Scottish Spending Review 2011 and Draft Budget 2012-13

Chapter 16: Local Government

PORTFOLIO RESPONSIBILITIES

Local government provides a wide range of services and leads local partnerships that are essential to the delivery of the outcomes that matter to the people of Scotland. The partnership between the Scottish Government and local government established in 2007 remains a cornerstone of our approach to government in Scotland. Building on that partnership, the Scottish Government and local government have agreed as Joint Priorities the delivery of better outcomes, and will work together on a programme of public service reform building on the findings of the Commission on the Future Delivery of Public Services.

Through this partnership and through leadership of community planning partnerships, local government makes a substantial contribution to the delivery of the Government's programme, as set out in Renewing Scotland: the Government's programme for Scotland 2011-2012 and the Government Economic Strategy.

BETTER PUBLIC SERVICES

Renewing Scotland sets out an agenda for public service reform founded on key principles of:

• A decisive shift towards prevention;
• A greater focus on 'place' to drive partnership, collaboration and local delivery;
• Investing in people who deliver services through enhanced workforce development and effective leadership; and
• A more transparent public service culture which improves standards of performance.

Local government has a key role to play in this agenda and this is reflected in the funding settlement for 2012-15. A new change fund to support preventative spend in the early years has been established and the existing change fund to enable independent living for older adults has been expanded. Together it is anticipated that national and local government and their community planning partners will invest up to £500 million through these change funds to support the greater alignment of budgets across the public sector on a preventative and outcomes-focused basis. This approach will be led by Community Planning Partnerships, embedded within Single Outcome Agreements and gives expression to our overall commitment to finding innovative ways of working together on our Joint Priorities.

SUPPORTING RECOVERY AND INCREASING SUSTAINABLE ECONOMIC GROWTH

In 2012-13, the Scottish Government will provide a total baseline package of resource and capital funding of £11.478 billion in support of local authorities' services. This figure includes income from business rates. However, it does not include the Council tax, or income from fees and charges which local authorities collect themselves nor funding provided directly from the UK Government (such as Council tax benefit) nor funding from the European Union. The package will be focused on delivery of our Joint Priorities: growing the Scottish economy and protecting front-line services and the most vulnerable in our society, including through a greater focus on prevention. This total funding package for 2012-13 consists of:

• a general revenue grant, which supports all services;
• non domestic rate income, collected by local authorities, paid into a central pool; this is then redistributed along with the general revenue grant to each local authority, using a formula that takes account of relative need;
• a general capital grant to support local authorities' spending on infrastructure and other projects; and
• a small number of specific revenue and capital grants.

The Scottish Government guarantees the combined general revenue grant and distributable non domestic rate income figure, approved by Parliament, to each local authority. A drop in non domestic rate income is compensated for by an increase in general revenue grant and vice versa.

The delivery of services is the responsibility of individual local authorities who will do all they can to protect frontline services and as a result provide protection to the most vulnerable in our society. In so doing, they will have regard to the requirements of the Climate Change (Scotland) Act 2009 and the provisions of the Equality Act 2010. Actions that local authorities take will also continue to help grow the economy. These will be delivered in partnership with the Scottish Government and other agencies, and

by undertaking activities at a local level. These activities include their planning function; economic strategy and policy; support for business start up and growth; export support programmes; place regeneration and skills and training related to employment or employability. Some of these actions are provided through the Business Gateway and through councils' support to existing and new Business Improvement Districts within their areas. Local authorities themselves provide a major contribution directly to local economies through their purchases of goods and services.

Cities are vital to our economy's success. The more successful our cities and the regions in which they sit, the more successful Scotland will become. That is why we are working with our cities and other stakeholders to develop a Cities Strategy to act as the catalyst for more effective collaborative action: between the Government and cities; between cities themselves where appropriate; and between the public, private and third sectors. Local government will have a very important role to play in this.

Local government continues to be active in supporting the move to a low carbon economy and in combating climate change. Scottish councils have demonstrated consistent commitment and political leadership on climate change following the signing of Scotland's Climate Change Declaration in 2007-08. Local authorities will continue to work towards the delivery of the new statutory obligations of the Climate Change (Scotland) Act 2009 and to provide leadership to wider civic society as Scotland moves to a low carbon economy.

