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About the P&I Team Briefings Home | Responses | PFI Index | Policy Guide
BRIEFING No 127 LOCAL GOVERNMENT FINANCE SETTLEMENT
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Briefing No 127

Local Government Finance Settlement 2006-2008

Introduction

The Minister for Finance and Public Service Reform has confirmed the finance settlement for local authorities for 2006-07 and 2007-08. This document provides information about the settlement and its implications.

Overview

The Minister for Finance and Public Service Reform, Tom McCabe MSP, has confirmed the core revenue allocations to local authorities, announced last year for a three year period. The core revenue allocations are 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 plans to distribute the following:

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

Mr McCabe said that this amounts to a 5.6% increase over two years.

The business rate is being reduced from 46.1p (in the pound) to 44.9p from April 1 2006 as part of the Scottish Executive's commitment to bringing the rates poundage in line with England by 2007. It is currently 41.5p in England.

Council Tax

The Minister has already said council tax rises should be no more than 2.5%. Local authorities are also under pressure to improve collection rates to increase their revenue.

Efficiency Savings

The Minister said he would consider the case for further additional resources for local government in 2007-08 only if councils make significant progress towards a target of £325 million in efficiency savings.

Councils Warn of Cuts in Front Line Services

The Convention of Scottish Local Authorities argued that the settlement is "extremely tight" and that to keep council tax low and meet efficiency targets would lead to major cuts in vital frontline services. Despite councils more than meeting efficient government targets, COSLA said the case they made for increased funds for local government had fallen on "deaf ears."

Table of allocations to each local authority in Scotland /

Aggregate External Finance Increases 2006-07 and 2007-08

 

AEF
05-06

AEF
06-07

£
incrs

%
incrs

AEF
07-08

£
incrs

%
incrs

Aberdeen City

287.115

292.857

5.742

2.0

298.413

5.555

1.9

Abdnshire

324.749

342.381

17.632

5.4

351.624

9.243

2.7

Angus

165.794

173.235

7.441

4.5

177.948

4.713

2.7

Argyll & Bute

167.159

176.126

8.967

5.4

179.525

3.399

1.9

Cl'kmn'shr

71.934

74.105

2.171

3.0

76.281

2.177

2.9

Dumf & Galloway

241.698

250.685

8.987

3.7

256.330

5.645

2.3

Dundee City

249.617

254.562

4.945

2.0

258.977

4.415

1.7

East Ayrshire

186.614

193.976

7.362

3.9

197.908

3.932

2.0

East Dnb'tnshr

149.735

153.302

3.567

2.4

155.983

2.682

1.7

East Lothian

129.054

135.575

6.521

5.1

139.455

3.880

2.9

East Rnfr'wshire

130.366

138.082

7.716

5.9

141.440

3.358

2.4

Edinburgh City

619.047

634.069

15.022

2.4

648.241

14.172

2.2

Eilean Siar

94.304

96.189

1.886

2.0

97.873

1.684

1.8

Falkirk

218.389

226.169

7.779

3.6

232.599

6.430

2.8

Fife

522.454

538.869

16.414

3.1

554.254

15.385

2.9

Glasgow City

1,117.898

1,139.946

22.048

2.0

1,159.622

19.677

1.7

Highland

373.801

389.152

15.351

4.1

399.912

10.760

2.8

Inverclyde

141.843

146.499

4.656

3.3

149.439

2.940

2.0

Midlothian

124.598

127.763

3.164

2.5

131.065

3.302

2.6

Moray

133.281

137.924

4.643

3.5

141.746

3.821

2.8

North Ayrshire

215.964

223.456

7.492

3.5

228.622

5.167

2.3

North Ln'kshire

496.465

514.782

18.317

3.7

527.325

12.543

2.4

Orkney

54.836

57.708

2.872

5.2

58.863

1.155

2.0

Perth & Kinross

197.062

206.358

9.296

4.7

212.361

6.003

2.9

Rnf'wshire

267.760

273.945

6.185

2.3

280.297

6.352

2.3

Scottish Borders

174.443

181.937

7.494

4.3

187.159

5.221

2.9

Shetland

77.608

79.162

1.554

2.0

80.548

1.386

1.8

South Ayrshire

164.550

169.810

5.260

3.2

173.782

3.972

2.3

South Ln'rkshire

456.205

468.441

12.236

2.7

478.778

10.336

2.2

Stirling

135.881

138.567

2.686

2.0

142.406

3.840

2.8

West
Dnb'tnshr

161.193

164.414

3.222

2.0

167.290

2.876

1.7

West Lothian

235.231

244.983

9.753

4.1

250.873

5.889

2.4

Scotland

8,086.647

8,345.027

258.380

3.2

8,536.939

191.912

2.3


Implications

The Minister 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. UNISON Scotland has a number of concerns, as do many other organisations and experts.

Professor Arthur Midwinter, Budget Adviser to the Scottish Parliament Finance Committee, warned that the settlement will put "severe pressures" on service levels and council tax levels. In a report on Efficient Government to the Finance Committee on 7 November 2005, he detailed the way many councils are being forced to look at savings from much wider budget areas than the five workstreams proposed in the Efficient Government initiative procurement, absence management, asset management, shared support services and streamlining bureaucracy. In a survey by the Committee, the ten councils which responded said they are all undertaking budget reducing exercises, despite the growth in planned spending in the local government settlement.

A number of councils have already said council taxes will need to rise above inflation even with cuts to front line services and there are fears of job losses.

UNISON Scotland has been calling for the Scottish Executive to fund councils to carry out their legal requirement to deliver equal pay and compensation for past discrimination for local government staff. Scottish Secretary Matt Smith said that the settlement reflects a much lower increase than that given to other parts of Scotland's public sector and will not pay for increased demands on local councils.

He added: "Any increase is better than none, but this seems to ignore both the many increased legislative responsibilities given to local government recently, as well as the legal need for local authorities to deliver on equal pay and compensate low-paid women for past discrimination. It is unfair to have equal pay in some public services funded by central government whilst others have to balance cuts in jobs and services and increases in council tax to give low-paid women what they are due."

UNISON Scotland complained that local government has had efficiency savings cut from budgets in advance, with no opportunity to plan or redirect the money into front-line services. It is also concerned that some councils have very little room for improving council tax collection rates.

 

Further Information

Finance Minister's Speech announcing the Finance Settlement:

http://www.scottish.parliament.uk/business/officialReports/meetingsParliament/or-05/sor1123-02.htm Col 20965.

UNISON Scotland Briefing on Single Status & Equal Pay in Local Government:

http://www.unison-scotland.org.uk/briefings/singlestatmsp.html

Contacts list:

Fiona Montgomery

f.montgomery@unison.co.uk

Dave Watson

d.watson@unison.co.uk

@ the P&I Team

14 West Campbell St

Glasgow G26RX

Tel 0141-332 0006

Fax 0141-307 2572

 

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Further Information

Finance Minister's Speech announcing the Finance Settlement:

http://www.scottish.parliament.uk/
business/officialReports/
meetingsParliament/or-05/sor1123-02.htm
Col 20965.

UNISON Scotland Briefing on Single Status & Equal Pay in Local Government:

http://www.unison-scotland.org.uk/
briefings/singlestatmsp.html

Contacts list:

Fiona Montgomery
f.montgomery@unison.co.uk

Dave Watson
d.watson@unison.co.uk
@ the P&I Team
14 West Campbell St
Glasgow G26RX
Tel 0141-332 0006
Fax 0141-307 2572