COUNCILS will struggle to fund even their most basic services because of a “shortfall” in funding caused by the council tax freeze, ministers have been warned.
Officials at the local authority body Cosla were working in the wake of Tuesday’s Scottish Budget – which saw the equivalent of a 5% increase in council tax funded by the Scottish Government – to tally up what the shortfall meant for local services.
Local authorities have estimated freezing council tax as costing £300 million, but Shona Robison pledged just £140m to fund the freeze – insisting it was a “fair offer”.
The Local Government Information Unit (LGIU) Scotland said the announcement would provide “no comfort” to 25% of Scottish local authorities who say they “could be unable to fund” statutory services because of the freeze.
This means the services councils have to fund by law – like waste management, education, general maintenance and sports facilities – may have to be cut.
Jonathan Carr-West, the chief executive of LGIU Scotland, said: “A council tax freeze funded as though council tax were increased by 5% is equivalent to the rises that councils were planning for this year, but it denies them the increase in their tax base and thus undermines their finances next year and for years to come.
“The ‘additional support’ promised all appears to be ring-fenced to Scottish Government priorities rather than enabling democratically elected councils to make decisions about priorities in their areas.”
Before the Budget was announced, 97% of Scottish councils told the body that they were planning to increase charges and 89% said they would need to spend their cash reserves, Carr-West added.
'Biting measures'
He said the £140m pledged to fund the council tax freeze would “not alleviate the need for these biting budget measures”.
Experts at the Fraser of Allander Institute said the shortfall could be as much as £180m if councils banked on increased multipliers for higher band properties.
Carr-West added: “Most worryingly, eight separate councils (25% of all local authorities) warned us that they could be unable to fund their statutory services – the services they have to provide by law.
“The funding announced today will be no comfort to these struggling councils, who will now have to make even more difficult choices to make up for their funding shortfall.
“For the average resident, this means their life will get more expensive and their services will get worse.
“For some of the most vulnerable members of society, as councils warned us, it may mean that if nothing changes then there is not enough money to fund the services they rely on.”
A Cosla spokesperson said: “Given the significance of the Scottish Budget to councils and communities across Scotland, Cosla officers are currently working through the detail of the figures, in order that a briefing can be prepared for [council] leaders, who will give it full consideration on Thursday morning at a special meeting.”
Oxfam called the council tax freeze “misguided” and expressed its disappointment the Scottish Child Payment was increased by £1.70 per week rather than the £5 it had recommended.
Jamie Livingstone, in charge of the charity’s work in Scotland, said the creation of a new higher tax band for those earning between £75,000 and £125,140 was “fair and proportionate” but would “likely be largely offset” by the council tax freeze.
He said: “This sobering Budget demonstrates disappointingly disjointed policy-making on tax.
“While the changes to income tax are fair and proportionate, the gains will likely be largely offset by a misguided council tax freeze which will do very little to help people on low incomes.
“The overall result will be a damaging squeeze on many vital public services which we all rely on, but which are particularly vital for those living in poverty.”
Outlining the Budget in the Scottish Parliament, Robison said: "Combined with the other support being provided to local government, this will increase their overall funding by 6% since the last budget, taking local government funding to a new record high of over £14 billion. "
Joao Sousa, deputy director of the Fraser of Allander Institute, said: “On council tax, the Scottish Government continued to claim it was 'fully funding' the freeze in rates for next year, and allocated £140m on the basis of a 5% increase.
“While this is about right for an average 5% increase in rates, some Councils would have been planning on increasing rates by more than 5%, and are unlikely to receive compensation for that.
“And it also excludes compensation for the planned increase in multipliers for higher band properties, which was consulted on over the summer and many could have assumed in their planning, and which would have required an additional £180m.”
The Scottish Trades Union Congress (STUC) secured a partial victory in its recommendations on income tax, with the Government adapting its proposal for the new “advanced” rate.
But general secretary Roz Foyer criticised ministers’ “unwillingness to countenance more ambitious tax reform”.
She added: “High-quality, fully funded public services must be at the heart of a wellbeing economy and we cannot countenance any cuts – spun and packaged up as ‘reforms’ – which act as a barrier to that goal.”
Speaking to reporters after her statement, Robison defended funding the equivalent of a 5% rise on the grounds it was “above inflation”, adding: “I think it’s a fair offer.”
Robison said: “The priorities we’ve set out are frontline services, a real-terms increase to the NHS, local government getting £14bn – the highest level ever – at a time where our budget is being cut.
“Our budget, both resource and capital are being cut together, we had to make difficult choices, particularly on the capital side. So what we’ve done is protected those frontline services."
'Damaging' or 'making progress'?
Liz Smith, the Tory shadow finance secretary, described the Budget as “dismal and damaging for Scottish taxpayers and businesses”.
She criticised tax increases for the well-off and castigated the Scottish Government for failing to replicate the UK’s rates relief programme for businesses.
“This betrayal again exposes Humza Yousaf’s ‘reset’ with business as a sham, because it increases Scottish firms’ competitive disadvantage with the rest of the UK,” said Smith (below).
“There is a complete abdication of responsibility by Shona Robison for her party’s running of the Scottish economy for the last 16 years. But the usual SNP excuse – it’s all Westminster’s fault – just won’t wash.”
Scottish Labour finance spokesman Michael Marra branded it a “chaotic Budget from an incompetent Government that will leave ordinary Scots paying much more and getting much less in return”.
Scottish Greens co-leader Patrick Harvie defended the Budget, saying it had “confronted head on the disastrous settlement the Scottish Government had inflicted on it by Westminster”.
He added: “By raising the Scottish Child Payment further, by sustaining tangible benefits such as free bus travel for under 22s and people seeking asylum, and asking those who can to pay a little more, we are lifting as many people as we can out of poverty and ensuring core green values will see further progress being made.”
Alex Cole-Hamilton, leader of the Scottish LibDems, said councils were “on the brink”, adding: “The vulnerable, pupils, taxpayers, all taxpayers, all suffering the cost of SNP/Green incompetence from ferries to the white elephant takeover of social care.”
