Local Government Finance (Scotland) Order 2002

– in the Scottish Parliament at 2:30 pm on 31st January 2002.

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Photo of Lord David Steel Lord David Steel Presiding Officer, Scottish Parliament 2:30 pm, 31st January 2002

The next item of business is a debate on motion S1M-2654, on local government finance. I would rather not take any more points of order, as many members have indicated that they would like to speak in this debate and we are tight for time. I ask those who are not staying to leave as quickly as possible.

Photo of Andy Kerr Andy Kerr Labour 3:33 pm, 31st January 2002

The order that we are asking Parliament to approve this afternoon is of real significance to all Scottish councils and their council tax payers. The Local Government Finance (Scotland) Order 2002 provides the grant support for Scottish councils' revenue expenditure in 2002-03.

Revenue funding for local government accounts for more than a third of the total assigned budget. The order distributes more than £6.5 billion of resources to local government. That is £500 million more grant than in 2001-02. Today's debate gives members an opportunity to comment on this vital element of the Parliament's responsibilities—an opportunity that I am sure they will embrace. We are distributing historic levels of resources to local government. That is further living proof of our partnership with local authorities.

I cannot emphasise enough the importance of local government as a key partner in the delivery of better public services. We are working closely with Scotland's councils to encourage and support their efforts and to remove barriers to service improvement.

We have already put in place many such reforms. The Scottish Local Government (Elections) Act 2002 represents an important step forward in strengthening local democracy. The move to four-year terms for councils will allow them to take longer-term strategic decisions. Concurrent elections will strengthen the legitimacy of councils, ensuring that the turnout at local council elections is increased, and will provide equal legitimacy in electoral terms for the Parliament and local government. The introduction of electoral pilot schemes offers councils a welcome opportunity to test new electoral procedures.

We will publish a white paper on the future of local government—our plan is to do so before the Easter recess—which will be followed by an extensive consultation process. The Executive will set out the future steps for legislation shortly after Parliament reconvenes in September. The debate will be set in the context of renewing and supporting local government as a vital part of the democratic system and will take into consideration the crucial role of elected councillors.

That is all part of the broader agenda to modernise local government, not only through the local government bill but through the leadership advisory panel, which reported last year. The panel worked with councils to support reviews of their decision-making processes, political management arrangements and other aspects of how they run their business. Councils responded well to that challenge and we are keen to maintain impetus.

Councils have already introduced the best value approach on a voluntary basis. That means that councils are reviewing the effectiveness of their services, asking their citizens what kind of services they want and thinking about quality as well as cost. To encourage and support further improvement, we will shortly introduce a bill to remove the barriers that prevent councils from providing new services and from working with others in their local areas to improve services. The bill will also give councils a statutory duty to pursue continuous improvement and will extend their obligations to report publicly on their performance. We will also amend the duties of the Accounts Commission and council auditors so that they embrace quality of service as well as cost. The aim of all that work is to support the delivery of better public services. The acid test will be whether we deliver real change to the local authority services that are provided to our communities.

It is clear that that work is vital, but local government also needs the resources to do the job. To underpin the reforms that we are introducing to strengthen local government, we are working to develop a finance system that supports, rather than impedes, our partnership with local government. We have already introduced three-year revenue and capital allocations, secured councils' agreement to publish three-year council tax figures and abolished expenditure guidelines. We have also begun to put in place local outcome agreements, but we have more work to do.

Last year we announced firm three-year capital allocations.

Photo of Brian Adam Brian Adam Scottish National Party

Does the minister agree that part of the work that still needs to be done is arriving at an agreement so that we no longer have the annual debate on whether the settlement fully funds changes? Each year, the Executive produces a financial statement that says that local government has received a lot more money and each year, the Convention of Scottish Local Authorities—and most individual local authorities—says, "No, that is not the case". Does the minister agree that we need a mechanism through which agreement can be reached on how the finances are to be presented and dealt with?

Photo of Andy Kerr Andy Kerr Labour

I agree with Brian Adam. Over the next few months, I will meet COSLA for extensive discussions to establish the ground rules for debates on issues such as the allocation of resources, which he raised, as well as ring fencing and hypothecation. I want to make significant progress on an issue about which local authorities approached the Executive, and on which we are happy to deliver through discussions with local authorities.

We want to move on to the next step of reforming the capital control system, for which local authorities have argued for many years. On Tuesday, I had a wide-ranging discussion with the Local Government Committee on that subject and indicated my willingness to take the matter forward. We have considered the arguments and now we will move forward with our local authority partners to reform the capital system. We will seek to deliver an improvement to the way in which we work together.

We want to establish a system that enables rather than constrains; that allows councils to meet the challenges of the 21st century, investing in assets that are fit for purpose; that improves the quality and accessibility of council services by investing in the latest technology; and that allows councils to work with other agencies and to pool resources without artificial restrictions. In partnership with COSLA, we will examine closely the capital control system and we will work with local government to develop a system that delivers those improvements.

All the measures that I have mentioned will allow further progress to be made down the road of shared responsibility, in order to achieve tangible benefits for all the people of Scotland.

Photo of Keith Raffan Keith Raffan Liberal Democrat

Is the minister aware of the growing concern among directors of finance about the settlement process? They are concerned not about the announcement, but about the drip-drip process through which they get details from the Executive of the settlements for individual local authorities. Some directors of finance have asked me to ask the Executive to hold a briefing seminar within a few days of the announcement of the settlement, so that they gain that detailed information much earlier than is the case at present.

Photo of Andy Kerr Andy Kerr Labour

I, too, am looking to improve that system. I am happy to take on board Keith Raffan's good idea, investigate it further and, I hope, deliver on it. He makes a sensible proposition that I am open to. I will discuss the matter with local government directors of finance in due course.

Last year, Angus MacKay announced firm three-year grant figures. That guarantee is still not available to councils elsewhere in the UK outside of Scotland. I am happy to reinforce that commitment.

As I said earlier, the finance order distributes more than £6.5 billion of resources to local government. That is £0.5 billion more than in 2001-02. For local authorities, that means that they have increases that range between 6 and 11 per cent.

Photo of Shona Robison Shona Robison Scottish National Party

The Labour administration on Dundee City Council has publicly announced that its council tax may rise by 25 per cent over two years. The Labour Minister for Finance and Public Services has said to the press that the council should not need to do that as it has been given more than enough money. The Dundee public are entitled to know who is telling the truth. Is it the Labour minister or the Labour administration in Dundee?

Photo of Andy Kerr Andy Kerr Labour

What has been said is grossly inaccurate. I have met the council leader, the director of finance and the convener of finance of Dundee City Council. I am happy to meet them again and talk. I am always happy to talk with local authorities.

Let us get the facts on the table. I acknowledge that Dundee City Council has come to me with legitimate concerns about settlement issues, but the amount of money that Dundee will receive is an above-inflation increase of 8.4 per cent, which is an increase of £16.1 million. In the following year, 2003-04, the increase is 5 per cent. I am more than happy to discuss the allocation of resources with local authorities, but let us not forget—

Photo of Maureen Macmillan Maureen Macmillan Labour

The minister may be aware that Argyll and Bute Council is anxious about its funding formula and has sent him a copy of Professor Arthur Midwinter's report. Can the minister assure me that he will pay close attention to the report? Argyll and Bute Council feels that it is disadvantaged by an unfair funding formula.

Photo of Andy Kerr Andy Kerr Labour

I am learning the lesson in this job that all councils are unique, but they are all unique in different ways. Satisfying them all is a difficult task.

I will not go into great detail about Argyll and Bute Council, as I understand that I am meeting its representatives next week to discuss the points that the member has made.

Let us get back to today's business, which is the finance order. We have effectively responded to local authorities' desire for stability in the allocation of resources by giving them money that allows them to plan. They have planned wisely and are delivering quality public services.

There seems to be confusion about hypothecation or ring fencing. Let me be clear.

Photo of Andy Kerr Andy Kerr Labour

We in the Scottish Executive have our priorities, as do local authorities. In setting their budget priorities, local authorities have flexibility over the major part of the available resources that they receive through Scottish Executive grant or locally raised income.

