgets by £251 million in real terms. That cut to local government finance has been carried out despite Scotland receiving a record £41 billion block grant from the United Kingdom Government this year. The decision to cut budgets was taken by SNP and Green ministers.

Councils across Scotland have joined together to condemn the cuts. As the COSLA president Alison Evison said,

“It is beyond frustrating that the importance of Local Government’s role in enabling Communities to Live Well Locally across Scotland, has not been reflected in the Budget announcement.”

Mr Briggs described the settlement as a “record” settlement, but that is not consistent with what the Scottish Fiscal Commission has said. It has indicated that there is a 5.2 per cent reduction to the Scottish budget. Who is right: Mr Briggs or the Scottish Fiscal Commission?

The minister will be acutely aware that councils have very limited options to meet the cut. That is one of the key parts of the debate, I believe.

The Scottish Government has to realise that, when it cuts budgets, that hits the most vulnerable in our communities, and it is damaging to the local government workforce, too. For example, the only options that my council here in the capital now has in trying to make up that reduction involve a tourism tax, which the SNP said it would never introduce, or the new car park tax, which will hit the lowest earners hardest. Many council leaders are concerned that, if they do not implement those changes, the Scottish Government will penalise them in future years, too. Perhaps that is why the City of Edinburgh Council is today receiving one of the lowest shares of funding from SNP and Green ministers within the budget.

I hope that SNP and Green ministers will genuinely pause and reflect following the budget process. Many of us have said that when debating previous budgets, but I really hope that they consider the point that it is not a great celebration for councils that this money is coming; there will be difficult decisions for them and they will have to cut vital public services. Again, we see a situation in which ministers put huge cuts to finances on the table, then they rethink that and come back with a slightly lower cut, and then they hope that councils and the Parliament will celebrate that. That is simply unacceptable.

We need to see the resetting of the relationship and a genuine partnership that delivers respect between the Scottish Government and local government, and gives local authorities the powers and funding that they need to deliver the vital public services on which we all rely.

Conservative members would take a different approach. It is time for the creation of a new fiscal framework for councils, which would see an automatic amount transferred each year from the Scottish Government’s budget, to help them deliver vital local services.

As I said, we will not oppose the order, because we do not want to penalise local authorities or disrupt their work. However, we need to highlight that the Scottish Government is delivering a poor funding settlement that will impact on all our communities.

It is clear that the SNP-Green budget will have a negative impact on councils across Scotland. We are already seeing councils setting budgets with an average increase in council tax of 3 per cent during a cost of living crisis, and increases in charges for local services while services are being cut. The responsibility for that rests firmly at the door of this SNP-Green Government.

I hope I that, in the future, councils will have an opportunity to have a grown-up, responsible debate with ministers about the finance that they need and receive. Councils will face many difficult decisions in the coming weeks and years. I hope that SNP and Green ministers will reset their approach and prioritise local government. That is something that we all, across the Parliament, want to see.

I call Mark Griffin to speak on behalf of Scottish Labour.

16:21  

Labour will vote for the order reluctantly, with no enthusiasm, to ensure that councils get the allocations that have been offered, and in the hope—more than the expectation—that the cost of living support package will make it into the pockets of those who need it most. We disagreed with the SNP-Green budget, because it will continue to squeeze our local authorities dry. It is not a fair funding package for our communities; it is a timid, uninspiring budget. It forces councils to comply and make more cuts while they struggle to keep up with demand for local services.

The Government’s utterly delusional spin said that the budget represents “a total cash increase” in real terms but, as we have come to expect year on year, the budget was in fact packed full of cuts. The overall size of the pie might have increased, but only because the proportion of the budget that is ring fenced—the bit that locally elected councillors cannot make decisions on—has increased seventyfold since 2013. This year alone, it will jump from 11.5 per cent of revenue grant to 17.9 per cent.

Councils came into the budget process setting out what they would need to survive, which was £700 million, and to thrive, which was £1.5 billion. That plea must have fallen on deaf ears, as it was business as usual for the SNP and the Greens, and what councils got was nothing. Funding for core services is flat. It is the same as it was in 2021-22, which is therefore a real-terms cut. In a matter of months, the difference will be magnified further as runaway inflation takes hold, pay claims come in and service demand escalates when people struggle in the worsening cost of living crisis.

