Meeting of the Parliament 27 February 2025
The motion on the Local Government Finance (Scotland) Order 2025 seeks Parliament’s approval for the guaranteed allocations of revenue funding to individual local authorities for 2025-26. It also seeks agreement on the allocation of additional funding for 2024-25 that has been identified since the Local Government Finance (Scotland) Order 2024 was approved on 28 February last year.
We cannot, of course, ignore the challenging circumstances in which we have had to agree the Scottish budget this year. The Scottish Government’s block grant funding for 2025-26 represents a 1 per cent real-terms increase for resource funding following the welcome reset of budgets in 2024-25. That first step to address 14 years of United Kingdom Government austerity measures is welcome. However, the challenges that our public services face can be addressed only by longer-term investment plans and commitments.
In response to the UK Government’s changes to employer national insurance contributions, the Cabinet Secretary for Finance and Local Government announced that the Scottish Government will provide an additional £144 million for local government, which is equivalent to a 5 per cent national increase in council tax.
However, the UK Government must fully fund the cost of the increase to Scotland’s public sector and not the much lower Barnett share of the funding that is provided in England. With our partners in the Convention of Scottish Local Authorities, ministers will continue to press the UK Government to fund the additional costs in full, and I would welcome support from across Parliament in that respect.
The 2025-26 budget that Parliament passed earlier in the week is a budget that delivers for the people of Scotland. It invests in our public services, lifts children out of poverty, supports jobs and the economy and responds to the climate emergency. The budget will deliver record funding of more than £15 billion to councils in 2025-26; we are providing revenue funding of more than £14.2 billion and almost £800 million of support for capital expenditure. The 2025-26 local government finance settlement provides an additional 8 per cent, which is a real-terms increase of 5.5 per cent compared with 2024-25.
The outcome of the Scottish budget provides demonstrable evidence of our actions to deliver a fiscal framework between the Scottish Government and local government. More frequent and meaningful budget engagement has been fundamental in the decisions that underpin the budget, including the real-terms protection that is applied to general revenue grants. The budget also baselined a further £525 million of funding, following the £1 billion of funding that was baselined across health, education, justice, net zero and social justice in 2024-25.
We hope to publish a version of the fiscal framework in the coming weeks and we continue to work with COSLA to develop the assurance and accountability framework that is critical to further substantial baselining of funding.
The presentation of figures in the Scottish budget comparing the autumn budget revision or the spring budget revision with the budget was requested by the Finance and Public Administration Committee. However, the presentation of the local government settlement has been consistent in recent years, and table 4.12 of the budget confirms that, by the conclusion of the 2025-26 spring budget revision, the local government settlement will be more than £1 billion larger than it will be at the conclusion of the 2024-25 SBR.
It is important to note that the total funding package is already finalised, following the passage of the Budget (Scotland) (No 4) Bill. Today’s motion simply seeks Parliament’s approval for the distribution of that approved funding total to individual local authorities.
The order seeks approval for the distribution and payment of £13.9 billion of the revenue total of £14.2 billion, with the balance mainly made up of specific grant funding, which is administered separately. That £13.9 billion is the combination of general revenue grant of more than £10.8 billion and the distributable amount of non-domestic rates income, which has been set at £3.1 billion.