Council budget cuts - cutting through the spin

This year’s local government budget allocation has been subjected to even more political spin than usual. So here is my attempt at a bit of clarity.

The war of words in the Scottish Parliament chamber is about the Scottish Government’s draft budget and how much they have allocated to local government. That is a very important part of any council’s finances, but it isn’t the whole picture. 

Lets start with the Scottish Government’s budget allocation to local government. The 2017-18 draft budget will cut the local government budget by £327m.  

The detail of that is set out in parliament’s independent information service report and this chart shows very graphically how badly local government is hit. 

COSLA also fairly put local government funding into context when they say:

”The financial facts are straightforward on this matter:

• In 2017/18 the revenue settlement for Local Government fell by 3.6% (£349m)
• In 2017/18 Local Government’s share of the Scottish budget fell from 30.6% to 29.7%
• LG Revenue Funding as a share of SG funding has decreased by 3.7% (£1bn) between 2010/11 and 2017/18 

Make no mistake the Scottish Government has a political choice here and with additional cash of £418m for next year there was no need for such a drastic cut to Local Government.”

The Scottish government responds to attacks about cuts to local government budgets by listing funding for their key policy initiatives for example:

• £120m for pupil equality scheme 
• £140m for energy efficiency 
• £47m to mitigate the bedroom tax 
• £470m for capital funding for housing 
• £107m social care funding 

Worthy though this spending is, it has little impact on the £327m budget cut. This is because this money is ring-fenced – it’s to pay for new initiatives and so can’t be used to plug the gap caused by the budget cut. The pupil equality scheme will go straight to schools; the social care funding is to pay for the living wage in social care, much of which is provided by the third and private sectors. Capital funding doesn’t pay for day-to-day services and so on. 

The one additional source of revenue that the Scottish Government can fairly refer to (although not include in their budget) is the £111m extra revenue generated by changing the council tax bands. In addition, any council that decides to increase the council tax (capped at 3%) will also generate real income (up to £70m nationally) that will mitigate the budget cut. 

I think councils should use these powers to mitigate austerity. I understand the argument that the Scottish Government is not increasing its basic rate of income tax, but expects councils to increase the basic rate of council tax. However, as my old gran used to say, ‘two wrongs don’t make a right’ – councils should not be the local  ‘administrators of austerity’.

Even this additional council tax funding will vary council by council, depending on their housing mix. For some authorities the number of households paying more tax will outweigh those paying less through the changes to the council tax reduction scheme. In other councils with a higher proportion of low-income families and fewer expensive homes, the picture will be more challenging. 

When UNISON branches sit down with their council finance directors they will find the reality of the local budget bears little relationship to the claims made in parliament. 

The council budget starts with their allocation (in itself controversial) of the Scottish Government cuts, mitigated by the extra council tax revenue and other modest income sources. Then they will be faced with what are described as ‘unavoidable commitments’. This year the biggest of these is likely to be the Apprenticeships Levy and it is as yet unclear how much of that money, if any, will come back to local authorities to support their apprenticeship schemes. In fairness, some of the ring-fenced grants will obviate some of what would have been unavoidable commitments, like the social care living wage costs. The result of this calculation will be budget deficit.

In conclusion, the finance minister’s spin simply doesn’t match the budget reality on the ground, but opposition parties also have to accept that there is some mitigation. However, the net result will be a big cut in the real budget for every local authority, although the scale will vary between councils. This will result in service cuts and even more job losses.