MSPs have rejected Conservative plans for local councils to receive a ring-fenced proportion of the Scottish Government’s budget every year – amid fears the strategy would leave NHS services out of pocket by hundreds of millions of pounds.

The Scottish Tories initiated a Holyrood debate on their proposal to safeguard funding for local authorities after Cosla, the umbrella organisation for councils warned they are facing a £511 million budget gap for day-to-day services in next year’s budget. The deficit highlighted by Cosla sits alongside an extra gap of more than £300 million to cover the impacts of the pandemic.

The plans, put forward by Tory MSP Annie Wells called for local government to be subject to its own fiscal framework that would automatically entitle the sector to a percentage of the budget drawn up by the Scottish Government.

She said: “It is astonishing that as local councils face new and existing challenges responding to the needs of residents, the total amount of money the SNP government has given to local authorities has fallen by £276 million in real terms over the course of seven years.

“Let us be clear, long before the Covid-19 crisis began the SNP government has been short-changing Scotland’s councils.”

She said council budgets were only going up by 1% in 2021/22, compared to the Scottish Government receiving a 9% uplift.

Ms Wells added: “It’s clear Scotland’s councils get a rotten deal from the SNP government, which means the Scottish people are getting a bad deal too.

“This must change and it’s clear the current funding model is no longer fit for purpose.”

Responding to Ms Wells, Local Government Secretary Aileen Campbell said the government had been working with councils to develop a fiscal framework, but this had been paused due to the pandemic.

She said the cash increase for day-to-day spending for councils for the next financial year stood at £335.6 million, about 3.1%.

Ms Campbell said: “The Tories have a brass neck to come to this chamber arguing for one thing while their counterparts and colleagues in London to quite another.

“But they have form on that, they turn a blind eye to poverty while local government and national government have to mop up the mess of austerity that they pursue.”

Scottish Labour’s Sarah Boyack said there had been historic underfunding of councils.

She said: “The warm words from the Cabinet Secretary do not take away the fact that we’ve had over a decade of underfunding, with £937 million of cuts to non-core funding for our councils.”

But Liberal Democrat leader Willie Rennie said that despite local councils being on the “rough end of this SNP Government’s priorities”, he could not back plans that would have seen £600 million “automatically removed” from NHS budgets between 2018 and 2023, warning the Conservative plans was a “crude formula we just don’t need”.

He added: "I think people in Scotland expect their parliament to judge the different needs not just delete £600 million of health spending because a Conservative computer told them to.

"What we need is a fair funding settlement that involves local government in its creation and creates the transparency and fairness we want.

"And it will allow us to deal with difficult problems, such as integrating health and social care without being saddled with an inflexible funding system."

Public Finance Minister Ivan McKee stressed that a “rules-based framework” is being developed alongside Cosla, adding that “any framework must be developed in partnership with local government”.

A Cosla spokesperson said: “We very much welcome today’s debate about the fair funding of Local Government.

“Local Government is such a massive and important part of people’s lives and so integral to communities that it deserves as much profile and parliamentary air time as possible. The value of local government can be seen in our response to Covid-19, where councils have taken decisive action to support communities, people, and businesses.

“For too long now local government has been given a poor diet by the centre - and that is why we developed the local government blueprint, which is our menu for change that we want to see. But it needs a fair funding deal for Scotland’s councils.”