Executive at war with councils over tax rise

Published on 25/01/2006 00:16

JACK McConnell brought the simmering row between the Executive and local authorities back to the boil yesterday by insisting that council taxes should go up by no more than 2.5 per cent this year.

The First Minister provoked a bitter new exchange with councillors after he told them that they could keep down the amount they take from council taxpayers by making more efficiency savings.

Speaking at his monthly media briefing in Edinburgh, Mr McConnell said: "I've said consistently now for 18 months that I don't believe there's any reason for councils to increase the council tax above 2.5 per cent."

He said that councils had shown recently that they were able to meet and exceed Executive efficiency targets. He added: "They should be driving that agenda further forward."

The First Minister's statement puts him at odds with Tom McCabe, the finance minister, who has refused to state publicly that councils should stick to the 2.5 per cent target.

And Pat Watters, the president of COSLA, the local authority umbrella body, responded swiftly to Mr McConnell's claims. Mr Watters said: "The First Minister's suggestion is totally unrealistic. He is not listening to the arguments, including what he is being told by his ministers."

Mr Watters said that councils - which are expected to set rises of between 4 and 5 per cent when they set their levels next month - had already made 122 million in efficiencies this year.

He added: "If the First Minister thinks that we are not doing enough, he should demonstrate where it is he thinks that we should be doing more."

The latest exchanges came as Des McNulty, the convener of Holyrood's finance committee, accused local authority leaders of failing to plan to meet the cost of equal pay deals.

COSLA told the committee that the cost of avoiding being taken to industrial tribunal and settling equal pay claims for council workers will be between 310million and 560 million.

But Mr McNulty pointed out equal pay legislation had been on the statute book for around 30 years and councils had reached an agreement in 1999 with unions to settle the issue.

He told Mr Watters: "You have known for five years that there was a need to resolve this matter and you are saying that somebody else should pay for it."

Councillor Watters, who gave evidence to the committee, argued that the NHS in Scotland had been given 150 million by the Executive to fund Agenda for Change, their equal pay plan.

He said that there should be a "cocktail" of funding to help meet councils' equal pay costs and pointed out that 80 per cent of local authority funding comes directly from the Executive.

Cosla has estimated that between 30 per cent and 35 per cent of equal pay awards will be taken by the Treasury in tax and national insurance and called for the money to be returned to local government.

A Treasury spokesman said authorities should pay "fair taxes" but ruled out repaying money to Scottish councils.

Scottish ministers have told councils that they can fund the equal pay deals out of reserves totalling 1 billion. COSLA argues that only 250 million of these reserves have not been allocated or earmarked for capital projects, insurance requirements or Executive-set policies.