Hansard

Through this statement, I am pleased to provide details of the local government finance settlement for 2007-08, the domestic rate poundage for 2007-08 and the small business rates relief supplement for 2007-08.

In my statement to Parliament on the 2006-07 settlement just over a year ago, I said that we were determined to secure improvements in the quality of public services for the benefit of everyone living and working in Scotland. During the past year, we have engaged in dialogue and debate about how our reform agenda should develop, not just with individuals and organisations in public services but with others, including the users of those services. One thing has become abundantly clear from professionals, service users and the third sector—few people believe that the status quo is an option.

Constructive steady change has taken place and will continue. There is real willingness on all sides to embrace the changes that still need to happen and to explore how best to take them forward. We might not be overgoverned in Scotland, but there is increasing acknowledgement that we are overmanaged.

By all accounts, we are making real progress, but we fully acknowledge that there is a long way to go. One area in which change is contributing to progress is the much more positive relationship that we are developing with local government. I have made no secret of local government's key role in delivering many of our vital public services. I very much welcome the progress that councils are making in improving the quality of those services and in delivering better value for money from the resources at their disposal. Councils recognise the further action that they can take to live within their means while they strive to deliver the quality of services that people in Scotland expect and deserve. Part of the equation is the level of funding that we provide to local government. Last year, the funding that we provided, together with the careful management that councils exercised over those resources, allowed councils to set the lowest average council tax rise since devolution.

I fully acknowledge that, even with all the progress that councils have made, a range of pressures and challenges has developed since the original 2007-08 funding levels were set earlier in the spending review. I have made it clear on a number of occasions that I am prepared to discuss with local authorities the possibility of additional funding for 2007-08, but I have also made it clear that we will not simply hand over additional funding without any conditions. Taxpayers fund our public services and they have a right to know what they will get in return. That is why I have consistently said that we would link extra funding to further progress on efficiencies and to other specific outcomes.

Local government has responded positively to that approach. We have had a number of extremely constructive discussions with the Convention of Scottish Local Authorities and with individual councils over the course of this year. The Improvement Service has provided us with the evidence that was needed to show that local government is tackling the drive for greater efficiency with some endeavour. It is with regard to that excellent performance that I am announcing today's provisional figures, although I acknowledge that, working together, there is still much more that we can achieve.

Today's provisional figures will enable councils to get ahead with setting their budgets for 2007-08 and will afford them the opportunity to comment on any details that require clarification. The figures will be finalised during the parliamentary debate in early February next year. The debate will provide the statutory basis for the revenue support grant payments to be made during 2007-08.

Against that positive background, I can set out the revised level of Scottish Executive grant support for local government in 2007-08. Local government will benefit from an additional package of measures worth more than £250 million. That will include an extra £157 million in revenue support for core services and an extra £61 million in capital grant. The figure also includes £19 million that we are making available for a new firelink communications system for the fire and rescue services, and £7 million for e-planning. In addition, because of the actions that we are taking on business rates, local government will benefit from a repeating windfall of approximately £10 million a year.

The new core settlement figures, which build on the previously announced figures, mean that total revenue funding for local government in 2007-08 will rise to £8.7 billion. That is an increase on last year of £393 million or 4.7 per cent. The £61 million of extra funding for capital means that the total support that the Executive will provide to local authorities next year for capital will be more than £900 million. In total, therefore, in 2007-08 local government will receive core and non-core funding amounting to £10.2 billion.

In return for that additional funding, councils have given assurances in the following areas. They will continue to bear down on council tax levels, not just in 2007-08 but in the following three years, putting the taxpayers first and offering the costed stability that the taxpayer deserves. They will act to build on the steady improvement in council tax collection and push collection rates even higher. They will work to develop more effective asset management strategies for all councils, and they will produce a regular report on progress, including outcomes and targets. They will also increase the level of efficiency savings that they seek to deliver by the end of 2007-08 by a sum that is at least as great as the extra capital grant that we are providing today.

It is important that councils will work with the Executive to establish once and for all the resources that they are spending on delivering free personal care and how effectively those resources are being used. They will do that so that people throughout Scotland receive the same high standard of service. They will put taxpayers first and offer the reassurance and stability that they deserve. In other words, by linking the extra finance to specific outcomes, we are sending a clear signal about the constructive and progressive relationship between central and local government in Scotland, as we work together to deliver the quality services to which the people of Scotland aspire.

Of course, we will be guided in our future actions by the success that we see in all those areas, but I can confirm that it is our intention that the £157 million of additional resources will be baselined in future years. So, providing that local authorities deliver on their part of the bargain—and I know that they will—the £157 million will be included in future local government budgets, not just for 2008-09 but for the years beyond.

Those amounts build upon the substantial sums that have been invested in local government in previous years. So, as the current spending review period comes to an end, the sums that I have announced today will mean that total funding for local government will have increased by almost £3.2 billion since 1999-2000—an increase of 57.9 per cent.

Later today, I will forward an information pack to all members, which will include some key facts on local government finance, a summary table showing what each council will receive in 2007-08, a copy of my statement and a copy of the letter that is being sent to COSLA to coincide with the statement, setting out the terms of our agreement and the conditions that we have attached to the additional funding.

I turn now to non-domestic rates. I can announce the non-domestic poundage rate and the small business rate relief supplement for 2007-08. One of the key factors that will help to determine our future prosperity is the success of our economy. Growing the economy is, rightly, our number 1 priority, and we are committed to ensuring that Scotland is populated by successful businesses that drive the kind of economic growth that will assist us in closing not only the all-important opportunity gap but that substantial fiscal gap that others try so hard to deny. We are helping business in a variety of ways—by creating business improvement districts, for example—and, within the resources available to us, we are continually seeking to target rate relief where it will achieve the maximum benefit.

I said in my statement last year that we would remove the existing gap between the Scottish and English poundage rates. In April, we halved the gap with England, and I confirm today that from 1 April 2007 we intend to remove the gap completely. The new poundage rate for 2007-08 will therefore be 44.1p. That new rate for Scotland represents a decrease of 0.8p from 2006-07. A technical note explaining how the figure was derived will be published shortly on the Scottish Executive website.

The 2005 non-domestic rating revaluation showed us that, on average, rateable values in Scotland had increased by 13.3 per cent, compared with 17.7 per cent in England. As a result of our policy of limiting rate increases, the rates burden on Scottish businesses relative to English businesses had already begun falling before we committed to equalising our poundage rate. That trend, in conjunction with the latest poundage rate, will mean that businesses here have significantly reduced operating costs. That will provide them with an all-important competitive edge. I now look to the business community to show that, in the interests of this country's economic competitiveness, it can take full advantage of the opportunity.

I am also pleased to announce that the small business rate relief scheme will continue in its present form and that, in line with our pledge to equalise the rate with England, the supplement on the poundage rate that is payable by larger businesses to cover the additional cost of the scheme will reduce from the rate in 2006-07 to 0.3p. The scheme benefits about 70 per cent of non-domestic subjects in Scotland. They will continue to receive relief up to the rate of 50 per cent. However, I want to assure Parliament and the business community in Scotland that we will continue our search to see what more we can do to support business, especially small business.

In conclusion, today's announcements see us build upon what are already record levels of investment and continue our record of providing above-inflation increases for local government in each year since devolution began. Those actions will contribute towards closing the opportunity gap by drawing more people into economic activity. That underlines our commitment to provide the best, costed, dependable and sustainable services for the Scottish people and to create the best opportunities for businesses, not only those already in Scotland but those that wish to invest here in the future. I commend the statement to Parliament.