In December, I announced a reduction in ring-fenced controls on local government funding, with the transfer of around £150 million of programme grant funding to unhypothecated general grant. Specific grants now account for less than 10 per cent of the total revenue funding that I am announcing today. We will consider the potential for further reductions in ring-fenced controls where appropriate.

Furthermore, as I mentioned earlier, in due course Peter Peacock and I will get together with COSLA to discuss the figures and clarify what we consider to be genuine hypothecation. That engagement will be positive and will be done in a spirit of understanding about where both sides sit in regard to local government finance.

No matter where people live or what their personal circumstances are, they undoubtedly use council services. We want to change those services for the better for the people of Scotland. The order commits substantial additional resources to deliver key policy priorities, including the modernisation of the teaching profession, improved care services for older people, enhanced concessionary travel schemes and extra resources for the police. For the first time in recent years, the settlement also includes provision towards general local authority pay and price inflation. Local government argued for that. We listened to their views and have changed.

The allocations for each local authority were fixed for each of the three years to allow stability and to allow them to better plan the delivery of local services. It was made clear at the time that the Executive would fund any policy commitments that were placed on local authorities. That is what we have done for many issues, such as pre-school education, the supporting people programme, adult literacy, the rough sleepers initiative and out-of-school care provision.

The finance order is critical for local government and for those who use local government services. It is only one part—although an essential one—of the way in which we are assisting authorities to deliver the local services that are important to communities. Peter Peacock and I will continue to have meaningful dialogue with COSLA. That will allow us to continue our progress in delivering better local services. That is what we are about.

I acknowledge the fundamental role that local government plays in this partnership and the contribution that the partnership makes to the quality of life of Scottish people. We are all about closing the gap, providing opportunity and providing high-quality services.

I move,

That the Parliament agrees that the Local Government Finance (Scotland) Order 2002 be approved.

Photo of George Reid George Reid Scottish National Party

We are tight for time, so I will give speakers a warning one minute before their time is up.

Photo of Tricia Marwick Tricia Marwick Scottish National Party 3:45 pm, 31st January 2002

The minister said that the finance order was critical for local government services. Indeed it is. Yet it took seven minutes of an 11-minute speech before the minister actually talked about the finance order itself. We heard a great deal about what the minister hopes to do for local government in future, but he did not address the order that we are supposed to be debating this afternoon. I wonder why.

The minister's rhetoric at the end of last year was that the Executive was offering a 10.7 per cent increase. The reality is that the increase is nothing of the sort. In my speech, I intend to look through the smoke-and-mirrors approach to local government that this minister and his predecessors have adopted. I will lay bare the reality of the so-called substantial additional resources that the minister promises.

Photo of Tricia Marwick Tricia Marwick Scottish National Party

No, let me get on with it.

In reality, we are facing council tax rises in practically every council in Scotland. Those rises will be accompanied by a reduction in services. That does not suggest to me—or to very many people who are involved in local government—that we have had the substantial increases that the minister claims.

Photo of George Lyon George Lyon Liberal Democrat

Does the member disagree with Professor Arthur Midwinter who, in evidence to the Local Government Committee, said that, whereas in April 2000 it had been clear that local government grant had been falling in real terms, the projection now is for real growth of 11.7 per cent over the plan period? Does she disagree with that statement?

Photo of Tricia Marwick Tricia Marwick Scottish National Party

I rely on figures that COSLA produces. I think that they are probably more accurate than the minister's figures. According to COSLA, instead of an increase of £650 million that the Executive claims, there will be a shortfall next year of £130 million. The minister perpetuates an illusion. Perhaps when have this debate next year, it will be based on agreed figures and not on the Executive's smoke-and-mirrors approach.

The Executive has four main techniques for inflating the local government settlement figure: first there is the double count; then, in the headline increase figure, they include money allocated to new burdens; then they underfund those new burdens, compounding the problems; then they ignore new year-on-year pressures.

For example, money that has already been paid to councils in the form of direct grants—for, say, pre-school education—has now been included in the headline budget figure. It shows as an increase, but it is not new money. Another of the minister's tricks is to include money for new burdens that the Executive has imposed. I was disappointed that the minister, in the newspapers today, did not recognise that "burdens" is the terminology that we all use.

The Executive has instructed councils to do work—for example, to provide personal care for the elderly—but that new work has to be paid for. The Executive has paid councils £125 million for the service. Put simply, that money is already spoken for. It is determined centrally. It is not additional money for councils. It is to pay for additional services that the councils must provide.

Photo of Tricia Marwick Tricia Marwick Scottish National Party

No, I will continue for a moment.

The money that I was speaking about also includes money for the rough sleepers initiative, adult literacy, balance transfers from the Department for Work and Pensions, out-of-school care and, indeed, McCrone. COSLA estimates that that totals approximately £440 million. A quick subtraction reduces the Executive's increase of £645 million to approximately £250 million.

We are not finished yet. There is one more sleight of hand. The Executive is quick enough to trumpet new policy initiatives to sell to the press. However, it is irresponsible enough to attempt to implement those policies without providing enough funding to do so. Once again, the councils are left to carry the can for the shortfall.

Perhaps the most topical example of that is the McCrone settlement.

Photo of Tricia Marwick Tricia Marwick Scottish National Party

No. I have a point to make and time is short.

I quote the minister's predecessor, Angus MacKay, speaking in the chamber in the same debate a year ago. He said:

"I am happy to confirm that the Executive has always said that it would fully fund McCrone."—[Official Report, 7 February 2001; Vol 10, c 968.]

In fact, the Executive is doing no such thing.

Photo of Tricia Marwick Tricia Marwick Scottish National Party

No, I will not.

In a recent report on teachers' pay, COSLA reported

"as a result of insufficient funding being provided, Scottish Executive and COSLA recognised that there was a cumulative shortfall over the three year period of £42.7m. It was agreed that this would be funded by local authorities."

The reality of the situation is that the Executive said last year that McCrone would be fully funded, but it is not fully funded. There is a shortfall of £42.7 million and that is to be met by the local authorities.

Photo of Tricia Marwick Tricia Marwick Scottish National Party

If the minister wishes me to give way, perhaps he should have addressed the finance order in the first seven minutes of his speech. He did not do so.

Photo of Angus MacKay Angus MacKay Labour

Setting aside the fact that the McCrone agreement was a negotiated agreement to which all parties voluntarily signed up and her criticisms are rather irrelevant, can Tricia Marwick tell the chamber what precisely the SNP would do differently with regard to that settlement?

Photo of Tricia Marwick Tricia Marwick Scottish National Party

I look forward to February 2004 when Mr MacKay will have the opportunity to debate the SNP's local government settlement. Since Labour came to power, COSLA estimates that approximately £700 million has been lost from local government budgets.

Returning to the minister's illusions, COSLA estimates that the underfunding of new burdens and the underfunding of year-on-year increases will cost local government £340 million. If we subtract that from the £210 million surplus, we are left with a deficit of £130 million.

Minister, the time for smoke and mirrors is over. Next year, we need to discuss real figures and not the hype that the minister brings to the debate. Nobody believes that the Executive is producing more money. COSLA does not believe it and, when the council tax bills go through people's doors in a few months' time, the people of Scotland will not believe it either.

Photo of Keith Harding Keith Harding Conservative 3:53 pm, 31st January 2002

I have a lot of ground to cover and, although I will be as quick as I can, I start by once again expressing my concern that we only have an hour and a half for such a vitally important and contentious debate. That seems ludicrous when, this morning, we had an hour extra that we did not need or use to discuss a bill on which the whole chamber was agreed.

When we come to finance discussions, I always reflect that the last two Scottish Executive budgets have resulted in underspends of £435 million and £718 million. The clear implication is that the Scots are paying too much tax and the Executive cannot find ways to spend the money. I can think of at least two obvious ways.

First, we could consider ways of reducing or preventing increases in the tax burden, specifically the council tax.

Photo of Keith Harding Keith Harding Conservative

No. The minister did not give way to my colleague.

I am always keen to support a tax cut but I am aware that a Labour and Liberal Democratic Executive will always favour a tax increase. After all, both Executive parties and the SNP are stuck firmly in the belief that they, as politicians, know better how to spend the public's money than the people do.

Photo of Keith Harding Keith Harding Conservative

I will not be giving way. I only have five minutes. I am sorry.

