Derek Mackay insisted he had delivered a “good deal” for local authorities in last week’s 2018/19 draft budget but admitted they would continue to have to make efficiency savings.
Interpretations of the allocation to local government have varied, with council body Cosla taking the view it represents a £153 million revenue reduction.
The independent Scottish Parliament Information Centre (Spice) has calculated a fall in total revenue for local authorities of £157.3 million.
The Scottish Government says it has protected day-to-day local government spending and increased the capital budget, and that if councils use their powers to increase council tax they will have an overall real-terms increase in funds.
Mr Mackay told Holyrood’s Local Government Committee the £157.3 million figure did not reflect “partnership priorities” such as teachers’ pay, investment in social care and the expansion of early learning and childcare.
“That’s real cash, real resource going to local authorities and is part of the settlement,” he said.
“If you discount that, yes, you arrive at a different figure. I include it because it’s real cash going to local authorities. It’s as simple as that.”
Pressed by Tory MSP Graham Simpson on whether councils would have to make cuts, Mr Mackay said: “That’s for local authorities to determine.
“It’s my position local government has got a fair settlement and, as I say, it’s far better than was forecast.
“I think the negotiations have gone well with Cosla in that they’ve raised a number of asks and I’ve been able to support them in that on particular pressure points.
“Will local authorities have to continue to make efficiencies? Yes they will, they actually have a target of approximately 3% every year.
“I have also recognised that these are challenging times for all our public services whilst expectations rise.
“But we as a government are proposing to use our tax powers to ensure that we can adequately resource our public services and local authorities also have that ability in relation to council tax.
“So I know Mr Simpson will want to use some pejorative language but I do think it’s a fair settlement. Will it require tough choices? Of course it will.
“We’ve had tough choices to make in government as well, but essentially I think it’s a good deal for local government.”
Spice has estimated it will cost councils around £150 million to match the Scottish Government’s plans to end the 1% public sector pay cap and implement a 3% rise for staff employed centrally.
Mr Mackay said: “It is a matter for local authorities as to where they set any pay increase. It’s absolutely not for me to instruct local authorities where to set a pay settlement.”
But he said at least one council leader had publicly stated that the settlement would allow them to match government pay policy, adding: “Knowing that the settlement was better than they were anticipating, knowing that they would have faced pressure for a pay uplift, I think they are in a reasonable place.”
On the removal of private schools’ eligibility for charitable relief from business rates, Mr Mackay said he did not believe it would have a disproportionate impact.
He said: “It has been put to me that many people would take a very dim view if independent schools became arguably more elitist because they had to pay non-domestic rates, which incidentally puts them in the same league as council schools.”