It is recognised that these statutory commitments to take action on climate change come at a time of significantly constrained public spending. Local government has a range of competing spending priorities to consider. However, local and national government are committed to working together to reduce emissions as far as possible through our overall spending, and to build upon the strong foundations already established at national and local level to respond to the challenges and opportunities of climate change.

Local government also makes a vital contribution to a more equal Scotland. Protecting the most vulnerable in our society continues to be more difficult because of the spending cuts, but local and national government agree that decisions needed to balance the budget must take full account of their needs. The Scottish Government's commitment to a more equal Scotland include in this portfolio, the council tax freeze and the commitment to the extension of exemption from the council tax to articulating students. The council tax freeze, although providing welcome relief to all council tax payers in these difficult economic times, has been shown to provide the greatest benefit, as a proportion of net household income, to households in the lower deciles. The preventative spending change funds covering early years and independent living for older adults will also bring about positive impacts on vulnerable groups and will support the greater alignment of budgets more generally. The Scottish Government will continue to work collaboratively with local government towards outcome-focused public services, using the framework provided by the Equality Act 2010. This helps public bodies to recognise and reduce negative impacts on vulnerable groups and also helps to promote equality by ensuring that services are responsive to local people's needs.

Empty property relief will be reformed to provide strong incentives to bring vacant premises back into use, reducing the prevalence of empty shops in town centres and supporting urban regeneration.

The health and social problems associated with alcohol and tobacco use are well documented and we are firmly committed to addressing them. These not only affect the health of the population, but create additional burdens on policing; business; local authorities and the NHS. In order to address these, the business rates paid by large retailers who sell tobacco and alcohol products will be increased by a supplement from 1 April 2012. The estimated income raised from this supplement will contribute to the decisive shift in the Spending Review to preventative spend measures to be taken forward by local authorities and their partners in NHS and Scottish Government.

OUR NATIONAL OUTCOMES

Local government remains committed to and contributes directly to the delivery of all 15 national outcomes which embody our Joint Priorities. These are given expression in the agreement and implementation of Single Outcome Agreements through Community Planning Partnerships so that national objectives are met in a way that takes account of distinctive local circumstances and priorities.

OUR ACHIEVEMENTS

A great deal has been achieved as a result of the partnership with local government established in 2007. The Scottish Government, working with local government, aims to build on that progress in 201213.

• Following decisions by all 32 councils to freeze council tax rates in 200809, 2009-10, 2010-11 and 2011-12 at 2007-08 levels, the Scottish Government provided councils with a total of £70 million in each year, representing an annual uplift in their council tax income base of over 3 per cent. As a result, over the 4 years to 2011-12, the Scottish Government has provided a total of £700 million to support the council tax freeze.
• Single Outcome Agreements based on the agreed set of national outcomes and local outcomes to take account of local priorities have been agreed and published for every local authority and their community planning partners since 2008-09. Two rounds of reports on progress with the SOAs have been published, in 2009 and in 2010.
• The Small Business Bonus Scheme, which was fully implemented in 200910, has provided much needed financial assistance to Scotland's small businesses to help them through the tough economic times. It was further extended in 2010-11. The latest full year figures show that 74,000 business properties benefited under the Scheme to the tune of £117 million in total, with the average saving per property worth around £1,400. 63,000 properties paid no rates at all.
• The value of ring-fenced grants has been substantially reduced from £2.7 billion in 2007-08 to less than £1.1 billion in 201112. Excluding the police ring-fenced funding, the total in 2011-12 was £0.3 billion. This has resulted in considerable savings in administrative costs both for the Scottish Government and local government and has provided local authorities with increased flexibility in how they allocate their total resources.