Photo of Keith Harding Keith Harding Conservative

Mr Rumbles will get his chance. If I get on a bit, I will come back to him.

If the Executive parties cannot bring themselves to cut tax, why do they not directly resolve some of the problems that they have created in local government? They could allocate additional funds to councils to spend as they wish on locally decided needs and priorities. After all, the financial aspects of the local government announcement have done little to reassure hard-pressed local council tax payers. Despite the barefaced spin from the Scottish Executive, taxpayers face yet another year of inflation-busting council tax increases at the hands of their local councils. That will come as a bitter body blow to thousands of Scots who see council tax bills swallowing up a larger proportion of their income each year.

Photo of Keith Harding Keith Harding Conservative

Not at the moment.

This is just another way for the Scottish Executive to achieve the chancellor's aim of increasing the tax burden without touching income tax levels. It is another stealth tax. With the money available from the underspend, the Executive could easily prevent some of the worst council tax increases, or give the councils genuine flexibility in the use of the money that they have available.

Photo of Keith Harding Keith Harding Conservative

I will not give way. It is not my fault. The Executive should allocate more time to the debate. I suggest that the member have a word with the business manager.

Before I hear complaints from the Labour and Liberal benches, I should say that I know that the Executive is claiming huge increases in council grants—in the Local Government Committee yesterday the minister described them as massive—for the coming year of up to 11 per cent. However, when one examines closely the funding available, it is clear that it is window dressing. The headline figures are high, but a large proportion of the increase is simply a transfer of existing ring-fenced funding into revenue support grant or is swallowed up by new burdens and the need to spend on the nationally agreed McCrone settlement. The 11 per cent increase is not new money and COSLA estimates that the actual increase in available funds that councils have discretion over is more like 3.6 per cent—that is £211 million rather than £646 million.

If the settlement is as generous as it is claimed, why are councils throughout Scotland cutting services? Fife Council is closing animal centres. Far from giving power back to the councils, the minister has simply tinkered at the edge of ring fencing and has left the councils with little option but to follow the Executive's agenda. The councils still have to provide the same service and the Scottish Executive has retained local outcome agreements and statutory powers to ensure that they do. Again, COSLA provides a helpful analysis: COSLA is clear that 30 per cent of local government funds come with strings attached.

It is no use the minister giving us a different figure and talking about the removal of ring fencing in a few minor areas. The evidence shows clearly that even in the areas where ring fencing has, in theory, been removed, ministers have failed to address the fundamental problems and have boxed in councils once again. What is the point of removing ring fencing if one does it only where the service must be provided by statute, where the service is such that no council would make cuts and many would want to spend more than the ring-fenced grant or where it can be done only after binding agreements with the Executive are put in place?

If the Executive wants future settlements to be welcomed, it must make some vital changes of principle. We must stop milking the taxpayer through central Government-inspired council tax increases of more than double the rate of inflation. Let us give councils the freedom that they require to resolve their core service needs. We should let local people make choices through local democracy. If councils make huge council tax increases, local voters will know what is going on and will give the politicians their verdict on the tax level at the next elections. The change is not just about finance but about the principle of accountability in local government. It is too late this year, but let us ensure that future financial settlements play their part in restoring accountability and democracy in local government.

Photo of Iain Smith Iain Smith Liberal Democrat 3:58 pm, 31st January 2002

I will not take any lessons about accountability and local government from a party that is on record as saying that it wants to take away control from local government and give it to quangos. That is the Conservative party's policy.

I welcome the significant additional resources for local government as a result of the local grant settlement. We are in year two of a three-year settlement. Over the three years, there will be an average increase of 23.6 per cent in aggregate sector funding for local authorities across Scotland—that includes 8.68 per cent in the year ahead, to which the order applies, and an additional 5.59 per cent in the following year. In real terms, over the three years, there will be £1.8 billion more than there was in 2000 and £1.75 billion more than there was in the Conservatives' local government settlement in 1997. The resources going into local government have increased significantly. Most important, the settlement reverses years of cuts in local government and begins to address major funding problems.

Photo of Andrew Welsh Andrew Welsh Scottish National Party

If all this largesse is heading towards local government, why are council taxes about to go up? Can the member name one council among all councils, including his own, that will not raise council taxes?

Photo of Iain Smith Iain Smith Liberal Democrat

There is a need to increase local council spending to improve services. That is why councils are increasing council taxes. Now that they have been given the freedom to do so, they want to fund services in addition to those that are funded by the Government. It is important to note that council taxes are being increased to help support additional services. In previous years of cuts, councils were restrained from increasing council taxes to do that.

I am not saying that councils have all the resources they need; that will never be the case. However, what is important is that the settlement marks a significant improvement in the resources that are available to local government. The settlement allows for the funding of important areas such as free personal care for the elderly. That is part of next year's funding package to local government, which will be implemented during 2002-03.

The settlement continues to help to fund the implementation of the McCrone agreement, which is an important improvement to how our teachers are paid. The McCrone agreement will result in significant improvements to our education service.

The settlement will fund additional investment in our policing services. The increase in the money that is going to the police specific grant is above inflation. That will allow the recruitment of additional police to enable record levels of policing to continue.

The settlement will fund the concessionary travel schemes that are due to be introduced later this year. It will also begin to reduce ring fencing, which local government has been requesting for years. It will start to address the deficit in capital funding, which is also important. This year, a 40 per cent increase has been made in capital funding, although that is not enough to address the long backlog of capital investment that is required in our schools, roads and other public services.

Significant improvements need to be made to the way in which the local government finance system operates. The Local Government Committee has completed its local government finance inquiry, although we have yet to reach our conclusions. I hope that the inquiry will reach some conclusions based on the evidence that has been taken over a year. Issues need to be addressed, including the grant distribution system. There is a difficult balance to achieve between the simplicity and transparency that everyone would like to see and the need to reflect different councils' different circumstances.

Another issue that needs to be addressed relates to the McCrone settlement. The settlement was calculated on the basis of the number of teachers, but the allocation is based on the number of pupils. That has resulted in some councils getting a windfall and others being affected. COSLA agreed to the system of allocation and yet it will cause difficulties for councils in areas where the number of pupils per teacher is lower—such as rural and sparsely populated areas. COSLA and the Executive will have to sort that out.

We must also address the fact that the three-year settlement will be made every three years, rather than there being a three-year rolling programme. That is partly to do with how the Westminster Government deals with its spending reviews. We need to address the fact that councils will have a degree of certainty about the next three years only in the first year. By the time councils get to the following year, they will have only one year's certainty of funding. They will not know what the budget for the next three-year block will be until the next year. If we are to have proper three-year funding, that issue needs to be addressed.

My final point is that we need to reach an understanding about the figures that we use. COSLA always disputes the Executive's figures and the Executive disputes COSLA's figures. If one examines both sets of figures, one sees that they are both open to question, as both are difficult to follow and to understand fully. We need to have an agreed set of figures that satisfy the local government community, the Executive and the Parliament. We need to have genuine and accurate figures so that we can make proper decisions and have a proper debate about their meaning.

Photo of George Reid George Reid Scottish National Party

We move to the open debate. I will keep speakers to a tight four minutes.

Photo of Michael McMahon Michael McMahon Labour 4:04 pm, 31st January 2002

I am fortunate to be a member of the Local Government Committee. During our inquiry into local government finance, I spent a lot of time hearing from local authorities that represent our disparate local communities. Having listened to them describe the issues, I believe that, although far from perfect, things are much better in local government in Scotland than they have been for a considerable time.

The announcement that we are debating today is a further indication that we are following the best possible route for a modern, collaborative and effective approach to local government finance—a system that is accountable to those that it serves and supports. As the minister pointed out, in no other part of the United Kingdom do local authorities have the certainty of knowing three years in advance what their central Government funding allocations will be. That is welcome, as it gives local authorities a certain security, allied to the flexibility that will allow them to make significant progress across the board.

Partnership is key in identifying shared priorities, which allows local authorities to plan for the long term and work together to remove any barriers to improvement. From what I have heard, I think that we now have much more open dialogue about the priority issues for both levels of government. That has to be a good thing.

Perhaps because of that, the increase in local authority capital investment allocations has already borne results, not only in additional local services and infrastructure, but in improved planning, and has paved the way for continued and sustained improvements for the future.

