Local Government Finance Settlement 2013-14

Part of the debate – in the Scottish Parliament on 27th November 2012.

Alert me about debates like this

Photo of John Swinney John Swinney Scottish National Party

My statement will cover two areas. I will set out the terms of the provisional local government finance settlement for 2013-14 and I will make a number of announcements on business rates.

The settlement is firmly set in the context of the on-going relationship between the Scottish Government and local government. We have reaffirmed our commitment to working together on our joint priorities to deliver better outcomes for the people and communities of Scotland.

As a result of our partnership working, we have worked closely with local government to provide fair and equitable settlements. Between 2007-08 and 2012-13, the resources available to the Scottish Government through a combination of the departmental expenditure limit and non-domestic rates increased by 6.4 per cent. Over the same period, local government’s budget increased by 8.9 per cent, demonstrating the strength of the financial settlement that we have agreed with local government in challenging financial times.

Following spending review 2011, total funding for local government from 2012 to 2015 would be a larger share of the funds controlled by the Scottish Government than the position we inherited when we first came to office in 2007-08. Although in 2013-14 our DEL will in cash terms decrease by £162 million compared with the previous year—the equivalent of a real-terms cut of 3 per cent—our record shows that we have provided a fair settlement to local government that continues to represent the best outcome that can be achieved in the current financial climate.

The draft budget 2013-14, which was published on 20 September, confirmed our draft budget for the second year of our current spending review period, including the headline allocations for local government. However, this local government finance settlement comes at a time of major restructuring of the services that are delivered by local authorities with the creation of the new Scottish Police Authority and fire service. As a result, funding for police and fire has been removed from the settlement from 2013-14, which means that exact funding comparisons with previous years are no longer possible.

Today, I can announce the provisional funding allocations to individual local authorities for 2013-14. Copies of summary tables containing the key information in my statement are available at the back of the chamber.

The Government reached an agreement with the leadership of the Convention of Scottish Local Authorities on an approach to delivering joint priorities between national and local government. That was described in my letter to COSLA of 21 September last year, which set out the terms of the local government settlement for 2012 to 2015. As part of the settlement, local authorities will deliver certain specific commitments: freezing the council tax, which is continuing to help families during tough economic times, maintaining teacher numbers in line with pupil numbers and securing places for all probationers under the teacher induction scheme.

However, the package being offered to local authorities is conditional. Although it is agreed between the Government and COSLA’s leadership in principle, it is now up to individual authorities to decide whether they wish to accept it. If they accept, they will receive their needs-based share of the overall revenue funding; if they choose not to accept, they will not receive their full share of the package of resources. The conditional amount of the overall package is worth in total £109 million across the whole of local government and includes £70 million for the council tax freeze and £39 million for the teacher commitments.

Total support for local government in 2013-14 will amount to more than £9.9 billion, which includes revenue and capital funding along with income raised from business rates. That represents an increase in funding of £35.2 million on a comparable basis with 2012-13.

Within the total available, support for revenue will amount to £9.4 billion in 2013-14, which represents a flat cash settlement on a like-for-like basis. There have been a number of changes to the local government budget for 2013-14, and the changes to revenue funding included in the draft budget were as follows: a net reduction of £954.7 million as a result of the transfer of responsibility for policing to the new Scottish Police Authority; a net reduction of £274.8 million as a result of the transfer of responsibility for the fire service to the new Scottish fire and rescue service; an increase of £23 million following the United Kingdom Government’s abolition of council tax benefit—as agreed with local government, 80 per cent of that sum will be distributed initially, with the final 20 per cent distributed as a redetermination when 2012-13 data is available—and an additional £3 million for free personal and nursing care.

There have also been a number of changes to the local government budget since the draft budget was published: £1.5 million for the provision of early learning and childcare for looked-after two-year-olds; £3 million for family support funding; and £720,000 for the blue badge scheme. In addition—and not included in today’s figures—are the moneys transferring from the Department for Work and Pensions for the devolved social fund programme, which is subject to final agreement with the DWP and COSLA.

Although the net reduction for police included in the 2013-14 draft budget document was £954.7 million, there might be a slight reduction in that figure following on-going discussions with individual local authorities and the current police boards. The outcome of the consultation process will determine the exact figure to be removed.

