Local Government Finance (Scotland) Amendment (No 2) Order 2011

– in the Scottish Parliament on 16th March 2011.

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Photo of Alasdair Morgan Alasdair Morgan Scottish National Party

The next item of business is a debate on motions S3M-8130 and S3M-8140, in the name of John Swinney, on the Local Government Finance (Scotland) Amendment Order 2011 and the Local Government Finance (Scotland) Amendment (No 2) Order 2011.

Photo of John Swinney John Swinney Scottish National Party

On 10 February, Parliament approved the Local Government Finance (Scotland) Order 2011, which enabled Scotland’s local authorities to set next year’s revenue budgets. As part of that, local authorities were asked to provide by 28 February formal assurances that their approved 2011-12 budgets included provision to deliver on all the specified commitments in the 2010 spending review agreement, including freezing council tax levels for a fourth consecutive year; maintaining record levels of front-line police officers to help to keep our communities safe; maintaining the commitment to implement the early years framework and curriculum for excellence, to help to ensure that our children receive the best possible education; maintaining pupil teacher ratios in primary 1 to 3; and delivering a new change fund to help to alleviate pressure on the health and social care system and to identify and deliver new ways of working to improve outcomes in those fields.

On 1 March, I was delighted to welcome the news that all 32 local authorities in Scotland had formally accepted the funding package that the Government had offered. Their decision had been taken on the clear understanding that the funding that was held back from the original order would be forthcoming. As a result, the motions seek Parliament’s agreement to deliver an extra £426.3 million revenue funding to support the vital services that our communities expect and deserve, and to help to deliver our jointly agreed set of commitments.

On a more technical point, this year’s local government finance order is subject to two amendment orders. This is because—as I announced on 9 February in the stage 3 debate on the Budget (Scotland) (No 5) Bill—I have also updated the forecasts for the total estimated distributable non-domestic rates income for 2011-12 to take account of lower than expected losses from revaluation appeals and a considered assessment of growth. As a result, the distributable amount of non-domestic rates income for 2011-12 has been increased by £11.5 million, and to maintain the total local government funding I have consequently offset the revenue support grant total by the same amount. Those two offsetting changes have no impact on the total revenue funding that will be available to local authorities next year.

Failure to approve both amendment orders today could have potentially serious consequences for all local authorities across Scotland and on the vital services that they will provide to our communities. It would, for example, result in a further significant reduction in funding on top of the £432.9 million that has already been taken out of local authority budgets in the face of the wider public spending reductions that had to be confronted in this year’s budget.

The provisions in the orders clearly support one of the Government’s central commitments, which is delivery of the council tax freeze. The freeze demonstrates the Government’s commitment to continuing to do all that it can to support families in what remains a challenging financial climate, and it will be welcomed by households as a means of helping to ease the financial pressures that they face as we work towards economic recovery.

Our agreement with local authorities to extend the council tax freeze means that, over the full four years of this Parliament, our commitment will have cumulatively saved households the length and breadth of Scotland £700 million. Such a substantial saving to all households in Scotland has helped—and will continue to help—to boost spending in local economies.

Photo of Jeremy Purvis Jeremy Purvis Liberal Democrat

Is the cabinet secretary very pleased by how that £700 million has been distributed between the wealthiest people living in the biggest houses and the poorest people living in the smallest houses?

Photo of John Swinney John Swinney Scottish National Party

It is clear that the council tax freeze has provided welcome assistance to people who are facing severe financial challenges. For example, since 2007-08, the tax for an average band D property in England has increased by £118, or 8.9 per cent, whereas in Scotland the tax has remained the same. As a result, the average council tax bill for a band D property in England is £290 higher than it is in Scotland. That is a real benefit to household incomes in Scotland.