We are now in year two of the three-year local government settlement. The additional £350 million in grant support is welcome and will build on the real-terms increases announced last year. Local authorities will receive an increase of almost 11 per cent this year, which will bring the increase in total revenue grant support that local authorities receive next year to more than four times the projected rate of inflation. The situation is almost unparalleled and demonstrates the Executive's commitment to providing better public services for Scotland's citizens and to continuing the vital role that local government plays in delivering those services. Every local authority is set to receive an above-inflation increase in revenue grant. When the move from ring fencing to local outcome agreements develops further, we will, I hope, see further progress on optimising service provision.

It is important that we realise the difference that an efficient, fairer system of funding will make for local authorities and service users, working for the communities and the people of Scotland. However, I am somewhat confused by recent COSLA statements on finance. I liaise regularly with my local authority colleagues in North Lanarkshire and South Lanarkshire. Last year, when the strategy was announced, I encountered favourable responses. Not only has the settlement found favour in Labour authorities but, I am glad to say, it has unearthed consensus across the political spectrum.

As an avid reader of the Montrose Review, I was delighted to see Alex Johnstone MSP quoted as saying:

"Nobody can describe the grant settlement to Angus Council as anything other than generous."

Photo of Michael McMahon Michael McMahon Labour

I have just been told that I am in my last minute.

Before the Nats start to shout that a right-wing alliance has been formed, I draw members' attention to the Largs & Millport Weekly News, where SNP councillor Alan Hill, in welcoming all the extra money that will go to his authority, whinges—as the Nats are wont to do—that he hopes that the Scottish Executive

"gives all of the money to the council straight away."

Therefore, it is surprising to hear the contrary being reported in COSLA's recent critical statements, especially since its vice-president Pat Watters last year described the programme as

"the most positive settlement in more than a decade."

Overall, the promises are being delivered upon. The modernisation of local government is progressing, ensuring that services are created and delivered with best value. More stable, fairer long-term plans are now the norm. The progress so far is good and it is our duty to guarantee that more will be delivered in future. Scotland deserves the best possible services for the money provided. I endorse the progress made in local government finance and congratulate ministers on their continued efforts.

Photo of Kay Ullrich Kay Ullrich Scottish National Party 4:08 pm, 31st January 2002

Well, here we are again—five years of a new Labour Government at Westminster and nearly three years of new Labour here in Scotland, and still local councils up and down the country do not have enough money to meet the needs of our local communities.

Today, yet again, we have heard more spin from new Labour. We have heard how extra this and more that is being provided. In effect, the minister has told us that all is well in the world. Well, I have news for the minister. It is time he woke up and smelled the coffee, because all is far from well in local government in Scotland.

We have heard the new Labour rhetoric; let us now hear the unspun reality. In my home area, covered by North Ayrshire Council, the reality bears little resemblance to the land of milk and honey that we have heard from new Labour today. Of course, the story of insufficient funding is not new, having started with the Tories. Labour councillors were up in arms then, baying their heads off. Since 1997, Labour-controlled authorities have been caught between a rock and a hard place. How can Labour councillors say that things are even worse under their own Government?

As anyone who has read the COSLA briefing—and I am sure that we all have—will realise, the times they are a-changin'. Labour councillors are starting to put their heads above the parapet.

Let me give just a couple of examples of the reality that the people in North Ayrshire have to face because of Labour Government underfunding. In the financial year 1999-2000, the Labour council was £4.4 million short of the funding required to meet the needs of the community. The following year, the same Labour council identified and costed the needs of the local community. Then it was told how much money it would get from the Labour Government in Edinburgh, and it promptly had to slash services to the tune of £6.25 million. The cuts included £1,859,000 from education, £75,000 from special educational needs and more than £2.5 million from social services. Wardens were cut from sheltered housing and charges were applied for the provision of alarms in the homes of the elderly. The minister can spin all he likes, but that is the reality in North Ayrshire.

Photo of Kay Ullrich Kay Ullrich Scottish National Party

No, I will not.

Of course, that is only one part of the story. How can we talk about local government funding without referring to care of the elderly? It is scandalous that people who have been assessed as needing long-term residential or nursing care do not get that care and continue to languish in acute NHS beds or, even worse, have to remain at risk in their homes.

I have a letter from Mr Bernard Devine, chief executive of Labour-controlled North Ayrshire Council, which says:

"it is quite obvious that local authorities throughout Scotland are unable to fund all persons assessed as requiring residential or nursing home care."

The Executive claims that local authorities receive sufficient funding, so my question to the minister is quite simple. Do they or do they not? Let us stop the ducking and diving.

Photo of Kay Ullrich Kay Ullrich Scottish National Party

Do local authorities have sufficient funding to meet what is, after all, their legal obligation to secure placements for all those elderly people assessed as requiring long-term residential or nursing care? Thousands of elderly people and their families are waiting to hear the minister's answer. It is quite simple: yes or no. Is the funding sufficient or insufficient? I look forward to hearing his answer when he sums up.

Photo of Andy Kerr Andy Kerr Labour

Has she finished? Can I answer?

Photo of Bill Aitken Bill Aitken Conservative 4:12 pm, 31st January 2002

As the debate takes place, local authorities will be deciding on council tax for the forthcoming year. I am not one to wallow in nostalgia, but listening to some of the comments made this afternoon reminds me of the times when, as a member of Glasgow City Council, I would be berated by Bill Butler, Des McNulty and others for the perceived inadequacies and unfairness of the Conservative Government's local government settlement. In those days, as one of Mr Kerr's employers, I had to sit there and take it, and I had to justify why the Conservative Government was making that amount of money available to local authorities and why that was fair and viable.

When I heard that there was to be an 11 per cent increase in funding for local government—that is what was in the circular that was issued—I thought, "Oh, happy days." I thought that we would get more services, a more imaginative approach and more freedom for local authorities to do what they want in their areas. Sadly, I was soon to be disillusioned. When I read the circular from COSLA—a Labour-controlled body—I saw that, once new burdens are deducted and consideration is given to the amount that is being transferred from the ring-fenced fund to the general account, the increase is only £211 million, or 3.6 per cent. It is not surprising that I share COSLA's total disbelief and bitter disappointment at the local government settlement.

Photo of Mike Rumbles Mike Rumbles Liberal Democrat

Bill Aitken is making a very amusing speech, but Keith Harding, who would not take an intervention, made it clear in his speech that the Tories felt that far too much public money was being given to local authorities. Does Bill Aitken agree that, if the Tories were in a position to reduce the local government settlement, they would cause a great increase in council tax?

Photo of Bill Aitken Bill Aitken Conservative

That brings me to the other part of my dream. I thought that perhaps we would not get better services and supposed that I could live without that. Perhaps there would be a reduction in taxation. Then I had a reality check and remembered that we are dealing with Labour-controlled councils and a Labour and Liberal-controlled Scottish Executive.

Photo of Jackie Baillie Jackie Baillie Labour

Bill Aitken is evidently confused, but he will recall that East Dunbartonshire Council, which is unfortunately Liberal and Tory-controlled, is unable to spend its money. Is that down to the incompetence of the politicians or is it a signal of happy days?

Photo of Bill Aitken Bill Aitken Conservative

I am more concerned about West Dunbartonshire Council which, like Glasgow City Council, cannot collect its money. Throughout Scotland, there is uncollected taxation.

Photo of Andy Kerr Andy Kerr Labour

In 1992, the poll tax collection rate was 67.5 per cent.

Photo of Bill Aitken Bill Aitken Conservative

No doubt the rate that Mr Kerr mentioned was the result of his and his colleagues' interventions. They encouraged people not to pay—they were the can't-pay-won't-pay brigade.

We are debating the issue in a total vacuum. Until members of the Labour and Liberal-controlled Executive are prepared to persuade and exhort their colleagues in local government to adopt a more positive approach, give them responsibility that will ensure that they are answerable to the electorate in respect of the projects that they wish to undertake, and cut down on ring fencing, we will not get much further.

Photo of Des McNulty Des McNulty Labour 4:17 pm, 31st January 2002

When he told us about his dream, Bill Aitken forgot to say that he voted for reductions in services every year for 20 years when he was a member of Glasgow City Council.

