Hansard

Before I make my statement, I place on record my appreciation and, I hope, that of the chamber, for the work of Angus MacKay, the previous Minister for Finance and Local Government, who laid down solid foundations. I also wish to thank him personally for his assistance since I took up my portfolio.

The Labour and Liberal-Democrat Administration is committed to providing a sound and stable financial platform for local government. For the first time ever, we have announced guaranteed three-year revenue and capital allocations for each local authority in Scotland. In no other part of the United Kingdom do local authorities have the certainty of knowing their central Government funding allocations three years in advance.

We have announced record levels of resources for local government, guaranteeing every local authority an above-inflation increase in revenue grant in each of the three years. Let me be clear about that: every local authority in Scotland is receiving a real-terms increase in grant support, not just for one year, or over three years, but for each of the three years of the current spending review. Those commitments are testament to the benefits of devolution and to the Administration's continuing partnership with and commitment to local government in Scotland.

In total, we have committed well over £1 billion in additional revenue grant support to local government over three years. We have also announced a 40 per cent increase in the allocations for local authority capital investment over three years. Those commitments are already bearing fruit, not just in additional local services and infrastructure, but in improved financial and service planning, laying the foundations for continued and sustained improvements in future years.

I am delighted, as Minister for Finance and Public Services, to announce today further substantial increases to the local government revenue grant support on top of the existing allocations for next year and the year after that. I will also confirm the transfer of resources out of ring-fenced programme grants into unhypothecated general grant provision and I will announce today the provisional national non-domestic rate poundage for 2002-03.

The three-year local government revenue grant allocations that were announced last year committed substantial additional resources to the delivery of key policy priorities. Those include, for example: modernisation of the teaching profession; improved care services for older people; enhanced concessionary travel schemes; extra resources for the police; and increased allocations for local authority capital investment in schools, roads and other infrastructure. We also included, for the first time in recent years, provision for local authority pay and price inflation. Those resources, with the stability of the three-year settlement, provide the perfect platform from which local government can better plan and deliver improvement in service delivery and secure best value.

No one should be in any doubt that I regard local government as a key partner in delivering better public services for all our citizens. I have great confidence in the capacity of local government to deliver, but I always want it to deliver the best. To be able to do so, councils need to benchmark their standards, to learn from one another and from other sectors, to compare and contrast their performance and to plan improvement.

I want every council to provide excellent services and to constantly seek improvement. I believe that the Executive has a key role in working with councils to assist in that process, helping to establish the benchmarks for the best performance and helping to facilitate improvement. In that spirit, we made it clear at the time of the previous settlement that new policy commitments that placed a financial burden on local government would be funded in full.

Today, I am announcing the allocation of an additional £350 million in grant support through the local government settlement next year. Those additional resources build on the real-terms increases that were announced last year. Scottish Executive revenue grant support to local authorities will total £6.7 billion next year, including that additional provision. That is an increase of £650 million, or 10.7 per cent, over the current year—more than four times the projected rate of inflation. I hope that members agree that that increase is remarkable. The revenue grant allocations will increase by a further £375 million, or 5.6 per cent, for the following year—more than twice the projected rate of inflation. Investment on such a scale is unprecedented and demonstrates our commitment to providing better public services for Scotland's citizens and to the continuing vital role that local government plays in delivering those services.

The details of the allocations for individual councils are set out in a finance circular that is being issued today to all local authorities. A summary of the allocations is available from the Scottish Parliament information centre table at the back of the chamber and copies of the full circular have been placed in SPICe. The settlement totals to which I have referred include provision of £125 million that was previously announced to fund personal and nursing care for older people. Those resources are not included yet in the allocations to individual authorities, as distribution arrangements are still to be finalised.

Even excluding the resources of £125 million, the increases for individual local authorities range between 5.5 per cent and 10.5 per cent for next year and between 5 per cent and 8 per cent for the following year. Therefore, all local authorities are receiving a year-on-year increase in grant that is at least twice the projected rate of inflation each year, with further allocations still to be confirmed. The allocations include resources totalling over £150 million over two years for the transfer of responsibility from the Department for Work and Pensions to local authorities for people in residential care homes and nursing homes.

We are making available additional money to assist local authorities in providing more literacy and numeracy learning opportunities for adults, to support improved out-of-school care for children and to help authorities to prepare for the new supporting people regime for housing support services. In total, local authorities will receive more than £13 million in additional support for those commitments next year, rising to more than £21 million in the following year. Those allocations reflect our priorities of providing children in Scotland with the best possible start in life and closing the opportunity gap.

