Chamber
Meeting of the Parliament 19 May 2010
19 May 2010 · S3 · Meeting of the Parliament
Item of business
“Report on Local Government Finance Inquiry”
I am pleased to open this debate on behalf of the Local Government and Communities Committee. The situation facing local government was described by Professor Alan Alexander, one of our witnesses at a round-table event, as the “perfect storm.” We have increasing demand for the services that councils provide, an aging population demanding better social care, higher demand for homelessness and other welfare support services, increased pension contributions and equal pay settlements. If that were not bad enough, it seems that even the weather is against councils, as they have just come through the worst winter that we have seen in many years and have had to endure significant flooding problems in parts of the country. That is set against a situation in which local government is unable to raise council tax and has had little or no increase in funding centrally, with council tax becoming more difficult to collect in a recession and the income raised from building warrants being on a downward spiral.
Against that backdrop, in June last year we announced our inquiry to ensure that there was a wider understanding of and debate on the financial pressures on local government. We began taking evidence for the inquiry in September 2009 and published our report in January of this year. I thank everyone who gave evidence to our inquiry, all the members of the committee and our clerks and researchers for their hard work, patience and support.
During the inquiry, there was a question about whether problems had arisen as a result of the recession or whether the recession had just exaggerated existing financial pressures that should have been addressed. Some of our other work, such as our inquiry into the debacle that is equal pay, suggests that some problems are of the councils’ own making. However, whatever the basis for the current situation, it is clear that different choices will have to be made and that there will be no quick fix.
We recently wrote to all 32 local authorities to find out what the up-to-date position is with their finances. The 27 responses that we received showed that the situation is pretty bad at the moment and likely to get worse over the next few years. Our inquiry report anticipated that, so we looked at how those financial challenges could be addressed. I think that everybody realises that the scale of the financial issues is such that they cannot be addressed merely by looking for efficiency savings. However, finding efficiency savings is important, and authorities should constantly strive to be more efficient and provide value for money.
Local authorities and trade unions told the committee that a lot of inefficiency had already been driven out of the system. However, some other witnesses, including Audit Scotland, were more sceptical, with some believing that the necessary scale of efficiencies could be achieved only with greater regulation. The committee nonetheless concluded that the way forward was to undertake more work on benchmarking to improve performance and efficiency. That is now being progressed by the Scottish Government and the Society of Local Authority Chief Executives and Senior Managers—we welcome movement in that area.
The other huge issue relating to efficiency savings is shared services. Just before we concluded our inquiry, Sir John Arbuthnott published his report on joint working and shared services in the Clyde valley, and there was certainly a lot of food for thought in that report. There was concern that local authorities had not done enough of that kind of work in the past and that decisions were being taken now only in response to the financial crisis rather than because of any kind of long-term change in the management process.
In his report, Sir John Arbuthnott said that local authorities
“cannot meet this challenge with short term solutions, such as year on year efficiency savings or ‘salami slicing’ budgets. The Councils and their public and private sector partners need to take a more strategic long term view.”
However, witnesses told us of tensions that can arise when services are shared or centralised. For example, a national scheme to drive efficiencies in procurement might involve a cost to the local economy.
The Arbuthnott report also highlighted a range of supports that the Scottish Government could provide. One suggestion was that the Scottish Government might introduce secondary legislation to smooth the way for interauthority shared services. The Government’s response to our report did not offer a view on that proposal, but it confirmed that work is on-going to see what further could be done. Perhaps the cabinet secretary will take the opportunity today to outline some of that work.
Public services cannot be delivered without staff, but when budgets are tight, questions are inevitably asked about whether big enough savings can be made without impacting on pay and jobs. Of course, none of that is easy. It is never easy for politicians to cut the wages of their voters or to threaten them with the sack. In local authorities, the big issue is that staffing accounts for about 50 per cent of total budgets, so how we achieve savings is a very pertinent question.
From the local authority responses that we received, it is clear that many authorities are looking to shed jobs to balance their books. In the main, they are trying to avoid going down the route of compulsory redundancies and are trying to manage any job losses by way of turnover and not filling vacancies or by voluntary redundancies. However, several authorities indicated that the scale of future budget deficits is likely to mean that compulsory redundancies cannot be ruled out.
