Hansard

I am pleased to give evidence on the Executive's detailed spending plans for local government for 2007-08, as published in the draft budget 2007-08. I remind the committee that these are draft proposals at this stage. We will reflect further on our plans in light of that and the consultations that are taking place with portfolio committees. I will restrict my comments to my overarching responsibilities for local government funding. Responsibility for individual services rests with individual portfolio ministers.Revenue support for local government for 2007-08, which councils receive through aggregate external finance—or AEF—and various other Executive grants, remains largely unchanged from that announced in last year's draft budget. Between 2006-07 and 2007-08, AEF will increase by 2.9 per cent in cash terms. In addition, councils will receive a range of specific revenue grants amounting to around £1 billion per annum and more than £400 million in direct capital grants. I should say more about those figures, because they are not the whole story. Nothing stands still in local government finance. Updating goes on continuously as, for example, agreement is reached to transfer funding from specific grant to AEF or funding awards are agreed by individual ministers, therefore the draft budget represents a point in time. While it was accurate when it was compiled and published, some of the figures for 2007-08 are already out of date. Unfortunately, some people concluded from what was published that some funding lines were being cut between 2006-07 and 2007-08. That was the wrong conclusion. The apparent gap was due to timing, as some figures were still to be confirmed and announced, which meant that they were not included when the draft budget went to print. To avoid any misunderstanding in future, we will add appropriate footnotes to the relevant tables to ensure that there is greater clarity. My officials recently met Professor Arthur Midwinter to discuss the position and I understand that he has revisited the advice that he provided previously. Last year, as the committee will know, the average council tax increase for 2006-07 across all councils was the lowest since devolution. Contact with councils indicates that council tax rises are likely to be kept down again in 2007-08. That would be a sensible outcome which, with prudent budgeting, I very much encourage them to deliver. I am pleased that councils have also continued to improve their council tax collection rates. There has been a steady year-on-year increase since before the millennium, and the latest in-year collection rate is now 93.3 per cent, which is up from 92.7 per cent last year. We are working with the Convention of Scottish Local Authorities and councils to ensure that that upward trend continues.We were pleased to welcome the publication on 9 November of the final report from the committee chaired by Sir Peter Burt that has been reviewing local government finance. The report is a substantial piece of work that merits careful consideration by us all. Clearly, we will need time to give the Burt committee's findings and conclusions detailed and careful consideration. Spending in the public sector since the Parliament was established, including support for local government, has increased substantially. By the end of the current spending review period, revenue support to local authorities will have increased by more than £3 billion compared with 1999-2000—an increase of 55 per cent. That includes the planned increase of 2.9 per cent for 2007-08, which is reflected in the tables. While that is a significant sum—and good news for the people of Scotland, who depend on the front-line services being provided—the Minister for Finance and Public Service Reform and I have said that if councils embrace greater efficiency, we are prepared to look again at the core funding settlement for local government for 2007-08. The evidence to date is that they are doing so. While it is too early to say anything further at this stage, I expect the Minister for Finance and Public Service Reform to be in a position to say more in early December in his statement to Parliament on the local government finance settlement for 2007-08. We are also approaching another spending review, which will set local government funding for the period after 2007-08. That review will take place next year and the outcome will be announced in September 2007. The extra year has created the space for us to think more fundamentally about where current trends might be heading and how best to respond to the long-term opportunities and challenges, and to think about different ways of achieving success. It is too early at this stage to comment on how that work is progressing. All the factors need to be considered to enable an informed decision to be taken after the election. One work strand that will impact on our thinking for the spending review is the debate that we have begun on the way public services are to be delivered. Over the past year, we have undertaken a dialogue involving people from right across the public sector and beyond. We have said that change is overdue, but not top-down change that focuses only on where boundary lines should be drawn on a map. While we are prepared to change structures where it is needed, our overall focus is not on structures but on a clear and shared vision of the role and value of public services and on a sustainable model for efficient delivery, high performance and strong accountability. In June, we published the consultation paper "Transforming Public Services: The Next Phase of Reform". We will shortly be announcing the next stages, and we are already identifying pathfinder councils with which we can test out new and better ways of working, including—but not limited to—outcome agreements. However, that is for the future.Coming back to 2007-08, and as part of our commitment to grow the economy we committed last year to equalise the business rate poundage with England. We will deliver on that in April 2007, and we will provide extra resources to local government through revenue support grant so that councils are no worse off. The figures contained in the 2007-08 draft budget already reflect that change, which represents a considerable boost to Scottish businesses. As with last year's report, the block grant provided to local government through AEF is largely unhypothecated, but a service split is available for the grant-aided expenditure that it supports. The draft budget includes details of GAE provision by portfolio. The GAE allocations are not, of course, expenditure targets. Rather, they represent a level of expenditure that the Executive thinks is justified as an input into the calculation of revenue support funding. Councils are free to incur additional expenditure over and above GAE, provided they can fund it from their own local resources and justify it to the electorate. The draft budget for 2007-08 covers the final year in the current spending review period. To that extent, our overall spending plans up to 2007-08 will not be reopened. We are looking again at the funding position for local government for 2007-08 from within our existing resources. There are relatively few changes from those that were reported in last year's draft budget, the most substantive of which are the additional resources to help local authorities deliver on the teacher numbers target and the transfer to the enterprise, transport and lifelong learning portfolio to reflect the introduction of the national concessionary fares scheme. Next year's draft budget will incorporate the outcome of the new spending review, and will be rather more significant.I am happy to take the committee's questions, and I or my officials will answer them.