There are many things to welcome. I welcome the extra £350 million in grant support to local authorities. We should welcome the additional stability that is provided by being in the second year of a three-year settlement. There are now record levels of support for local government. We should also welcome the steps that have been taken to reduce ring fencing.

New burdens and new responsibilities are being handed to local authorities—that is important. The Parliament and people in local communities are asking more of local authorities. In particular, more is being asked of local authorities that cope with high levels of deprivation and poverty.

Much has been said about the problems that Glasgow faces. I have first-hand experience as a councillor in Glasgow and support the case that Glasgow has repeatedly put for deprivation factors to be given greater weighting in the distribution formula. If we are committed to social justice, we must recognise that deprivation should be considered differently.

It is important to focus on three dimensions. Local concentrations of deprivation must be treated as special factors. We need to consider the balance between affluence and poverty in an authority. Edinburgh has local concentrations of deprivation, but the balance between affluence and poverty is fundamentally different from that in Glasgow and in West Dunbartonshire.

I want to highlight the problems that West Dunbartonshire faces: unemployment in West Dunbartonshire is running at almost double the rate in Glasgow; average incomes are significantly lower; and a higher proportion of the population are claimants than in Glasgow, which has been highlighted as having particular problems. West Dunbartonshire has an additional problem. Poor people in the area who need more support are asking for council services from a small authority with limited budgets. My colleague Jackie Baillie and I have fought hard for additional resources for West Dunbartonshire and have been successful to an extent. There has been an additional £9 million over three years from the better neighbourhood fund, we have won a share of URBAN II and we have had support from additional capital consents for schools and bridges.

Unless we shift the basis on which core funding is provided for areas such as West Dunbartonshire, I have real concerns about the capacity of a small authority, which deals with high concentrations of poverty and does not have much of a resource base from tax-gathering powers, to deal with its problems. A young person going into a secure care environment in West Dunbartonshire can wipe out 20 to 25 per cent of the authority's relevant budget line. That problem is faced not only by West Dunbartonshire Council, but by Inverclyde Council and other small Scottish authorities.

I acknowledge that there are problems in West Dunbartonshire and that the local authority has difficulties with tax and rent collection. It can learn from other authorities, such as West Lothian Council, about how to deal with people. However, the circumstances in West Dunbartonshire are fundamentally different: it has a concentration of poverty, the balance between affluence and poverty is unequal, and the authority faces restrictions because it is small.

West Dunbartonshire suffered just as much as Argyll and Bute, Glasgow, Dundee and other authorities at the time of local government reorganisation. That was identified in the Midwinter study. We need a better deal for authorities that have special problems. I hope that, in considering how local government finance can be reformed, problems of deprivation can be dealt with differently. It is not only about counting the amount of deprivation, but about double counting it, because we need to deal with it in the context in which it occurs.

Photo of Sandra White Sandra White Scottish National Party 4:21 pm, 31st January 2002

Government's announcement on local government finance is subjected to proper analysis it turns out to be like so many of new Labour's policies—all packaging and no content. Government claims of increases in local government grant support, subjected to proper scrutiny such as that from COSLA, are exposed as a trick of smoke and mirrors.

Members need not take only the SNP's word for that, but can take that of COSLA and other councils too. COSLA expressed its disbelief and bitter disappointment with the settlement. It said that the Executive's headline figures were being used to camouflage the realities of another difficult financial settlement for local government.

As COSLA said, the announced settlement was £130 million less than it had asked for. I am glad that Glasgow can no longer be accused because of its role in COSLA—that magic word again—as it is now not a member. However, COSLA also pointed out the increased pressures on local government because of the cost of financing long-term care for the elderly, the McCrone settlement and teachers' pay, and police and fire pensions.

Local government has suffered for far too long from underfunding and interference from central Government, which many believe has undermined local democracy and accountability. In a recent submission Unison contended that:

"Local government has suffered from the effects of year on year cuts in funding coupled with restraints on freedom of action. The effects of persistent neglect can be seen in declining local services and under investment in staffing and infrastructure."

Those are not my words, but Unison's. That position has not improved—nobody has mentioned this—since the election of new Labour in 1997. I seem to remember that new Labour said something like

"things can only get better."

An awful lot of people are saying that things can only get worse. New Labour's ideology is driven by Tory ideology. I am thinking particularly of PFI, or PPP, whichever way one wants to put it. I believe that those schemes will lead to further pressures on local government finance. The means of financing public services is wasteful and expensive. Every £1 billion of PFI contracts will cost the public purse £50 million more per year than borrowing through traditional public sector avenues would. That will only further undermine public services in the years to come. If members do not believe me they can read COSLA's submissions.

The minister mentioned ring fencing, or hypothecation, call it what one wants. The minister and I had a full debate about ring fencing at a Local Government Committee meeting. I remember that he thanked me for my kind words—I am sure that he was sincere. However, concerns remain regarding this type of hypothecation or ring fencing. COSLA mentions in its report that 30 per cent of all the moneys that local authorities get, which amounts to £6.6 billion over the next three years, comes with those strings attached. That is our concern.

The SNP, COSLA and local government are basically saying, "For goodness sake, give us less interference from central Government, less ring fencing, and less Executive talk about pushing through its policies and priorities at the cost of local needs and local people." I wish that the minister would take that on board. I know that we have had this discussion before, but I ask him to look at the matter again. The Executive may have priorities, but local government must be given the proper funding to address them.

Photo of Mike Rumbles Mike Rumbles Liberal Democrat 4:25 pm, 31st January 2002

There is no doubt that the Scottish Executive is committed to increasing the overall level of funding that is allocated to local government services. That is much-needed and I welcome that trend.

The level of support to local councils is 11 per cent higher in real terms than the first settlement by the Scottish Executive at the beginning of the Parliament. Other colleagues and I opposed that settlement at the time, in the first vote on the local government budget some two years ago. At that time I drew the Executive's attention to the fact that my local council, Aberdeenshire Council, suffers from an out-of-date funding formula that penalises rural councils. I have done so consistently since then and I make no apology for raising the issue once again.

We all know that it simply costs more to deliver council services such as education in rural Scotland than in urban Scotland. Des McNulty made the case about rural deprivation. However, I emphasise the fact that schools, school transport, roads, refuse collection and policing must be delivered. It does not depend on how well off or relatively poor the people living in a local authority area are; those services must be delivered. Aberdeenshire is the most rural of all Scottish council areas. More people live in small rural communities in Aberdeenshire than in any other local authority area, including the Highlands and Islands.

Photo of Des McNulty Des McNulty Labour

Why should the council with the richest tax base in Scotland get more money? It already gets £13 million in transferred business tax.

Photo of Mike Rumbles Mike Rumbles Liberal Democrat

I shall tell Des McNulty why. Through the Arbuthnott formula, £50 million every year is siphoned off from the north east. If Aberdeenshire received the average funding, we would lose £42 million. If Des McNulty listens to my speech, he might learn something.

As a result of pressure in the Parliament, the Executive has introduced several reforms that were outlined by the Minister for Finance and Public Services at the beginning of his speech. It has abolished the capping restriction on local authorities, moved to three-year funding and increased the total amount of money that is going to local government. I am especially pleased that it has started to recognise the funding difficulties that Aberdeenshire Council faces—Angus MacKay and Peter Peacock have secured an increase in that funding of 2 per cent above the average until the year 2004. However—and here is the rub—the funding formula is still heavily biased against Aberdeenshire. Aberdeenshire receives only 88 per cent of the average funding for each council. I hope that Des McNulty is listening. That works out at £182 less per person than the Scottish average, or £42 million less for the people of Aberdeenshire. That bias in the formula cannot be allowed to continue. It is simply wrong.

Since 1996, when Aberdeenshire Council was formed, until this year, it has faced continuous cuts in public services due to insufficient funding from all central Governments. This is the first year in which the council will not have to cut, although it will have a standstill budget. That is a welcome step in the right direction. An increase of £42 million each year would start to restore the level of services in Aberdeenshire to the level of services that are available in most other council areas.

I wanted to say something about the Conservative position, but I am running out of time. I cannot understand the position that was outlined by the Conservative spokesman. The Conservatives say that too much money is going into local authorities and would force up the council tax.

