Government Spending Plans 2005-2008
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
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
The Scottish Executive plan to distribute the
- £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
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.
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
There will also be pressure on local councils
to improve their council tax collection rates to increase their
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.
Finance Minister's Speech announcing the Local
Government Finance Settlement:
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