Nearly a quarter of Scottish councils warn of effective bankruptcy
EVERY SINGLE COUNCIL plans cuts to services, affecting millions of residents
New research out today from Local Government Information Unit (LGIU) Scotland reveals that nearly a quarter of Scottish councils fear they will not be able to balance their budgets in the 2024/25 financial year.
This is despite the fact that every single council in Scotland plans to cut spending on services in the next financial year, with around two-thirds of respondents cutting spending on education, parks and leisure, and business support.
Alongside planned cuts, nearly all (97%) said that they would be increasing fees and charges, and nine in ten (89%) that they would be spending reserves.
The first annual LGIU State of Local Government Finance in Scotland survey, found more than three quarters of respondents (76%) believe these cuts will be evident to the public.
Had it not been for the Scottish Government decision to unilaterally declare a council tax freeze, every council would have raised council tax, most often by a significant amount. The proposed council tax freeze has contributed to an increasingly poor relationship between Scottish Government and local government.
The current state of the economy, manifested in high rates of inflation, affects wages, utilities and food, thus making service provision even more expensive for councils and was considered to be a problem by every respondent who answered. The associated cost of living crisis – which puts additional demand on services – was also considered to be a problem by over 90% of respondents.
There was widespread agreement on the most pressing issues in council finances: in addition to inflation, ring-fencing, staff recruitment, cost of living crisis and pressures linked to demographic change were all considered to be problems by more than 90% of respondents.
Adult social care and children’s services were considered the greatest shortest-term pressures on council finances, and adult social care by far the greatest long-term pressure.
Jonathan Carr-West, Chief Executive, LGIU Scotland,said: “Councils in Scotland are raising a red flag that council finances are completely unsustainable. With nearly a quarter of councils warning they may be unable to fulfil their statutory duties, it is only a matter of time before we see the first council in Scotland declare effective bankruptcy.
“Councils are pulling every lever available to them to balance their books. Every respondent said they were cutting spending on services, 97% that they would be increasing fees and charges, 89% that they would be spending reserves. But it is not enough. Councils have little to no confidence in local government finance and the issues behind the crisis are not going away.
“Scottish Government must work productively with councils to restore trust, remove ring fencing, identify revenue streams and reform core funding for councils to ensure residents, and particularly the most vulnerable in communities, are able to access the services they need and pay for.”
The central responsibility of any government is to do what is necessary for economic stability.
Behind the decisions we take and the issues on which we vote are jobs families depend on, mortgages that have to be paid, savings for pensioners, and businesses investing for the future.
We are a country that funds our promises and pays our debts.
And when that is questioned, as it has been, this government will take the difficult decisions necessary to ensure there is trust and confidence in our national finances.
That means decisions of eye-watering difficulty.
But I give the House and the public this assurance: every single one of those decisions…
…whether reductions in spending or increases in tax, will prioritise the needs of the most vulnerable.
That is why I pay tribute to my predecessors for the Energy Price Guarantee, for the furlough scheme…
…and indeed for even earlier decisions to protect the NHS budget in a period when other budgets were being cut.
Mr Speaker, I want to be completely frank about the scale of the economic challenges we face.
We have had short term difficulties caused by the lack of an OBR forecast alongside the mini-budget…
…but there are also inflationary and interest pressures around the world.
Russia’s unforgivable invasion of Ukraine has caused energy and food prices to spike.
We cannot control what is happening in the rest of the world, but when the interests of economic stability mean the government needs to change course, we will do so – and that is what I have come to the House to announce today.
In my first few days in this job, I’ve held extensive discussions with the Prime Minister, Cabinet colleagues, the Governor of the Bank of England, the OBR, the head of the Debt Management Office, Treasury officials, and many others.
The conclusion I have drawn from those conversations is that we need to do more, more quickly, to give certainty to the markets about our fiscal plans.
And show through action, not just words, that the United Kingdom can and always will pay our way in the world.
