COSLA BREAKAWAY PORTENDS RATES SURGE

Glasgow City Council’s walk-out from the Convention of Scottish Local Authorities (COSLA) signals a major bust-up with the SNP Scottish government over town hall funding. And it could mark the first cracks in the ice of the council tax freeze – with business rates already set to rise.

Glasgow, Scotland’s largest council, confirmed yesterday it will leave Cosla to join Aberdeen, South Lanarkshire and Renfrewshire in a rival organisation – the Scottish Local Government Partnership (SLGP).

Now a major clash is threatened between the government and cash strapped town halls.

Audit Scotland, the spending watchdog body, said earlier this week that Scotland’s councils will face financial pressures “of a scale not previously experienced” in the coming years. It warned that budgets would become even tighter in the future and that council debt repayments to the private sector would peak at a time when they are set to face unprecedented demand for services.

For decades Cosla has enjoyed monolithic control of Scotland’s 32 local authorities in their dealings with the Scottish government. And ministers have long shied away from picking a fight with Scotland’s town hall barons – their toughness exemplified by their reputation as “the men who eat cement for breakfast.”

Glasgow council leader Gordon Matheson (pictured) said the partnership was an “exciting new start for local government in Scotland.

“In the future it will simply not be possible to speak to local government without including us as an equal partner and we have already started meeting with Scotland’s trade unions as we prepare for our role in national collective bargaining.”

Behind the revolt are intensifying pressures on local authority budgets and a simmering row over how government money should be distributed.

Council tax payers and businesses may now face sizeable increases in their bills.

The Scottish government has been increasingly reliant on more non-domestic rates income (NDRI) to boost its coffers, and less on council taxes.

According to a paper from Fiscal Affairs Scotland this week, in 2009-10 council tax amounted to 5.6 per cent of the total revenues raised and NDRI to 5.7 per cent.

By 2015-16 the respective shares are estimated to be 5.3 per cent and 7.5 per cent.

“It would need”, says “FA, “an increase of around 50 per cent in council tax receipts to return them to the position of near-parity in 2009-10”.

Meanwhile the independent Scottish Fiscal Commission is seeking more evidence from the Scottish government to support the current projections of £2.7 billion for NDRI by 2015-16.

Local government is not currently exposed to any NDRI shortfall. But “this position”, warns FAS, “may change in the future.”

A resort to additional year-on-year borrowing may be need to fund the increasing demand for services. But Scotland’s borrowing capacity and limits are still to be negotiated between Scottish and UK governments.

Says Jo Armstrong, Executive Director of FAS, “As budgets continue to tighten, while demand continues to rise, it is increasingly hard to see how the continued delivery of many of Scotland’s key public services can be achieved by local authorities securing additional efficiency savings alone.

“At a time of impending elections and the implementation of new tax and spending arrangements across the UK, there is a real need for an honest and inclusive debate on the future role of local government. Just what do we expect local authorities to deliver and how should funding for those chosen services be raised?”

Scottish councils face increasing demand to implement SNP priorities such as the council tax freeze, “free” personal care, housing standards, class sizes and other legislation and national policies.

Pressure also comes from other areas, including future spending commitments such as financing NPD/PFI debt, other borrowing, rising pensions, equal pay costs and other liabilities.

The Accounts Commission said: “Annual interest and debt repayments have increased from £946 million in 2009/10 to £1.5 billion in 2013/14, with repayments for PFI and NPD contracts totalling £488 million in 2013/14 and predicted to peak at around £600 million a year between 2024/25 and 2027/28. By this time, demographic pressures caused by an ageing population and more children will be rising.

Almost all councils’ auditors have indicated risks to the administrations’ financial positions in the medium to long term.

Specific risks include councils spending more money than planned, not making planned savings, unexpected compromises on the quality of services, an inability to meet demand for services and inadequate funds in their reserves.

Rent arrears increased by 24% between 2012/13 and 2013/14 despite £29.4m of government discretionary housing payments (DHPs) handed out last year.

Now the moment of truth has arrived: either hefty spending cuts, or rises in both council tax and business rates – or more likely a baleful combination of both.

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