I support the motion. If we did not, the councils would receive no funds at all and there is no other option before us. The motion is a step in the right direction. However, I want the Executive to go much further than it has done. It is not radically overhauling the whole system of local government finance. Like Des McNulty, I want a radical change—although we are coming from opposite ends of the spectrum. What we need is a radical shift in resources to where they are really needed, on a fair and sustainable basis. I would like the whole system of local government finance to be reformed, at the same time as local government organisation and service delivery is reformed. I want an Executive with an agenda for radical reform and I am not convinced that we are there yet.

Photo of Sylvia Jackson Sylvia Jackson Labour 4:29 pm, 31st January 2002

I have approached today's debate, as others have, from the perspective of our deliberations in the Local Government Committee, which has spent months collecting evidence as part of our local government finance inquiry, the report of which will be available shortly. As Keith Harding said, I hope that we will have more time to discuss it than we have had for the debate today.

Many of the issues raised in that inquiry are pertinent today. In looking forward, the committee has been able to gather views as to the progress made by the Executive so far. The feedback has been generally positive. Three-year budgeting allows for much greater flexibility and less stress for councillors than the normal yearly budget settlement process. There is still concern about the level of ring fencing. While it is accepted that Governments should ensure that priorities are delivered, councils still feel that the present degree of ring fencing does not allow sufficient flexibility for them to focus money effectively on particular local needs.

The piloting of local outcome agreements has been welcomed as a useful way forward. Other options for improving the framework for local authority capital investment through a prudential system have also been welcomed. Both mechanisms should allow authorities more flexibility. The latter mechanism should allow there to be more flexibility in determining councils' investment levels while ensuring that they continue to seek best value when choosing between funding options.

This is an opportune moment to say that the committee has heard evidence to the effect that some councils are considering not-for-profit modifications to the more usual PPP schemes. I welcome the minister's agreement at the last Local Government Committee meeting to continue examining all options relating to PPP.

I could not finish my speech without mentioning that the cost of the renewal and maintenance of the huge non-trunk road system in my constituency is of some concern. I should add that, over many years, ring-fenced money has not been used to keep pace with maintenance issues. That said, the cuts that have affected local authorities over recent decades have left councils with difficult choices to make, often involving the use of non-ring-fenced money to keep core services afloat.

I make a special plea that non-trunk roads, which must be important to many other MSPs, should be addressed. The Executive is moving in the right direction but there is, as a result of years of cuts, much still to be done.

Tricia Marwick's earlier remarks demonstrated that she is unable to appreciate that we must look at the bigger picture of the modernisation of local government in order to put local finance in it.

Photo of Brian Adam Brian Adam Scottish National Party 4:32 pm, 31st January 2002

I do not envy the task of Andy Kerr, the minister with responsibility for both finance and local government because, inevitably in this kind of debate, he hears a lot of special pleading on behalf of local authorities who have—quite properly—been lobbying their local MSPs. He will be glad to know that I do not intend to make a special plea on this occasion.

I was interested in the point that Dr Jackson made about modernisation. Every time I hear the word "modernisation" coming from the lips of new Labour members, I cringe and worry about what is going to get emasculated now. Normally, modernisation equates to a cut. What will differ on Friday 14 this year, as opposed to previous years, is that instead of every council making cuts, fewer councils will do so. To some extent—and perhaps I say this grudgingly—that is some measure of progress. However, I am confident that almost all the authorities will increase their council tax by more than the rate of inflation, most of them by at least twice the rate of inflation and some by considerably more.

There are significant discrepancies between the view of the Executive and the view of COSLA on the settlement. That happens every year. It is neither helpful nor illuminating and we must resolve that problem. The Executive and its predecessors have always been guilty of adding in on top of the headline figures the burdens of the new initiatives that will cost the councils money and are not always fully funded. That is a significant element of the 11 per cent headline increase.

Photo of Brian Adam Brian Adam Scottish National Party

I ask Jackie Baillie to let me continue. I do not plan to take an intervention.

The difference between COSLA's figure and the Executive's figure is of the order of £750 million from a £6.5 billion settlement.

The minister and COSLA have differing views on the amount that is ring-fenced. The minister says that the figure is 10 per cent; COSLA says that it is 30 per cent. We need agreement about how that dispute is to be resolved, because that is part and parcel of the debate.

What has not arisen is the fact that the increase in council tax that has been levied since Labour came to power is the equivalent of 2p in the pound on income tax. Burdens are moving not only on to councils, but on to council tax payers. That happens against a background of cuts in services.

Photo of Murray Tosh Murray Tosh Conservative

The member is in his last minute.

Photo of Brian Adam Brian Adam Scottish National Party

I was interested in the First Minister's response at question time to a question about the lack of a settlement of the independent care homes dispute. He said that that was under negotiation and made it clear that the Executive would not pick up the whole burden. I presume that local authorities will pick up more burdens. From where will the money for local authorities come? Will it come from cuts in services elsewhere or from increases in council tax? I am most interested in what ministers will say about the impact that that will have on council taxes and council services in the coming year, when local authorities will not have more money to throw into the pot.

Photo of George Lyon George Lyon Liberal Democrat 4:37 pm, 31st January 2002

I welcome the figures in the order. They reflect the Liberal-Labour coalition's priorities, and, above all, they will start to rebuild local government services after years of cuts by the Tories, and, unfortunately, by our Labour colleagues during their first two years in power.

At least the coalition lays out its priorities and provides the finance to back them up. That is in stark contrast to the Opposition. Despite having 15 minutes between them, the SNP's front-bench speakers—Ms Marwick and Ms Ullrich—offered us not a single suggestion about what they would do differently. If Opposition members want to engage in serious debate on a serious issue, they must make a serious contribution.

Professor Arthur Midwinter told the Local Government Committee that whereas in April 2000

"it was clear that local government grant had been falling in real terms, the trajectory is now for real growth of 11.7% over the plan period."

Professor Midwinter is well regarded as an independent expert on the subject.

Every party should welcome the Executive's clear commitment to rebuilding our vital local services that is contained in the order. It is not a cure-all and will not undo all the cuts that were administered under the Tories, but it is a significant start at rebuilding local government services. It is also to be welcomed that when the coalition imposes new initiatives on local government, they are backed by real cash to pay for them. That is unlike previous Governments, which top-sliced and ring-fenced part of the existing settlement to local government and expected it to deliver initiatives.

That is why the settlement contains new money to fund McCrone and free personal care, which are key priorities for the Liberal Democrats and Labour in the coalition. It is important to note the work that Andy Kerr and his colleagues are undertaking to build indicators of rural deprivation into the formula for distributing the financial cake. That is important work that will ensure that rural councils are given their fair share of resources, to tackle rural poverty and rural deprivation. That is important to many members.

I draw two matters to the minister's notice. The first was touched on by Des McNulty—Professor Arthur Midwinter's report into the mismatch effect, which has resulted in several councils having to raise council tax well above the average increase to make up the shortfall in central Government funding.

That report was a serious piece of work undertaken by an independent, highly respected expert on local government finance, and I would hope that the Executive will look favourably on its findings. I have sent the minister a copy of it, and I, along with my colleague Jackie Baillie, who represents a constituency that partly lies in Argyll and Bute, would like to ask the minister for a meeting to discuss that issue in more detail. I would appreciate it if the Deputy Minister for Finance and Public Services could, in summing up, indicate that that will take place.

I would also like to draw the minister's attention to the distribution of the McCrone settlement, which was mentioned by my colleague, Iain Smith. The cost of the settlement was clearly calculated based on the number of teachers, but its distribution was based on grant-aided expenditure.

That has meant that many rural councils face being penalised because of the extra teachers required for small rural schools. I raised that issue with the previous Minister for Finance and Local Government, but I ask Andy Kerr, the new Minister for Finance and Public Services, to reconsider that important issue. Rural councils are being penalised and that is an anomalous situation. If the total amount of the budget is calculated, surely that should be distributed according to the number of teachers employed.

The Liberal Democrats support the substantial increase in local government finance, which delivers on Liberal Democrat and Labour priorities. It demonstrates our commitment to reversing the cuts of previous Administrations and, I believe, deserves the support of all members.

