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FORSYTH'S CAPPING ANNOUNCEMENTS

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Michael Forsyth, secretary of state for Scotland today announced in a Parliamentary answer two steps to 'protect' S...
Michael Forsyth, secretary of state for Scotland today announced in a Parliamentary answer two steps to 'protect' Scottish council taxpayers.

Mr Forsyth said that, against the background of significant increases in Scottish local authority spending and staffing levels and council tax levels in recent years, he had decided to control the extent to which authorities can use CFCR (capital funded from current revenue) and to retain capping.

In an answer to a Parliamentary question from Sir Hector Monro MP, Mr Forsyth said that the planned level of use of CFCR in the current year was nearly three times the level in 1991-92 and that, as CFCR was funded entirely from the council tax, this had pushed-up the average Band D council tax by 79 in the current year. He planned to limit the use of CFCR next year to 62 million as compared with planned use of 132 million in the current year. T

This step would reduce the average band D council tax by 41 as compared with this year.

Mr Forsyth also said that, despite his general desire to reduce controls on local government, he had decided that capping must be retained. To assist local authorities with their budgeting, he announced his provisional capping principles for next year.

The text of the Parliamentary answer is:

'During the past ten years, current expenditure by Scottish local authorities has increased in real terms by 20 per cent, even after adjusting for additional responsibilities on authorities. In the same period, there has been an increase in Scottish local authority manpower levels. Since 1987, those levels have increased by almost 6 per cent.

In the same period, staffing levels have reduced in England by over 6 per cent, despite the fact that English authorities have also had additional responsibilities such as Care in the Community transferred to them.

Since its introduction in 1993-94, the council tax in Scotland has risen faster than in England. The average band D tax has increased from 559 to 624 in the current year in Scotland and from 569 to 609 in England. In other words, there has been an increase of 11.6 per cent in Scotland as compared to only 7.4 per cent in England

Against this background, I have decided that action must be taken to protect Scottish council taxpayers. In addition to the significant increase in Government support for local authority spending next year which I am announcing separately, I plan to take the following 2 further measures.

Capital Funded from Current Revenue (CFCR)

The first concerns the use of CFCR by Scottish authorities. In the current year, authorities budgeted to spend a total of 132 million on CFCR, nearly three times the level in 1991-92. As CFCR is funded entirely from the council tax, increase in its use has pushed up tax levels. In the current year it has added 79 to the average band D council tax.

Particularly in view of the predictions by some authorities of large tax increases next year, I have concluded that the use of CFCR needs to be curbed. For 1996-97 my intention is to use my powers under section 94 of the Local Government (Scotland) Act 1973 to limit consents for CFCR to a total of 62 million.

As compared with the level of budgeted expenditure this year will reduce the average band D council tax by 41.

The detail of this, including how the 62 million will be distributed amongst authorities, will be the subject of discussion with COSLA.

Capping

Despite my general desire to reduce controls on local government, I have concluded, especially against the background of the growth in expenditure, staffing levels and council tax levels in Scotland, that capping must be retained. I have therefore decided to announce provisional capping principles for the year ahead in order to assist local authorities in their budgeting process.

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 1996-97 are:

Mainland Councils

Any increase in budget for 1996-97 of more than 0.8 per cent over the amount specified in relation to that council in a report under section 94A of the Local Government Finance Act 1992 will be an excessive increase if the resulting budget is above the council's GAE for 1996-97 (in the case of the Scottish Borders, Dumfries and Galloway, Fife and Highland Councils) and the council's GAE for 1996-97 adjusted to take account of the transitional scheme to deal with the mismatch problem announced by my hon Friend, the Minister for Industry and Local Government on 22 November (in the case of all other mainland councils);

Orkney Islands, Shetland Islands and Western Isles Councils

Any increase in budget between 1995-96 and 1996-97 of more than 0.8 per cent will be an excessive increase if the resulting budget is above the council's GAE assessment for 1996-97;

Any budget for 1996-97 more than 12.5 per cent above the council's GAE assessment will be excessive save that if that budget is no greater than the budget set by that council for 1995-96, the council will not be capped.

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