Scottish Budget: Orkney Islands Council agrees to freeze council tax - but only if it gets £1m extra cash

Finance Secretary Shona Robison has promised the local authority more cash through the Barnett consequentials

Orkney Islands Council has said it will accept the Scottish Government’s council tax freeze – but only if ministers come good on their promise to hand over an extra £1.1 million.

The council had been discussing proposals to ditch the Government’s council tax freeze and instead raise taxes by 10 per cent.

However, the local authority has provisionally agreed to the Government’s plan after finance secretary Shona Robison wrote to the council promising more money – but only if councillors agreed to freeze council tax.

Whitemill Bay on Orkney, where the council has agreed to a council tax freeze - so long as it receives £1.1 million in funding. Picture: Getty Images

This comes after Argyll and Bute Council rejected the Government’s council tax freeze and will now raise council tax by 10 per cent.

Orkney council leader Heather Woodbridge said: “The view of the chamber today was that we should give the people of Orkney the benefit of a council tax freeze if it is fully funded by the Scottish Government. However, this is entirely dependent on that money being guaranteed to Orkney.”

She said the council’s finances were “unsustainable” as the local authority needed to save £9m over the next three years. At a meeting on Tuesday, councillors agreed to the council tax freeze while also taking £20m out of its strategic reserves fund.

Councillor Woodbridge said: “Very much like a household budget under pressure, we are also significantly dipping into our savings to keep the lights on and the bills paid. There are two levers to balance a budget, whether that’s a household budget or a council one – to increase the money coming in and to decrease the money going out.

“Ideally, we need to look at both, and this is where the difficult decisions for elected members come in. Our communities must be aware of the challenges ahead, not just this year, but also for the years ahead.”

The Scottish Government said in the 2024/25 Budget it would cover a 5 per cent increase in council tax, allowing local authorities to freeze amounts for the next year. This would have given Orkney Islands Council just over £565,000 – a 10 per cent increase in council tax would have brought in £1.2m.

UK Chancellor Jeremy Hunt is due to set his spring budget next week and is expected to pass on additional funding to the Scottish Government through Barnett consequentials.

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Ms Robison has pledged to hand over some of this money to councils, including an extra £1.1m for Orkney. She said the council could now receive £240,990 from the UK government’s Barnett allocation, alongside £900,000 from an islands’ cost-of-living allocation – but only if it agrees to freeze council tax.

If the promised extra money doesn’t materialise, the council says it will meet again on March 11 where proposals to increase council tax by 10 per cent will be back on the table. Should this happen, it would bring the rate for a Band D property on the islands up to £1,506.13, which is in line with the council’s medium-term financial strategy.

Finance Secretary Shona Robison said: “I welcome this decision by Orkney Islands Council to freeze the council tax in support of households across their communities.

“In the face of a profoundly challenging financial situation, the Scottish Government is making available record funding of more than £14 billion to councils in 2024/25 - a real-terms increase of 3.2 per cent compared with the previous year if the council tax freeze is accepted.

“We will remain in communication with Orkney Islands Council and confirm the funding position following the UK spring budget.”

A spokeswoman for HM Treasury said: “Any changes to Scottish Government funding due to tax and spending decisions taken at spring budget will be set out in the usual way.

“We are currently providing the Scottish Government with a record £41 billion per year settlement, and the renewed fiscal framework gives it greater certainty and flexibility to manage its budget and deliver high-quality public services for the people of Scotland.”