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05/02/15 14:39

Local Government Finance (Scotland) Order 2015

Deputy First Minister and Finance Secretary John Swinney
Scottish Parliament
5 February 2015

Presiding Officer, today’s Local Government Finance Order seeks agreement to the allocation of revenue funding to local government for 2015-16 to enable local authorities to maintain and improve the vital services on which communities across Scotland depend. It also seeks agreement to the allocation of additional funding for 2014-15 since the 2014 Orders were discussed and approved this time last year.

The 2015-16 local government finance settlement is a single year settlement. This is necessary as the Scottish Government can only allocate funding once we know what our budget settlements are from the UK Government and on this occasion we are only aware of our budget for 2015-16.

In 2015-16, the Scottish Government will provide councils with a total funding package worth over £10.85 billion. This includes revenue funding of almost £10 billion and support for capital expenditure of over £856 million.

Today’s Order seeks Parliament’s approval for the distribution and payment of £9.8 billion out of the revenue total of almost £10 billion. The remainder will be paid out as specific grant funding for which separate legislation already exists and other funding which will be distributed later.

I will bring a second Order before Parliament once councils have set their 2015-16 budgets to pay the £70 million to compensate all councils that freeze their Council Tax again in 2015-16, for the eighth consecutive year.

I will also use the second Order to distribute the funding for the Discretionary Housing Payments amounting to £35 million for next year which will enable this Government to fully mitigate the effects of the UK Government’s bedroom tax and any other changes that may be required.

I advised Parliament yesterday about the approach the Government is taking about the number of teachers employed in our schools. This Government has been clear and consistent in our commitment to maintain teacher numbers in line with pupil numbers as a central part of our priority to raise attainment. Over the period 2011-12 to 2014-15, we have provided additional funding of £134 million to local authorities specifically to support them in maintaining teacher numbers.

As I explained yesterday, despite specific and sufficient funding being available to maintain the employment of teachers, the number of teachers declined slightly last year and the ratio of pupils to teachers rose slightly into the bargain.

In discussion with COSLA, I have offered to suspend the penalty for 2014-15 that I was entitled to apply as a result of the fall in teacher numbers, as well as to provide a further £10 million next year on top of the previously allocated £41 million to support the employment of teachers.

£10 million is in fact the amount put to me as necessary by COSLA to deliver this commitment.

At this stage COSLA has been unable to agree to what I consider to be a fair and generous offer of Government support to deliver a good outcome for our education system. As a result, this Government has no alternative but to make that funding available on a council by council basis if—and only if—councils are prepared to sign up to a clear commitment to protect teacher numbers. Individual councils who share our ambition to maintain teacher numbers will have access to a share of the planned £41 million and of the further £10 million to help them deliver on their commitment.

However, a failure to deliver will result in a clawback of funding.

The most important change to the figures I announced in December is the distribution of the £343 million in respect of the Council Tax Reduction Scheme.

The only addition to the total figure is the £869k resulting from this Government’s decision to bring forward legislation to ensure that local authorities can take no further action to recover ancient community charge or “poll tax” debts.

The 2015 Order also seeks approval for the changes to the net increase of £146.5 million in 2014‑15 funding allocations that was either held back from the 2014 Order or has been added to fund a number of agreed spending commitments which have arisen since the 2014 Order was approved. These include:

  • £68.6 million representing the agreed 20 per cent hold back for the Council Tax Reduction Scheme;
  • £27.5 million for the Teacher’s Induction Scheme;
  • £16.5 million for the Free School Meals in primary P1-P3 policy;
  • £15 million for Looked After Children;
  • £12 million for the Discretionary Housing Payments;
  • £5 million for the National Teachers Qualifications policy; and
  • £3.5 million for Workforce Development resulting from the Children and Young people Act 2014.

I should also explain that the total revenue funding to be paid out to Councils but not included in this Order in 2015-16 includes:

  • £86.5 million paid to directly to Criminal Justice authorities;
  • £70 million to fund the Council Tax freeze;
  • 35 million for Discretionary Housing Payments; and
  • £27.6 million for the Teachers Induction Scheme.

The £70 million to fund the Council Tax freeze will be added to the individual local authority settlement totals when I bring forward the Local Government Amendment Order for those councils who have budgeted to freeze the Council Tax in 2015-16.

Presiding Officer, you will be aware that my Budget Bill statement yesterday included changes that will impact on the 2015-16 funding both on the total local government financial settlement and the distribution of the figures included in the Local Government Finance Order under discussion today.

As a result of our decision to match the UK Government’s cap on the business rates poundage increase to 2 per cent this reduces our business rates income by £11 million but as explained yesterday I have allocated a compensating amount from the associated Barnett consequentials to match this reduction in income. What this means in practicable effect is that I will reduce the distributable Non Domestic Rates by £11 million in the Amendment Order and increase the General Revenue Grant total by the same amount. The redistribution of these sums will ensure that all 32 local authorities receive exactly the same total funding as set out in the Order before Parliament today.

Although not part of today’s Order, the overall package for local authorities includes support for capital funding in 2015-16 of over £856 million, delivering on our commitment to maintain local government’s share of the overall capital budget.

Presiding Officer, I now turn to the issue of business rates, and our continuing delivery of the most competitive business tax environment in the UK. For example, support under our Small Business Bonus Scheme is at a record high, with over 96,000 business properties benefiting.

In December I confirmed that we will continue to match the English poundage rates for 2015-16 and that reaffirms this Government’s commitment to maintaining the competitive advantage enjoyed by Scottish businesses since 2007.

Our extensive package of business rates reliefs also continues, worth around £618 million in forthcoming financial year, offering enduring support for Scottish businesses. And our Community Empowerment Bill proposes the power for councils to offer further rate reliefs in their local areas if they choose to do so.

As confirmed previously, the public health supplement will conclude at the end of this financial year.

Looking ahead, we will continue to use the time before the 2017 revaluation to make further improvements to the business rates framework, based on our 20-point action plan and our current consultation on the appeals system, and responding to the important feedback that we receive from ratepayers.

In summary, the total funding from the Scottish Government to local government next year amounts to over £10.85 billion.

With that in mind I move that Parliament agrees to the Local Government Finance (Scotland) Order 2015.