Local Government Finance (Hansard, 26 November 1996)

§ Mr. Michael Forsyth

For the second successive year, I have decided to improve on the plans for the local government settlement. The level of Government supported expenditure has been increased by 2.2 per cent. or nearly £132 million and the level of aggregate external finance by 1.1 per cent. or £60 million, in both cases after adjusting for the phasing-out of local government reorganisation on costs and the transfer of responsibility for funding nursery education.

Next year, Scottish local authorities will receive Government support totalling over £5.4 billion, which represents over 37 per cent. of the total Scottish Office 167W budget. As a result of the settlement, Scottish local government will continue to enjoy levels of spending and Government support far in excess of those available in either England or Wales. Spending in Scotland will be 30 per cent. higher per head of population than in England and Government support will be 42 per cent. higher.

In determining the settlement, I have given particular priority to the police and fire services, and have also provided additional resources for education and social work.

I have decided that capping must be retained in order to protect council tax payers, and I am today announcing my provisional capping principles for next year. Council tax payers in the areas concerned will also benefit from the second year of the transitional mismatch and district equalisation schemes. Grant totalling around £18 million will be provided in 1997–98 to fund these schemes and this will be in addition to the aggregate external finance total which I am announcing today.

The details of the settlement are:

Government supported expenditure

I propose that Government supported expenditureGSE—for 1997–98 should be set at £6,214.3 million. This compares with previous plans of £6,186 million.

Grant aided expenditure

Local authorities will incur an estimated £793.3 million on loan and leasing charges in 1997–98. This is an increase of £15.5 million over this year's figure. These charges continue to increase and I am announcing separately the action I am taking to bring them under greater control. After deducting this sum from the GSE total, £5,421.0 million is available for allocation as grant aided expenditure—GAE. This GAE amount is also 2.2 per cent. or over £116 million higher than that for the current year, after making the above adjustments. I shall announce GAE figures for individual local authorities as soon as possible.

Aggregate external finance

I further propose that Government support for local authority current expenditure—aggregate external finance (AEF) which consists of revenue support grant, specific grants and non-domestic rate income—for 1997–98 should be set at £15,343.2 million, which compares with the previous plans of £5,298 million. Proposals for the distribution of AEF to individual local authorities are likely to be issued to councils before Christmas.

Capping

I have the power to cap a local authority either where I consider that its planned expenditure is excessive or where there is an excessive increase in its planned expenditure as compared with the previous year. My provisional capping principles for 1997–98 are: any increase in budget between 1996–97 and 1997–98 of more than 0.5 per cent. will be an excessive increase if the resulting budget is above the council's GAE for 1997–98—in the case of Dumfries and Galloway, Fife, Highland, Orkney islands, Scottish Borders, Shetland islands and Western Isles councils—and the council's GAE for 1997–98 adjusted to take account of the second year of the self-financed mismatch scheme, in the case of all other councils; any budget for 1997–98 more than 12.5 per cent. above the 168W council's GAE assessment, as adjusted if necessary, will be excessive save that if that budget is no greater than the budget set by that council for 1996–97, the council will not be capped.