There is one transfer out of the local government settlement. The Parliament passed the Regulation of Care (Scotland) Act 2001, which provided for the new Scottish commission for the regulation of care to take over responsibility from local authorities for inspecting care establishments from next April. Resources of £5.6 million will transfer to the commission to reflect that transfer of responsibility.

There has been much discussion of ring fencing in relation to local government funding. Contrary to suggestions that have been made elsewhere, specific grants continue to account for only around 10 per cent of total Scottish Executive support through the general local government settlement. From next year, we are allowing local authorities even more flexibility in how they use resources, with the abolition of certain ring-fenced controls.

However, ring-fenced specific grants have a role. For example, no one would argue that funding for police services should not be protected. In the same way, specific programme funding has allowed us to move from uneven provision of nursery places between local authority areas to a position in which pre-school places are available, where parents wish, for every three or four-year-old in the country. As that aim has been achieved, it is right that the resources should return to general local authority control. Therefore, from next year, £137 million of specific programme funding through the pre-school grant will transfer to unhypothecated general grant. Similarly, resources of £8.8 million for the rough sleepers initiative have helped to develop services for homeless people across Scotland, and annual specific resources of £8.8 million can now transfer to general grant.

Of the other allocations, we have agreed with the recommendations that were made by the care development group and the Parliament's Health and Community Care Committee that, during the initial implementation period, we should monitor local authority expenditure from the £125 million that is being provided for personal and nursing care.

No specific financial conditions are attached to any of the other additional allocations that I am announcing today. We are keen to shift the focus away from resource inputs and on to what we and service users are really interested in—the outcomes that are being achieved in terms of additional and improved services.

Local authorities have been asked to prepare local outcome agreements relating to the additional support that I have announced today for adult literacy and homelessness. Outcome agreements are also being prepared for community care services and social justice. We are working with the Convention of Scottish Local Authorities on pilots to test the wider potential of the outcomes-based approach.

The distribution of the original three-year settlement allocations was established following discussions with COSLA. Those increased allocations are provisional. Following further discussions with COSLA, they will be confirmed in the local government finance order next year. With COSLA we have worked on the establishment of three-year budgets, the implementation of teaching for the 21st century recommendations, the proposals for long-term care for older people and the review of care home fees. We will continue to pursue that joint approach.

Income from non-domestic rates forms part of the total Scottish Executive revenue grant for local government. Today, I announce a provisional non-domestic rate poundage for 2002-03 of 47.8p. That represents an increase of 1.7 per cent on the figure for 2001-02, matching the inflation rate to September 2001, and fulfils, as in the past, our commitment to limit year-on-year increases to growth in the retail price index. We will seek the views of business organisations before confirming the poundage early next year.

The additional allocations that I am announcing today will meet in full the costs arising from new policy commitments and should not impact on local authorities' existing council tax plans. It is, of course, for local authorities to set council tax at the levels that they consider appropriate, following consultation with their electors. All authorities have published provisional council tax changes or upper limits for next year and the year after that—that represents a commitment by councils to local taxpayers. I congratulate councils on the responsible way in which they have handled that new commitment; I recognise that it was a major challenge for them and congratulate them on having risen to that challenge. Council tax payers now have a clear indication of what they can expect to pay and can better judge their councils' actions if and when any variation in tax levels occurs.

The resources that I have announced today, which come on top of the increases that were announced last year, represent a significant investment in local services. It is vital that local authorities make effective use of those resources and work with other local agencies to deliver quality services that put people's needs first. We want to ensure that local authorities have the resources and flexibility to do their jobs and the powers and responsibility to work with other agencies to deliver real and visible improvements in public services.

The Parliament will have the opportunity to debate the final allocations for 2002-03 when it considers the local government finance order next year. Early next year, I will confirm the final rate poundage for 2002-03.

I hope that all members will join me in welcoming the substantial additional support that the Labour and Liberal Democrat Administration is committing to local government for the next two years, on top of the significant increases that have been provided for the current year. In anyone's book, a year-on-year increase in grant support of nearly 11 per cent, with further increases in the following year, represents a substantial investment in local services and a vote of confidence in the continuing role of local government in delivering those services to all Scotland's citizens.