The amendment orders also contain the additional funding that I announced in the stage 3 debate on the budget on 9 February, which includes £5 million for the supporting people budget to help to smooth the impact on local authorities that are most adversely affected by the recent updating of indicators used in the distribution formula, and a £0.4 million increase in Edinburgh's capital city supplement. In summary, approval of the amendment orders will authorise the distribution of a further £431.7 million to local government to fund the on-going council tax freeze and the essential services that local authorities deliver for the people of Scotland.

Since the order in February, two distributional changes to revenue funding have been agreed with the Convention of Scottish Local Authorities. The distribution of £15 million for the protection of teachers’ posts has now been agreed and included in the revised figures in the amendment order, and the Lothian and Borders Police board loan charges specific grant allocations have been reallocated within the constituent local authorities.

In order to provide the best possible outcome for councils, we have worked constructively with our local government partners, and have agreed an overall funding package that restricts councils’ average funding reduction to 2.5 per cent. That is greater protection than there is in other parts of the Scottish budget, and the agreement for Scottish local authorities is superior to that for local government in England.

I move,

That the Parliament agrees that the Local Government Finance (Scotland) Amendment Order 2011 be approved.

That the Parliament agrees that the Local Government Finance (Scotland) Amendment (No. 2) Order 2011 be approved.

Photo of Michael McMahon Michael McMahon Labour

When we previously debated a local government finance order, on 10 February, local authorities throughout the country were in the throes of putting together cuts that were foisted on them by the budget reductions which Mr Swinney outlined in his financial package. At the time, the cabinet secretary advised us that he would come back at a later date, as not all of our local councils had written back to confirm their annual submission to his council tax freeze blackmail threat. With the requisite acquiescence obtained, we have come back to the chamber to finish off the job.

Mr Swinney will receive the usual enthusiastic support for his suppression of local democracy from the anti-local government Conservative party, but I assure the Scottish National Party Government that there is no agreement from the Labour Party that the local government financial settlement is fair or that its concomitant additional burdens are properly funded. Like many of our colleagues in local government, Labour accepts the financial deal with resigned recognition of a fait accompli, rather than with any recognition that it is fair and properly funded.

As I said when the initial order was presented to members, the Government’s failure to get its priorities right and the maintenance of its coercion strategy have prevented it from working constructively and imaginatively with our local authorities to find ways of protecting jobs and services.

Photo of Joe FitzPatrick Joe FitzPatrick Scottish National Party

I am curious and slightly stuck for words. Can the member tell me whether or not the Labour Party supports the council tax freeze? The proposals that have been made are important, as they will deliver the council tax freeze. Does the Labour Party support that freeze?

Photo of Michael McMahon Michael McMahon Labour

Mr FitzPatrick should have stayed stuck for words. We have made it absolutely clear that we have always objected to the underfunding of the council tax freeze. That is the problem. I am glad that Mr FitzPatrick intervened, as I was going to make that point. When I spoke in the debate on 10 February, I made it absolutely clear, for the avoidance of doubt, that Labour has no problem with zero increases in the council tax. I suggest that members look at the Official Report of that debate and read other debates in which we have confirmed that position. I welcome the opportunity to reiterate that view and to remind members that what we object to is the unnecessary adverse impact of the underfunding of the council tax freeze and what that has continually forced on our councils. The loss of more than 3,000 teachers in our schools lies at the door of the underfunded freeze. We should make no mistake about that.

Four weeks on from the previous debate, we remain concerned about the adverse impact of the Government’s strategy, but we accept its reality. That said, we must acknowledge not only that our local authorities have signed up for the status quo for the fourth year, but that it has been indicated to them that they can expect no better in the 2012-13 financial year.

It is clear to us that the SNP has broken local government finance. Its proposals for a local income tax would smash local government finance to pieces and ultimately wreck local government altogether. It will take some time for us to undo that mess. We have to accept that, when we come into office in May, we will have to begin the task of repairing local government.

