Hansard

The purpose of today’s debate on the draft Local Government Finance (Scotland) Order 2021 is to seek Parliament’s approval for the guaranteed allocations of revenue funding to individual local authorities for 2021-22. We also seek agreement to the allocation of additional funding for 2020-21 that has been identified since the 2020 order was approved around this time last year.

Although this is not included in today’s order, I take the opportunity to announce that an additional £40 million of general revenue funding will be allocated to local authorities in 2021-22. Councils will have complete autonomy to allocate the extra money based on local needs and priorities in their communities. Distribution will be discussed and agreed with the Convention of Scottish Local Authorities, and local authorities will be notified of their share as soon as possible.

Returning to the order, under the most challenging of circumstances, the 2021-22 budget delivers a fair settlement for local government. Including the additional £40 million of general uplift, the settlement now provides an additional £375.6 million for vital day-to-day services, which is an increase of 3.5 per cent, and a further £259 million of non-recurring Covid-19 consequentials, which local authorities will have complete autonomy to allocate based on the specific needs and priorities in their communities. That builds on the 2020-21 pre-Covid-19 local government finance settlement, which provided an increase in local government day-to-day spending of £589.4 million, or 5.8 per cent compared with the previous year.

In 2021-22, the Scottish Government will provide councils with a total core funding package worth almost £11.7 billion. That includes revenue funding of almost £11.1 billion and support for capital expenditure of more than £600 million. In addition, councils will receive a further £259 million of non-recurring Covid-19 support.

It is important to note that the total of the funding package is no longer up for debate, following the passing of the Budget (Scotland) (No 5) Bill last week. In today’s debate, we seek Parliament’s approval for the distribution of the approved total funding to individual local authorities. We seek approval for the distribution and payment of £10.4 billion out of the revenue total of £11.3 billion, with the balance mainly made up of specific grant funding, which is administered separately. The £10.4 billion is a combination of general grant revenue of almost £8.1 billion, the distributable amount of non-domestic rates income, which has been set at almost £2.1 billion, plus £259 million of non-recurring Covid-19 consequentials.

The settlement not only gives local authorities the resources and flexibility to respond to the challenges that the pandemic has created but, importantly, provides continued fiscal certainty that does not exist in England, through our policy of guaranteeing the combined general revenue grant plus non-domestic rates funding as set out in the order. That means that, unlike the position for councils in England, 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, which in effect underwrites that critical revenue stream.

As approved as part of the Scottish budget, the overall funding package for 2021-22 includes £134.8 million of general uplift for vital local services; £59 million of revenue to support the final tranche of increased funding for the expansion of funded early learning and childcare entitlement to 1,140 hours; and £90 million to compensate councils for choosing to freeze council tax levels.

It also includes, in addition to the £100 million that is available this year, a further £72.6 million, which will be transferred from the health portfolio to local authorities in-year for investment in health and social care and mental health services that are delegated to integration authorities. That brings the total that will be transferred from the health portfolio to support health and social care integration to £883.6 million in 2021-22.

The funding package for 2021-22 includes the on-going provision of £88 million to maintain the pupil teacher ratio nationally and to secure a place for all probationers who require one under the teacher induction scheme; continued provision of £156 million in support of teachers’ pay and £97 million in support of teachers’ pensions; an additional £7.7 million of support for inter-island ferries, which brings the total to £19.2 million; £5.3 million for Barclay implementation costs; and £10 million of additional capital funding for flood risk schemes and £12 million for the maintenance of local bridges.

The Scottish Government included £90 million in the local government finance settlement to compensate local authorities in the event that they chose to freeze their council tax at 2020-21 levels. All local authorities have now taken the decision to freeze council tax levels, thereby helping to provide stability and certainty at a time when so many households in our communities are under financial pressure.

As part of the process of securing support for the Budget (Scotland) (No 5) Bill, the Cabinet Secretary for Finance confirmed that the £90 million to fund the council tax freeze will be baselined for future years, which will protect vital local services and provide assurance for households that they will not be affected by higher increases in future years.

There remains a further £115 million of revenue funding that will be distributed once the necessary information becomes available, and it will be included for approval in the 2022 order. In addition to the revenue funding for which today’s order provides, there is £775.9 million-worth of specific revenue funding that is paid directly by the relevant policy areas under separate legislation.

The 2021 order also seeks approval for £1.3 billion of changes to funding allocations for 2020-21. The full list of changes can be found in the report on the 2021 order. Although all those sums have been announced previously, an unprecedented sum of additional funding is being made available to deal with these unprecedented times. That funding includes more than £1.2 billion to address Covid-19 pressures, including the additional £275 million that was announced on 16 February and the £200 million for the lost income scheme. Taken together with the additional £259 million that will be allocated next year and the additional fiscal flexibilities that were announced on 8 October, that brings the value of the overall Covid-19 support package for councils up to almost £2.1 billion.

In summary, next year, the Scottish Government will provide local government with a total of almost £11.7 billion of funding. The funding proposals reflect the key role that local government will play as we focus on how to rebuild and renew our communities. The Scottish Government will continue to work in partnership with local government to improve outcomes through first-class public services as we move towards a healthier, greener and fairer society.

I move,

That the Parliament agrees that the Local Government Finance (Scotland) Order 2021 [draft] be approved.