Local Government Finance (Hansard, 29 November 1994)

§ Mr. Lang

Government Support Expenditure

I propose that Government supported expenditure—GSE—for 1995–96 should be set at £6,116.9 million. Inclusive of additional provision for care in the community, this is an increase of 1.72 per cent. on the current year's figure.

Grant Aided Expenditure

I estimate that local authorities will incur £798.7 million on loan and leasing charges in 1995–96. This amount is top-sliced from GSE, leaving a residual amount for grant aided expenditure—GAE—of £5,318.2 million. This figure is 1.11 per cent. higher than that for the current year. I shall announce GAE figures for individual local authorities as soon as possible.

Aggregate External Finance

I further propose that Government-determined support for local authority current expenditure—that is, aggregate external finance (AEF)—for 1995–96 should be set at £5,306 million. This is an increase of 0.64 per cent. on the current year's figure. Proposals for the distribution of AEF to individual local authorities are again likely to be issued before Christmas.

Provisional Capping Principles

To assist local authorities in their budgeting process, I have again decided to announce provisional capping principles for the year ahead. I have the power to cap a Scottish 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 688W with the previous year. My provisional capping principles for 1995–96 are:

(a) for regional and islands councils
any increase in budget between 1994–95 and 1995–96 of more than 0.7 per cent. will be an excessive increase if the resulting budget is above the local authority's grant aided expenditure (GAE) assessment for 1995–96;
(b) for district councils
any increase in budget between 1994–95 and 1995–96 of more than 0.5 per cent. will be an excessive increase if the resulting budget is above the local authority's GAE assessment for 1995–96; and
(c) for all local authorities
any budget for 1995–96 more than 12.5 per cent. above the local authority's GAE assessment will be excessive save that:

(a) if that budget is 30 per cent. or less above the authority's GAE assessment for 1995–96 and that budget is no greater than the budget set by that authority for 1994–95, the authority will not be capped;
(b) if that budget is 60 per cent. or less above the authority's GAE assessment for 1995–96 and that budget is at least 5 per cent. below the budget set by that authority for 1994–95, the authority will not be capped;
(c) if that budget is at least 10 per cent. below the budget set by the authority for 1994–95, the authority will not be capped.

Council Tax Transitional Relief Scheme

As we are now approaching the third year of the council tax and tax payers have had an opportunity to adjust to the new system, I have decided not to continue in 1995–96 the transitional relief scheme which has operated for the past two years.

In determining the level of this settlement, I have assumed—in line with the Government's general approach to public sector pay—that any pay increases for Scottish local authority employees will be fully funded by efficiency savings. The settlement includes provision for a number of additional burdens being placed on local authorities next year including improvements to school and social work transport, the continued introduction of devolved school management, child care developments and the costs of the elections of the shadow councils.

This is a tight settlement but, having regard to the low level of inflation and the Government's approach to public sector pay, a realistic one. The onus is now on local authorities to act sensibly in setting their budgets and council tax levels for next year. I shall not hesitate to use my capping powers to prevent excessive expenditure.