Hansard

Thank you very much.

We are pleased to be here today and welcome your invitation. We have circulated a paper, which gives some detail on the case that we will make today. I will briefly go over the main points in it; after that, we will be happy to answer any questions that the committee might have.

The second page is headed "Existing Resource Pressures". I will start by giving the committee our views on that. Members will see further down the page that, since reorganisation in 1996-97, the local government share of the Scottish block has declined from 40 per cent of the block to 36 per cent, which equates to a 10 per cent decline in our share. There has been an absolute decline. Had local government received the same funding that other services in the Scottish block have received, we would have had an outturn of about £0.5 billion more than we currently have. That is an increase, but in revenue terms we have had a decrease of £100 million.

That has had serious implications for local government over the period. As we state in our submission, facilities have closed, charges have increased and there have been 13,000 job losses and a fairly substantial increase in the council tax levied in aggregate overall. The 41 per cent figure for the increase in council tax income equates to the increase of last year, but in the current year there has been another substantial round of increases. I am not sure what the figure since reorganisation stands at now, but it might be 50 per cent.

We are at odds with the Executive in respect of the allocation of resources. We feel that there is evidence that someone has got their figures wrong. The Executive established expenditure for local government through grant-aided expenditure figures. The figures in annexe B show that GAE, in aggregate, for Scotland for the current year is £440 million less than the budget of local government. As a councillor, I would say that the last thing that any council wants to do—for political reasons as much as any others—is to increase its council tax, yet that makes up the difference. What we spend, and therefore what we have to levy, is £440 million more than the money that the Government feels is appropriate for local government to spend. There is obviously room for analysis and a review of the methodology that is adopted by the civil service in respect of the allocation for each service in each local authority. I do not believe that we would be spending £440 million more if we did not need to do so.

We have had to absorb a number of elements over the period. The most significant is the pay rises that we have had to absorb. Since 1993, no provision has been made in any allocation by central Government for the pay rises that local authorities have to deal with year on year. We estimate that they have cost about £700 million, which has had to be absorbed within current expenditure.

Another significant element is the fairly massive reduction in capital allocations. We estimate that about 50 per cent of the capital allocations that were given a few years ago have been removed from the current allocation. That has an impact, especially in terms of efficiency. As I am sure all committee members are aware, local government is a labour-intensive service, so the only major improvements that can be made in efficiency are brought about by capital investment, perhaps in new technology or new buildings. Capital investment has been seriously curtailed over the past three or four years, which has had an impact.

Members will see a number of headings in the section on future funding requirements, which shows the increasing demand that we have had to absorb over the past few years, including demand arising from demographic changes, demand for new services, and demand arising from social changes and legislative changes brought about by central Government and from maintaining assets. Those are all matters that we have had to do our best to accommodate within the reducing resources that we have received. We state in our submission that the Executive's

"simplistic approach of assuming that such cost pressures can be met by efficiency savings is not consistent with open, honest and transparent arrangements."

McIntosh referred to that in his report. I know that the committee has taken on board McIntosh's belief that the present arrangement does not provide for transparency or accountability in the provision of local government services. It would be a start if the Executive were to recognise that the present allocations do not take into account adequately all the pressures on local government.

The last page of the paper contains some of our suggestions for improvements. There are some helpful trends of which we approve, such as agreeing joint service priorities, to try to get community planning to operate in a way that allows us to kick the ball into the same goal mouth. Local government will find three-year planning useful, because year-on-year uncertainties have always presented local government with difficulties, which three-year planning might address. While I might return to the relaxation of controls in my summary, we also mention the pooling of funding streams and reviewing public expenditure definitions—the latter point might be useful in relation to self-financed expenditure and section 94 consents. That is a somewhat technical issue, which I will not go into, but suffice it to say that section 94 implies double consent for all capital expenditure made by local government, which we do not think is necessary. If that requirement were lifted, the level of capital expenditure, to which I referred earlier as being reduced, could be reinstated.

We are looking for agreement that a partnership exists between local government and central Government and that there are shared priorities on many issues. We agree with the Government's priorities, which are often the same as those indicated to local government by our own electorate. However, the key to achieving that partnership is to allow local government the flexibility and freedom to operate in whichever way it sees fit to reach those outcomes, and for central Government not to dictate to local government.

We are looking for three things. First, we want a review of the allocation methodology, to ensure that all 32 authorities in Scotland receive adequate grants that are appropriate to the demands placed upon them. As I said, we think that there is something at odds with the methodology that is in operation, in terms of GAE—we think that we are spending more than GAE and there must be a reason for that difference. That issue must be examined.

Secondly, we would support the return of the business rate to local government control as another useful development. I know that McIntosh made much of that issue—indeed, I think that that was his recommendation. We believe that returning the business rate to local government control would extend the local tax base. It would also provide the means for a dialogue between local authorities and the business community, rather than the totally spurious dialogue that exists at present, with every local authority being seen as just a tax gatherer for central Government. Local authorities do not set the business rate and, while they collect it, they do not receive, pro rata, exactly what they collect—they receive only a pooled share. The business rate has become part of central Government taxation. We believe that returning business rates to local authority control would provide scope for considerable improvement in the relationship between businesses, local authorities and the local electorate.

Thirdly, we want flexibility. I referred to the fact that we are unhappy with ring fencing and with the trend that appears to be emerging from the Executive whereby around 10 per cent of local government expenditure is ring-fenced. That is particularly the case in education, where the minister decides not only what money will be spent but how that money will be spent. We do not think that that is appropriate, as every authority in Scotland has a different approach and a different demand base. If we had that flexibility, we could achieve the same outcomes, but in a way that was more appropriate to each local authority.

We have had ludicrous situations where money has been available for particular services, but the local authority has been unable to spend it. There might, for instance, be money for classroom assistants but no money for teachers. That sort of thing demonstrates the inadequacy of the system.

That is all we have to say. If we had had an adequate allocation over the past few years, some of the other issues might not have arisen. We feel that adequate recognition has not been given to the fact that, since reorganisation, the replacement of the old regional and district system by 32 unitary authorities has not been reflected in the new financial arrangements—either in the global allocation or in the detail of distribution. We believe that that should be examined, which is why we would support a review of all or part of local government finance as it is currently organised.

I am happy to take any questions that the committee has.