Green councillor Gavin Corbett, who sits on the Finance and Resources Committee of City of Edinburgh Council, argues that “has the council tax freeze been fully funded” has always been the wrong question when trying to understand local government finances since the SNP came to power in 2007
WITH the first minister outlining the SNP’s local tax plans, it’s clear that the council tax freeze is now at the end of the road. Hopefully, there is still political room for the council tax itself to be replaced by a more progressive, stable and accountable local tax, although that, sadly, may take a little longer.
The more thoughtful SNP politicians, however much they might have celebrated the freeze back in 2007, realise that, by 2016, it has become a trap, with councils cutting core services left, right and centre, trade unions highlighting the massive loss of jobs and the independent poverty tsar querying its negative impact on low income families.
However, in the Punch and Judy show that is often Scottish politics the extent to which the council tax freeze has been fully funded has been hotly contested.
This has always puzzled me as a local councillor in Edinburgh. Scottish Government funding for Edinburgh for 2016-17 has been slashed by PS23.4 million so it is entirely fatuous to claim that because a sum of PS6.898 million has been rolled up within that settlement to “compensate” for a council tax rise, then it is fully funded. In other words, all this is really saying is that you cannot “council tax” your way out of dramatic central government cuts; and that you cannot divorce the question of funding for the freeze from funding from local government more generally.
“Scottish Government funding for Edinburgh for 2016-17 has been slashed by PS23.4 million so it is entirely fatuous to claim that because a sum of PS6.898 million has been rolled up within that settlement to “compensate” for a council tax rise, then it is fully funded.”
The key alibi cited by the less thoughtful SNP politicians and parroted uncritically by the media, has been briefing 15/58 from the Scottish Parliament Information Centre (SPICe), among which conclusions are that the council tax freeze has been fully-funded, indeed, over-funded.
On the face of it, by the end of 2016-17, the Scottish Government will have diverted PS3.15 billion from other policy priorities into keeping council tax frozen at 2007-08 levels.
Now, SPICe is an excellent source for a great deal of data which informs Scottish public policy in an objective and thorough manner. I would have been slightly more impressed had the conclusions been published by more authoritative sources like Audit Scotland or CIPFA, but nevertheless, anything SPICe produces deserves to be looked at seriously.
There are a couple of problems with the SPICe analysis. The first is pretty rudimentary and it results from a failure to compound the rise in council tax each year. The city council has been earmarked PS6.898 million each year, which is 3.2% of the council tax base in 2007-08. By the end of 2016-17, then, it will have had PS62.082 million earmarked in that way. If however, it had actually raised council tax by that 3.2% each year, then by 2016-17 the council tax base would be PS70.561 million higher, an increase of PS8.569 million over what the SPICe arithmetic assumes. So much for “over-funding”.
The other point is more fundamental. It strikes me that the much-cited conclusion above is arrived at only by asking a very specific question; in fact, a rather naive question. In other words, if you take the council tax freeze in isolation and compare the cumulative total of PS70 million annually provided by the Scottish Government for the freeze to the amount which would have been raised had council tax risen by inflation you get the conclusion above.
If, however, you look at that in the context of what else has been happening in local government funding over the period of the freeze, you get a quite different conclusion.
“The council tax freeze has been used as a cover to mask the fact that underlying Scottish Government funding for local council services has been slashed by 12.6%: an order of magnitude four times greater than the Scottish Government itself has faced.”
Happily, the SPICe briefing provides the data to allow that wider analysis. Over the freeze period to 2015-16, Scottish Government funding to councils has declined by 6% in real terms, at a time when the Scottish Government budget has fallen by 3% in real terms. However, those data include the amount allocated for council tax freeze. So once you strip that back out, the cut to local government has been 12.6% in real terms.
Let’s be absolutely clear what this means. The council tax freeze has been used as a cover to mask the fact that underlying Scottish Government funding for local council services has been slashed by 12.6%: an order of magnitude four times greater than the Scottish Government itself has faced.
In fact, it is worse than that. The above data are adjusted to take into account the fact that police and fire services came out of local government funding in 2013-14. However, over the period of the freeze there have been other changes to the status quo – usually additional costs associated with new statutory duties – which have increased cost pressures and required extra funding: for example, extended nursery provision at early years or free school meals at P1-3 (both of which are good things, in my view).
Further, all of the above findings only go as far as 2015-16. The 2016-17 spending deal will amplify the funding gap, given that the 2016-17 settlement sees local government take a disproportionate hit on funding, in the worst local government funding round since devolution in 1999.
Where does this leave us? The council tax freeze was undoubtedly both popular and populist in 2007. It spoke to a view of the council tax as unfair and badly-designed: a view I entirely share. But freezing it has had a cost. That cost is both an opportunity cost for that PS3.15 billion (which, for example, could have wholly financed a housing programme of 60,000 affordable homes over 5 years to end the housing shortage); and it has had a cost in local services, from libraries to community centres, from schools to home-care; and from parks to street cleaning.
With the SNP’s very modest reforms now in the public domain, the contest for a replacement means of funding local government has now moved up a gear; and with it, the prospect of an end to sterile rhetoric and a debilitating race to the bottom on public services.