After last week’s debate on the Committees’ pre-Budget reports, the Parliament has now commenced formal consideration of the Budget Bill.
The Parliament debated and voted on the general principles of the Budget Bill 2019-20 yesterday at Stage 1 of the process. In his opening statement, Derek Mackay, the Cabinet Secretary for Finance, Economy and Fair Work provided details of the deal agreed between the Scottish Government and the Scottish Green Party.
At decision time, the Bill received 67 votes for and 58 votes against. There was one abstention.
What has been agreed?
The deal agreed between the Scottish Government and the Green Party combines a mix of new spending and new policy commitments.
On spending, the Cabinet Secretary announced an additional £90 million for the local government general resource grant. This additional money changes the various headline figures for the local government settlement, as covered in detail in previous SPICe blogs and briefings on the budget:
- the non-ringfenced revenue funding available for councils to deliver services (the sum of general resource grant and non-domestic rates income) now falls by 2.5% in real terms (-£230.7 million)
- once all of the revenue funding in other portfolios is added, along with, specific (ring-fenced) resource grants, the total revenue funding increases by 1.1% in real terms (+£110.4 million)
- finally, once all the above, and the capital budget is included, the total funding for local government now increases by 2.8% in real terms (+£298.9 million).
In addition to this new money, the Cabinet Secretary also announced two additional “flexibilities”:
- to allow local authorities to increase council tax by a maximum of 4.79% (rather than 3%) in 2019-20 – the Government states this would raise an additional £47 million
- to allow local authorities to spend £50 million previously earmarked for social care either on social care, or on whatever area of service they choose.
Taken together, the Cabinet Secretary stated that these three changes could increase the spending power of local government by £187 million. However, to be clear, the only additional funding to local government is the £90 million to the general resource grant.
Policy changes centred on new powers being given to Local Authorities on taxation. The Cabinet Secretary committed to:
- Consult on the principles of a locally-determined transient visitor levy (also known as a Tourist Tax) and introduce legislation thereafter
- Support an agreed Green Party amendment to the Transport (Scotland) Bill. This would enable local authorities to introduce a workplace parking levy, with Scottish Government support being contingent on the exclusion of hospitals and NHS properties.
- Devolve Non-Domestic Rates Empty Property Relief to local authorities in time for the next revaluation.
- Convene cross-party talks on replacing the current council tax. If agreement is reached, the intention would be to publish legislation by the end of this parliamentary session. The legislation would then be taken forward in the following session.
- Bring forward a three-year funding settlement for local government from the 2020-21 budget onwards.
- Develop a rules based framework for local government funding, in partnership with COSLA, that would be introduced for the next parliament.
COSLA issued a statement welcoming the changes. COSLA President Councillor Alison Evison said:
Whilst challenges still remain, and today’s movement from Scottish Government clearly doesn’t mitigate all of our funding issues, we are now in a better place than we were with the original budget proposal.
So, how will the additional spending be funded?
The Cabinet secretary announced that the additional allocations would be funded by “further unexpected funding in Barnett consequentials this year”. These Barnett consequentials arise from the UK Government’s 2018-19 supplementary estimate and provide £126 million in Resource (day-to-day) spending and £22 million in capital for the Scottish budget. Given the lateness in the 2018-19 financial year, the UK Government has given the Scottish Government the flexibility to use this resource in 2019-20.
Of this additional £148 million, £90 million will be allocated to Local Government and £4 million to Health via amendments to the Budget Bill. The remaining £54 million will go into the Scotland Reserve.
What happens next?
The Budget Process Review Group final report said:
any changes to the Scottish Government’s published spending proposals during the budget process must be dealt with through amendments to the Budget Bill at Stage 2 and Stage 3.
The parliamentary process now moves to Stage 2 at the Finance and Constitution Committee next week, where members will be able to question the Cabinet Secretary on these changes, when the amendments are considered.
The week commencing 18 February will see the Scottish Rate Resolution being voted before the final Budget Bill Stage 3 vote the following day.
Ross Burnside and Allan Campbell, Financial Scrutiny Unit