That comes on top of a decade of cuts, which means that, since 2013-14, the core services budget—income from the general revenue grant and business rates—is now worth £911 million less in real terms. The SNP has let inflation eat away at services across the country. Glasgow’s budget is worth £182 million less, North Lanarkshire’s is £69 million less and Edinburgh’s is £65 million less. That is millions of pounds gone from services that keep our towns, villages and communities going.

It is no wonder that social work is on its knees, roads are crumbling, libraries have closed and bins overflow weekly. That is what years of the SNP raiding council budgets gets us. It has stripped services to the bone, just as this order will do. In the Scottish Government allocations over the same period, the revenue budget has grown by 8 per cent, yet core council funding has been slashed by 12 per cent since 2013-14.

Worse is still to come. The £120 million that the cabinet secretary found is not baselined, so 2022 will be spent looking for further savings in 2023. The one-off £30 million that councils got in the autumn to settle a pay claim was not baselined either, and there is no headroom for next year.

Local government pandemic heroes, patronised all year long by ministers and told that they are not comparable to national health service workers, fear an even worse pay offer this year, which will fall behind the cost of living. As the Local Government, Housing and Planning Committee heard, councils know to expect

“a very difficult industrial landscape ahead”—[Official Report, Local Government, Housing and Planning Committee, 11 January 2022; c 10.],

but, as ever, the Government seems unwilling to listen.

I raise with the minister the appalling choice to copy the Tory cost of living council tax rebate and simply stick a saltire on it. Despite the SNP promising repeatedly to reform council tax, we are no further forward in abandoning the Tories’ regressive local taxation system. Council tax bands have never been a proxy for income, but the Government’s own figures show that, to hugely wasteful effect, 40 per cent of people who are due the £150 have above-average incomes and about 100,000 of the richest households—those with the top 10 per cent of incomes—are set to receive the £150 because they live in properties in bands A to D.

More important, payments should be made directly to people so that they can budget for themselves, just as with our fuel payment proposal. It would be absolutely disastrous if the £150 went towards the £260 million of council tax debt that 300,000 households owe. It is a poor offer, just like the wider package for local government, which will not do much to support our communities or the people who need help most.

16:26  

I rise to speak for the Liberal Democrats in this important debate. As Miles Briggs said, it is not just a technical debate. The tone of the minister’s speech was—quite frankly—astonishing, because it jarred terribly with the message that we are all receiving from councils, councillors and public servants, who are at the sharp end of the coalition Government’s choices.

As I said in my intervention, last Friday, I was on the panel discussion at COSLA’s annual conference, as was Miles Briggs. Alongside me were Ben Macpherson and Lorna Slater, and their defence of the local government settlement was entirely eviscerated. Public servants from across Scotland spoke out about the devastating choices that they are being forced to make as a result of the cuts. I do not know whether the SNP and Green ministers did not feed anything back from that meeting or whether they tried and failed to effect any change, but it is deeply regrettable that there has been no rethink.

At stage 3 of the budget, the Cabinet Secretary for Finance and the Economy set the same elephant trap as her predecessors did. Year after year, the SNP lay down a punishing cut to councils, only to offer a little extra cash at the 11th hour and expect to be lauded as heroes for so doing. However, let us make no mistake that deleting £370 million from the budget, only to restore £120 million, still leads to a £250 million cut. As Anas Sarwar said at the COSLA event, it is a bit like someone taking £20 from your wallet and giving £5 back then expecting to be thanked for it. From the COSLA conference, it was clear that nobody who is involved at any level of running public services is fooled by the claim that there is any funding boost or additional funding. Everyone can see right through those tricks.

There are no heroes today on the Government benches. That includes Scottish Green Party ministers, who have been busy this week claiming that they are having an influence in government and getting things done. What I did not see among the slim pickings in the press and social media was the Scottish Greens taking the credit for their coalition’s £250 million cut to our local authorities. It is the single biggest decision that they have made since entering government, and it is a rotten one—it stinks. Our Green and SNP MSPs do not want to own it because there is no escaping the harm that it will do to local services in every community and every corner of Scotland.

I end my speech with an appeal, because those same communities are already busy working out what they can do to help the people of Ukraine. I have written to the Cabinet Secretary for the Constitution, External Affairs and Culture, Angus Robertson, to ask him to ensure that local authorities are provided with new funding to support people who are fleeing the invasion. Last week, STV News revealed that as many as 300 Afghans remain in temporary bridging accommodation and 151 are still in hotels here in Edinburgh. That is nowhere near good enough. We are not ready for an influx of refugees.