The committee fully appreciates that such decisions are difficult. Like freezing pay, reducing staff numbers might seem an attractive option to achieve savings, but we also appreciate that it is not a good idea to cut capacity to the extent that it will be difficult to deliver services in the future. Like all the other decisions that local authorities need to make, such decisions should be made with a strategic long-term view rather than as part of a short-term, knee-jerk reaction, which could have a detrimental impact in the future.
Against that backdrop, in June last year we announced our inquiry to ensure that there was a wider understanding of and debate on the financial pressures on local government. We began taking evidence for the inquiry in September 2009 and published our report in January of this year. I thank everyone who gave evidence to our inquiry, all the members of the committee and our clerks and researchers for their hard work, patience and support.
During the inquiry, there was a question about whether problems had arisen as a result of the recession or whether the recession had just exaggerated existing financial pressures that should have been addressed. Some of our other work, such as our inquiry into the debacle that is equal pay, suggests that some problems are of the councils’ own making. However, whatever the basis for the current situation, it is clear that different choices will have to be made and that there will be no quick fix.
We recently wrote to all 32 local authorities to find out what the up-to-date position is with their finances. The 27 responses that we received showed that the situation is pretty bad at the moment and likely to get worse over the next few years. Our inquiry report anticipated that, so we looked at how those financial challenges could be addressed. I think that everybody realises that the scale of the financial issues is such that they cannot be addressed merely by looking for efficiency savings. However, finding efficiency savings is important, and authorities should constantly strive to be more efficient and provide value for money.
Local authorities and trade unions told the committee that a lot of inefficiency had already been driven out of the system. However, some other witnesses, including Audit Scotland, were more sceptical, with some believing that the necessary scale of efficiencies could be achieved only with greater regulation. The committee nonetheless concluded that the way forward was to undertake more work on benchmarking to improve performance and efficiency. That is now being progressed by the Scottish Government and the Society of Local Authority Chief Executives and Senior Managers—we welcome movement in that area.
The other huge issue relating to efficiency savings is shared services. Just before we concluded our inquiry, Sir John Arbuthnott published his report on joint working and shared services in the Clyde valley, and there was certainly a lot of food for thought in that report. There was concern that local authorities had not done enough of that kind of work in the past and that decisions were being taken now only in response to the financial crisis rather than because of any kind of long-term change in the management process.
In his report, Sir John Arbuthnott said that local authorities
“cannot meet this challenge with short term solutions, such as year on year efficiency savings or ‘salami slicing’ budgets. The Councils and their public and private sector partners need to take a more strategic long term view.”
However, witnesses told us of tensions that can arise when services are shared or centralised. For example, a national scheme to drive efficiencies in procurement might involve a cost to the local economy.
The Arbuthnott report also highlighted a range of supports that the Scottish Government could provide. One suggestion was that the Scottish Government might introduce secondary legislation to smooth the way for interauthority shared services. The Government’s response to our report did not offer a view on that proposal, but it confirmed that work is on-going to see what further could be done. Perhaps the cabinet secretary will take the opportunity today to outline some of that work.
Public services cannot be delivered without staff, but when budgets are tight, questions are inevitably asked about whether big enough savings can be made without impacting on pay and jobs. Of course, none of that is easy. It is never easy for politicians to cut the wages of their voters or to threaten them with the sack. In local authorities, the big issue is that staffing accounts for about 50 per cent of total budgets, so how we achieve savings is a very pertinent question.
From the local authority responses that we received, it is clear that many authorities are looking to shed jobs to balance their books. In the main, they are trying to avoid going down the route of compulsory redundancies and are trying to manage any job losses by way of turnover and not filling vacancies or by voluntary redundancies. However, several authorities indicated that the scale of future budget deficits is likely to mean that compulsory redundancies cannot be ruled out.
The committee fully appreciates that such decisions are difficult. Like freezing pay, reducing staff numbers might seem an attractive option to achieve savings, but we also appreciate that it is not a good idea to cut capacity to the extent that it will be difficult to deliver services in the future. Like all the other decisions that local authorities need to make, such decisions should be made with a strategic long-term view rather than as part of a short-term, knee-jerk reaction, which could have a detrimental impact in the future.
