Yesterday's leader in The Herald asked whether Finance Secretary John Swinney's spending review represented a masterly juggling act or simply a clever conjuring trick.
Yesterday as the Scotch mist cleared and analysts got a clearer view of the detail, a picture emerged that inclines towards the latter interpretation.
Two items loom large. The first is that local authorities, their staff and those who depend on their services are being made to pay the cost of guarantees made on other budgets, such as police and teacher numbers. Secondly, if the business community was under the impression that the Scottish Government’s desire to lessen tax pressures on council tax payers would extend to non-domestic rates, it is in for a grave disappointment. Is this fair on either local government service users (and workers) or a business community that has been told it is at the heart of Scotland’s recovery plan?
The council tax freeze was introduced four years ago, supposedly as a temporary measure until it could be replaced by local income tax (LIT). But LIT has run into trouble, partly over administrative wrangles with HMRC but mostly because of the basic disadvantage that in a downturn LIT receipts would shrink in parallel with income tax. With no party prepared to abandon the freeze in this year’s Holyrood elections, it has become a seemingly untouchable subject. Scottish Government ministers insist that its freeze is sparing “hard-pressed Scottish households”.
However, these same households also use council services and are watching in dismay as bin collections disappear, libraries close and care charges for the most vulnerable spiral upwards. Audit Scotland has concluded already that so-called efficiency savings may be a cipher for cuts in services. It is particularly iniquitous in Glasgow, which introduced its own freeze two years before the SNP imposed one.
It is not yet known how the local authorities’ budget will be divided between Scotland’s 32 councils, but Gordon Matheson, leader of Glasgow City Council, believes this week’s announcement will mean finding £61 million of cuts and savings. That is more than the total budget for roads, lighting, cleansing, parks, sports facilities and community halls.
Should councils be allowed a small rise, of say 3%, to help offset some of the most brutal cuts? After all, the council tax freeze benefits the wealthy most, while higher charges and cuts in services hit the poorest, who do not benefit from freezing a tax that they do not pay.
A broader political point is whether a year-long freeze undermines local democracy by denying voters the choice between lower bills and better services. The council tax is certainly flawed but most advanced democracies tax property as well as incomes and alterations to the banding could make it more progressive.
How are councils meant to fill the holes in their budgets? Partly through using their borrowing powers, though a number of questions remain about how this would operate. Secondly, as analysis by Glasgow University’s Centre for Public Policy for Regions shows, the draft budget to 2015 shows three consecutive years of well above inflation increases in non-domestic rates, amounting to around £500m in cash terms. Though this includes the proposed alcohol and tobacco levy on superstores, which The Herald supports, that accounts for less than 10% of the increase and it is ring-fenced for preventative measures. Much of the rest will come from small and medium-sized businesses, many of which are already struggling to survive. If Mr Swinney is depending on sustained economic activity to bring in millions in extra business taxes to support local authorities, he is taking a big risk. Red screens in the world’s stockmarkets yesterday indicate a bumpy ride ahead.
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