Following the outcome of spending review 2011, overall local government capital funding was increased by £34.7 million in 2013-14 and £47.6 million in 2014-15 as a result of consequential funding announced at stage 3 of the 2012-13 budget bill. That delivered on the Government’s commitment to maintain local government’s share of the total capital budget at 28 per cent.

Following the transfer of responsibility for the police and fire services, capital funding has been reduced by a total £29.9 million in 2013-14. That means that capital funding for local government in the settlement for next year amounts to £0.5 billion. In addition, local government will benefit from capital funding for the school building programme, which is estimated at £61.2 million, and funding for digital infrastructure of £14.8 million in 2013-14.

I turn to business rates, which are a key issue for Scotland’s business community and an integral part of local government finance. This Administration acknowledges that business rates play a part in attracting and retaining businesses in Scotland. We are delivering the most competitive business rates available anywhere in the United Kingdom, for example through the small business bonus scheme. I am delighted to say that the scheme is at a record high, with more than 89,000 business properties benefiting from it.

In our election manifesto and in our economic strategy, we committed that we would not allow the poundage for business rates to rise above what it is in England during this session of Parliament. The UK Government is expected to announce the English poundage in the next few days. I reaffirm my commitment to match the English poundage and will confirm the Scottish poundage rate as soon as possible after the rate for England is announced.

As well as maintaining a competitive approach to business rates, we must acknowledge that business rates are an integral part of our public finances that help fund the services on which our communities and businesses rely. That is why I have committed to embark on a review of business rates in advance of the next revaluation to provide the best support that we can for business.

I am pleased to confirm today the publication of our business rates consultation, which will provide a comprehensive and fundamental review of the rating system. The consultation delivers on my commitment to undertake a review and enables us to seek the views of all business ratepayers, representative bodies, professional advisers and agents, and citizens. The scope of the consultation will seek views on the full spectrum of business rates policy, including the effectiveness of current reliefs, transparency and openness, and tax avoidance. In addition, I am aware that some ratepayers are dissatisfied with the appeals system and the consultation poses questions on how that can be improved.

Any changes to the rating system resulting from the consultation will be put in place in time for the next revaluation, but early actions that are identified and affordable can be implemented much sooner. However, I must emphasise that the needs of all ratepayers must be balanced against the need to fund services, so the cost of any reforms must be balanced from savings elsewhere within the rating system.

The next revaluation would normally take place in 2015, but, as Parliament knows, the United Kingdom Government has taken the decision to delay its next revaluation to 2017. That decision creates a set of circumstances that could undermine our commitment to match the poundage rate south of the border. Given that for many years before we took office business rates were set at a higher level than in the rest of the UK, I believe that that danger must be avoided. I confirm, therefore, that the date of the next revaluation will be 2017. The Scottish Government is confident that by that stage we will have a range of economic powers achieved through independence that can create further competitive advantages for businesses in Scotland.

The outcome of spending review 2011 maintained local government’s revenue funding and ensured that local authorities would receive a larger share of the funds contributed by the Scottish Government, including business rates, than they did under the position that we inherited in 2007-08. The provisional allocations that I have announced to Parliament today maintain our social contract with the Scottish people, and ensure that the revenue funding available to local government for its remaining responsibilities is maintained.

The revenue allocations are inclusive of resources to enable local authorities to continue to freeze their council tax, which is a crucial element of the social contract with Scotland. That is one bill that, in the face of increasing costs, families can know will not rise. I hope that all local authorities will take up that offer and deliver a much-needed boost for hard-pressed families in these tough times.

In line with our manifesto and economic strategy, I am delighted to have confirmed for 2013-14 that the Scottish Government will again deliver on our commitment to businesses that we would not allow the poundage rate for business rates to rise above what it is in England during the lifetime of this session of Parliament. To keep Scotland’s competitive edge, I have today launched our consultation on business rates to provide a thorough and comprehensive review of the business rates system in advance of the next revaluation in 2017.

Today marks the start of the normal consultation period with local government on the provisional allocations. I will bring the final figures to Parliament as part of the local government finance order early in the new year.