MANAGING PRESSURES AND CUTS IN PUBLIC EXPENDITURE

The scale of the real terms reduction in the Scottish Government budget for 2012-13 has required tough decisions to be taken about expenditure across government and careful consideration of pressures and priorities in all portfolios. Key pressures falling on local government funded from within the portfolio in 2012-13 include general inflationary pressures and greater service demands in the light of demographic changes. The overwhelming majority (86%) of the funding package is delivered through the revenue block grant. It is for individual local authorities to allocate their total available resources, including locally raised income from the council tax and fees and charges, on the basis of local needs. This is subject to meeting statutory obligations and the jointly agreed set of national and local outcomes, which guide prioritisation at a local level.

In order to accommodate the reduction in real terms of the overall funding package and the increased inflation and demand pressures, local government will be faced with a number of very difficult decisions.

Local authorities do, however, have a statutory duty to bring forward a balanced budget for the settlement provided and they will do so by a combination of actions. These may well include overall reductions in staffing levels and the level of pay within the workforce, the scope for increased efficiencies including service redesign and the possibility of improving on their ability to generate additional income.

The Scottish Government acknowledges the funding pressures faced by local authorities and is fully committed to ongoing discussion of the delivery of our Joint Priorities.

OUR PRIORITIES

In 2012-13 we will make available to local government a total funding package amounting to £11.478 billion. This total includes the Government's best estimate of non domestic rate income to be collected during 2012-13. The final non domestic rates figure cannot be confirmed until later in the year as it is linked to the September Retail Price Index ( RPI) figure. To access the full amount of this package, each local authority will require to agree formally to work with the Scottish Government to deliver a council tax freeze for the fifth consecutive year. How the financial support is to be distributed to authorities will be the subject of consultation with COSLA and set out in a Scottish Local Government Finance Circular in early December 2011.

Given the significant financial constraints on the Scottish Budget, this represents a challenging but fair settlement for local government which builds upon the financial commitment demonstrated in settlements over the previous four years.

Within the Local Government portfolio, the existing cash settlement has been maintained for ( NDRI/ RDEL). The capital settlement, although calculated on maintaining share of the reduced capital share, (-£8.8 million/-£74.5 million/-£52.1 million), has been further reprofiled with reductions in 2012-13 and 201314 of £120 million and £100 million respectively with a corresponding increase in 2014-15 of £120 million, with the remaining £100 million to be added back in 2015-16. In the light of the very constrained capital position, the Government wishes to maximise the availability of capital spending. The Government recognises that local government has the power to borrow in order to supplement capital budgets and we will work with colleagues in local government to see to what extent this can sensibly be used to maximise capital expenditure, which is critical to economic recovery. By the end of the Spending Review period, local government's share of DEL/ NDRI will have been maintained above the level inherited in 2007.

As part of an agreement to focus on Joint Priorities, the Scottish Government and local government will each do what is required to ensure delivery of specific commitments in the areas described below. In addition, the Scottish Government and local government are committed to working together to ensure that our collective capital resources are used to best effect to support economic growth.

Council tax

As part of the overall funding package, the Scottish Government will provide a further £70 million in 2012-13 to those councils which freeze their council tax rates at 2007-08 levels for a fifth consecutive year. In the light of current continuing tough economic circumstances, extending the council tax freeze in 2012-13 will provide further protection to hard pressed households across Scotland, many of whom have been affected by the economic downturn and UK welfare reform.

Police

Individual local authorities will pass on all Police Grant in full to Police Boards, as a contribution to maintaining the number of police officers at least at 17,234 throughout the three-year period 2012-15. As a result, police grant will be subject to a cash freeze in 2012-13. The number of police officers has an impact on crime. It is clear that less crime makes our communities safer and the latest reported crime statistics show that the 323,000 crimes recorded in 2010-11 represents a four per cent reduction on the previous year and the lowest level in 35 years.

Education

Local government will maintain teacher numbers in line with pupil numbers and secure places for all probationers who require one under the teacher induction scheme.

