Scottish Grand Committee
Wednesday 3 December 1997
[Mr. John Maxton in the Chair]
Local Government Settlement
4.30 pm
Mr. Norman A. Godman (Greenock and Inverclyde): On a point of order, Mr. Maxton. In the highly unlikely event that there is spare time left after you have called every hon. Member who wishes to question our remarkable Secretary of State, would you allow an hon. Member to ask a second question? I do not anticipate being called to do so but, if sufficient time is left out of our allotted 90 minutes, can a member of the Committee ask a supplementary question?
The Chairman: Yes. The statement and questions last for an hour and a half. The order allows us to continue our discussions until 6 o'clock and, if there is time for people to ask a second question, I shall allow that to happen that is, if they catch my eye.
Before I call the Secretary of State to make his statement on the Scottish local government settlement and the redistribution of resources for 1998-99, I appeal to members of the Committee, including the spokesmen for Opposition parties, to keep their questions brief. I also ask the Secretary of State to make his answers brief. As a result of that, each member of the Committee should have time to ask at least one question, and it may be possible to call some right hon. and hon. Members to ask a second question.
The Secretary of State for Scotland (Mr. Donald Dewar): I apologise, Mr. Maxton, for my marginally late appearance in Committee. If you had seen me making my best pace along the Committee Corridor, the amusement would have outweighed any inconvenience that I was causing to the Committee. However, Mr. Maxton, you were imprisoned in the Room.
I wish to make a statement about public expenditure in Scotland and the financial settlement for local authorities in Scotland, which I am proposing for the financial year 1998-99. A table summarising my decision together with details of the local government settlement is on the Table and that material will appear in a written answer in the Official Report for today. Further copies will be available in the Vote Office, as will copies of my statement. Full details of today's announcement will be published in the spring in my departmental report.
I genuinely take to heart, Mr. Maxton, your point about brevity. I must therefore apologise for the length of my statement, but it deals with two major areas of Government policy and contains much information that, I hope, will assist colleagues although they might want to digest it over the next day or two.
In allocating Scottish expenditure between programmes for the coming year, I have been guided by several important considerations. First, I have been concerned with pressing ahead in Scotland with the Government's main priorities: improving standards in education and health; preparing for devolution; supporting welfare to work; tackling Scotland's housing challenges and consolidating measures on criminal justice. Much work needs to be done under each of those headings and today's announcement marks further progress, with additional resources to support those priority areas throughout 1998-99.
Secondly, I have needed to take account of the Government's comprehensive spending review. We initiated the review shortly after coming to office, and it involves a root-and-branch examination of all Government spending. In Scotland, work is already well under way scrutinising the major programmes for which I have responsibility. Fundamental questions are being asked about whether resources are being used on the right priorities; whether the money is being used efficiently and effectively; and whether there are ways of making the available resources work harder for example, through partnerships between the public and private sectors.
I expect the review to be completed in the spring of 1998. Its conclusions will be fed directly into the resource allocation decisions made for 1999-2000. I am determined that the Government should provide the new Scottish Parliament with real choices in its first six months, and that it should be fully involved during the vesting period in considering the outcome of the comprehensive spending review and the implications for Scotland.
Today's announcement does not pre-empt that review, but after 18 years of decisions on Scottish spending being vested in politicians who did not share the people's priorities for Scotland, it represents a real change in direction. Today's announcement lays the foundations for the more fundamental changes that I expect to emerge from the comprehensive spending review and from the transfer of financial responsibility to the Scottish Parliament.
Thirdly, I have to consider the wider economic considerations and the Government's policy of maintaining a tight control over public expenditure. The Government are committed to the sound management of public finances and to the avoidance of the boom-and-bust cycle that has been so damaging to the country's economic interests. All Government Departments, including the Scottish Office, have been asked to allocate public expenditure for the coming year within existing spending plans. However, key additional resources were provided in the Budget and thereafter; I shall, of course, return to this subject.
The Government's general fiscal discipline must apply in Scotland. Our long-term economic prosperity is inextricably linked to the performance of the United Kingdom's economy. It is misguided and unrealistic to suggest that the solution to Scotland's problems lies in an ever rising curve of public spending. Good government lies in carefully identifying the country's needs and priorities and then maximising the output from the available resources.
