SNP facing £250m budget gap amid anger over council pay

Finance Secretary Derek Mackay
Finance Secretary Derek Mackay
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The Scottish Government is under growing pressure to find an extra £250 million to help fund a pay hike for thousands of council workers or face the collapse of its budget.

A committee of MSPs today said Finance Secretary Derek Mackay had “created an expectation” that staff on councils would benefit from the lifting of the public sector pay cap – but a looming £157m cut to local authority budgets have prompted fears it will be unaffordable.

Meanwhile, Greens co-leader Patrick Harvie warned that he will demand both extra cash to reverse the cuts and more funds to let councils meet the pay rise for workers.

Staff in Scotland’s public sector earning less than £30,000 are to get a 3 per cent rise next year after Mr Mackay revealed in his draft budget last month that the 1 per cent cap imposed in recent years will be lifted. But that will not apply to council staff, who are paid directly by local authorities, which are facing cuts to their budgets.

A report by Holyrood’s local government committee today states: “The outcome of the Scottish Government’s public sector pay policy creates an expectation as to what local government workers might receive.”

The Scottish Government’s pay policy states that it should “act as a benchmark” for all major public sector workers across Scotland.

The MSPs added: “Whilst we recognise the different responsibilities for the Scottish Government and local government in setting pay policy, we seek information from the Scottish Government about how its public sector pay policy aspirations are taken into account in its decision on the local government revenue budget.”

The independent Scottish Parliament Information centre (SPICE) found it would cost £150m to fund the pay cap. If the 1 per cent cap is assumed, as applied to workers this year, it would cost an extra £90m.

Mr Harvie said yesterday: “The government has to reverse the proposal for a £157m of cuts to local government and on top of that make a fair contribution to the extra cost that local government will have to meet if they are going to have a pay policy that’s remotely acceptable to unions.”

The budget is unlikely to secure the support of the Scottish Conservatives or Labour, so the minority SNP government may be forced to rely on the pro-independence Greens to get its spending plans passed, as it did last year.

Mr Harvie said: “Local government needs to be in a position of knowing that they have the resources available to make a fair pay offer for all those people. A lot of councils are budgeting for something like a 2 per cent pay increase. Well, if they want to go that little bit further and reach inflation, then there’s got to be a fair contribution.”

The Scottish Government backed a Greens amendment at Holyrood last week which called for changes to made to the draft budget which would find extra cash for councils and protect frontline services.

Local government umbrella body Cosla has already made clear “it did not consider that the local government settlement included funding for any local government pay award”.

The organisation added that councils have a “significant proportion” of workers earning less than £30,000 a year, stating that funding a 3 per cent rise for them would be a “significant pressure”.

A spokeswoman for the Scottish Government said discussions are “ongoing” with other parties on the draft budget.

She added: “Pay and other employment issues for local government staff are matters for local authorities.

“The 2018-19 local government finance settlement foresees an increase both in revenue and capital (11 per cent) investment as part of a wider package of measures.

“Together with the additional power to increase council tax by up to 3 per cent (worth around £77m next year), this will generate an increase of 1.6 per cent in the overall resources to support services.”