Scotland Finance

A budget for uncertain times – local government funding settlement 2021-22

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On Thursday 28th January, Finance Secretary Kate Forbes gave the budget statement to Holyrood. The point was made that in the year since the last budget statement the whole world has been impacted by a global health crisis that has affected everyone everywhere. She suggested that this budget was the most important budgetsince devolution and the formation of a Scottish Parliament over twenty years ago.

I suggest every budget is a monumental task of balancing the books, meeting pressures and competing demands. On this occasion, Scottish Government have had to set a budget in times of unprecedented turmoil and with little certainty of the funding available from UK Government at the present time.

What is known is the uncertainty felt in Holyrood is mirrored by uncertainty felt by every council, community and family as each organisation and individual has to balance their own books in the middle of what all commentators agree is a continuing economic storm.

The key priorities for this Scottish Government budget are creating jobs for a sustainable recovery, responding to the pandemic, and tackling inequalities.

Ms Forbes paid tribute and expressed her gratitude to local government who in her words has been “working day and night at the forefront of distributing grants, supporting communities and responding to the pandemic”. At LGIU we know the role local government and partners play; officers and politicians have without question stepped up to the plate, as we knew they would. Local government services have supported all communities, urban, rural, affluent and less affluent every day in every way.

Turning to the money, the million-dollar question is how much? The total local government funding package is £11.6 billion, including a £245.6 million increase in core revenue funding and £259 million in non-recurring covid funding. That is additional revenue funding of more than half a billion pounds. Naturally, the devil is in the detail of monies in this settlement as well as monies in other portfolios that apply to and support local government services, for example tourism and business grants.

Some of that funding comes with strings attached and an administrative burden as well as ear marked or “ring fenced” to deliver specific services including early learning and childcare, health & social care and inter-island ferries. In addition, funding of £90 million is on offer to freeze council tax. A freeze to council tax has been policy before this year and commentators suggest a freeze in council tax adversely affects local democracy and impacts on the independence of local politicians and decision makers. COSLA, representing local government, have reacted cautiously as they wait to see the detail of this settlement but early indications are that this settlement does not meet the fair funding amount requested on behalf of local government.

The finance secretary went on to cover many different aspects of the budget, but of particular note to local government and public services are:

  • Green jobs fund and green jobs academy
  • Scottish National Investment Bank funding
  • Increase in landfill tax
  • A progressive public pay policy
  • Affordable housing
  • Tackling child poverty
  • Non domestic rate relief extension

Scottish Government believes a recovery must be a green recovery and, on the road to COP 26, Scotland can lead the world. The support for a low carbon future is for all of Scotland, including specific support for the rural economy on the route to net zero including tree planting & forestry. There was a specific mention of 20-minute neighbourhoods, a topic LGIU returns to this month – you can read our most recent briefing here.

The statement closed with a note of hope. Now, as everyone knows, the hard work starts as people look at the detail and compare the winners and losers. Already some voices are saying “not enough for me”. This budget has to be passed through parliament and will require cross-party support for SNP minority government budget plan. So a period of negotiation and debate starts now. The local government settlement has been a bone of contention between political parties in recent years and this year will be no exception.

LGIU are with you on the journey to offer insights and support. Next week we will publish a full analysis of this budget, quickly followed by a review of the recent Accounts Commission report on local government funding. Then we will track and report on the progress to budget bill approval, our efforts focused on reporting public services funding.

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