By Keith Aitken in Edinburgh | 21 January 2014
The true cost of delivering local authority services in Scotland is being under-estimated by nearly £1bn per annum, a deficit equivalent to £175 for every individual in the land, CIPFA Scotland has told a commission on local democracy.
The figure comes in a paper submitted by CIPFA ahead of giving oral evidence next month to the independent Commission on Strengthening Local Democracy, set up by the Convention of Scottish Local Authorities. The paper argues for much greater local accountability over the spending decisions of councils.
It highlights differences between local authority budgeting systems, as required by statute, and the international accounting standards operated in private sector businesses and elsewhere in the public sector. Specifically, factors like depreciation of equipment and changes in pension liabilities are not fully reflected in the council budgeting process.
The paper notes that council funding requirements are assessed by reference to legislative formulae rather than professional accounting standards – even though the latter are used in local authority financial reporting.
‘CIPFA considers … that accountability is wider than just the level of taxation set and the level of funding provided by the Scottish Government,’ the paper says. ‘Proper accountability would draw attention to the actual level of resources used in providing local services.’
Using the accounting standards method, CIPFA comes up with an annual cost of £19.5bn for providing local services. ‘When compared to reported income, there is an estimated accounting deficit of more than £900m. This represents a deficit of £175 for each person in Scotland,’ the paper said.
The current system ‘does not support the delivery of better outcomes’, the paper says, and it is heavily critical of the decline in local fiscal accountability, especially since the introduction of the council tax freeze.
It says: ‘While the council tax freeze is undoubtedly welcome for tax payers, it has resulted in the removal of an important financial lever for local authorities and removes a key layer of local accountability.
‘The balance of local accountability has been fundamentally altered, distorting the previous relationship between local government, the citizen and central government,’ the paper adds. It calls for development of a ‘place-based’ approach to budgeting, which replaces the focus on inputs and structures with a ‘place-based’ assessment of all community planning partner resources.
‘Our vision is for a local government that is truly local, where the level of local taxation is a matter for local decision-making and where local government is the leader in a modernised “place-based” resource planning and budgeting framework,’ the paper says.
