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Mr. Deputy Speaker (Sir Alan Haselhurst): With this it will be convenient to discuss the following motion:
- That the draft Housing Support Grant (Scotland) Order 1999, which was laid before this House on 28th January, be approved.
The local government order delivers the most generous financial settlement for local authorities for seven years. It underlines our commitment in the comprehensive spending review to invest in quality local services. Councils will be able to increase spending by almost 5 per cent. next year. Much of that increase will be targeted at the Government's priorities, which are shared with Scottish local government, of education, social work and the police and fire services. On top of that, the three-year spending plans that we announced last July after the CSR provide further real-terms increases over the following two years. The firm three-year plans offer councils long-term stability and should help them to plan their service delivery over a sensible period. In turn, that should deliver better value for money.
Next year alone, council spending is set to increase by more than £300 million. By the third year of the CSR, Scottish local authorities will have an extra £840 million per year to spend on front-line services. Those are significant real-terms increases, and as local authorities deliver the efficiency gains to which they and we are fully committed through best value, their real spending power will be even greater.
Overall, the settlement represents a major boost to local government spending power, providing councils with the means to make real progress in improving the quality of front-line services. This is a fresh start for the local government and reverses several years of tight spending controls made necessary by the economic mismanagement of the previous Government.
Councils must be rigorous in their continuing efforts to improve efficiency. Keeping council tax rises down is a key objective. Council tax payers expect and deserve no less. We have, as promised, scrapped crude and universal capping, but it remains important that councils budget prudently. We have therefore introduced a new system of expenditure guidelines to inform council budgeting rounds.
Mr. Donald Gorrie (Edinburgh, West):
Can the Minister clarify what the difference, if any, is between the guidelines and the crude universal capping that he is so much against?
Mr. Macdonald:
Yes. The expenditure guidelines will let councils know the level of spending that we think
Mr. Alex Salmond (Banff and Buchan):
The Minister argues in principle against the rigid capping of previous years, in which I support him. The Scottish Office--in future, the Scottish Parliament--tightly controls the revenue flow to local authorities: 90 per cent. or more of the money available to local authorities will come from central Government, whether through the Scottish Office or the Scottish Parliament. In principle, what is the need to have further guidelines, even indicative ones? If the revenue is being controlled, cannot local authorities at least be trusted to distribute their expenditure?
Mr. Macdonald:
The hon. Gentleman knows that we must also have regard to the interests of council tax payers. This is a significant step forward to providing data flexibility and discretion for local authorities, but it is prudent to keep the existing capping powers in reserve. I hope and trust that there will be no occasion to use them.
It is not only council tax payers who are hit if council tax rises are excessive. Large hikes also affect national taxpayers, and the assigned budget through increased council tax benefit subsidy payments. The White Paper, "Scotland's Parliament" signalled arrangements to ensure that any resultant extra cost would have to be found by the Scottish Parliament. We have therefore put in place subsidy limitation arrangements to ensure that councils themselves bear the responsibility for the benefit costs associated with high spending increases.
Sir Robert Smith (West Aberdeenshire and Kincardine):
On the new method of controlling local government spending, is the guideline figure at or below the grant-aided expenditure figure for the councils?
Mr. Macdonald:
The guideline figure is the GAE figure. If councils spend considerably above that, or increase council taxes considerably above the expected 5 per cent. on average, the reserve powers are available to deal with the situation. We hope that that will not happen. The signs so far for next year suggest that the reserve powers will not prove necessary, but they will remain in reserve.
Dr. Liam Fox (Woodspring):
To help the debate, can the Minister say what he means by "considerably", and give councils in Scotland an idea of what that means in practice?
Mr. Macdonald:
If the guideline, which at £6.5 billion for next year is pretty generous, or the expected average council tax increase of about 5 per cent. is breached, we would consider the situation in the individual local authority. We would examine why it had happened and assess each situation as it arose. That is the point of
Mr. Salmond:
My understanding from the Convention of Scottish Local Authorities is that planned expenditure for Scottish local authorities collectively is some £300 million above the GAE assessment for next year. Given that situation, does the Minister intend to act? If not, or if he thinks that the expenditure planned by local authorities is unreasonable, what would he cut from the £300 million to bring the figures into line? The Minister for Home Affairs and Devolution shakes his head, but COSLA argues that planned expenditure is £300 million more than the GAE assessment. Either the planned expenditure or the assessment is wrong. It argues that the assessment is wrong.
Mr. Macdonald:
Perhaps I inadvertently misled the hon. Gentleman. I said that it was about £6.5 billion next year; I think that the figure is actually £6.9 billion. That is the figure that we will take as a guideline. We will assess whether local authorities are spending way above that guideline figure.
Mr. Salmond:
So that is another £400 million?
Mr. Macdonald:
No. There is no sense of the sort of squeeze that the hon. Gentleman fears. We do not expect any local authority to exceed the guideline in the coming year, certainly not by any significant amount.
Mr. Tam Dalyell (Linlithgow):
Will my hon. Friend comment on part of COSLA's case, that application of convergence criteria with the implicit aim, over time, of regarding each council's grant-aided expenditure as its spending guideline is strongly opposed? What is the Government's view?
Mr. Macdonald:
There is nothing new in that. The notion that expenditure by councils should be more in line with the assessment of councils' needs is one that has been advanced for many years by different Governments. COSLA's case is nothing new--that has always been its argument. The importance of the new procedures and the new expenditure guidelines is that they represent a far less rigid approach to achieving convergence than the old crude and universal capping procedures, so there is now greater flexibility than there was previously.
Mr. Oliver Letwin (West Dorset):
The Minister is being most generous in giving way, but will he finally clarify the position regarding the guidelines? He mentioned total guidelined expenditure of £6.9 billion, compared with grant-aided expenditure of £5.7 billion. From where did he get the extra £1.2 billion; that is, how did he calculate that the guidelines ought to give headroom of £1.2 billion over the grant-aided expenditure figure?
Mr. Macdonald:
The guideline figure is £6.9 billion. Some local authorities spend in excess of the GAE figure: because council tax increases in past years have been larger than previous Governments thought that they
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