Hansard

With Fergus Ewing's consent, I will steer clear of freedom of information this morning and stick to the local government settlement.

Since devolution, the Labour-Liberal Democrat Administration has demonstrated its commitment to strengthening the partnership between local government and central Government, to providing a sound financial platform to support modern and effective public services, and to ensuring that all Scotland's citizens are able to share in those benefits. I am therefore delighted to be able to announce our grant allocations to local government, which will provide record levels of support for every local authority in Scotland.

Local authorities will be notified of their provisional allocations by Executive circular today. Tables showing the settlement allocations for each council will be available from the Scottish Parliament information centre desk at the back of the chamber following the statement. Copies of the circular will also be available from SPICe. For the first time ever, the allocations cover not just 12 months, but will give councils the certainty of knowing their grant allocations for the next three years. Local authorities will therefore have the stability to plan their budgets and council tax levels, and the resources to achieve real and sustained improvements across the full range of their service responsibilities and to make the necessary investment in local infrastructure. I will also announce today the provisional national non-domestic rate poundage for 2001-02.

The spending review announcement earlier this year provided for the most sustained improvement in total support for local government in decades—an additional £1.2 billion over three years. By far the largest part of those additional resources will be directed to individual local authorities through the revenue grant and capital allocations that I am announcing today. Total revenue grant will increase by 6.2 per cent next year and by a further 5.4 per cent and 3.8 per cent in the following two years, to a total of more than £6.5 billion—increases of more than twice the rate of projected inflation in the first two years, and higher than the rate of projected inflation in the third year.

The single allocation for councils' capital investment will also receive a significant boost. For next year, the allocations total more than £311 million—an increase of more than 24 per cent. By the third year of the settlement, the total will have risen again to almost £350 million. I intend to say more about what can be achieved by local government with those substantial increases. However, I would first like to set out the structure of the settlement and say how the allocations for individual authorities have been arrived at.

I recently detailed to Parliament the new financial partnership that we have established with local government covering three-year grant and council tax levels, guaranteed grant increases for every council, a simpler and fairer distribution system, greater flexibility for councils in setting their total spending levels, and an increased focus on service outcomes. Those improvements are reflected in today's announcement.

In previous years, although three-year figures were available for total local government support, individual local authorities were advised of their allocations for one year only. The three-year grant allocations that I am announcing today for both revenue and capital will assist all local authorities to plan their budgets better and to provide their local electors with certainty about their tax commitments.

We want all Scotland's citizens to share in the benefits of improved local services and infrastructure. In the past, the local government settlement announcement has sparked debate about the relative winners and losers from the annual cycle of distribution reviews. Those discussions distracted people from the real issue of how local authorities could make the most effective use of their resources.

The distribution system was so complex that my predecessors had to announce four different sets of figures for each council. Few people understood the distinction between those figures. The system was also unfair. From year to year, individual councils could lose grant support as a result of changes in methodology or data. The first that they would know about that was in the December immediately before the April when the changes would happen.

We have made the system simpler and fairer. It is simpler in that what I am announcing today is the total revenue grant figures that each local authority will receive. Those are the figures that they will use to plan the budgets on which they will consult their electors. We are making it fairer in that individual local authorities will be able to plan for changes in their grant allocations over a longer time scale. In addition, the substantial additional resources provided from the spending review have allowed us to ensure that every local authority in Scotland will receive a real-terms increase in grant support.

In each of the three years of the settlement, we have provided a minimum grant increase guarantee or floor. For next year, every local authority in Scotland will receive an increase in revenue grant of at least 5 per cent—twice the predicted rate of inflation. For the following two years, the minimum grant guarantee will provide increases of at least 4 per cent in the second year and 3.4 per cent in the third year. The minimum grant guarantee is easy to understand and it is fair. It will ensure that no local authority is unduly disadvantaged relative to other councils in terms of its total grant increase. It also provides for a far more stable distribution of grant between local authorities over the three-year settlement period.

The substantial additional resources provided from the spending review and the guaranteed grant increase are the key elements that will influence councils' relative grant increases over the next three years. That has reduced the relative importance of the distribution formula. The existing distribution system for revenue grant has been developed over many years through detailed consultation between central Government and local government. We agreed with the Convention of Scottish Local Authorities that it was right to anchor the new arrangements to the existing formula.

I am aware of speculation about other distribution options and whether they would take more account of specific factors, particularly deprivation. However, it is a myth that a different block and formula style distribution would have taken more account of deprivation. The aim of the new arrangements is to simplify the existing formula. The simplified formula that we use will continue to take account of those factors that have been identified as the key influences on local authorities' relative spending needs, including population levels, sparsity, urban pressures and deprivation.

The Executive is committed to working with local government to tackle the causes and consequences of deprivation. This year, with COSLA, we carried out a thorough review of the account taken of deprivation in the distribution system. That study was based on evidence from councils and reviewed by independent consultants.

Following the recommendations of the review, additional support is being provided within the formula to assist local authorities dealing with high levels of deprivation. For example, the consultants recommended an increase in the teachers-for-deprivation assessment of between 30 and 40 per cent. We agree with that, and have increased support for that factor by 40 per cent at the upper end of the recommendation to £41 million next year, with further increases built in for years 2 and 3. A range of other assessments to help local authorities to tackle deprivation within the population distribution formula have also had specific increases.

The effect of seasonal employment patterns on the data used in the distribution formula to measure deprivation has also been taken account of. That is of particular relevance to rural authorities.

