Local Government Finance

I recognise that, in the current economic climate, many people will welcome a council tax freeze. Who does not like a cut in tax? However, as my colleague Jeremy Purvis said, the tax freeze locks in the unfairness of the discredited council tax for another year. The council tax freeze was supposed to be a temporary measure, easing difficulties while a fairer local income tax system was developed. In that light, we did not oppose it. In the same way, it has been tholed by councils across the country on the understanding that it heralded a major reform of how local services are funded. However, of course, that is no longer the case. The situation changed when the Government announced that it would not take forward any such reform in the current session of Parliament.

With the LIT having been ruled out for this session, it is unlikely that change will happen within the next five years even if there is a majority for reform in the next session of Parliament. I am concerned that that is a missed opportunity to strengthen the role of local government. Councils should be responsible for raising a significant proportion of funds locally-we can argue about what that level should be-and they deserve to have that autonomy. We have been happy to lobby for fiscal autonomy for our Parliament, but I hear less about applying the same principle to local government.

Rather than an increase in the share of funds that is raised locally and, importantly, accounted for locally, we are seeing the erosion of the principle of locally elected people being responsible for local services. Local government is in danger of morphing into local administration these days. John Swinney has said that he wants a new, equal relationship with local government, yet he has in effect removed local discretion to raise additional revenue for locally needed services. That is not my idea of a new relationship.

In a similar debate last year, I said that a council tax freeze must be fully funded by central Government and must not impact on other budgets for local government services in the current year or in future years. We now face the real prospect that the on-going council tax freeze will adversely impact council services in coming years. The Government has made a commitment to freeze the tax until 2011, but at what cost to local services? Is the tax to be frozen for all time? If not, what kind of hike in council tax will be needed all at once? A massive increase will be required just to provide the same level of funding for local authorities. Perpetually freezing council tax helps no one. It is irresponsible to do that without demonstrating that there is an exit strategy, so the Government is piling up trouble for future years. Of course, the SNP is fond of grand gestures-leaving the pieces to be picked up by the next Government-but it has dug itself into a big hole with the council tax freeze.

Liberal Democrats believe in strengthening local government. Devolution should not stop here at Holyrood. The SNP's increasing tendency to exert control over spending contrasts with its assertion that it is giving more control to local government. Although the move to single outcome agreements has some merit, the demands of the concordat coupled with the council tax freeze mean that councils have less control over their spending than ever before. Indeed, there is a good deal more confusion, which makes the need for a review of the distribution formula more pressing.

I thank John Swinney for insisting, in the face of worrying resistance from COSLA, that the distribution formula will be reviewed, but I continue to press for an interim solution to help the five councils that currently receive less than 90 per cent of the Scottish average. When I proposed that such councils should be protected through a top-up fund, John Swinney responded:

"the current distribution formula-whatever we might think of it-is broadly accepted by all elements of local government"-[Official Report, 11 February 2009; c 14934.]

I disagree. The current distribution formula is accepted by the majority of councils, which have a vested interest in resisting change. Since local government reorganisation, the funding system has contained an in-built unfairness that the majority has been unwilling to address. As a minority Government, the SNP should have some sympathy with the difficulties that a minority can face in bringing about change.

I will not hide the fact that I campaigned for such a review when my party was in government-I like to be consistent-or that, to its credit, the Executive had started to tackle the issue. However, the freeing up of ring fencing has reversed that trend, with the result that five councils have been pulled even further below the Scottish average. I believe that that was an unintentional consequence. It is to John Swinney's credit that he is pushing COSLA to consider the distribution formula-COSLA does not want to do that-but I ask him to go one step further. To ease the problems facing Aberdeen City Council, Aberdeenshire Council and the others, he should put in place an interim measure to introduce a safety net that stops councils receiving less than 90 per cent of the Scottish average.