Council Budgets 2018/19: the case for additional funding
22 November 2017
Councils call for a “fair settlement”
The Convention of Scottish Local Authorities (COSLA) has called for Councils to be given additional funding of £545 million in their 2018/19 revenue budgets to meet the cost of inflation and increased service demands. They have also called for an end to single year budgets, the removal of ring-fenced budgets, the removal of the 3% cap on Council Tax increases, and the introduction of discretionary taxation.
Their case is set out in the document “Fair Funding for Essential Services” which also calls for a “fair settlement” for local government and “full and transparent” funding for new Scottish Government initiatives.
This is a bold move by COSLA compared to recent years and puts local government on the front foot, but why the change of approach?
Two years of disputes
The previous two budget settlements caught Scottish Councils off guard and they failed to get their message over about the impact on local services.
The 2016/17 budget for Councils was the worst financial settlement since the creation of the Scottish Parliament in 1999. Councils calculated it represented a £350 million reduction in revenue grant, equivalent to a cut of 5.2% in real terms. The Scottish Government disputed this figure and said it represented a 2% reduction in total estimated local authority expenditure (not the same thing).
The dispute moved up a gear in 2017/18. Councils were preparing themselves for a cut in grant similar in the level of cut they received in 2016/17, so it came as a shock when the Finance Minister announced in the Scottish Parliament that he was providing local government and “local services” with an additional £240 million of funding and revenue. He went on to say there would not be an overall reduction in funding for local services. In contrast, Labour politicians claimed there was a real-terms reduction of £327 million in funding for local government.
These conflicting statements made it very difficult for Councils to then argue their case, and this year’s change of approach has put Councils on the front foot for the first time in three years.
The case for additional funding
Councils have referred to external sources to back up claims that overall funding has gone down by 8% in real terms between 2010/11 and 2017/18. Importantly they have also focused on the reduction in funding for core services. They have calculated that, as a result of new additional resources being directed towards Scottish Government-led policies (such as the extension of early learning and childcare) core funding has decreased by £590 million over the same period.
They have also calculated that, as a result of government funding restrictions, non-protected services have suffered funding cuts of 20%.
COSLA argues that they have managed this reduction in funding by making £1.4 billion of efficiency savings, reducing the workforce by 15,000 full-time equivalent staff, and by increasing local charges, but there is no more room for manoeuvre.
By getting these messages out early, Councils have a better chance of these messages getting over to MSPs, the public, and the media.
Council spend and the importance of economic growth
However, could COSLA have been more upfront about the contribution Councils make towards economic growth? As a result of the devolution of tax powers to the Scottish Parliament, the growth in the Scottish economy, relative to that of the UK economy, now has a direct bearing on the amount of resources available to fund public services in Scotland.
Councils spend £5 billion a year on educating children and education outcomes are a strong predictor of inclusive growth. In addition, Councils employ 244,000 people and spend around £6 billion on procurement. Furthermore, they invest more than £250 million a year in promoting economic growth and providing direct support for business.
The contribution Councils make to economic growth may yet prove to be one of the strongest arguments for continued investment in local services and further work should be carried out to determine the economic impact of local government activity.
Having made the case for additional funding, will the Cabinet Secretary for Finance take any heed of this when he makes his budget announcement in mid-December? Probably not – and certainly not at the level of £545 million. Having said that, any improvement on the past two year’s budget settlements would represent modest success.
What the new COSLA approach is more likely to achieve, however, is to make it easier for MSPs, the public and the media to assess whether or not the financial settlement for local government is adequate to meet the challenges they face. And this, in itself, is a positive step forward.