Level 3 Local Government

Table 16.01: Detailed Spending Plans (Level 3)

Level 3	2011-12 Draft Budget	2012-13 Draft Budget	2013-14 Plans	2014-15 Plans
	£m	£m	£m	£m
General Resource Grant	7,754.8	7,747.6	7,575.6	7,346.6
Non-Domestic Rates ( NDR) and other AME Grants	2,179.5	2,272.0	2,444.0	2,673.0
Support for Capital**	520.9	563.0	517.3	759.7
Specific Resource Grants*	599.9	571.2	571.2	571.2
Specific Capital Grants*	170.9	0.0**	0.0**	0.0**
Total Local Government portfolio	11,226.0	11,153.8	11,108.1	11,350.5
Other Local Government*	322.0	323.9	333.8	351.8
Total Local Government Level 3	11,548.0	11,477.7	11,441.9	11,702.3
of which:
DEL Resource	8,354.7	8,318.8	8,146.8	7,917.8
DEL Capital	691.8	563.0	517.3	759.7
AME	2,179.5	2,272.0	2,444.0	2,673.0

* Held within other portfolio chapters includes both resource and capital specific grants and ring-fenced funding for police numbers and police and fire pensions.
** The split between Support for Capital and Specific Capital Grants to be agreed in discussion between the Scottish Government and COSLA. The split will be shown in the 2012-13 Local Government Finance Circular which will be issued in December 2011. The 2012-15 capital allocations have been reprofiled (-£120m/-£100m/+£120m with the remaining £100m to be added back in 2015-16).

Notes:

1. The Scottish Government guarantees the combined General Resource Grant plus the distributable Non Domestic Rates ( NDR) Income figures. The figures above are provisional as the NDR figure cannot be finalised until the September RPI figure is known and a decision taken on whether to increase the non-domestic rates poundage by the full increase in RPI. Any increase in NDR will be matched by the same reduction in General Resource Grant and vice versa.
2. The 2011-12 Draft Budget figures are as published in Scotland's Spending Plans and Draft Budget 2011-12. They do not include the changes between the Draft Budget and the final local government finance settlement of £11,553.4 million. The changes were an additional one-off £5 million for Supporting people and £0.4 million for the Edinburgh Capital City Supplement. There was also a switch of £11.5 million between General Resource Grant and NDR.
3. These figures currently include the funding for the police and fire services which may be removed from the local government finance total if the planned reform proceeds. This would also include funding for police and fire pensions and the cost of funding the additional police officers.

Level 3 Local Government

Table 16.02: Detailed Spending Plans (Level 3 real terms) at 2011-12 prices

Level 3	2011-12 Budget2011-12Budget	2012-13 Draft Budget	2013-14 Plans	2014-15 Plans
	£m	£m	£m	£m
General Resource Grant	7,754.8	7,558.6	7,196.5	6,795.5
Non-Domestic Rates ( NDR) and other AME Grants	2,179.5	2,216.6	2,321.7	2,472.5
Support for Capital**	520.9	549.3	491.4	702.7
Specific Resource Grants*	599.9	557.3	542.6	528.4
Specific Capital Grants*	170.9	0.0	0.0	0.0
Total Local Government portfolio	11,226.0	10,881.8	10,552.2	10,499.1
Other Local Government*	322.0	316.0	317.1	325.4
Total Local Government Level 3	11,548.0	11,197.8	10,869.4	10,824.5
of which:
DEL Resource	8,354.7	8,115.9	7,739.1	7,323.9
DEL Capital	691.8	549.3	491.4	702.7
AME	2,179.5	2,216.6	2,321.7	2,472.5

