George Kerevan: We need to talk about local government funding crisis

But here’s the thing – we live our lives dominated by what our “toon cooncillors” do or don’t do. Our schools, roads, care services, rubbish collection, parks, museums, housing, pub, and a million other things are either provided by or regulated by them.

And our councils are running out of ready cash. Some are likely to go bankrupt – just like Birmingham in England (which has an annual shortfall of £87 million). And for the pedants among you, I know very well that councils (north and south of the Border) have a statutory duty to balance the books and so can’t technically go bankrupt.

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But the financial crisis in local government is such that town halls and city chambers across the land will soon be legally obliged to make savage cuts in services. Some (in England) will come under direct rule from Westminster, meaning even more savage cuts.

This crisis has now entered political territory with the (abortive) threat from some Scottish local authorities to reject the SNP Government’s plan for a Council Tax freeze, and the (daft) call by the Labour leader of Inverclyde Council, Stephen McCabe, for Michael Gove to take over funding Scottish councils.

Not that you would think there’s a crisis if you ask the Scottish Government. The SNP-Green administration claims the latest Scottish Budget has provided “a real-terms increase in revenue funding for local government in both 2022-23 and 2023-24”. A spokesman for the Scottish Government added: “Scottish ministers are aware many councils are under financial pressure, which is why the 2024-25 Scottish Budget provides record funding for local government of more than £14 billion.”

That sounds dandy until you realise the government is baselining its supposed “record funding” against last financial year. Since then, Holyrood has (as usual) landed local government with more services to provide.

Nor does the new funding include an allowance for wage increases beyond a modest (and unlikely) 2%. Above that, wage and salary increases have to come out of “savings” – otherwise known as service cuts. All in all, the Convention of Scottish Local Authorities (Cosla) thinks there will be a £62.7m cut to the core council revenue budget for this financial year, with a £54.9m drop in the capital allocation.

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The Scottish Government has also imposed a freeze on raising Council Tax, in a nakedly populist bid to limit cost of living hikes. This move is a reverse ferret on two years ago, when Holyrood gave councils the latitude to set their Council Tax as local voters saw fit.

The SNP Government claims it is “fully funding” councils for this lost revenue. However, Cosla says otherwise. You might reply: “They would say that, wouldn’t they.” But the Government is only compensating what it imagines local councils would raise in a tax increase (+5%), which itself is arbitrary.

We are not done with the budgetary jiggery-pokery. The new budget settlement ignores the fact that in the last two financial years Holyrood gave local councils the right to switch some £120.6m of designated capital funding to revenue purposes. This has been withdrawn for 2024-25. That represents a big (disguised) revenue cut. Ah! You say: inflation has fallen reducing the pressure on councils. True, but for the tiny fact that a lot of council spending is indexed with a time lag.

For instance, contracts with voluntary care sector organisations are indexed using inflation dating from the previous autumn. For 2024=25, that means the baseline is actually autumn 2023, when inflation was still high – 6.7%.

I’M sure your head is spinning by now. Which, of course, is why politicians at Holyrood (and Westminster) are able shamelessly to claim magic spending increases when the reverse is true. It also explains why local government is falling apart and no-one seems able to do anything about it.

This might seem a mere debating point but for the fact that cuts in local spending have gone on for a long time and so deep that we are close to breaking point. We have used up all the financial and political sticking plaster.

According to Audit Scotland, the independent financial watchdog, in the decade to 2022, there were savage real cuts to road maintenance, cultural and leisure services (read libraries and swimming pools) and environmental services.

If you are wondering why there are so many badly designed buildings, derelict high streets and general urban blight, it might have something to do with a circa 40% cut to council planning services. And if you think those are secondary services, Audit Scotland also concludes that the adult social care sector “is in crisis, with growing backlogs, declining satisfaction and no clear picture of demand or unmet need”.

Of course, this collapse in Scottish local services is ultimately traceable to the crude austerity policies introduced by then chancellor George Osborne during the 2010 Tory-LibDem coalition. That austerity policy remains in force.

The latest Tory Budget has huge, unspecified cuts written in for after the General Election. Labour’s Rachel Reeves is unlikely to turn on the spending taps – quite the reverse. That will feed through eventually to more cuts in Scottish local government. We need a rescue plan here in Scotland.

I’m of a generation of nationalists that believed independence was just the start of a more radical decentralisation of power. That included giving genuine power to local communities – including over taxation, borrowing and spending.

Such an arrangement would be more democratic, more responsive, more flexible and more inclusive.

Yet somewhere along the line Holyrood has taken to centralising power. Any road to salvation of our local government lies through reversing this pernicious trend.

But that still leaves open the issue of precisely how and where to allocate limited resources. To prioritise one thing is to deprioritise something else. Conjuring up extra economic growth is no solution because that will take 1) independence and 2) at least a decade of rising productivity. In the short term, we need to shift existing resources from private consumption to investment in public services.

That can only be achieved with any legitimacy and sustainability by devolving much of taxation and fiscal responsibility to local government.

Holyrood lacks the will or the vision to take the radical decisions necessary to save our cities and local communities. Which is why we need to empower those communities by giving them control over local resources.

The argument for devolution – as a halfway house to independence – was in part to convince the Scottish people that they could govern themselves – and do it far better than the shouting house at Westminster.

But devolution is a living process of experimental democracy.

The failure of Holyrood to allow Scottish local government to flower ultimately threatens the whole independence project.

Which is why you find Labour politicians such as Stephen McCabe trying to hand Scottish local government back to the Tories.