Hansard

Today’s debate on the Local Government Finance (Scotland) Order 2023 seeks Parliament’s approval for the guaranteed allocations of revenue funding to individual local authorities for 2023-24. It also seeks agreement to the allocation of additional funding for 2022-23 that has been identified since the Local Government Finance (Scotland) Order 2022 was approved on 2 March last year.

We cannot ignore the hugely challenging circumstances in which we have had to agree the Scottish budget this year. Inflation is still running at double digits; in January, it had gone down to 10.1 per cent. At the start of February, the Bank of England raised interest rates to 4 per cent, which is the highest level in 14 years.

Brexit, too, is continuing, and will continue, to cause harm and have an adverse impact on our economy. The International Monetary Fund has forecast that the United Kingdom economy will be the only major economy to shrink in 2023—it expects the UK economy to fall by 0.6 per cent.

Despite that, within the limitations of the devolution settlement, we have used the powers that we have to protect public services, invest in the transition to net zero and take decisive steps towards eradicating child poverty.

The Scottish budget strengthens our social contract with every citizen of Scotland for the wider benefit of society. That means that people in Scotland continue to enjoy many benefits that are not available throughout the UK, including free prescriptions, free access to higher education and the child payment. That also applies at council level. People can access more local services than can be accessed elsewhere in the UK—for example, they can access more fully funded early learning and childcare for all three and four-year-olds; a welfare fund that is delivered locally; and free bus travel for nearly 2 million people, including every child and young person under 22.

The Scottish Government is providing nearly £13.5 billion in the 2023-24 local government finance settlement. That funding includes revenue support of almost £12.6 billion and support for capital expenditure of more than £0.8 billion.

Following the flat cash position that was set out in the resource spending review, we listened to councils and are increasing the resources that will be available next year by £793 million. The 2023-24 local government finance settlement now provides an additional 6.3 per cent, or a real-terms increase of 3 per cent, compared with 2022-23.

As we do every year, to reach that number, we have compared the proposed budget with the allocations that Parliament approved in the previous year. That provides the best like-for-like comparison of available funding.

In addition, individual local authorities will have full flexibility over local council tax rates and the newly devolved empty property relief. The Scottish Government also intends to introduce a local visitor levy bill in Parliament this year, which will, in time, give local authorities a discretionary power to apply a levy on overnight visitor stays in their areas and to utilise that additional funding locally.

It is important to note that the total funding package has already been finalised, following the passing of the Budget (Scotland) (No 2) Bill. Today’s debate seeks Parliament’s approval for the distribution of that approved total funding to individual local authorities.

The order seeks approval for the distribution and payment of almost £11.6 billion of the revenue total of £12.6 billion, with the balance mainly made up of specific grant funding, which is administered separately. The £11.6 billion is a combination of general revenue grant of more than £8.5 billion and the distributable amount of non-domestic rates income, which has been set at just over £3 billion.

The settlement provides continued fiscal certainty through our policy of guaranteeing the combined general revenue grant plus non-domestic rates funding set out in the order. That means that any loss of non-domestic rates income resulting from the impact of Brexit or Covid-19 will be compensated for by increased general revenue grant, unlike the position for councils in, for example, England. That effectively underwrites that critically important revenue stream.

As approved as part of the Scottish budget, the overall funding package for 2023-24 includes £360 million of support for local government pay deals, a £72.5 million increase to the general revenue grant, £105 million to give effect to the devolution of non-domestic rates empty property relief, an extra £50 million capital to help with the expansion of the free school meals policy, additional funding of £100 million to deliver a £10.90 minimum pay settlement for adult social care workers in commissioned services, and consolidation of £30.5 million for the homelessness prevention fund.

There remains a further £330 million of revenue funding that will be notified to local authorities once the distribution has been discussed and agreed with COSLA. That will be included for approval in the 2024 order.

There is specific revenue funding that is paid directly by the relevant policy areas under separate legislation, which amounts to almost £776 million.

The 2023 order seeks approval for almost £371 million of changes to funding allocations for 2022-23. The full list of changes can be found in the report to the 2023 order.

This Government recognises the financial challenges that local authorities across Scotland—and, indeed, the whole public sector—are facing. We acknowledge the importance of providing more fiscal flexibility and more revenue-raising powers for local government.

The fiscal constraints that we share emphasise the need to focus urgently on improving delivery of sustainable public services, designed around the needs and interests of the people and communities of Scotland. We must also continue to press the UK Government for additional funding for our shared priorities and pressures, and I would welcome support from across the Parliament in that respect.

The Budget (Scotland) (No 2) Bill, which Parliament passed last week, ensured that total funding from the Scottish Government to local government next year increased not only in cash terms but in real terms. The order confirms the distribution to individual councils and the proposals reflect the crucial role that local authorities and their employees continue to play in our communities.

I move,

That the Parliament agrees that the Local Government Finance (Scotland) Order 2023 [draft] be approved.