The concerns of our cities, especially those experiencing high levels of deprivation, cannot be dealt with by the local government finance settlement alone. The ability of the Executive and its partners in local government to eradicate poverty and deprivation will depend on stronger joint action to bring to bear the full range of resources at our disposal. To assist our joint work on deprivation, we plan a series of discussions with leaders from each of Scotland's cities and from some of our near-urban authorities on how to meet their aspirations. That fits well with our commitment to the role of councils in community leadership. Separate arrangements will give new impetus to our relationship with cities, in parallel with arrangements through the national rural partnership for examining the challenges faced in rural areas. We aim to maintain an on-going dialogue with all councils. The important point is that substantial additional resources are being provided for local government as a whole. The minimum grant guarantee will ensure that every council—rural, urban or other—benefits from those resources.

The distribution arrangements will take into account the results of a number of other distribution reviews completed this year. Following a major review of the special islands needs allowance, account has been taken of the additional costs faced by mainland councils with some island-based populations. That is in addition to the support that is already provided to the three wholly islands authorities. A number of other reviews have been completed this year, all of which have been fed into the formula calculation for next year.

The impact of those reviews explains in part the slightly wider range of increases in the first year of the three-year settlement period. Local authorities will receive increases of between 5 and 8.7 per cent from this year into next. That is worth repeating—local authorities in Scotland will receive increases in total revenue grant support of between 5 and 8.7 per cent next year.

For years 2 and 3, the distribution formula will be updated using population projections, to ensure that councils that need to provide additional services to growing populations will have the resources to do so. The floor will ensure that councils with declining populations still receive above-inflation increases in grant. Without the annual process of reviews, the distributions are far more stable. Increases range between 4 and 6.3 per cent in 2002-03, and between 3.4 and 6.2 per cent in 2003-04. That means that for each of the three years of the settlement, every local authority in Scotland will receive a real-terms increase in grant.

One element of the Scottish Executive grant support to local government is income from non-domestic rates. Today I am announcing the provisional non-domestic rate poundage for 2001-02. Last year we set out to conduct the 2000 revaluation of non-domestic rates with minimum turbulence for business. That is what we aimed for and that is what we have achieved. We also gave a commitment to hold increases in the non-domestic rate poundage to no more than the increase in the retail prices index, save in exceptional circumstances. I am pleased to announce that next year's provisional non-domestic rate poundage will be 47p, which represents an increase smaller than the increase in the retail prices index.

That is very good news for Scottish businesses. We consulted business interests before deciding on the rate. Today's announcement demonstrates that we have listened to the concerns of business by keeping the increase to below the inflation rate. That will provide for further stability for business. A paper explaining how the provisional poundage has been calculated will be published on the Executive website and is available from SPICe.

I am also mindful of the concerns of small businesses. I intend to make a further announcement later this month about the point that we have reached in our consideration of a small business rates relief scheme.

In previous years, besides announcing the settlement allocations, we would have advised local authorities of the assumed average annual increases in council tax that are built into the settlement and guideline calculations. Last week, I confirmed that we will not issue explicit guidelines for local authority expenditure. We expect councils to continue to show restraint in setting their council tax levels and to take account of benefit implications, which impact on the assigned budget. However, it will be for each local authority to set its council tax level, taking account of what local electors are willing to accept.

Today I am also announcing the capital allocations that will support local authority investment in local infrastructure for the next three years. As with the revenue settlement, we will provide a guaranteed increase in capital allocations between this year and next. No local authority will receive an increase in its capital allocation of less than 20 per cent. Allocations will simply be uprated for the following two years, so that councils will receive the percentage increase that corresponds to their formula allocation for 2001-02. By 2003-04, the total allocations will have increased by nearly 40 per cent. That is a 40 per cent increase in the single allocation that local authorities spend according to their assessment of local needs.

There will be further support for local authority capital investment through the public transport fund and the strategic waste fund, and from resources set aside for priorities such as school buildings and flood prevention. Where they have not already done so, colleagues will make separate announcements about those allocations.

It is important that we focus not only on the raw statistics that I am announcing today—the percentage increases and grant totals—but on the good that those resources can do for the communities and people of Scotland. My ministerial colleagues have already made a number of announcements about specific policy initiatives that we are working with local government to deliver. The substantial provision that we are making available today will enable local authorities to make significant improvements to care services for older people, to increase police numbers to record levels, to improve education opportunities for our young people and the physical environments in which they learn, to provide free, local off-peak travel for older people, and to make substantial additional capital investment in the local road network. Those are just some examples of the real improvements that can be achieved through the increased allocations. By far the largest part of the allocations is not ring-fenced for specific purposes. It is for each local authority to consider how best to use the allocations to meet its commitments.

In addition to the allocations that I am announcing today, separate strategic funding will be made available for a number of other initiatives. Those include additional support for deprived communities, better-integrated services for vulnerable children and local improvements in waste management. In due course, separate announcements will be made about each of those funds.

Copies of the provisional allocations for each local authority should now be available at the back of the chamber. The Parliament will have the opportunity to debate the final allocations in the local government finance order early next year.

I hope that members will acknowledge the substantial additional support that the Executive is providing for local government over the next three years. The allocations reflect our aim for a simpler and fairer distribution of grant that will provide real improvements in the quality and range of local services and increased investment in local infrastructure, from which all Scotland's citizens should benefit.

The spending commitment marks a step change in funding for councils in Scotland. The additional money is available for investment because of the outstanding success of the UK Labour Government and Gordon Brown's economic policy. The spending announcements have been made possible by the Labour and Liberal Democrat Administration's support for local government. Today we present councils with a positive challenge—not how to cut budgets, but how to invest the real-terms increases. From Fife to Falkirk, from Aberdeen to Ayrshire, the Administration is delivering more money for better services, more financial stability for councils and council tax payers and more autonomy for councils. This is a very good day for councils and for everyone who relies on the services that they provide.