The Scottish Budget 2017-18

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The Government has published its draft budget for the next financial year. This is the first since the new fiscal powers devolved to Scotland so it includes not just spending plans, but how it intends to raise revenue as well.

I welcome the U-turn on taking money raised by their tinkering with the higher bands in the Council tax and giving that money direct to Head Teachers. I also welcome the lifting of the freeze on council tax that has been imposed on local authorities. Something I have been calling for over the past few years.

They are continuing to fund the Bedroom Tax, something they do deserve praise for.

I wish they would stick to their commitment of completely replacing Council Tax, with a really progressive tax. But I wont hold my breath.

The Tory Government’s austerity and spending plans have seen the Scottish Government’s budget allocation reducing year on year. However, in the coming year the Scottish Government has a little wriggle room because there is in reality a small real term increase in funding of £188m.

So to the detail; The Government will not use its new devolved tax powers to increase income tax. However, they will not cut tax for higher rate (40p) taxpayers. They do predict that will raise an additional £79m in 2017-18. Other devolved taxes on land transactions, landfill and aggregates, generate small additional revenues.

They do however remain committed to a 50% cut in Air Passenger Duty. In my view that is an un-affordable, environmentally damaging tax cut for the better off and a reduction in tax receipts.

Business rates will also be reduced by 3.7%.

On Local Government

There is a real term cut in the local government (including grants) budget allocation of £327m (this is Labours favoured number). The Government argues this is mitigated by the extra income from tinkering with the council tax bands (£111m) and the extra £107m coming from the NHS budget for social care. The reality is that the £327m is reduced by £111m as this is a real increase for councils. So we have to look at £126m as the real cut to council funding.

2016-17 Draft £m 2016-17 Actual Budget £m 2017-18 Draft £m
Local Government 9,935 10,094 9,647 -448
Grants to Local Authorities 217 219 340 121
                              Reduction -327
  Council Tax band change 111
    All raise charges by 3% 70
                        Net reduction -146

The council tax band change is a revenue increase, even if there is no basis for including it in a central government budget, as this is collected by councils. This is all part of the smoke and mirrors they are using to manipulate the numbers.

The NHS social care £107m is for a specific additional commitment, contractors living wage etc. This is a welcome addition but this will not in any way mitigate any grant cuts to Councils.

The government also assumes that councils will increase the council tax by the maximum 3%, generating £70m of extra revenue. Again, this is a matter for councils, who may wish to point out the hypocrisy that the government isn’t using its tax raising powers to mitigate cuts. I wonder how many councils will be brave enough to raise the 3% on council tax in an election year? So the £70m is not guaranteed in any way.

The £120m that the Government, is now giving direct to Head Teachers, is additional money that Councils have no control over and is there only to help the Government achieve its Education targets. It is being thrown at Education due to the shambles Scottish education now is.

This £120m cannot be included in anyway within the Councils budgets as the Government are trying to portray. The councils have no control and will still have to fund Education to the exact same percentage as before. This is the per-cursor to academisation and the removal of Education from Council control. This is yet another centralising policy of this centralising Government.

Mr Mackay said, the entire package added up to “an increase in spending power on local government services” of £240.6m. Note his precise use of language, this is all smoke and mirrors. It is not all, in anyway, money that Councils have any say or control over and his extras are totally ring fenced for Government priorities. It is in fact misinformation.

The £240m increase that the Government announced is based on £9,935 draft (not actual) budget 2016-17, plus the £120m to Head Teachers and the £107m to NHS/Social Care on top of the £111m and £70m from Council tax.

At the very best Councils are still faced with a shortfall of £146 million in the coming year. That is if all councils raise the council tax by 3%. The reality is this, the shortfall will be somewhere between £146m – £216m depending on council tax increases.

Wages

The Government also published its pay policy for 2017-18. Yet again pay increases are capped at 1% for those earning more than £22,000, at a time when average earnings are going up by 2.6%. So yet again with inflation rising, public service wages are reducing. Add in to this the fact that most councils are not replacing workers who leave and piling more work onto those that are left. What you have is overworked people whose wages in real terms are reducing.

Councils across Scotland are still predicting huge budget deficits next year and every year up to 2020.

Local services need real investment not smoke and mirrors number juggling to make politicians and parties look good to the public just before the local elections. Local government cuts are a reality, austerity is still with us. The Scottish Government are still imposing austerity on local services. Local services are the cash cow that is continually milked to provide the money for all their vanity projects. It is and has always been the easy target for all Governments.

Local Government services face huge challenges and cannot continue to absorb cuts to funding on the levels they have had to contend with. Local Government and local services are close to meltdown.

That is a fact that cannot be denied.

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