The cuts that have been caused by the settlement hurt the most vulnerable people: the young, the old, the poor and the disabled. They will not get the services that they need and deserve from our local councils because of the SNP Government. Local authorities and those whom they serve can only hope that the financial orders are the last ones to be inflicted on them by the current finance secretary. We will do all that we can to ensure that that is the case and that the road back to strong local government can begin when a Labour Administration is returned to the Parliament to deliver that.

Photo of Derek Brownlee Derek Brownlee Conservative

That is a terrifying prospect.

Given that we vote in the budget debate in February, I always wondered why we regularly come back to consider such orders. I appreciate that there is the technicality of voting to give additional money to councils around the council tax freeze, but I always wondered why we had debates associated with such orders and whether we were not simply rehearsing old territory. It has suddenly come to me that that is actually a work of tactical genius—on the part of the Government business manager, I presume—because it ensures that we regularly have to sit through what has become a long-running soap opera: the Labour Party’s evolving position on local government finance. Only four years ago, the Labour Party said that it was going to have a review of local government finance and that we would have the details soon. Now, it appears that Michael McMahon is simply the latest in a long list of Labour figures who have been hung out to dry by their leader.

Photo of Michael McMahon Michael McMahon Labour

Does the member recognise that, in the interim, we have had a recession and the council tax freeze? Does he accept that the landscape of local government has changed and that it would be remiss of us not to reflect that?

Photo of Derek Brownlee Derek Brownlee Conservative

I am glad that someone on the Labour benches has finally admitted that the recession happened on that party’s watch, because Labour members have been keen to deny that in previous years. Michael McMahon tells us that the Labour Party has been keen on the council tax freeze, which makes me wonder what Tom McCabe, David Whitton and Malcolm Chisholm were thinking when they voted against the council tax freeze in the Finance Committee’s report on this year’s budget.

Photo of Derek Brownlee Derek Brownlee Conservative

Oh—it is underfunded, which I presume is why, in 2009, Mr McMahon said:

“The SNP Government is ripping off local councils by £270 million.”

Are we to take it that the Labour Party proposal now is that the council tax freeze will be fully funded if it gets £270 million per year extra? It appears that Labour members here, like their masters in London, are happy to make spending commitments, but do not have a clue how to meet them.

We have been consistent in welcoming the council tax freeze. We are the only Opposition party that has supported the council tax freeze since 2007. Of course, we welcome the measures that have been taken in relation to police numbers.

Photo of Jeremy Purvis Jeremy Purvis Liberal Democrat

When the evolving debates began, I think that the Conservative policy was to halve the council tax for all pensioners. For the record, and so that I understand the member’s party’s position, is that still Conservative policy?

Photo of Derek Brownlee Derek Brownlee Conservative

If I remember correctly, the Liberal Democrats were committed to a local income tax, but Ross Finnie has said that they would not introduce it in the next five years. We would reduce pensioners’ council tax bills by £200. I appreciate that that is a different formulation from that in 2007 but, as Mr McMahon said, things move on. In relation to the measure on police numbers, which is a key commitment that was also secured by the Conservatives, it is nice that there is no longer any confusion in the Labour Party and that it now seems to want that to happen, too.

I turn to an issue on which we should reflect as we discuss the orders. Mr McMahon has reeled off a list of things that he will sort if we have a Labour Administration in May, but where on earth will Labour get the money from? The Labour Party has ruled out spending reductions here, there and everywhere and has made spending commitments in every spending portfolio. Apparently, it now rules out a graduate contribution, although a previous member of the Labour shadow cabinet was hung out to dry on that by their leader. So, where exactly will the money come from? That makes we wonder whether the Labour Party has given any thought to what would happen in the unfortunate event that we wake up after 5 May and find that we have a Labour Government, because an awful lot more Labour spokesmen will be hung out to dry in that case.

Our position is clear. We support the council tax freeze. Just as we would not have supported a budget this year that did not freeze the council tax, we will not do so in future years. Labour members might wish to reflect on that if we are unfortunate enough to have them in government again.

