Scottish Parliament e-Brief

Issue 8, 28^th February 2000

SECTION 1 - BUSINESS THIS WEEK

THE CHAMBER

Wednesday 1^st March

• Executive Debate on Local Government Grant Distribution

Thursday 2^nd March

• Conservative Debate on the European Convention on Human Rights
• Executive Debate on Gaelic

For briefings on the main debates, see section 3.

COMMITTEE BUSINESS

Education, Culture & Sport

• The role of the BBC in Scotland.
• Standards in Scotland’s Schools etc. Bill

Equal Opportunities

• Evidence from Scottish Refugee Council
• Evidence re Disabled persons housing service *

Finance

• Inquiry into the Finance Functions of the Scottish Executive
• European Union Funding Arrangements

Justice & Home Affairs

• Adults with Incapacity (Scotland) Bill – part 5 at stage 2

Local Government

• Non Domestic Rating Revaluation
• Draft Ethical Standards in Public Life etc. (Scotland) Bill

Please note that the Procedures, Public Petitions, Rural Affairs, Social Inclusion, Subordinate Legislation and Transport and the Environment Committees will meet this week.

* Session will be in private

SECTION 2 - NEWS

CASH FOR HOMELESS GROUPS

Communities’ Minister, Wendy Alexander, has announced details of a grant package worth nearly £1m for homeless groups. The four biggest award winners were:

Scottish Homeless Advisory Service: awarded £250,000 to provide an advisory service across Scotland;

Borderline: £120,375 to provide help, advice and accommodation for homeless Scots in London;

Scottish Council for Single Homeless: £169,277 for provision of advice, training and info services for homeless people;

Scottish Women’s Aid: £84,394 for work on refuge and permanent housing options for abused women.

SECTION 3 - NOTES ON THIS WEEK’S DEBATES

EUROPEAN CONVENTION ON HUMAN RIGHTS

In terms of human rights and of open and accountable Government, it is important to embrace the European Convention on Human Rights and make ourselves accessible in the courts.

The Scottish Parliament is leading the way within the UK.

The UK Government is committed to the principles set out under the UN Convention on the Rights of the Child and the European Convention on Human Rights.

The ECHR was introduced in Scotland with the enactment of the Scotland Act. It will come into force in the rest of the UK in October. Under the Scotland Act, the Scottish Executive and the Parliament must comply with the European Convention on Human Rights. This means that anything the courts judge as non-compliant may be struck down.

LOCAL GOVERNMENT FINANCE

The Local Government Finance settlement for each year between 1999 and 2001 was announced in July 1998 as part of the Comprehensive Spending Review.

Local Government finance is renowned for being a complicated issue and this guide shall try and unravel some of the main calculations used in agreeing each finance settlement for Scottish Local authorities.

GSE, GAE, AEF, RSG and NDRI

The number of three letter acronyms in local government finance is surprising! The following map is intended to explain how each of the headings relates to each other. Descriptions are then given below:

GSE = GAE + Loan Charges

AEF = RSG + NDRI + Specific Grants

Council Budget = AEF + Council Tax + Income

What it all means:

a) GSE

This is the ‘Government Supported Expenditure’. This is a hypothetical amount of money that the Scottish Executive estimate as being what a council needs to service the debts it has and provide services. Because the Scottish Executive needs to compare ‘like-with-like’, this figure is made up on the basis of a ‘Scottish average’ – although the actual mechanics of getting to the figure are extremely complex with many variables.

It is important because it is the basis of all the other calculations to follow.

For 2000-2001 the GSE figure in Scotland is £6.7 Billion.

b) GAE

This is Government Aided Expenditure and is the amount that states how much the Scottish Executive thinks a Council should spend on delivering its services. This is a very important figure and is the basis of everything that the Council gets in its AEF.

It is recognised that it is not appropriate or fair to distribute resources to local authorities on a pro-rata to population basis. Service (e.g. Education) GAEs are produced in order to introduce much greater refinement into the distribution system. Each service or sub-service GAE has its own distribution formula.

c) AEF

This is called Aggregate External Finance. In other words, it is the real amount of money that a Council gets externally, i.e. they didn’t raise by themselves.

This is very important to a council and is made up of non domestic rates, the revenue support grant and other grants that the Scottish Executive pays to the Council for the delivery of specific services.

For 2000-2001, the Aggregate External Finance total is £5.9 Billion.

Every year, each local authority’s portion of the AEF is approved by Parliament in advance. This has been done through the Local Government Finance (Scotland) Order, which was laid before Westminster each February, but will now be laid before the Scottish Parliament.

d) RSG

This is the Revenue Support Grant. This is the actual amount of money that the Scottish Executive hands over to each council from the ‘Scottish Block’

This is the key amount of money and most complaints about lack of finance is because this amount is seen to be too small.

e) NDRI

This is Non Domestic Rates Income, i.e. business rates. The Scottish Executive sets the amounts for these but they are collected by local councils and pooled by the Scottish Executive. This pool is then distributed back out to the council on the basis of financial needs.

Other Issues:

• New Burdens As part of the annual exercise to determine the local government financial settlement for each year, the Government considers in consultation with COSLA the impact that any policy changes will have on the duties and responsibilities placed on local authorities. A good example of a policy change could be the reduction of class sizes for infants.

• Top-Slicing This means that the government ‘slices’ off’ a part of the councils money (before they get it) to pay things like loan charges and PFI payments. This doesn’t have a great impact on the council because they will already have been able to estimate how much money would have been needed to make these payments. All it means is that the Scottish Executive are taking responsibility for the money being sent to make the payments.

• Ring Fencing. Ring fencing is when a defined sum of money is passed on to the council to be spent for a specific purpose. For example, the housing revenue account. This is where revenue from rent is placed, this money is then ring-fenced so it can only be used on the maintenance and up keep of council property. Other government money cannot be transferred into it.

• Expenditure Guidelines. The Comprehensive Spending Review announcement of 1998 confirmed the end of crude and universal capping. The Government then moved towards a new system of expenditure guidelines. The guidelines for 2000 -2001 were issued to councils in December 1998 as part of the 2000-2001 settlement. The guidelines seek to restrain council spending so that it is in line with the overall increase in Government Supported Expenditure. This is important because it can in some cases restrain Council spending.

• Specific Grants The aim of specific grants is to encourage local authorities to give priority to the services concerned in determining their budgets. By far the largest grant is for the police. The estimated provision for each of the specific grants is top-sliced from the AEF total. Specific grants do, however, allow Ministers greater influence in the delivery of their priorities, and may be appropriate in exceptional circumstances, for example the Education Excellence Fund introduced in 1999-2000.

• The Council Tax Safety Net The Council Tax Safety Net for each authority was introduced in 1998-99 to contain the potential impact on the council tax of changes in the method of distribution of support between councils from year to year. The Council Tax Safety Net was introduced after consultation with COSLA. The safety net amends each council’s figure for adjusted Government Supported Expenditure by the amount necessary to ensure that year-on-year changes in the distribution of those elements of support with a potential effect on the council tax should be limited to a £28 increase or decrease per Band D property.

• Changes to the Distribution Formulas While the total Local Government Finance aggregate settlement was announced in 1998 in advance, the distribution of funding between authorities is announced each year following consultation with authorities through discussion with COSLA. Consideration is being given by this Distribution Committee to the practicality of bringing the announcement forward to early December in future years to allow more time for authorities to plan their budgets and undertake local consultation.

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