I am determined that both Scotland and the UK should make generous offers of support to people who have to leave their country in fear for their lives. There is not a moment to lose in preparing our offers of safe harbour. There is not a moment to lose in preparing our councils and communities to receive people, with all that that means for services such as housing, education and health. Preparations must be backed by funding, to ensure that everyone who arrives is given every opportunity to start a new life—and for the long term, if need be.

I hope that the minister will address the issue in his closing speech and say when plans will be published and what support the Scottish Government is prepared to give local authorities as they get ready to receive those refugees.

I call Tom Arthur to respond to the debate. I can give you up to four minutes, minister.

16:30  

I am grateful to members of all parties for their speeches and I welcome the comments of Mr Briggs and Mr Griffin, who said, respectively, that they will not oppose and will vote for the order.

I will pick up on Alex Cole-Hamilton’s important point. He will be aware that we have committed £4 million in aid to support Ukraine and that we stand ready to do whatever we need to do to support Ukrainians who flee the brutal terror of Vladimir Putin’s incursions and invasion from Russia. We will of course keep the Parliament fully informed of developments as the situation progresses. I think that Alex Cole-Hamilton knows that, although we support what the UK Government has done so far, we think that it has to go further. I am sure that that is his position, too.

In the debate, we have rehearsed a lot of arguments that have been made previously. I will pick up on three points and take a constructive tone.

First, Mr Briggs talked about a fiscal framework. The Tory proposition is that local government should receive a pre-determined fixed amount of the Scottish budget. I welcome an idea being put on the table, but the idea requires careful scrutiny.

As members are aware, the cabinet secretary is engaging with local government on the application and development of a fiscal framework. That is a long-standing commitment, the pursuit of which we had to pause when we were confronted with the immediate and acute crisis of the pandemic. We are taking work forward and, of course, the approach must be agreed through engagement and partnership with local government, as I am sure that members understand and appreciate.

Secondly, I think that Mr Griffin mentioned ring-fenced funding—I apologise if I misheard him. He will be aware that, through the resource spending review, the cabinet secretary has committed to a full review of ring fencing for local government, in recognition that local government has raised the issue in previous years. That will require engagement with local government; we stand ready to have those conversations. We encourage local government to offer ideas and take the opportunity to move to an approach that is based on mutual trust and partnership, with shared outcomes and objectives, in the pursuit of which we ensure best value.

On council tax, Mr Griffin will realise and respect that the Government honoured its manifesto commitments of 2011 and 2016 and he will be aware of the Government’s commitment, in partnership with the Scottish Green Party, to move towards a deliberative process, which will culminate in a citizens assembly that will look at the resourcing of local government, including through council tax. I am pleased to confirm that that work is under way.

Scottish ministers have said that they want the £150 cost of living payment to go out before the end of April. Will the minister confirm that the software and information that councils will need if they are to deliver the payment are in place?

I am not in a position to speak on behalf of local government. The member’s point relates to something that Mr Griffin said. When the cabinet secretary announced the funding, she recognised that it is not perfect, but we should not make the perfect the enemy of the good. We could have taken more time to design systems, but the priority is to get the money out and that is what we seek to do.

Will the minister clarify that not a single penny of that funding should go towards paying existing council tax debt, to ensure that it reaches the people who need it most?

We have sought to ensure that there will be a cash payment. I take the point that the member made, but we must recognise that, ultimately, local government is administering and delivering the payment.

I wanted to make a final point, Presiding Officer, but I think that you said that I have only four minutes, so I need to conclude. There is a lot more that I could say. I have sought to take a constructive tone, but what has been lacking from this discussion on local government finance is any sense of what budget line should be deprioritised to allow for additional investment. I want to have a mature debate on local government financing, but it is not enough for members to come to the chamber and simply say that there should be more money for local government without giving any indication of where that money should come from.

I hope that this is the last year when we have the conversation that we have had every year. As we move into the budget process next year, if members believe that the local government finance settlement should be increased—that is a perfectly legitimate position to take—I hope that they will identify from which budget line that increase should be taken.

That concludes the debate on the Local Government Finance (Scotland) Order 2022.