Photo of David Davidson David Davidson Conservative 4:41 pm, 31st January 2002

It is a pity that, at the end of his speech, the Minister for Finance and Public Services did not follow the courtesy that the Presiding Officer has suggested, and stay in the chamber for at least the following two speeches—it would have been fairer had he stayed to hear my colleague, Mr Harding.

What we have usually got from Labour in the past is education, education, education. What we have heard today, from both Labour and some Liberal Democrats, is hypocrisy, hypocrisy, hypocrisy.

Photo of David Davidson David Davidson Conservative

If there has been delivery, why was Mr Rumbles complaining about a lack of support in order to deliver?

Photo of David Davidson David Davidson Conservative

I will take Mr Rumbles in a second or two.

It is an absolute nonsense to say that there is more money for local government in the terms that the minister describes. An increase in resources has indeed been going through, but much of that is totally tied to the agenda that is being driven by the Executive. How do councils fund that increase? They take money out of other services, which they are hard-pressed to deliver, in order to support— [Interruption.] Those are COSLA's own words; it has been like that for years.

Photo of David Davidson David Davidson Conservative

Not at this time. I will come back to Mr Rumbles.

If the members of COSLA are so happy—and let us face it, COSLA is rather full of Labour councillors, although it has a few members of other breeds too—they will be united in their view of hypothecation. If hypothecation shifts from one burden, as it were, to an open-ended commitment to spend money anyway, that does not equate to new money, and people cannot pretend that it does. I am sorry that the Minister for Finance and Public Services did not accept my intervention when he was discussing that in his speech.

As we heard from Brian Adam, there is a definite pressure on councils to raise council tax instead of opting for the tartan tax, because the Executive did not want to raise that tax before the next election. Mr Adam's figure is 2p, and I have heard other figures from other authorities.

The COSLA briefing started interestingly: it called for honesty. That would be a very good place to start for those on the Executive benches.

Photo of David Davidson David Davidson Conservative

Before I give way to Mr Rumbles, I will point something out to him. He accused my colleague, Mr Harding, of saying that there should be a reduction in the moneys going to local government. What my colleague actually said—which Mr Rumbles would have heard had be been listening—was that, if there is all that underspend washing about in the centre, why are councils not given some support to deliver essential services, as well as the services that the Executive wishes to push through?

Photo of David Davidson David Davidson Conservative

I will take the minister before I take Mr Rumbles.

Photo of Andy Kerr Andy Kerr Labour

I have said umpteen times that end-year flexibility and underspends are good systems to operate. They allow for capital slippage on projects and for resources to be spent on their allocated purposes. People could advocate putting money into the system in a rush at the end of the financial year, which would mean that money is unwisely spent and does not deliver public services—that is the alternative.

Photo of David Davidson David Davidson Conservative

As the minister knows, I cannot disagree with that, because we do not want there to be poor spending. However, as Mr Smith rightly pointed out, even if councils have a three-year forward notice of what they are likely to receive in their settlements, that is still not a rolling settlement. Councils do not know what the Executive will bang on to them as service requirements in the years in between, so they cannot proceed with planning. Mr Smith was, for once, absolutely right in pointing that out.

If I may, Presiding Officer, I will now come round to Mr Rumbles.

Photo of Murray Tosh Murray Tosh Conservative

You are in your last minute, Mr Davidson.

Photo of Mike Rumbles Mike Rumbles Liberal Democrat

The member keeps using the word "hypocrisy". It comes very quick to his lips. He still will not make it clear what the Conservative position is. Does the Conservative party want to put more money from the Executive into local government or does it want to cut the money that goes to local government and to increase council taxes?

Photo of David Davidson David Davidson Conservative

We do not necessarily wish to cut anything. That is for the local council to decide.

We want a fairer distribution of support across Scotland, particularly to rural councils. We want councils to be left to make the decisions that they are best fitted to make. One size does not fit all—that is the very argument that Mr Rumbles makes. The Scottish National Party made the same comments. It is time that we reached a situation—

Photo of David Davidson David Davidson Conservative

My final point is that it is about time that the Parliament did not chicken out of the debate that we need to have. That subject of that debate is simple—for what should local government be responsible. When we have dealt with that, we can deal with the finance for it.

Photo of Andrew Welsh Andrew Welsh Scottish National Party 4:46 pm, 31st January 2002

I thoroughly agree with the last comment. It is just a pity that local government finance was never properly dealt with under Conservative Governments.

I now know what déjà vu means, because I have listened to the same debate and to the same plea for the adequate funding and financing of local government for the past 25 years. The Scottish Executive is simply following a long tradition. Michael Forsyth played exactly the same game for many years throughout which local government and its services suffered. Past settlements were simply an exercise in juggling funds between one heading and another—robbing Peter to pay Paul. The total sum was not adequate to fund properly the services that local government was asked to deliver.

We now have local administration—we no longer have local government per se, which I find deeply regrettable. Central Government has a stranglehold over local authorities. It controls capital expenditure and revenue expenditure. Local authorities have a limited ability to raise local finance. The imposition of new burden after new burden without the provision of the necessary resources continues. I have observed that process for decades. The Executive is simply following a long tradition. The fact that local government is underfunded for the tasks that are given to it is a real problem. The present settlement does nothing to change that.

Photo of Andy Kerr Andy Kerr Labour

The allocation of resources to local government will rise by 25 per cent to £7 billion. What does the SNP advocate on the resourcing of local government?

Photo of Andrew Welsh Andrew Welsh Scottish National Party

This is a case of mirrors and spinning. The minister has indicated that the increase this year is £630 million. When all the burdens placed by central Government are added in, there is a £130 million deficit. The Executive is using smoke and mirrors—the same deceit that Labour members of Parliament fought against when the Tories were in power. Now that the Labour party is in power, however, I do not hear many comments about that. Mr Kerr will have to explain the situation to Labour councillors the length and breadth of the land, because they are the ones who will be left with the mess that he has created.

In his speech, the minister spoke about

"distributing historic levels of resources to local government."

He referred to a partnership. It is a gey one-sided partnership that involves central Government control of capital revenue spend and the imposition of new burdens without money to meet them.

I noticed that the minister quickly moved away from describing the financial provision for this year to elections and other important, but non-financial, matters. I do not blame him for trying to deflect attention away from the new financial deal and the imposition of new burdens without resources. The minister should not pretend that the funding is new money, because it is not. He said that he was for the delivery of better public services and the resources to do the job. We are all in favour of that, but the present deal simply does not provide it. I wish Mr Kerr well in explaining to Labour councillors what the deal will mean.

Tricia Marwick's analysis of the deal brought us closer to the reality. George Lyon's rosy picture will not seem so rosy to Liberal Democrat councillors who are setting increases in council taxes and cutting services. There are few councils more used to cutting services than Liberal Democrat councils—that applies to Iain Smith. I suppose that Liberal Democrat members have to justify being in bed with Labour, but they cannot justify this settlement.

Michael McMahon wanted progress across the board and better public services. So do we all. This settlement will not provide that. For him to quote his Tory pal Alex Johnstone was a big mistake. Of the £12 million extra that is being made available to Angus Council, £10 million is already spoken for. Two million pounds will not meet pay increases and inflation, so in fact there has been a cut.

Photo of Andrew Welsh Andrew Welsh Scottish National Party

Local government services are crucial to the social and economic well-being of our country. Failure properly to finance those services affects the quality of life of every individual and family in Scotland.

Photo of Murray Tosh Murray Tosh Conservative

The member is in his last minute.

Photo of Andrew Welsh Andrew Welsh Scottish National Party

Scottish local taxpayers were expecting a better deal from the Scottish Parliament. Instead, they face a combination of higher local taxes and service cuts. That is the reality of the Executive's settlement.

The blame rests not with Scottish local authorities, but with Scotland's central Government. Our new Parliament should have been a new start, but now it offers the same failed, anti-local-government recipe for poorer local services. The people of Scotland are being fed on a diet of deceit, deliberate deception and financial conjuring tricks from the coalition Government. What the unionist coalition calls a generous rise of £650 million in local government funding is in fact a decrease of £130 million in the money available. The con comes from double counting, ring fencing, underfunding new burdens and omitting new on-year spending pressures, such as inflation, McCrone payments and policies imposed by central Government policies. The combination of gearing, new burdens and underfunding will ensure the worst of all possible worlds for the Scottish people—higher council taxes and cuts in essential daily services.