Photo of Jeremy Purvis Jeremy Purvis Liberal Democrat

We will not block the council tax freeze and we will vote in the same way as we have done on previous local government finance orders. We register our concern about some of the implications, but the measures will not be blocked by Parliament. I did not enjoy being asked in the Finance Committee to welcome the policy, which I think was the subject of the vote to which Mr Brownlee alluded.

It is interesting that one of the few things that was talked about at the SNP conference at the weekend was how the SNP has delivered the council tax freeze in every year of the session. Of course, the SNP did not want to keep that commitment, as it was supposed to be only a stop-gap measure in advance of replacement of the council tax with a local income tax—a policy for which Liberal Democrats are still arguing. The SNP failed even to introduce to the Parliament proposed legislation on council tax abolition, so it is interesting that the SNP now claims that the council tax freeze is one of its biggest promises kept.

The problem of fairness comes into play and simply cannot be denied. One of the biggest concerns is that those who are on the biggest incomes would pay more under a local income tax, but are the ones who gain more through the council tax freeze, as they are likely to live in the biggest homes.

We speak to constituents about the fairness of the policy. Time and again it is worth repeating that I am fully aware that freezing the council tax helps many families. I am fully aware of the pressures on their household incomes and of the fact that many view the freeze as being a contribution to dealing with those pressures.

However, we must consider the people in the largest homes, who gain the most, and the people in the lowest income brackets, who are not gaining. The figures are straightforward. There are 130,000 households on low incomes that live in band A properties. If a family’s income is less than £15,000, they will have gained not one penny from the £700 million tax cut. If we use the deflators that the Government uses and to which the cabinet secretary has referred, those in the biggest houses—such as those in band G, which had average council tax bills of £1,900 in 2009—are making a cumulative saving of £138 a year. Those who are on the lowest incomes gain nothing and those who are among the highest incomes gain £138 a year.

I asked the cabinet secretary specifically about the distribution of the £700 million between the lowest and the highest—between those in band A and those in band H—because I am fully aware of the figures for band D. I wanted him to acknowledge on the record the situation between band A and band H, but he chose not to, which was a telling omission.

The SNP has blamed reductions in council services on everyone else, when the council tax freeze has caused a revenue shortfall of £700 million. We know from lecture after lecture that the Scottish budget is fixed and that, if we come up with spending plans, we must tell the Government where the money for them would come from. Given that, I presume that £700 million has been saved elsewhere in the Scottish budget to offset the council tax freeze.

We will abstain on the motions. I know that the Parliament will support them, but it is worth recognising that the policy is not fair.

Photo of Joe FitzPatrick Joe FitzPatrick Scottish National Party

The orders will put in place the last piece of council funding for 2011-12, which will ensure that council tax is frozen across Scotland for a fourth consecutive year. When fuel and food prices are rising at well above the inflation rate, it is a source of comfort for families across the country that council tax will not rise by even one penny.

Photo of Michael McMahon Michael McMahon Labour

Some people might benefit from the freeze, but is Joe FitzPatrick concerned about people who rent small band A and band B houses from their councils and whose rents have increased by double-digit figures?

Photo of Joe FitzPatrick Joe FitzPatrick Scottish National Party

I had intended to congratulate the Labour Party on doing one of the most fantastic U-turns to support the council tax freeze, but I am sorry—Labour members cannot support the council tax freeze while continuing to oppose it.

The argument in relation to people who live in lower-band properties is clear. The Finance Committee’s adviser made it clear that, although the saving from the council tax freeze is smaller for people in lower bands, it means much more to people who are on low incomes. Saving on average £300 in council tax might not matter to Michael McMahon, but it matters to my constituents.

