Picture of stacked coins and the Scottish budget document

Budget Bill Stage 1: an extra £120 million for local authorities

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As explained in a recent SPICe briefing, the Scottish Government’s Budget document shows that the “core” revenue allocation to local government remains the same in cash terms between 2021-22 and 2022-23. However, when taking account of inflation, the settlement sees a real-terms reduction of £284 million (or -2.5%) over the year. The Cabinet Secretary for Finance and the Economy says she “cannot inflation proof all budgets”; however the overall settlement, which includes substantial in-year transfers from other portfolios, is, in the SG’s view, “fair but affordable”.  

COSLA’s position – which all 32 council leaders support – is that on top of the real-terms reduction to “core” revenue, the settlement from the Government is £100 million short of what councils need to fund national insurance rises, council tax reduction increases and other commitments. For COSLA, the settlement therefore represents a real-terms shortfall of £371 million.

Until last Thursday, the Cabinet Secretary appeared slightly sceptical of the £100 million figure. For instance, in her response to Douglas Lumsden MSP, during a recent Finance and Public Administration Committee session, the Cabinet Secretary stated:

“In relation to the core budget, which is protected in cash terms, I do not recognise the £100 million figure that local government is using. COSLA recently wrote to me about that £100 million, and I am trying to get underneath it. My understanding is that COSLA is saying that it is for Scottish Government priorities, but I do not recognise the figure”

But during last Thursday’s Stage 1 Budget debate, the Cabinet Secretary stated:

“Councils asked for an additional £100 million to deal with particular pressures. We have heard them and listened and we are going to go further. That will allow them to deal with the most pressing issues that they face, at a time when people are understandably worried about the cost of living.”

As such, the Cabinet Secretary used her speech to state that the Government would allocate a further £120 million of resource funding to local government in 2022-23. Although stressing that councils will have “complete flexibility to allocate that additional funding as they wish”, the Cabinet Secretary was also careful to link the increase to Council Tax:

“That increase in funding would be equivalent to a 4 per cent increase in council tax next year so, although councils have full flexibility in setting local council tax rates, I do not believe that there is a requirement for any inflation-busting increases next year.”

So, the £120 million is not ring-fenced and it is also not conditional on councils freezing their Council Tax rates. How it will be distributed between Scotland’s 32 local authorities is yet to be agreed with COSLA; however, the next Local Government Finance Circular will include details of individual allocations when it is published over the next few weeks.

With regards how this is being funded, The Cabinet Secretary said that she would utilise the Scotland Reserve to fund this additional resource and that she would amend the Budget Bill at Stage 2 next week. It is still unclear how these additional monies have materialised, a matter which is likely to feature in Finance and Public Administration Committee questions to the Cabinet Secretary on Tuesday 1 February.

The additional £120 million is clearly some way short of the £371 million COSLA say local authorities need to meet the pressures of inflation and increasing demand from service users. Whether local authorities will still use the opportunity afforded to them this year to raise Council Tax above inflation remains to be seen. This issue will no doubt be hotly debated throughout Scotland’s council chambers over the next month.

Greig Liddell, Senior Researcher, Local Government