Local government funding: speech by the Minister for Public Finance, Planning and Community Wealth

Speech given by the Minister for Public Finance, Planning and Community Wealth Tom Arthur to the Scottish Parliament, Edinburgh on Wednesday 19 January 2021.

Presiding Officer,

I’d like to open my contribution by welcoming this debate and also, as Miles Briggs, has done and I’m sure many others will do as well, recognise the crucial role that councils play in delivering public services, in supporting communities and the part they play in delivering a national recovery. We may disagree at times but hopefully we can all agree on this.

We are ultimately talking today about difficult budget choices. 

Core to today’s debate is the fact that the Scottish Budget in 2022-23 is lower than it was in 2021-22. That is not my conclusion nor that of the Cabinet Secretary for Finance and the Economy. That is the conclusion of the independent Scottish Fiscal Commission who in their Economic and Fiscal Forecasts report said, and I quote:

“Overall the 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 a 5.2 per cent reduction, the Scottish Budget still delivers record funding of £18 billion for health and social care, doubles the Scottish Child Payment and introduces free bus travel for everyone under the age of 22.

It delivers an overall settlement worth over £12.5 billion. This represents an increase of £588.2 million in real terms. 

In the context of a 5.2 per cent real terms reduction in the overall budget, the local government settlement has increased by 5.1 per cent, again in real terms. 

This growth in the overall settlement was acknowledged by the COSLA Resources Spokesperson in evidence to the Local Government, Housing and Planning Committee last week.

Having taken the decision to pass on all frontline health and care consequentials in full, we have also then protected local government by providing a flat cash core budget alongside a further £1.4 billion which is transferred from other portfolios for joint priorities.

Now, by definition a flat cash core allocation does not take account of inflation. The Cabinet Secretary for Finance and the Economy has acknowledged we cannot inflation proof any part of the Scottish Government Budget, such is the nature of inflation right now.

We do not underestimate the challenges this allocation presents but it is simply not possible to inflation proof all Budget lines when the overall budget is not inflation proofed. But acknowledging these challenges, we must also be honest that pay increases and changes in the design of national insurance are themselves inflationary pressures. It is therefore not correct to claim that there is a real terms cut to the local government budget and then also claim that it does not take account of pay inflation or increased employer national insurance contributions.

Of course, some in this chamber may disagree with our decisions to:

  • pass on health consequentials in full
  • protect some of the poorest in society by doubling the Scottish child payment
  • provide over £550 million to support investment in health and social care
  • allocate £145 million extra for additional teachers and support staff 
  • support the expansion of free school meals with an extra £64 million revenue and £30 million of capital funding

We take the view that these are not simply Scottish Government priorities, they are joint priorities with local government and I believe that they also attract cross party support from across this Chamber.

However, if opposition parties do not agree with these investments, they are fully entitled to propose alternative but balanced funding proposals ahead of the Budget Bill next week.

The Budget also provides councils with a number of flexibilities including full flexibility over council tax rate setting, as they requested, and we have reaffirmed our commitment to developing a local government fiscal framework in partnership with COSLA. 

And I want to be clear that any framework must be developed in partnership with local government, it must be workable and learn lessons from the implementation of the broader Scottish Fiscal Framework and crucially it cannot put funding for the NHS at risk. 

It will be important for local government to bring forward fiscal framework proposals that can then be explored in partnership. But there’s no reason why these proposals need only come from local government.

In this regard I want to just note  and concluding the Conservatives’ motion, I want to welcome the contribution Miles Briggs is making and I hope that other Conservative members, or Mr Briggs or Miss Smith in summing up later in this debate, can provide more detail about how that would work in practice because clearly there would be significant consequentials elsewhere in the budget.

Just to conclude Presiding Officer, let me again welcome this debate and say that I’m looking forward to contributions from members across the Chamber.

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