I will raise another point that the Labour Party has failed to recognise. The SNP Government has continued the work to improve housing across Scotland. Often, that involves taking people out of lower-band houses and putting them in higher-band houses. People in Ardler in my constituency have been affected by that. The community of Ardler village resided originally in multistorey flats, which were all band A. In the main, those people now live in band C housing association houses. Their incomes did not change when they moved house, but their council tax shot up. Some of those folk feel that it is unfair that they must pay much more just because they have decent houses. That is why it is crucial that, ultimately, we get rid of the council tax. However, until we get rid of it, it is crucial that we freeze it at least, to take the pain out of the sting.

I have argued for the council tax freeze in the Finance Committee and in the chamber for the past four years. I was slightly upset that I had failed to persuade our Labour colleagues in that time. All of a sudden, however, Iain Gray has made a statement, but it is clear that he has not persuaded other Labour members. It is clear that the U-turn was about fear of punishment at the ballot box. Anyone who speaks to their constituents knows just how important the extra little bit of help from the SNP Government—in the form of the council tax freeze—has been. In my constituency, I have found on the doorsteps huge support for the freeze—from people in large and small houses.

For the past four years, the Labour Party has missed the point that the council tax freeze is about ensuring that people—in these challenging economic times when bills are increasing—do not have their challenges compounded by spiralling council tax bills. Members should remember that under the previous Administration double-digit increases were the norm. Bills were rocketing. In Dundee, Labour put up the council tax by 15 per cent in one year. Fifteen per cent! I say to Michael McMahon that people’s incomes did not rise by 15 per cent that year. The Labour Party did not care about those households—in band A, band B, band C, band D and band E—that had to find the extra money.

For the past four years, the SNP has stood by the people of Scotland by freezing the council tax in these trying times. The average household in my constituency would have had to pay an extra £150 this year if Labour had got away with stopping the council tax freeze in 2007. Year on year, such savings add up to more than £300, where—

Photo of Alasdair Morgan Alasdair Morgan Scottish National Party

I need to stop the member there, I am afraid.

Photo of Mary Mulligan Mary Mulligan Labour

I am pleased to be able to take part in today’s debate. Everyone in Scotland is affected by local authorities’ ability to deliver quality local services, so the financing of those services is a critical issue for us all.

I understand that this is a challenging time for public finances, but it is equally challenging for individuals. No one wants to increase financial burdens on hard-working people across Scotland. However, people know that the services that they and their families depend on need to be paid for. By introducing a cut in local authorities’ budgets of 2.6 per cent, and by insisting on an underfunded council tax freeze, the SNP is delivering the worst of all worlds.

As members might expect, I agree with my colleague Michael McMahon when he says that the council tax freeze is not fully funded—despite the £70 million uprated in each year of the freeze.

Photo of Mary Mulligan Mary Mulligan Labour

Let me make this point first.

To understand the pressure that local authorities are under, we need only consider the kind of cuts that they are having to introduce. In West Lothian, the council decided to make a saving of £123,000 per year by axing free milk for pupils in primary 1 to primary 3 who were not on free school meals. With the new charge of 17p per carton, people will clearly be out of pocket when we consider the few pence that they will save from the council tax freeze.

In another decision, West Lothian Council increased the charges at the Low Port outdoor education centre by between—

Photo of Mary Mulligan Mary Mulligan Labour

I will finish these examples and then let Mr Brownlee in.

The council increased those charges by between 28 and 44 per cent. The cost of a half-day visit will increase by £1.30—more than the average saving from the council tax freeze. The First Minister is very proud of his Linlithgow roots, and I am sure that he and the Cabinet Secretary for Justice have experienced the joys of the Low Port centre. I am also sure that they are pleased that they did not have to pay the present prices.

Photo of Derek Brownlee Derek Brownlee Conservative

The member made a point about the council tax freeze having been underfunded consistently since its introduction, and the Labour Party is committed not only to freezing the council tax but to funding it fully. By how much will the council tax freeze have to be funded in order to be fully funded?

Photo of Mary Mulligan Mary Mulligan Labour

We will come to that, Mr Brownlee.