Fulfilling our manifesto commitments and laying a proper foundation for the future were the watchwords for today's settlement. It is on those firm foundations that the comprehensive spending review and ultimately the Scottish Parliament will build. We are confident that today's settlement means Scotland getting more for its money less waste, better priorities and new foundations for growth.
The financial year 1998-1999 has to be regarded as transitional. Additional resources were made available in the Budget in June, but today's announcement goes further. It builds on that foundation to tailor Scottish spending more closely to Scotland's needs by exploiting my ability to move resources around within the Scottish block.
I come now to the more concrete elements of my statement. I shall distribute an extra £270 million on top of the spending plans that we inherited from the previous Government for 1998-99. Those resources represent Scotland's share of budget and subsequent initiatives aimed at meeting the Government's key priorities. That money serves significantly to reverse the fall in block spending built into the previous Government's plans. I also propose to re-allocate a further £100 million within my block resources to support the Government's key priorities for Scotland.
The key message is that the Scottish Office is building for the future with a three-point package for investment in education. Education, education and education is what we promised, and the package that I announce today represents a major step in our delivery on that pledge, with a crucial boost for the pre-five-year-olds, investment in schools, and new investment in further and higher education.
Health will get a boost in advance of the publication next week of the White Paper on the national health service in Scotland, which will propose to sweep away the wasteful bureaucracy of the internal market and redirect resources into putting patients first.
Housing, which was too long neglected by the previous Government, will have more than £50 million extra to take the homeless off the streets, bring empty homes back into use, improve energy efficiency and support new public-private sector partnerships to lever extra resources into housing.
I turn now to the details. I do not need to stress that good education opens up opportunities in life and that an early start is needed. We have already announced that pre-school vouchers will be replaced from August 1998 with a new funding and planning system. The Government guarantee a nursery place for all four-year olds in Scotland whose parents want one by the winter of next year. That means a major expansion of services. An extra £9 million will be made available to local authorities to deliver that, bringing our overall commitment to the scheme to £76 million next year.
Investing in good teaching to raise standards in our schools is vital if Scotland's children are to fulfil their potential and progress to further and higher education. Resources in the classroom are our overriding priority. We are making an additional £89 million over and above the former Government's planned total available to authorities to spend in schools next year as my right hon. Friend the Chancellor announced in the Budget. Much of that money will go into improving standards in our classrooms.
Already in Glasgow we are seeing a commitment to rationalise schools. The priority across the country must be to move cash back to where it is needed, in supporting good teaching, not heating half-empty buildings. Where schools buildings are to be used they must be of a high standard. Hence we have promised both to tackle the backlog of repairs to school buildings and to improve facilities for information technology. Additional capital resources of £8.9 million for this year and £26.7 million for the next four years were announced in the summer Budget, and all education authorities will benefit from that. Those resources will also help the development of a national grid for learning throughout the United Kingdom, which will build on the distance learning initiatives already under way in many parts of Scotland.
Making education an overriding priority means seeking out new ways to finance what needs to be done. For example, Falkirk council is promoting one of the most innovative private finance initiative projects in schools across Britain, with a capital cost of about £70 million affecting five secondary schools. I am sure that that initiative will encourage a number of other authorities in Scotland which are also developing imaginative PFI schemes to improve their schools and provide information technology. We are determined to put the framework in place to ensure that schools throughout Scotland are upgraded and modernised so that they are capable of delivering the highest standards that we expect of them.
The Government have recognised that learning does not stop when a child leaves the classroom. Children are our future and we have a duty to ensure that they have a safe and challenging environment. Outside the school day, children must have an environment in which they can build on what they have learnt during the day through activities that will help take forward our commitment to raise standards and encourage personal development. We also need to ensure that parents, especially women, have opportunities open to them to balance work and family life. That is why we announced last week an additional £28 million over the next five years, drawing on the new opportunities fund, to extend affordable after-school child care in Scotland.
Last summer, we had to take important decisions about the future funding of higher education following the Dearing and Garrick reports. The central challenge to which those reports drew attention was the need to get more resources into higher education if our students were to benefit from high-quality facilities and if our national research base was not to be fatally eroded. Hard decisions I do not disguise that have been taken because we believe them to be right to secure the future of our universities and colleges. The need to get more resources into higher education was even more pressing in Scotland, where we send a higher proportion of students into further and higher education and where the skill of our work force is increasingly Scotland's key selling point in the global market place. I am pleased, therefore, to announce that next year the resources available to the higher education sector will rise by £17 million from a planned £653 million to £670 million the same in cash terms as this year. The resources available to the further education sector will rise by £8 million. Some £22 million of that additional £25 million is a result of the tough decisions which we have taken on student finance. It will provide significant[Mr. Donald Dewar]
and welcome relief from the position that we inherited and the tight squeeze that the sectors have been facing in recent years.
