Ian Lang also announced local government funding for 1994-95 Government financial support for Scottish local authorities will amount to almost £5.3 billion in 1994-95.
Giving details of the local government finance settlement for 1994-95 in a Parliamentary answer, Mr Lang described the settlement as 'realistic' given the low level of inflation and the Government's public sector pay policy.
The full text of today's question and answer is: MR GEORGE KYNOCH: To ask the Secretary of State for Scotland, if he will announce details of the 1994-95 Scottish local government finance settlement.
Grant Aided Expenditure. I estimate that local authorities will incur £753.5 million on loan and leasing charges in 1994-95. This amount is top-sliced from GSE leaving a residual amount for Grant Aided Expenditure (GAE) of £5260.1 million. This figure is 3.42 per cent higher than that for the current year (again after adjusting for the Careers Service transfer) or 2.23% after taking account of transfers to local authorities next 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) - should be set at £5272.0 million for 1994-95. This is an increase of 2.41 per cent on the current year's figure (again including an adjustment for the Careers Service transfer) or 0.97 per cent excluding resources being transferred to local authorities to meet the cost of additional responsibilities, especially Care in the Community. In determining this AEF figure, I have assumed that local authorities will contribute £12.5 million to the next stage of unified business rate policy. I am announcing separately today details of the total reduction which I plan to make in Scottish business rates next year.
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 with the previous year. My intended capping principles for 1994-95 are: 1) any increase in budget between 1993-94 and 1994-95 of more than 1.75% it will be an excessive increase if the resulting budget is above the local authority's Grant Aided Expenditure (GAE) assessment for 1994-95, 2) any increase in budget between 1993-94 and 1994-95 of more than 1.25 % will be an excessive increase if the resulting budget is over 5 per cent above the local authority's GAE assessment for 1994-95, 3) any increase in budget between 1993-94 and 1994-95 of more than 0.75% will be an excessive increase if the resulting budget is over 10% above the local authority's GAE assessment for 1994-95, and 4) any budget for 1994-95 more than 12.5 per cent above the local authority's GAE assessment will be excessive save that:
a)if that budget is 30% or less above the authority's GAE assessment for 1994-95 and that budget is no greater than the budget set by that authority for 1993-94, the authority will not be capped, b) if that budget is not more than 60% or less above the authority's GAE assessment for 1994-95 and that budget is at least 5% below the budget set by that authority for 1993-94, the authority will not be capped, c) if that budget is at least 10% below the budget set by the authority for 1993-94, the authority will not be capped.
These principles are necessarily provisional. Before taking my decisions on capping, I will, of course, take into account all appropriate considerations.
Council Tax Transitional Relief Scheme In the current year provision was made for a transitional relief scheme to ensure that during the phasing-in of the council tax no household faced too great an increase in its bill as a result of the change in the tax system. I intend that this scheme will continue in 1994-95 so that those taxpayers who faced the largest increase in the current year will continue to receive assistance at an appropriate level. In general, they will receive the amount of relief granted in 1993-94 less an amount ranging from £67 a year for Band A to £137 a year for Band H. I estimate that this scheme will cost approximately £5m and this will be funded in addition to the AEF sum announced above.
In determining the Local Government Finance settlement for next year, I have taken full account of the views the Convention of Scottish Local Authorities have expressed to me. However, as I made clear to the Convention at a meeting on 29 October, I regard their proposals as unrealistic, especially given the Government's view that increases in pay for public sector employees next year would require to be funded by efficiency savings.
I made it clear to COSLA at the above meeting that I expected this policy to apply to Scottish local authorities and the settlement I am announcing today has been determined on that basis. The settlement includes provision for additional burdens being placed on local authorities next year including the introduction of devolved school management, child care and preparing for local government reform and water and sewerage restructuring.
Having regard to the low level of inflation and the Government's approach to public sector pay, this is a realistic settlement. I hope that in the light of it, local authorities will budget sensibly for next year. If they do not, I shall not hesitate to use my capping powers.