We have therefore decided to make further changes to the mini budget immediately, rather than waiting until the Medium-Term Fiscal Plan in two weeks’ time, in order to reduce unhelpful speculation about those plans.
Mr Speaker I am very grateful for your agreement on the need to give the markets an early, brief summary this morning, but I welcome the opportunity to give the House details of the decisions now.
We have decided on the following changes to support confidence and stability.
Firstly, the Prime Minister and I agreed yesterday to reverse almost all the tax measures announced in the Growth Plan three weeks ago that have not been legislated for in Parliament.
So we will continue with the abolition of the Health and Social Care Levy, changes to Stamp Duty, the increase in the Annual Investment Allowance to £1 million, and the wider reforms to investment taxes.
But we will no longer be proceeding with:
The cut to dividend tax rates, saving around £1 billion a year.
The reversal of the off-payroll working reforms introduced in 2017 and 2021, saving around £2 billion a year.
The new VAT-free shopping scheme for non-UK visitors, saving a further £2 billion a year.
Or the freeze to alcohol duty rates, saving around £600 million a year.
I will provide further details on how those rates will be uprated, shortly.
Second, the Government is currently committed to cutting the basic rate of income tax to 19% in April of 2023.
This government believes that people should keep more of the money they earn, which is why we have continued with the abolition of the Health and Social Care Levy.
But at a time when markets are asking serious questions about our commitment to sound public finances, we cannot afford a permanent, discretionary increase in borrowing worth £6 billion a year.
So I have decided that the basic rate of income tax will remain at 20% – and it will do so indefinitely, until economic circumstances allow for it to be cut.
Taken together with the decision not to cut Corporation Tax, and restoring the top rate of income tax, the measures I’ve announced today will raise around £32 billion every year.
The third step I’m taking today, Mr Speaker, is to review the Energy Price Guarantee.
This was the biggest single expense in the Growth Plan and one of the most generous schemes in the world.
It is a landmark policy for which I pay tribute to my predecessor.
It will support millions of people through a difficult winter and will reduce inflation by up to 5%.
So I confirm today that the support we are providing between now and April next year will not change.
But beyond next April, the Prime Minister and I have agreed it would not be responsible to continue exposing the public finances to unlimited volatility in international gas prices.
So I am announcing today a Treasury-led review into how we support energy bills beyond April next year.
The review’s objective is to design a new approach that will cost the taxpayer significantly less than planned whilst ensuring enough support for those in need.
Any support for businesses will be targeted to those most affected. And the new approach will better incentivise energy efficiency.
There remain many difficult decisions to be announced in the Medium-Term Fiscal Plan on October 31st …
…when I confirm that we will publish a credible, transparent, fully costed plan to get debt falling as a share of the economy over the medium term…
…based on the judgement and economic forecasts of the independent Office for Budget Responsibility.
I would like to thank the OBR, whose director Richard Hughes I met this morning, and the Bank of England whose Governor Andrew Bailey I have now met twice.
I fully support the vital, independent roles both institutions play, which give markets, the public, and the world confidence that our economic plans are credible, and rightly hold us to account for delivering them.
But I want some more independent, expert advice as I start my journey as Chancellor.
So I am announcing today the formation of a new Economic Advisory Council to do just that.
The Council will advise the government on economic policy with the first four names announced today:
Rupert Harrison, former Chief of Staff to the Chancellor of the Exchequer,
Gertjan Vlieghe, Element Capital
Sushil Wadhwani, Wadhwani Asset Management
Karen Ward, J. P. Morgan
Mr Speaker,
We remain completely committed to our mission to go for growth, but growth requires confidence and stability – which is why we are taking many difficult decisions, starting today.
But while we do need realism about the challenges ahead, we must never fall into the trap of pessimism.
Despite all the adversity and challenge we face, there is enormous potential in this country.
We have some of the most talented people in the world.
Three of the world’s top ten best universities.
The most tech unicorns in Europe.
One of the world’s great financial centres.
Incredible strengths in the creative industries…
…in science, research, engineering, manufacturing, and innovation.
