Councils will struggle to raise workers' pay, reports warns

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In his draft Budget last week, Finance Secretary Derek Mackay announced he was lifting the long-standing 1 per cent cap on pay for central government and quango staff.

Those earning below £30,000 will see a 3 per cent increase next year, while there will be a 2 per cent rise for salaries between £30,000 and £80,000.

The government said it expected the formula to set a benchmark for NHS staff, fire-fighters, police officers, teachers and further educations workers.

However the policy does not cover councils, which employ around half the 500,000 people in Scotland’s devolved public sector, as they negotiate their own pay deals with staff.

The Holyrood paper said that if councils stuck to a 1 per cent raise it would cost them £60m next year, but if they matched the 3 per cent hike it would cost another £90m.

However general revenue grant funding from government and business rate income is due to fall by £49.1m in cash terms, or £183.7m (2 per cent) in real terms in 2018/19.

Even after specific revenue grants are included, total revenue income is predicted to rise by just £3.2m in cash terms, a real terms cut of £135m in day-to-day spending.

“Therefore, councils may face challenges in matching this pay policy commitment,” the analysis said.

Council capital spending for investment and repairs will rise by 9.8 per cent in real terms next year to £876m, taking total council funding to £10.4bn.

But even this still leaves a net real terms cut of £58m, something Mr Mackay has suggested could be plugged by 3 per cent rises in council tax, to generate £77m.

The Scottish Parliament also highlighted how the SNP Government had squeezed council budgets harder than Westminster had squeezed Holyrood.

Adjusting for changes to police and fire funding, it said the government’s revenue budget fell 5.1 per cent in real terms from 2010 to 2018, but council budgets fell 8.5 per cent.

It said Argyll & Bute and East Renfrewshire would be the biggest losers next year, with revenue cuts of 4 and 3.2 per cent respectively, while at the other end of the scale Midlothian escaped with a cut of just 0.1 per cent.

The SNP is currently part of the administration in 15 councils.

A spokesperson for the council umbrella group Cosla said: “This chimes with what we said following the Budget statement. This is not a flat cash revenue settlement for local government. It is a cut of £153m for essential services.”

The Scottish Greens, who helped pass the 2017/18 Budget, repeated their warning that they would not back next year’s package without £150m more for councils.

Co-convenr Patrick Harvie said: “This analysis confirms the draft Budget would not enable councils to keep services running as they are, or offer a fair pay settlement to employees.

"We have been very clear with the Finance Secretary that we cannot support a budget that imposes real terms cuts, either to pay or to local government in general."

Labour MSP James Kelly added: “This briefing makes grim reading for local government. These cuts will fall the hardest on the poorest, the most vulnerable, and our children.

“Meanwhile, Derek Mackay seems to expect councils to deliver a real-terms pay rise.”

Scottish LibDem leader Willie Rennie said the Budget had overlooked council workers.

“Unless the government changes its plans they will be forcing councils to cut public services to pay their workers the wages they deserve."

Meanwhile, a Fraser of Allander Institute briefing said the Scottish Fiscal Commission's forecast of GDP growth below 1 per cent to 2021 would be the longest such run in 60 years.

The Institute said it was an “unprecedentedly weak economic outlook” but the Budget was “on track” to deliver major policy commitments on health, policing, education and childcare.

Tory MSP Murdo Fraser said the briefing showed “tax rises and tinkering will do nothing to help our hard pressed public services unless we have a long term plan for economic growth".

The Scottish Government said that until pay awards had been settled it was not possible to estimate accurately what they would cost.

Mr Mackay said the parliament analysis bore out his own Budget figures.

He said: “The 2018/19 finance settlement foresees an increase both in revenue and capital investment as part of a wider package of measures.Together with the additional power to increase Council Tax (worth around £77m next year), this will generate an increase of 1.6% in the overall resources to services.”