The Cabinet Secretary for Finance today announced the Local Government Financial Settlement for 2011/12. Essentially this confirms the plan outlined in the draft Scottish budget. The needs based distribution formula remains unchanged.
The settlement means a cut of 5.5% in real terms. Councils are given a classic Hobson’s choice. A cut of 2.6% if they accept the Government’s priorities, or a 6.4% cut if they don’t. If any council wanted to bridge the gap with a Council Tax rise they would need an increase of between 15% and 18%. Not an attractive political prospect for any council!
This settlement will damage essential services and the local economy. It also heralds a return to ring fencing and a major attack on local democracy. Councils are being turned into the administrative arm of central government.
A practical example of the impact is set out in a report in the Herald today on plans to cut care services. A survey of social work chiefs across the country reveals closing care homes and day centres, removing wardens from sheltered housing at weekends and creating waiting lists for homecare services are among the measures being taken to save cash.
It also builds in massive waste such as police officers backfilling police civilian staffs at a huge cost to the taxpayer. Another example of waste is the reintroduction of PFI. The Commons spending watchdog reports today that banks charged an extra £1bn to fund new schools, hospitals and roads under private finance initiatives (PFI) schemes during the credit crunch – and the government failed in its duty to negotiate better deals.
The main Scottish Government priority is the Council Tax freeze. This undermines local democracy and the shortfall is increasingly being made up by charges for services. This disproportionally hits low income households who rely on council services, yet it is the wealthiest who gain most from this real terms tax cut. The Council Tax freeze is simply not viable in the current financial climate. It supports wealthy homeowners at the expense of those who rely most on local services. The Scottish Government is keen to talk up this tax cut as part of its election strategy, but less keen to identify the services that will be cut to pay for it.
The actual financial impact on local services will be greater than this allocation implies. Councils are already planning budget cuts and job losses over and above this grant settlement due to higher inflation, reducing income, rebuilding balances and demand for services in a recession.
Overall, another dismal day for Scottish local government.