Local Government Finance


Speech by Lewis Macdonald in the Scottish Parliament debate


7 March 2019

This debate marks the formal conclusion of the annual budget process for local government funding, but as other members have said, it is the tough decisions that councils have had to make up and down the land that are the real-life outcome of that process.

Local councillors are rightly accountable to their electorates for the decisions that they make, but this year, once again, those decisions are largely about what cuts to make to which services, rather than about how to grow or enhance the services that they provide.

That is very limited accountability.

Responsibility for the larger decisions on local government finance lies here, which is why the debate can never be a mere formality.

If the funding that ministers choose to provide means cuts to services or jobs, ministers as well as councillors have to be accountable for those cuts.

This year’s settlement also highlights wider issues around the accountability of local councils to local people.

Year on year, ministers have reduced central Government’s contribution to local government funding, but they have failed to loosen their grip on local government’s ability to make its own decisions.

In my home city of Aberdeen, local council tax payers, local business rates payers and citizens who pay fees and charges for council services now contribute a whopping 87 per cent of the city council’s revenue budget.

There is a case to be made for councils being self-sufficient.

The problem is that, despite being funded almost entirely from local resources, Aberdeen City Council still cannot make its own funding and spending decisions.

When an additional £28 million comes in from non-domestic rates, none of the benefit stays in the city, as the minister has acknowledged.

Every penny is clawed back through a reduction in the general revenue grant.

That is the context in which the general revenue grant for Aberdeen this coming year has been cut by a third in a single year and is now on a par with the smallest mainland and island councils, rather than with Scotland’s other cities.

Despite the challenges, I am delighted that, this week, Aberdeen City Council was able to protect the community projects that the fairer Aberdeen fund supports, and to reject the suggestion to make savings at the expense of staff terms and conditions.

In the face of a multimillion-pound funding gap, that was the right choice to make, but tough choices still had to be made, and some options remain effectively closed by Scottish ministers.

For example, Aberdeen City Council owns the largest fleet of hydrogen-powered buses in Europe, but the buses are operated by private companies.

The council would like to have the option of creating its own bus company, but—despite amendments to the Transport (Scotland) Bill to that effect being lodged—ministers have so far refused to contemplate a public bus company that would compete with private operators.

VisitAberdeenshire has been mentioned. It is an effective, innovative and well-respected agency that promotes the city as well as the shire.

I am sorry that in order to avoid cuts elsewhere its funding from the city council will be cut.

That funding gap could have been filled by a transient visitor levy, were one in place by now—

Kate Forbes: Would the member take an intervention?

Lewis Macdonald :

In a moment.

However, ministers spent too long resisting a tourism tax, even though it was strongly supported by many members of the minister’s own party in local government.

The Deputy Presiding Officer (Linda Fabiani): We are already over time, so an intervention will be removed from your own time, minister.

Kate Forbes: It is just a quick intervention. Why, in that case, did Lewis Macdonald vote against the budget and the agreement with the Greens that would have enabled Aberdeen to get that levy?

Lewis Macdonald:

That was because—as the minister has acknowledged—in real terms, the money that her Government provides to the council is clawed back in another way.

We all recognise the need for local government funding—both in relation to council tax and business rates—to be reformed.

More than that, the whole relationship between central and local Government must be revisited, so that councils either get the funding that they need from the centre, or have the freedom to make their own decisions—preferably both.

At the moment, a dynamic and progressive council like Aberdeen City Council has neither the funds nor the freedom that it needs.

If we are to have truly accountable and effective local government in the future, that must change.