In the same item of business
The Presiding Officer (Alex Fergusson)
NPA
The next item of business, for which we are extremely tight for time, is a debate on motion S3M-6318, in the name of Duncan McNeil, on the Local Government a...
Duncan McNeil (Greenock and Inverclyde) (Lab)
Lab
I am pleased to open this debate on behalf of the Local Government and Communities Committee. The situation facing local government was described by Professo...
Margo MacDonald (Lothians) (Ind)
Ind
On the need for a strategic overview, I could not agree more. However, did the committee consider whether that should include the ending of some services or ...
Duncan McNeil
Lab
We did not look at those very detailed discussions, but we believe that it is important that local authorities deal with the issue not just as a response to ...
The Deputy Presiding Officer (Alasdair Morgan)
SNP
The member will need to conclude.
Duncan McNeil
Lab
Right.There is no evidence that local authorities or the Convention of Scottish Local Authorities are having that debate. Do we want local government or loca...
The Cabinet Secretary for Finance and Sustainable Growth (John Swinney)
SNP
I welcome the Local Government and Communities Committee’s report, which offers a wide-ranging assessment of the potential impact of the current economic sit...
Jeremy Purvis (Tweeddale, Ettrick and Lauderdale) (LD)
LD
The cabinet secretary is aware that councils are asked to make 2 per cent efficiency savings on their budgets, and they are able to retain those savings. If ...
John Swinney
SNP
That is, of course, a hypothetical question. The difference between the current Government and the previous Government, in which Mr Purvis’s party was a part...
Michael McMahon (Hamilton North and Bellshill) (Lab)
Lab
I congratulate Duncan McNeil and the members of the Local Government and Communities Committee on undertaking an inquiry into local government finance and on...
John Swinney
SNP
Can Mr McMahon explain to Parliament the consistency between the line of argument that he is pursuing and the comments that Andy Kerr made overnight, which c...
Michael McMahon
Lab
I do not believe that there is any inconsistency. Andy Kerr asked the cabinet secretary to be honest about the decisions that must be made now, instead of de...
The Deputy Presiding Officer
SNP
The member needs to wind up.
Michael McMahon
Lab
Like the committee, I welcome the fact that Audit Scotland is undertaking a review of the achievement of efficiency savings, as we may get some hard facts on...
The Deputy Presiding Officer
SNP
I am sorry, but the member is out of time.15:32
Derek Brownlee (South of Scotland) (Con)
Con
I congratulate the Local Government and Communities Committee on a very thoughtful report. Given that the Parliament spent the first two years of this sessio...
Jim Tolson (Dunfermline West) (LD)
LD
The Local Government and Communities Committee, of which I am a member, conducted its inquiry in order to assess the potential effects of the current economi...
John Swinney
SNP
Mr Tolson mentioned 3,000 or so targets that are in the single outcome agreements. Does he accept that not all of those relate to every local authority? He g...
Jim Tolson
LD
What the cabinet secretary seems to be saying is exactly in agreement with me. There are all those targets out there in whatever way one wants to look at the...
Margo MacDonald
Ind
Will the member give way?
Jim Tolson
LD
I will happily give way.
The Deputy Presiding Officer
SNP
Sorry—it is too late. You are too near the end of your speech, Mr Tolson.
Jim Tolson
LD
All right. Sorry. In summary, whether in relation to funding distribution, the concordat or the voluntary sector, the Government has failed miserably to perf...
The Deputy Presiding Officer
SNP
The member must finish there. We must move on to the rest of the debate.
Jim Tolson
LD
—who suffer at the hands of the SNP Government’s incompetence and arrogance.15:44
Bob Doris (Glasgow) (SNP)
SNP
During the current session of Parliament, the Scottish Government has prioritised Government resources to further Scotland and her economic needs in the face...
Jeremy Purvis
LD
I want to ensure that I heard the member correctly before I refer to the Official Report of the meeting tomorrow. Did he say that it is justifiable for Scotl...
Bob Doris
SNP
I am delighted that the member chose to intervene rather than say something misleading. He should read the Official Report tomorrow. I am talking about Scotl...
Jeremy Purvis
LD
Is that a new policy from the SNP?
Bob Doris
SNP
That is a very good question. We will wait to see what the Lib Dem-Conservative coalition does down south as it brings savage cuts to Scotland. Mr Purvis wil...