Thank you, convener. I warmly appreciate your good wishes.
It is a pleasure to be before the committee to look at the 2015-16 draft budget. The committee has indicated that its scrutiny will focus on the draft local government finance circular. The circular in question, which is dated 7 July, provides a representation of a snapshot in time. On 11 December, the Government will publish the 2015-16 draft local government settlement, which will mark the start of the statutory consultation on the new circular that will apply to local government.
The committee will know that the Scottish Government has worked hard with COSLA to provide fair settlements to Scottish local authorities, given the reductions that we have faced in our budget as a consequence of the United Kingdom Government’s austerity programme.
The Scottish budget is divided roughly into three parts, with health and local government sharing about two thirds of the total budget. Given that the health budget has received a real-terms increase in each and every year, as set out in our manifesto, some very difficult decisions have had to be taken to maintain local government funding. Because of the difficult decisions that we have taken, local government has been treated fairly under this Government. The local government finance settlement has been maintained across the period 2012 to 2016 on a like-with-like basis, with extra money being applied for new duties that have been allocated to and agreed with local government. That has resulted in a total settlement of more than £10.6 billion in 2014-15, which is set to increase to almost £10.8 billion in 2015-16. I believe that that settlement has enabled local authorities to deliver front-line services effectively.
The distribution of that considerable sum of money is vital for individual local authorities, which is why the distribution formula is kept under constant review at official and political levels with COSLA. Following the most recent review in 2009, the consensus was that the indicators that were then used in the formula were reasonable and that, generally, they offered a fair reflection of need among local authorities. The Government’s preference, which we share with COSLA, is to have a fair and equitable settlement across all local authorities.
On non-domestic rates, we now allow councils to retain the income that is generated within their boundaries. Although the Scottish Government still guarantees each council’s formula share of the funding by making up any shortfall in business rates income, we now incentivise local authorities by allowing them to share any additional income that is generated through increased buoyancy or other factors. The original business rates incentivisation scheme was too blunt, so we have worked with our local government partners to better focus the scheme on promoting and rewarding growth. I hope to announce further details to Parliament on 11 December.
Local government and the Scottish Government work collectively to meet the financial and social challenges that the people of Scotland face. One of the Scottish Government’s priorities has been to maintain a freeze in the council tax. The freezing of the council tax for the eighth successive year will provide continued respite to all taxpayers the length and breadth of Scotland at a time of financial constraint.
I am happy to answer any questions from the committee.