Another tough settlement for local government

Yesterday I met with Labour Group leaders from local councils across Scotland.   They told of the direct impacts the Scottish Government’s draft financial settlement will have on local services.   They were clear that the difficult decisions that they have had to make this year will be even tougher in the next two years.   While they are all protecting front line education and social care services there is huge pressure given the increasing demands that they are facing.

The draft financial order was debated by the Scottish Parliament in a brief half hour two weeks ago when the Scottish Government pushed through its annual settlement setting out the funding that will be allocated to councils across the country in the year ahead.  You can watch the debate in the video above, including my own speech (9:40 into the video) and that of my colleague Richard Baker (at 27:25).

I am deeply concerned that the latest settlement continues a trend of local government not being given the priority it deserves by the Scottish Government.

According to a report from the Joseph Rowntree Foundation, local government spending in Scotland is set to fall by almost a quarter between 2008 and 2015.  The impacts of this decrease can be seen from the loss of nearly 35,000 local government jobs since 2008, the fact that councils are having to increase charges for services and, increasingly, through cuts to frontline services.

The result is that local government cuts are disproportionately affecting some of our poorest communities who rely the most on public services.  Moreover, the financial settlement has meant councils now introducing or increasing their charges for some services.  Again putting pressure on low or middle income housesholds.   In a warning for the years ahead, the JRF also noted that while much of the cuts to date have been absorbed by efficiency savings, the cuts to come will force councils to reconsider what services it can provide and for whom.

One of the key issues of these annual debates is the continuation of the Council Tax freeze.  While the Scottish Government boasts that the freeze benefits hard-pressed households, I have worked to highlight the flaws of this argument.

The major flaw is that the policy has been underfunded.  Each year, the Scottish Government makes an additional £70m available to councils to adopt the freeze.  This figure has remained unchanged since the freeze was introduced in 2008/09, ignoring the impact of inflation and the fact that the cost of delivering council services has increased by over 10% since 2007.

The annual cost of the policy also continues to rise.   The Scottish Government is providing an additional £70 million of funding in 2014-15 to freeze the council tax at the previous year’s level.   However, since the freeze is based on 2007-8 levels of Council Tax, the actual cost (and amount of money provided by the Government) to freeze the council tax for 2014/15 is £490 million.

The second major flaw is that the council tax freeze fails the fairness test.  Information provided by the Scottish Parliament Information Centre has found that over the first six years of the freeze, households in Band A properties will have saved a total of £258 (or a little over 80p a week) while owners of Band H properties, the highest band, have saved over £1,500.  Furthermore, some of the lowest income households do not see any benefit from the council tax freeze as they are already eligible for the council tax reduction scheme.

When council tax was first introduced, it accounted for around 20% of local government funding.  As time has gone on, and as a result of the council tax freeze, that proportion has dwindled and the proportion of council funding coming from central government has increased.   This has implications for local accountability and is a manifestation of a Scottish Government that is following a more centralised agenda.   The SNP plans to introduce their hated local income tax have been put on hold until 2016.  Intriguingly, the SNP’s White Paper gives no more details.

Despite the financial constraints being placed upon them, local authorities across Scotland have responded positively to the challenge.  In discussion with council colleagues across the country I have heard of positive initiatives targeting fuel poverty and youth employment among others.  Here in Edinburgh, the council also engaged in a consultation exercise, announcing its budget plans early and encouraging local people to have their say.  In Stirling the Labour councillors led an engagement exercise which asked local communities what their priorities were given the financial constraints facing the council.

As Scottish Labour’s Local Government spokesperson, I am working to engage with a variety of initiatives to help reinvigorate local democracy, including Labour’s own Devolution Commission.  A central challenge to strengthening local government lies in fixing how it is financed and I will be working on this issue in the months and years ahead.   We need a fairer system.  There’s a real irony that while the SNP government demands more fiscal powers for the Scottish Parliament their treatment of local government has been to impose tighter controls than were seen in the Thatcher years.