HOLYROOD’S budget process moves into high gear this week with MSPs voting on the general principles of Derek Mackay’s tax and spending plan for 2018-19 on Wednesday. The final vote is in mid-February.

The council settlement is a key bone of contention, and last week saw two valuable contributions to the debate. The first was a report by Holyrood’s local government committee which highlighted Mr Mackay’s sleight of hand on public sector pay. Capped for years at 1 per cent, for core government staff next year this will become a 3 per cent raise for those below £30,000, a 2 per cent cap between £30,000 and £80,000, and a maximum uplift of £1600 for those earning more.

But this doesn’t cover most of the 240,000 council staff. Ministers admit it creates an “expectation” of 3 per cent for them, but the £10.5bn core council settlement doesn’t include a pot of cash to meet it.

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The council umbrella group Cosla say every 1 per cent rise costs £70m across the 32 local authorities, so 3 per cent means £140m more than usual. In practice, that means cuts. Council tax isn’t the answer. Even hiking it by the maximum allowed would only raise £77m next year.

Mr Mackay was rather glib on the point when it was put to him: “What [councils] do in negotiations with trade unions is a matter for them. I think they will be able to arrive at a fair settlement for their workforce. However, I do not set that.”

But as the man with his hands on the purse strings, it’s also a matter for him. The three big unions who represent non-teaching council staff want a rise of up to 6.5 per cent. The main teaching union wants 10 per cent. The council settlement does include £24m for teacher pay, but not enough for that demand.

Obviously, these are aggressive opening bids in negotiations, but even to meet them halfway, given Mr Mackay’s provisional settlement, councils would have to take some very “difficult decisions” indeed.

Worse, councils reckon 58 per cent of their budgets are effectively off-limits to cuts because of SNP government priorities such as education, childcare expansion, and integrated health and social care. So all cuts fall in the other 42 per cent.

This includes economic development, employability, early intervention to tackle inequality and regulatory services, such as environmental health. According to Cosla, this means “cuts are hitting the most vulnerable, which is creating further inequalities.”

It’s a problem that’s been building for years as council budgets have been cut deeper than most. Holyrood researchers found that since 2010 the SNP Government’s revenue budget has fallen 5.1 per cent in real terms because of UK austerity, but the budgets passed on to councils have fallen 8.5 per cent.

Which brings us to the other report of the week, the latest Accounts Commission verdict on Clackmannanshire Council. It’s not all bad for the Wee County. The report acknowledges it is making progress in some areas, and has to cope with high levels of deprivation in parts. But there is also a ‘canary in the coalmine’ feel to it, a warning of what happens when problems pile up and there’s no happy way out.

The Commission said it was “seriously concerned” about Clackmannanshire’s finances and lack of clear political leadership, and recommended outside help. The smallest mainland council is looking at £29m of savings over the next three years, from an annual budget of £118m. The problem is “acute”. Instead of making those difficult decisions, the council fell back on the “unsustainable” practice of using its reserves to fund services. The piggybank is almost empty

The council isn’t ignorant. It knows its options. But they’re extremely painful. Axing spending, shedding one in six workers, an ominous sounding “whole organisation redesign”. What has been missing is political focus, with administrations coming and going and hard choices being ducked.

Such problems are not unique. In a November report, the Accounts Commission also said North Ayrshire and Moray will run out of reserves in two or three years without remedial action. Others are on the slippery slope. In 2015-16, eight councils drew on revenue reserves. The following year it was 19. This was described as a classic symptom of “financial stress”.

Money problems mean political strain. As funding falls, tensions rise, and it’s harder for councillors to make the choices they know will hurt their communities and anger voters. The instinct is pass the buck rather than pass cuts.

With every council now run by a minority party or an alliance of some sort, the scope for friction and fall-outs is obvious and growing. And more messy politics means more delayed decisions and bigger problems stored up for the future. Cash won’t fix a fractious council, but a lack of it makes one worse.

The Commission put it bluntly. “The financial challenges facing councils will inevitably mean councillors need to make difficult choices and take decisions that may not sit neatly with the manifestos they were elected on in May 2017. This requires effective political leadership.”

In other words, on the current numbers, local politicians are going to have to let people down, then deal with it. Mr Mackay’s budget will now determine how much pain councils, including the 14 which the SNP helps run, have to suck up.