Table 16.03: Specific Grant Funding and other Local Government Funding 20112015

	2011-12 Budget	2012-13 Draft Budget	2013-14 Plans	2014-15 Plans
	£m	£m	£m	£m
Justice
Resource Specific
Police	489.7	480.3	480.3	480.3
Criminal Justice Social Work	86.5	86.5	86.5	86.5
Resource Other
Police Numbers	39.5	33.0	33.0	33.0
Police Pensions	217.3	222.6	231.0	249.6
Police Loans Charges	9.0	9.0	9.0	9.0
Fire Pensions	56.2	59.3	60.8	60.2
Capital Specific
Fire	20.2	tbc	tbc	tbc
Health, Wellbeing and Cities Strategy
Resource Specific
Housing Support Grant ( AME)	1.2	1.2	1.2	1.2
Hostels Grant ( AME)	6.9	7.8	7.8	7.8
Capital Specific
Vacant and Derelict Land	10.0	tbc	tbc	tbc
Transfer of Management of Development Funding ( TMDF)	97.7	tbc	tbc	tbc
Assistance to Owners affected by Glasgow Stock Transfer	15.0	tbc	tbc	tbc
Education and Lifelong Learning
Resource Specific
Determined to Succeed	19.2	0	0	0
Gaelic	4.5	4.5	4.5	4.5
Finance Employment and Sustainable Growth
Capital Specific
Regional Transport Partnership	20.5	tbc	tbc	tbc
Cycling, Walking and Safer Routes	7.5	tbc	tbc	tbc
Total	1,100.9
of which:
Total Specific Revenue Grants ( DEL)	599.9	571.2	571.2	571.2
Total Specific Revenue Grants ( AME)	8.1	9.0	9.0	9.0
Total Other Resource	322.0	323.9	333.8	351.8
Total Specific Capital Grants	170.9	tbc	tbc	tbc

tbc The split between Support for Capital and Specific Capital Grants to be agreed in discussion between the Scottish Government and COSLA. The split will be shown in the 2012-13 Local Government Finance Circular which will be issued in December 2011.

The figures for 2011-12 shown in this document are from the 2011-12 Draft Budget - the police grant figure agreed as part of the 2011/12 Budget Bill was £480.3m.

The 2011-12 Police Numbers figure included an estimate for police pensions that has for 201215 been taken out and shown as part of the police pensions figures.

Provision for Determined to Succeed was rolled up in the general revenue element of the budget from 1 April 2011 following publication of the 2011-12 Draft Budget.

Local Government's Spending Plans 2012-13

For information purposes only, Scotland's local authorities have budgeted to spend the total resources available to them from the Scottish Government's funding and income raised locally through the council tax on services as set out in Table 15.04.

Table 16.04: Local Government Revenue Expenditure plans 2012-13

2011-12 Budget Estimate - Net Revenue Expenditure	2011-12 Budget £m
Education	4,622.7
Social Work	2,859.4
Police	951.2
Fire	264.4
Roads and Transport	475.4
Environmental Services	693.4
Planning and Development Services	279.8
Culture and Related Services	606.8
Emergency Planning	4.3
Administration of Housing and Council Tax Benefits	26.0
Private Sector Housing Renewal	25.9
Housing Benefits	2.5
Non Housing Revenue Account Housing	44.1
Homelessness	83.5
Housing Support Services	226.7
Welfare Services	6.7
Licensing	1.1
Elections	10.4
General Grants, Bequests and Donations	9.5
Registration of Births Marriages and Deaths	6.9
Local Tax Collection (including Non Domestic Rates)	40.8
Council Tax and Non Domestic Lands Valuation	34.1
Non-Road Lighting	11.0
Corporate and Democratic Core	177.8
Statutory Repayment of Debt	1,159.6
Equal Pay/Single Status (prior year cost provision only)	1.0
Other Miscellaneous Services	48.5
Non Distributed Costs	85.9
Total Budgeted 2011-12 Net Revenue Expenditure	12,759.4

Note:
The difference between the individual figures and the total is due to rounding.

In addition, Scotland's local authorities are planning a capital expenditure programme for 201112 as set out in table 15.05. The capital resources available to them to fund this programme come from grants from the Scottish Government and its agencies; self financed borrowing, capital receipts from the sale of assets and other sources.

Table 16.05: Local Government Capital Expenditure plans 2012-13

2011-12 Budget Estimate - Gross Capital Expenditure (Figures taken from 2011-12 Quarter 1 forecasts)*	2011-12 £m
Police	41.1
Fire	43.5
Non Housing Revenue Account Housing	158.7
Roads and Transport	514.6
Education	699.7
Social Work	87.2
Environmental Services	148.8
Culture and Related Services	302.0
Planning and Economic Development	181.0
Trading Services	12.8
Central Services	175.7
Other Services	42.9
Capitalisation of Equal Pay	4.7
Capitalisation of Other Revenue Expenditure	2.6
Capital Grants to Community Groups	2.9
Total Estimated 2011-12 Capital Expenditure	2,418.2