Further education also has a major part to play in tackling skill shortages in Scotland and in widening access to lifelong learning. The colleges will, therefore, also benefit from a share of the funds available to support the education and training option of our welfare to work agenda. Those additional funds should enable the further education sector to play a full role in delivering key Government initiatives.
The educational investments to which I have referred are about laying the foundations for Scotland's future prosperity. Those principles have also determined the change that I have made to the industry budget. The previous Government asserted that they also supported enterprise and inward investment, yet we inherited plans showing a planned decrease in the Scottish Enterprise gross budget of £26 million between 1997-98 and 1998-99. Despite that inheritance I am pleased to say that we will increase the gross budget, which represents the real spending power of Scottish Enterprise, by £14 million above the proposed plans, to bring it up to £454 million. I will, however, be looking to the network to make hard choices and to set out a realistic range of priorities for future years to reflect our objectives.
Scotland has, of course, been very successful in attracting inward investment, and I pay tribute to the excellent work of Locate in Scotland and the rest of the enterprise network in that achievement. I am confident that the attraction of Scotland as a location for both inward investors and indigenous firms will ensure that companies will continue to establish themselves in Scotland and to prosper.
The training activities of Scottish Enterprise and Highlands and Islands Enterprise will continue to receive substantial support, and that will be boosted next year by the new deal to get young people and the long-term unemployed off welfare and into work. That programme should pump up to £300 million into Scotland's efforts in that field over the next five years.
I also propose to restore the £1 million cut in the Scottish tourist board budget planned by the previous Administration. Tourism is a vital sector of the Scottish economy especially for rural areas and I will be looking to the Scottish tourist board to make effective use of those additional resources.
I turn now to health. I am making significant additional resources available to improve standards of health care. In the Budget, we made it clear that we were going to increase funding for the national health service in Scotland by more than £106.6 million in 1998-99. Taken with the increase already built into the plans, that will mean that the health service in Scotland will receive almost £205 million more than the planned expenditure for this year. That represents an increase of 4.7 per cent., which will mean that we can carry on with the improvements that we have already started this year.
Let me say a word about what we have already achieved in the past eight months in health. One of our first actions when we came to Government was to instruct health boards to find £5 million in efficiency savings to tackle waiting lists. They found £7 million I give them credit for that. At the same time, boards were charged with ploughing another £5 million worth of savings into planning for the inevitable winter pressures that hospitals begin to face at this time of year. Last month, we made £27 million available this year to help the NHS to cope with the expected increase in demand for emergency admissions to Scottish hospitals, to reduce waiting times, to enable more rehabilitation wards to be opened and to provide for new community-based facilities for the Borders. The additional resources for next year will enable those improvements to continue and, I hope, expand.
However, improving the health service is not simply a matter of money. We must ensure that resources are used effectively. The forthcoming White Paper on the NHS in Scotland will outline our proposals for how the health service should develop. I firmly believe that it will lay the foundations for a modern health service for the new millennium one that is more patient-friendly and efficient and free at the point of need for all who require its services. The measures that the White Paper will outline to improve the efficiency and effectiveness of the Scottish health service will ensure that it is second to none in its quality of patient care. It will reiterate the Government's manifesto pledge to provide real terms cash increases for the NHS a commitment that I hope a future Scottish Parliament will also feel bound to honour.
Scotland's housing was shamefully neglected under the previous Government. Our commitment to live within published plans means that everything cannot be done at once. We have also had to find £30 million to meet the extra costs associated with the repayment of Scottish Homes' debt, in line with obligations entered into by our predecessors. However, we have made a vital start with four important initiatives to tackle major challenges.
The rough sleepers initiative, designed to take the homeless off the street, will now have a total budget of £5 million next year. The initiative will be backed by our new code of guidance on homelessness, which came into force on Monday. The empty homes initiative will receive an extra £7 million to assist local authorities to develop a wide range of innovative projects to bring empty houses back into use. Home energy efficiency measures will be boosted by £5 million, with resources to be linked to new deal projects to get young people back into work. The new housing partnerships initiative will receive £35 million in addition to the planned figure for next year, to develop partnership projects with the private sector.