The unionist coalition has continued Westminster's policy of underfunding and undervaluing Scotland's local government system. That is the reality of the Local Government Finance (Scotland) Order 2002, and no amount of spin doctoring can disguise it.

Photo of Peter Peacock Peter Peacock Labour 4:51 pm, 31st January 2002

A number of interesting points have been made in the debate, but very few of them have been made in the past five minutes.

I start by addressing the points made by those members who recognise the truth of what is being done today through the Local Government Finance (Scotland) Order 2002 and the good news that the order represents for Scottish local authorities. The settlement involves a real extra increase in grant of about £500 million. Iain Smith, Michael McMahon, Mike Rumbles, Sylvia Jackson, George Lyon and others referred to that. They recognise that the extra resources that are being made available to local authorities will provide for real new services across the board. Free personal care, a high priority of the Executive, will be delivered through the settlement. The settlement will also fund concessionary fares across Scotland for elderly people and those with disabilities and it will fund an expansion in education. Nursery places will be made available to all three and four- year-olds who want them. Teachers will be paid better and their motivation will be improved. The list goes on and on.

Photo of Andrew Welsh Andrew Welsh Scottish National Party

Can the minister explain how the settlement helps to fund self-financing pay awards, inflationary price increases, police and fire service pensions and increases in insurance premiums? Every local authority would love to know the answer to that question.

Photo of Peter Peacock Peter Peacock Labour

The answer is quite simple: this three-year settlement is one of the first for many years to recognise pay and price inflation in local government. Previously, that had to be funded out of efficiency gains. Those efficiency gains can now be used to expand public services in the way that we want councils to do. Other members referred to the benefit of the three-year budget system, which gives councils stability and the opportunity to have proper planning horizons, enabling them to build and develop the services that we all want.

Sadly, today we saw the SNP slip back into its normal greetin, moanin and girnin about every piece of good news that the Executive provides. SNP members talk about smoke and mirrors, but that is simply the SNP's new form of alchemy—it is trying to create smoke where there is no fire. Yesterday the SNP issued a press release. At the time, we did not know that that would turn out to be Tricia Marwick's speech in this debate. I do not know Tricia Marwick's professional background, but it is certainly not in accountancy. From her press statement and her speech today, it seems that she does not know the difference between addition and subtraction, let alone multiplication. When money is added, in the strange world of the SNP it is subtracted; when totals rise, in the strange world of the SNP they shrink. When we give more money, the SNP claims that we give less.

We are providing for new services that are fully funded, not new burdens on local authorities. We are funding all the additional services that we are asking local authorities to provide. Those services include free personal care—a priority not just for this Parliament, but for the Scottish people.

The SNP still cannot count. That is why it would lead Scotland to economic disaster. The recent report "Government Expenditure and Revenue in Scotland" showed very clearly a structural deficit of £4 billion. That would not contribute to an oil fund, but would mean a deterioration in the services that are available to the Scottish people. That is why we have seen no budget from the SNP; we have still not seen any of the money.

Photo of Iain Smith Iain Smith Liberal Democrat

The minister referred to an Opposition press release and to the speeches that Opposition front benchers have made today. Can he confirm whether that press release contained an indication of how much additional money the SNP would put into local government or how it would pay for such an increase?

Photo of Peter Peacock Peter Peacock Labour

Iain Smith makes an excellent point. The press release revealed that the SNP has no costings or proposals for its budget and nothing that would take Scotland forward—the SNP would simply take Scotland backwards.

As for the Tories, I have seldom heard a more audacious approach to this issue than that taken in the speeches that I heard today. The Tories have an utterly abysmal record in running local government in Scotland. They constantly undermine local government and denigrate the efforts of public officials who are trying to do a good job. As Des McNulty pointed out, they imposed the massive cuts in spending for which Bill Aitken voted throughout his 20 years as a member of Glasgow City Council. Keith Harding has the nerve to talk about giving local authorities genuine flexibility, yet his party introduced spending guidelines, capping regimes that were so extreme that local authorities found it impossible to work properly, and penalty regimes that clawed grant back.

The Tories also introduced such limited planning horizons that we had to recalculate my council's budget in one morning because of a fax that came in from the Scottish Office at 10.30 am. That is the amount of planning time that the Tories gave councils, in stark contrast to the Executive's actions. We are giving councils stability in their finances and we are removing guidelines and penalty systems so that local authorities have the freedom to act.

Photo of Brian Adam Brian Adam Scottish National Party

I thank the minister for giving way. Will he answer the question that I posed earlier? We all hope that a settlement between the independent health care operators and COSLA will be reached soon, but what impact will that have on local authorities? Where does he think that the money to pay for a settlement will come from? Will the Executive take that situation into account in next year's deal?

Photo of Peter Peacock Peter Peacock Labour

I have nothing to add to the comments that the First Minister made during question time—he covered the point adequately and the negotiations are continuing.

I will finish the point that I was making about the Tories. The Tory party that introduced those restrictions now claims to support local government. The same Tory party wants to remove education from local government control and wants to privatise care—it has described in the chamber time and again how it intends to do so. The truth is that, as soon as the Tories are given the opportunity, they return to their old agenda of cutting and denigrating public services.

Photo of Keith Harding Keith Harding Conservative

The minister has taken the road to Damascus—it was a lengthy journey. Does he agree that we are equally entitled to change our views?

Photo of Peter Peacock Peter Peacock Labour

The problem is that the Tories have not changed their views—they just pretend that they have. As I said, they have returned to their old agenda. They remain committed to removing education—the largest service—from local government control and to the privatisation of care. They have nothing to offer local government—they never had anything to offer local government.

I will pick up on a number of points that members raised during the debate. In particular, I want to address the issue of funding for the McCrone settlement and the bogus SNP claims that that settlement has been underfunded. The plain fact is that COSLA agreed, in writing, both to the total sums involved and to the funding distribution system. We made full provision of more than £850 million in this year and in the next two years. The funding has been distributed on exactly the same basis as was followed in previous years when teachers' salary rises were distributed. Neither COSLA nor individual councils have asked for changes to be made to the distribution system.

Photo of Tricia Marwick Tricia Marwick Scottish National Party

The Executive's estimate of the cost of implementing the McCrone settlement was £430.4 million and its agreed funding for the settlement is £404.9 million. COSLA's figures show that a shortfall of £42.7 million is being met by local authorities. Does the minister agree with COSLA's figures?

Photo of Peter Peacock Peter Peacock Labour

I repeat that our agreement with COSLA was that it would fund the normal, year-on-year increases for teachers' pay and that the Executive would fund the additional costs of the settlement. Agreement on the total sums and on the distribution system was struck in writing and we have stuck to that agreement.

Mike Rumbles and Iain Smith referred to the problem with the distribution system in rural areas, which arises because calculations are based on pupil, not teacher, numbers. No allowance is made for the number of small schools in an area and I am aware of the argument in the Highlands that no allowance is made for Gaelic schools. However, I repeat that the distribution system was agreed— the same system has always been used for such matters. It would be inappropriate to distribute that resource using teachers as the measurement, as that method would reflect the policy choices of individual local authorities—it would be wrong for Glasgow to pay for the policy choices of Highland, Argyll and Bute or Aberdeenshire, as those councils make local policy choices to vary numbers of staff.

The grant settlement makes provision for small rural schools where the pattern of provision cannot be altered. That is why Highland Council receives a rural addition of £3.1 million, Aberdeenshire Council receives an addition of more than £2.6 million and Argyll and Bute Council receives an extra £1.4 million. That is also why additional funds have been provided for Gaelic-medium education. I should perhaps say that that is the rationale for much of the special islands needs allowance that is received by the islands and by Argyll and Bute. If we were to unravel that settlement, those councils' difficulties might increase.

I make no apologies for again emphasising our main message: the finance order is a crucial local government settlement that continues the year-on-year real-terms growth in funding for councils. By any standards, the past three years have seen unprecedented increases. The planned 25 per cent increase in funding to local authorities means that resources reach almost £7 billion. Those resources are being attached to the Executive's highest priorities: improving education; improving transport; and reducing crime and making people feel safer in their communities. I commend the order to the Parliament.