Scottish council tax freeze “not underfunded”

22 Sep 15

An analysis by the Scottish Parliament has found the funding provided by the Scottish Government to local authorities for the seven-year council tax freeze has exceeded the amount of revenue that would have been raised had rates increased by inflation.

A paper from SPICe (the Scottish Parliament Information Centre) found that £2.52bn had been provided by the Scottish Government to compensate local authorities since 2008/9 for the effects of the freeze. This is estimated to be more than councils would have generated in additional revenue had the council tax been increased each year in line with inflation, despite claims by opposition politicians that the freeze had been "underfunded".

“In total, over the six years to 2013/14, this has resulted in an estimated £164.9m extra going to local government as a result of the freeze,” the paper says.

The report also challenges claims there has been a steady and significant drain of financial power from local to central government under devolution.

Since the Parliament began in 1999, it acknowledges local government’s share of the Scottish budget has fallen from 36.2% to 32.2%. But the analysis finds this figure has been distorted by the creation of single national police and emergency services two years ago. These bodies were created in place of the regional bodies previously funded through local government.

The paper calculated that, if these services’ budgets are restored to the councils’ total to allow like-for-like comparison, the local authority share of the budget has only fallen 0.2% to 36%. On that same notional basis, it says, the local authority budget has grown at almost identical levels to that of the Scottish Government since devolution: by 52% compared with 52.5%.

Meanwhile, a row has erupted between Scottish and UK Ministers over what the latter claim could be a Treasury cash-grab of nearly £400m through the apprenticeship levy announced in his latest Budget by Chancellor George Osborne.

The levy, imposed on both public and private sector employers to fund three million apprenticeships in the current parliament, will cost Scottish employers £391m a year. Of this, £146m will come out of public sector budgets with a consequent impact on public service provision, according to the Cabinet Secretary for Fair Work Roseanna Cunningham.

Cunningham said that correspondence with UK skills minister Nick Boles had confirmed that the levy would apply in Scotland, but had not brought any accompanying commitment to fund Scottish apprenticeship programmes, which are differently structured from those south of the border. 

“That would rob Scotland of hundreds of millions of pounds, including up to £146m per year from schools, hospitals and public services,” Cunningham said. “Not only will this effectively be a stealth cut to Scotland’s public services, but it would put this at real risk our ability to fund Scotland’s distinct Modern Apprenticeship system.”

  • Keith Aitken
    Keith Aitken

    covers Scottish affairs for Public Finance from Edinburgh. He was formerly economics editor and chief leader writer on The Scotsman and now has a busy freelance career as a writer, broadcaster and event chair.

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