One of the aspects of this year's settlement that gives me the most pleasure is the need to start making provision for devolution. That represents a departure for me, a very welcome departure from previous public expenditure statements. An enormous amount of work is already under way to prepare for the Scottish Parliament, but next year will see a step change in the level of activity. I am therefore making available £15 million specifically for devolution-related expenditure, most of which will be required to take forward the new Parliament building project.
As we all know, it is never easy to find money for new and innovative programmes, but I have no difficulty in justifying my decision in this case. Those resources are an investment in decision-making by Scots in Scotland. I am not known for my profligacy, and I assure the Committee and Scotland that we can combine the need for fiscal prudence with an efficient and effective building a fit home for a powerful and accountable Scottish Parliament.
In the field of criminal justice, one of my particular concerns has been to relieve the pressure on the prisons system and to develop effective alternatives to custody. Community-based sentences ensure that offenders give something back to the community. All courts should have access to a full range of effective non-custodial disposals which will bring home to offenders the consequences of their behaviour and encourage a law-abiding lifestyle. To allow for the expansion and development of community-based disposals, I am making a further £2.5 million a year available. That will bring our annual commitment up to about £37 million and will, for example, allow for the pilot project for restriction of liberty orders with electronic tagging.
In determining expenditure for transport, we have begun the process of shifting resources from a narrow focus on ever more roads to a more comprehensive transport strategy. The roads review is now under way. Existing road construction projects as announced in June, will of course proceed as planned, including the schemes on the A75 and the A828. We are committed to the proper maintenance of the trunk road network and we plan to spend more than £95 million on that next year. Additional resources have been made available to a variety of road safety programmes, including those aimed specifically at reducing the number of child casualties on our roads.
In line with our policy of encouraging traffic off the roads, I propose to increase assistance for measures aimed at transferring freight traffic from road to rail. Another £4.1 million will be made available to the freight facilities grant programme to encourage greater use of rail freight services.
Another priority has been to improve lifeline services to outlying island communities. In particular, the ferry services to the northern and western isles will receive an additional £10.5 million next year. I also propose to provide an additional £3 million to Highlands and Islands Airports Ltd. to help the company's capital investment programme in Shetland.
Pausing for breath, I come to the local government settlement. I am sure that the Committee will have taken down all the details already and so I will push on.
Those, then, are the main features of the distribution of Scottish block resources for 1998-99. As the Committee knows, a large proportion of that block more than 40 per cent. is used to support local government spending.
This afternoon, I announced in a parliamentary answer aggregate figures for the local government finance settlement for next year. In the past seven months my hon. Friend the Member for Leith (Mr. Chisholm) and I have had many meetings with local authorities and visited many councils across Scotland. We have seen at first hand the pressures on local government and the good work that is being done. We have also had some very constructive discussions with the Convention of Scottish Local Authorities about the financial settlement for next year, and I pay sincere tribute to the way in which the COSLA leadership and membership have faced up to some very difficult issues. It is absolutely clear that the emphasis that my colleagues in local government and I place on the development of best value is vital. We are determined to ensure that the substantial resources that we devote to council services are used to the best possible effect.
The plans that we inherited from the previous Administration left us with some very real difficulties. In cash terms, grant to Scottish councils was set to fall by more than 1 per cent. and expenditure to rise by only 0.7 per cent., even after making provision for new burdens such as community care. Despite that severe squeeze, the plans that we inherited still implied an average council tax rise of around 7 per cent.
I have been able to make significant improvements to those plans to reflect particularly our priority for education. First, I have announced my provisional capping principles, which will set and decide local authority spending power, allowing for an increase in capped spending of £191 million on this year's level an increase of 3.4 per cent.
On top of that, local authorities will receive a further £75 million of direct Government support to fund pre-school education next year. That, too, is an increase over the plans inherited from the previous Administration, reflecting the importance that we attach to nursery education and delivering our pledge on pre-school education a place for every child in the pre-school year whose parents want it. Including the additional funding for nursery education, the total expenditure on services by Scottish local authorities will be 3.6 per cent. higher next year than it was this year.