All that gives me genuine optimism about our long-term prospects for growth.
But to achieve that, it’s vital that we act now to create the stability on which future generations can build.
The reason the United Kingdom has always succeeded is because at big and difficult moments we have taken tough and difficult decisions in the long-term interests of the country. That is what will we now do.
And I commend this statement to the House.
Hunt statement fails to undo damage to families and businesses and leaves more uncertainty, says TUC
Commenting on the Chancellor Jeremy Hunt’s fiscal statement), TUC General Secretary Frances O’Grady said: “The Conservatives drove the UK economy over a cliff. Hunt slamming the gears into reverse now won’t help families and businesses already hit by soaring borrowing costs.
“People needed reassurances today. Instead, they got more uncertainty – about energy bills, about our public services, and about whether universal credit and benefits will rise with inflation.
“We are now on the brink of a deep and damaging recession that threatens millions of jobs. But the latest Conservative Chancellor still has the same basic approach that got us into this mess.
“The Chancellor should have announced a boost to universal credit and pensions, and a comprehensive plan to get wages rising faster for everyone. And he should have announced a much higher windfall tax on oil and gas giants.”
On the announcement of a review of support for families and businesses with energy costs beyond April 2023, she added:
“Families and businesses now face months of worry. There is going to be less help with bills – but no-one knows who will lose out, by how much, or whether there will finally be a programme to fix Britain’s cold and draughty homes. This is not the reassurance working families need.”
CHANCELLOR Kwasi Kwarteng has been sacked, carrying the can for the ill-judged ‘mini-budget’ which has caused economic turmoil since it was announced three weeks ago today.
‘I’m going nowhere’ Kwarteng, Prime Minister Liz Truss’s choice as Chancellor, was recalled from an IMF meeting in Washington DC this morning to be told the news.
Prime Minister Liz Truss will desperately hope that the departure of close ally Kwarteng will appease the markets. She made the following brief statement confirming a humiliating U-turn this afternoon:
Good afternoon,
My conviction that this country needs to go for growth is rooted in my personal experience.
I know what it’s like to grow up somewhere that isn’t feeling the benefits of growth.
I saw what that meant and I am not prepared to accept that for our country.
I want a country where people can get good jobs, new businesses can set up and families can afford an even better life.
That’s why from day one I’ve been ambitious for growth.
Since the 2008 financial crisis, the potential of this great country has been held back by persistently weak growth.
I want to deliver a low tax, high wage, high growth economy.
It’s what I was elected by my party to do.
That mission remains.
People across this country rightly want stability.
That is why we acted to support businesses and households with their energy costs this winter.
It’s also the case that global economic conditions are worsening due to the continuation of Putin’s appalling war in Ukraine.
And on top of this, debt was amassed helping people through the Covid pandemic.
But it is clear that parts of our mini budget went further and faster than markets were expecting. So the way we are delivering our mission right now has to change.
We need to act now to reassure the markets of our fiscal discipline.
I have therefore decided to keep the increase in corporation tax that was planned by the previous government. This will raise £18 billion per year.
It will act as a down-payment on our full Medium-Term Fiscal Plan which will be accompanied by a forecast from the independent OBR.
We will do whatever is necessary to ensure debt is falling as a share of the economy in the medium term.
We will control the size of the state to ensure that taxpayers’ money is always well spent.
Our public sector will become more efficient to deliver world-class services for the British people.
And spending will grow less rapidly than previously planned.
I met the former Chancellor earlier today. I was incredibly sorry to lose him. He is a great friend and he shares my vision to set this country on the path to growth.
Today I have asked Jeremy Hunt to become the new Chancellor.
He is one of the most experienced and widely respected government ministers and parliamentarians.
And he shares my convictions and ambitions for our country.
He will deliver the Medium-Term Fiscal Plan at the end of this month.
He will see through the support we are providing to help families and businesses including our Energy Price Guarantee that’s protecting people from higher energy bills this winter.