The other point that puzzles me—Mr McMahon mentioned this too—is that, although the SNP Government staunchly defends the council tax freeze, it does not use the same arguments when it comes to increases in council house rents or housing association rents. The Scottish Government claims that the council tax freeze is to protect the poor and the vulnerable. Although the poorest in social housing will receive housing benefit, just as the poorest paying council tax receive council tax benefit, it is the people who are just above the housing benefit line who will suffer the most. They can least afford the higher rents—and, in fact, higher rents may affect their ability to work. Despite that, the silence on rent increases from this Government—in particular from Joe Fitzpatrick when he was asked—is deafening.

I understand why local authorities have signed up to the council tax freeze—not to do so would cost them dear. However, I am surprised that alarm bells have not been ringing for the cabinet secretary, given that his biggest supporters are the Conservatives. Perhaps that reveals a truth that the SNP would rather not admit to. I fear that Mr Swinney has been more concerned about grabbing a council tax freeze headline, rather than considering how he can best support local services for people in Scotland.

Photo of John Swinney John Swinney Scottish National Party

Mr Purvis made a point about a £700 million revenue shortfall, which could have been spent in other ways. I simply point out to Mr Purvis that, in the budget settlement this year over which the United Kingdom Government of which he is a supporter has presided, revenue funding to the Scottish Government has been reduced by £500 million in one financial year. I do not really think that there is much room for us to be criticised in that respect.

Mr McMahon, in a quite astonishing contribution to Parliament, did not give off the vibe that he is particularly convinced by the latest Labour position of supporting a council tax freeze. His speech had the hallmarks of the position of giving every reason, in Parliament, why a council tax freeze should be opposed; meanwhile, his party is shoving leaflets through doors saying that it will deliver a council tax freeze. That type of thing is much more a Liberal Democrat tactic than something with which the Labour Party is associated.

We should look at the record to see what everyone has said on the matter, starting with a couple of the members who have spoken in the debate. It is nice that Mary Mulligan has spoken in today’s debate. The last time that she spoke on the issue in the Parliament, Mrs Mulligan said:

“the council tax freeze now seems like a bad idea. The money that was used to secure the freeze could have been better used.”—[Official Report, 19 May 2010; c 26334.]

Photo of Alasdair Morgan Alasdair Morgan Scottish National Party

Order. We need to have fewer conversations in the chamber, please.

Photo of John Swinney John Swinney Scottish National Party

I wonder where Mrs Mulligan was the day when it was carefully considered at the policy forum of the Labour Party to undertake that spectacular U-turn.

That brings me to Mr McMahon—we have a couple of remarks before us, and this one is very much on the point that Mr Purvis raised. Mr McMahon said:

“The fact is that those who are hardest hit by the recession, and by social exclusion generally, are those who benefit least from the council tax freeze”.—[Official Report, 19 May 2010; c 26324.]

If that was the Labour Party’s position, why is it now arguing for a freeze? Labour is arguing for that because things are getting tough for it on the election circuit.

Iain Gray told us this on 17 August 2010, in the Daily Record—if it is in the Daily Record, it must be the orthodox Labour position:

“Labour leader Iain Gray demands end to council tax freeze to help authorities offset Tory cuts.”

The long and the short of it is that we cannot believe a word that Labour says.

Photo of John Swinney John Swinney Scottish National Party

I will certainly give way to Mr McMahon if I have the opportunity to do so.

Photo of Michael McMahon Michael McMahon Labour

It will take only a brief intervention to point something out to Mr Swinney. I explained the difference between what he has said and what I have said. However, I cannot do anything about his inability to understand our position.

Photo of John Swinney John Swinney Scottish National Party

The problem is that I understand all too well what the Labour Party is up to. The Labour Party has been caught in that very familiar accident and emergency situation that it found itself in today with regard to Monklands. Apparently, Labour is going to save Monklands from the health secretary who has saved it already. It really is quite preposterous, as we go back to the flip-flop over tuition fees. The Labour Party has no credibility, and it is not coming back into office either.