As well as that increase in spending power, there is an increase in Government funding, mostly for education. Scottish local authorities will receive £5.3 billion in Government support through aggregate external finance in the coming year. Overall, I do not expect the average council tax rise in Scotland to be significantly different from the rise implied by the inherited plans around 7 per cent. despite the improvements in spending on services that our settlement allows. The rise in each area will, of course, depend on local circumstances and on decisions taken by individual councils.
I have already made it clear I make no apology for it, nor do I seek to hide it that this will be a tight settlement for local government. Within the total increases available, authorities will have to focus resources on our agreed priorities and cope with some inescapable pressures, such as the increase in the cost of their pension contributions from the abolition of advance corporation tax. The capping provision I have announced will give them some headroom to do that. Authorities will therefore be faced with some difficult choices; I make no secret of that. It may be no consolation, but those are exactly the choices I myself have had to face in other parts of my budget.
[Mr. Donald Dewar]
I now turn to my priorities for services within the local government block, as expressed in the service split of grant-aided expenditure. Those priorities have been discussed with COSLA, and represent our shared assessment of the priority areas for spending increases. I have allocated an additional £108 million to education, which adds nearly £20 million to the extra resources already announced in the Budget. I have increased the social work GAE by £40 million £15 million on top of the £25 million additional resources already earmarked for community care this year. That recognises a number of pressures on the social work budget, such as the provisions of the Children Act 1989. GAE for the police has been set at £691 million, an increase of £16 million over this year. That represents the levels of spending for police forces which can be afforded and which I think appropriate for authorities to spend. I have also given favourable treatment to the fire services, with an increase of £6 million to GAE of £170 million. The details of the split across all services are given in the circular to local authorities which my Department is issuing today and of which a copy is on the Committee Room Table.
There are two other aspects of the settlement to which I draw attention. First, a number of significant technical changes are working their way through the grant distribution arrangements and it is unacceptable that fluctuations in the way in which we distribute the grant should cause big increases or decreases in council tax levels which are wholly unrelated to the spending decisions of the councils themselves. I have had careful discussions with COSLA about a grant safety net to reduce those fluctuations, and again it has risen to the challenge and shown an ability to deal with such questions in a mature and constructive way. Therefore, in this year's grant distribution, I will ensure that major changes in the GAE assessments for different councils are phased in gradually and that there will be a council tax safety net in the system, which will restrict the effect of grant distribution changes on council tax levels. That safety net will not, however, affect councils' spending power. I have also ensured in the capping criteria that I announced capping flexibility for those lower spending councils which will not gain as much grant as they had hoped because of the grant stability arrangements. Indeed, I have been able to set capping principles that show greater flexibility and which are in all respects more generous than the criteria set by my predecessor. No council, overall, is likely to have a budget rise of less than about 2.3 per cent. with some markedly larger increases. In addition, I propose to make available to authorities the option that they enjoyed last year, of "spend to save", under which they have the flexibility to use part of their capital allocations as revenue expenditure to realise savings in future years.
Taken together, that represents a demanding but fair local government settlement. It gives authorities scope to increase their spending to focus on our agreed priorities, particularly education, and to cope with some of the unavoidable pressures on them. I also place great emphasis on making progress with the best value agenda. The Government are determined to ensure that we get the most efficient and effective use of every taxpayers' pound spent on our public services. I am glad to acknowledge the commitment that local government is showing to that. Nevertheless, councils will still face demanding choices and tough decisions just as we have had to take in relation to the Scottish block as a whole. However, working in partnership with councils, we have ensured that that will be managed equitably, and with a proper concern for the effect on the council tax payer.
I thank colleagues for listening patiently to what has been, inevitably, a lengthy statement. However, the matters I have outlined are important. After 18 years in opposition this is an important time. We have come to government to find an enormous amount that needs to be done. In the comprehensive spending review we have created a mechanism that will allow us to identify and act upon real opportunities for shifting public expenditure towards the targets that really matter. The redistribution that I have announced today is an important step on that road. The outcome of the spending review will open up new opportunities to Scottish parliamentarians to align resources in Scotland more closely with the nation's priorities. Today is an important start in realising those objectives. I have used new resources and the flexibilities allowed me by the block, to put in place a range of packages that respond to the pledges on which we were elected and which set us firmly on the course we intend to pursue and will, above all, improve significantly the lives of people in Scotland. I commend my proposals to the Committee.
Several hon. Members rose
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