And he will drive our mission to go for growth, including taking forward the supply side reforms that our country needs.
We owe it to the next generation to improve our economic performance to deliver higher wages, new jobs and better public services, and to ease the burden of debt.
I have acted decisively today because my priority is ensuring our country’s economic stability.
As Prime Minister, I will always act in the national interest.
This is always my first consideration.
I want to be honest, this is difficult. But we will get through this storm.
And we will deliver the strong and sustained growth that can transform the prosperity of our country for generations to come.
Kwarteng’s replacement – and the UK’s fourth Chancellor in a tumultuous 2022 – is none other than veteran former health secretary Jeremy Hunt.
Hunt supported Rishi Sunak – who’s predictions on the economy have been proved painfully accurate – in the recent Tory leadership election.
Hunt himself was an early casualty in the recent Tory leadership election and was also once voted as the most unpopular front-line politician of all time!
Clearly another popular choice … what could possibly go wrong?
HM Treasury issued the following statement this evening:
Government update on Corporation Tax
The Prime Minister has set out that the way the government is delivering on its mission to achieve a low tax, high wage, high growth economy is to change.
The legislated increase in the Corporation Tax rate from April 2023 will go ahead, with most small businesses benefitting from the new small profits rate.
Chancellor Jeremy Hunt will deliver the Medium-Term Fiscal Plan on 31 October, detailing action to get debt falling as a percentage of GDP over the medium term.
The government has today [Friday 14 October] announced that Corporation Tax will increase to 25% from April 2023 as already legislated for, raising around £18 billion a year and acting as a down payment on its full Medium-Term Fiscal Plan.
The decision has been taken in recognition of the need to ensure the UK’s economic stability and reassure markets of its commitment to fiscal discipline, after elements of September’s Growth Plan went further and faster than markets were expecting.
The Prime Minister has set out that the government is prepared to do whatever is necessary to ensure debt is falling as a share of the economy in the medium term and to ensure that taxpayers’ money is well spent, putting public finances on a sustainable footing.
The previously announced small profits rate of Corporation Tax will be maintained. Smaller or less profitable businesses will not pay the full 25% rate, and companies with less than £50,000 of profit – the large majority – will not see any increase at all, continuing to pay Corporation Tax at 19%.
The UK’s corporate tax regime will remain competitive and supportive of growth at the 25% rate, continuing to be the lowest rate in the G7. As part of the forthcoming tax review, the government will look at how the tax system can go further to promote growth and investment.
The government is committed to growing the economy and taking forward supply-side reforms that will ignite strong and sustained growth that delivers prosperity for the UK.
Chancellor of the Exchequer Jeremy Hunt will set out the government’s Medium-Term Fiscal Plan on 31 October, alongside a full forecast from the independent Office for Budget Responsibility.
For the first time since the financial crisis, NatWest Group plc (formerly Royal Bank of Scotland Group plc) is no longer under majority public ownership following a £1.2 billion sale of part of the government’s shareholding back to NatWest.
This is the government’s fifth sale of its NatWest shareholding bringing its level of ownership down from 50.6% to 48.1%. This is a landmark in the government’s plan to return to private ownership the institutions brought into public ownership as a result of the 2007-2008 financial crisis.
The Economic Secretary to the Treasury authorised the sale of approximately 550 million shares in NatWest at 220.5p per share raising a total of £1.2 billion. The shares were bought back by NatWest and the process was managed by UK Government Investments.
The Economic Secretary to the Treasury, John Glen said: “This sale means that the government is no longer the majority owner of NatWest Group and is therefore an important landmark in our plan to return the bank to the private sector.
“We will continue to prioritise delivering value for money for the taxpayer as we take forward this plan.”
NatWest chief Alison Rose said the share buyback is an “important milestone” for the bank.
Ms. Rose said: “The deal is a good use of capital for the bank and our shareholders. Reducing government ownership below 50% is an important milestone for NatWest Group and a further demonstration of the progress we are making as we continue to deliver for our customers and shareholders.”
