Local Government Finance Act 1992 (Scotland) Order 2009

Speech by Alison McInnes delivered to chamber, Sottish Parliament on Wed 11th Feb 2009

Whether we have too many councils has been debated recently, but that question is less important than asking whether our local government is truly free to govern locally. Local government should have sufficient autonomy and resources to be free to respond to local needs while recognising that it has a key role in helping to address urgent national agendas. A tension between those aspects always exists, but achieving the right balance is important for our communities.

Have the changes that the SNP introduced, such as the concordat, the removal of ring fencing, shifts in budgets, the council tax freeze and single outcome agreements, lived up to the hype? Are we in a new era of respect for local councils? Can councils get on and do what is needed for their communities? I do not think so. On the one hand, councils must provide adequately for needs-led local services such as home care and special educational needs support and, on the other hand, councils are still being pushed to deliver uncosted and unrealistic SNP election pledges. That all takes place in the face of what has become a council tax freeze of indefinite duration. The SNP's retreat today on local income tax is another muddle.

More than 40 specific grants disappeared last year. The removal of ring fencing was intended to make council budgeting more flexible, but we know that it made budgeting harder for some voluntary bodies. As Jeremy Purvis said, it also created problems in waste management and flood prevention.

There has been a deal of confusion about what is and is not in the concordat. Councils have waited for almost two years with growing frustration for clarity about the Scottish Futures Trust. Meanwhile, school buildings and swimming pools continue to deteriorate; year groups progress through schools; and communities wonder when the Government will help councils to tackle some of the big capital headaches. Prudential borrowing and small increments in capital allocations are insufficient. Councils were insulted by the constant reiteration by the former Minister for Schools and Skills that they had extra capital and that they should just get on and build schools. I am therefore delighted that, as Jeremy Purvis said, the Liberal Democrats challenged that and secured continuing annual revenue support for school building.

As Helen Eadie said, like businesses and households, councils have faced particular pressures in the past year because of rising fuel costs. Those pressures were compounded by reducing revenues from planning fees and land sales.

Several north-east members have pointed out the problems that the grant allocation system presents for Aberdeen and Aberdeenshire, and Nicol Stephen made an impassioned plea on Aberdeen's behalf. I have supported the fair share campaign since its outset. The previous Administration started-albeit painfully slowly-to turn around the situation and the two north-east councils were edging towards receiving a fairer share of the Scottish budget. Sadly, that position was reversed last year, when Aberdeen City Council and Aberdeenshire Council received the worst settlements that they have ever had, which represented 85 per cent and 88 per cent of the Scottish average. That is grossly unfair. The fair share campaign asks for three things: opening of the grant distribution debate at COSLA and Scottish Government level; introduction of a floor for aggregate external finance per head of population; and simplification of grant distribution and allocation under grant-aided expenditure. The debate has started. As Mr Swinney said, a COSLA working group has been set up, but I am concerned about the pace of its work. I would like to see a concerted effort to tackle the unfairness in the current system. It cannot be right that last year Aberdeenshire received 13.4 per cent less than the Scottish average-such variation is too great.

The drop in share is a consequence-perhaps unintended-of the removal of ring fencing. If we look at previously ring-fenced funding, last year Aberdeenshire received 41.5 per cent less than the Scottish average. I accept that this year's figures show a little movement, but it is minimal.

The GAE process must be simplified. Currently more than 100 indicators are used, several of which are seriously flawed. About 66 per cent of expenditure is determined by only 12 indicators. The existing grant system, which has been in place, with a few modifications, since the 1970s, was designed to meet the needs of larger regional councils. At that time, ups and downs in individual criteria could be ironed out over the piece and the gearing effect was not so extreme. The indicators are no longer fit for purpose and must be comprehensively reviewed. New criteria should target the main areas of spending need in councils; we should use indicators that are intuitively as well as statistically and logically valid. I have heard it suggested in COSLA that that is too difficult and that there would be winners and losers, but there are losers at the moment, without any justification.

We know that public spending will be squeezed more in the next few years, so it is vital that everyone gets a fair share. In the meantime, those few councils that receive less than 90 per cent of the Scottish average-there are only five of them-should not be allowed to slip further back. I call on the cabinet secretary to give them some assurance. If a floor of 90 per cent of the Scottish average were agreed, it could be funded from underspends. The cabinet secretary does not need to wait until the review has been carried out-he can help Aberdeen and Aberdeenshire now.

We will not block the Local Government Finance Act 1992 (Scotland) Order 2009 today, as councils need certainty of funding. However, there are legitimate concerns that need to be taken on board.

Given that only five councils in Scotland fall below the 90 per cent floor to which Mr Rumbles referred, does Mr Swinney agree that the issue could be dealt with on an ad hoc basis by using underspends? I understand that that would cost £100 million. In advance of the review, is the cabinet secretary willing to consider using year-end underspends to pull up those councils to 90 per cent of the average?