Local Government Spending Plans 2005-2008

Introduction

The Minister for Finance and Public Service Reform has announced the finance settlement for local authorities for the next three years. This document provides an outline of this settlement.

Overview

The Minister for Finance and Public Service Reform, Tom McCabe MSP, has announced the core revenue allocations to local authorities. This is also referred to as the Aggregate External Finance, which is the proportion of local authority revenue expenditure that the Executive supports. This is supplemented by council tax income, and the two combine to become grant-aided expenditure, which is the indicative amount that the Executive believes local government needs to spend in specific areas such as roads and social work.

The Scottish Executive plan to distribute the following:

• £8.1billion in 2005/06;
• £8.3 billion in 2006/07; and
• £8.5 billion in 2007/08.

Councils will also receive around £1billion in each of the next 3 years in revenue grants to allow councils to fulfil spending commitments on behalf of the Scottish Executive.

The total support for capital funding to councils will exceed £2 billion over the next three years. By 2007-08, local government will receive loan charge support to provide for more than £900 million of new capital investment over the period.

There is also a change to the business rate which is being reduced from 48.8p (in the pound) to 46.1p; the Minister believes that this will help offset the effect of a revaluation which should come into effect next year and which will see rateable values rise.

Council Tax

The Minister expects next years council (2005/06) tax to be kept as low as possible and that it would not rise by more than 2.5% in the following two years.

Efficiency Savings

The Minister has admitted that the settlement is tight but realistic and is hoping that efficient government will allow significant sums of money to be put back into local services. This includes a proposed target of £325 million in efficiency savings.

There will also be pressure on local councils to improve their council tax collection rates to increase their revenue.

Implications

Although the Minister has indicated that the figures announced are provisional, allowing local authorities and COSLA to comment on the detail before a final figure is given in February next year, there are a number of concerns.

There is a basic concern about the whole issue of local government funding as highlighted by Professor Glen Bramley in a Scrutiny Paper for the Local Government and Transport Committee in November 2004. In this paper Professor Bramley complains that much of the information on local government finance is 'baffingly opaque'. Another issue highlighted was that the basic grant settlement has tended to be relatively static with any growth tending to come through ring-fenced projects which are often time limited.

As regards the Executive's plans for efficiency savings, Professor Bramley also highlights a concern as to whether or not such savings are available within local government after previous efforts of both Audit Scotland and Best Value regimes have failed to identify significant savings. There is a concern that the Executive's target of £325 million is unrealistic. UNISON Scotland is concerned that pressures on budgets could lead to cuts in local services (including possible job cuts) and councils' failing to deal with key staff shortages.

COSLA's Finance spokesperson has indicated that they are very disappointed at the settlement with a concern that it would mean pressure on both council tax and services. There was a further concern that the Scottish Executive has not decided whether or not to release additional funds allocated by the Chancellor, which are being used in England to keep council tax down.

Another concern is that the Minister stated that he expects councils to improve their rates of council tax collection. He believed that this could be of considerable assistance to councils when they set their council tax rate and as a way to expand their services. However the latest figures from Audit Scotland reveal that the Scottish average for council tax collection is now standing at 91%; the highest collection rate since council reorganisation in 1996. Although this rate varies from 83.7% in Glasgow to 97.7% in Orkney, the Audit Scotland report indicated that 29 out of the 32 councils in Scotland have improved their collection rates. There is a concern that the Minister is relying on an improved collection rate to improve councils when it appears obvious that some councils will have little scope for improvement.

While UNISON Scotland welcomes the increase in funding to capital budgets there is a concern that this money may be used to finance PPP projects. Currently 29 Scottish councils have a total debt of £2.5 billion in PPP schemes. UNISON Scotland is concerned that unless the opportunity is taken to allow authorities to move away from expensive PFI/PPP projects, this money is unlikely to be used to deliver services most efficiently.

Further Information

Finance Minister's Speech announcing the Local Government Finance Settlement:

http://www.scottish.parliament.uk/business/
officialReports/meetingsParliament/or-04/sor1208-02.htm#Col12643