Why did Humza Yousaf backtrack on commitment to local councils?

Humza Yousaf boasted he had turned over a new leaf in resetting the beleaguered relationship between the Scottish Government and local councils.

In June, the First Minister acknowledged that things between central and local government in Scotland had been a bit frayed.

As he signed the Verity House Agreement, Mr Yousaf “committed to build a stronger relationship with local government”, one that is built on “mutual trust and respect at its core”.

But little more than four months later, Cosla president Susan Morrison has insisted the umbrella group for Scottish councils is espousing “extreme disappointment” at Mr Yousaf’s decision to “undermine the spirit and the letter of the Verity House Agreement, so soon after it being signed”.

This stooshie has emerged after Mr Yousaf made a key announcement at the SNP conference last week on the hated council tax.

The First Minister has pledged that there will be no hiking of council tax in the next financial year – much to the puzzlement of local authorities.

Just three months ago, the Scottish Government announced a consultation which could see those in the highest value properties asked to pay more if they can afford to.

But this latest move has opened up a potential rift with the SNP’s partners in government, the Scottish Greens.

Green finance spokesperson Ross Greer warned his party is “concerned about the effect this freeze could have on already-strained frontline public services if it is not properly funded”.

The Scottish Government is set to essentially offset local councils for the amount of cash they would have raised from hiking local authorities – but this will end in a war of words because it is very unlikely Cosla and ministers will agree on a number – they rarely do.

The SNP needed a big announcement to dominate the party’s conference, or any sort of tangible policy, ahead of next year’s general election.

Halting council tax rises is a populist policy, one aimed at shoring up flagging support for the party of government.

Mr Yousaf’s government claims to have the most progressive tax system in the UK in Scotland amid speculation that next year’s Budget could include income tax hikes.

If the Scottish Government does bring forward income tax hikes for higher earners, ministers will point to the need to be able to generate more funding to pay for services – not an unusual strategy for a left-leaning government, particularly during a time of economic stress.

But eyebrows will be raised in city chambers and council offices across Scotland that local authorities are not being offered the same luxury.

Scottish councils’ budgets have been under the knife for the past decade – and this is the last thing that local authorities needed to hear.

One council senior official told me that it was “far too late” to be hearing that council tax cannot go up next year, adding that it was “already factored into some of the forecasting around next year”.

To be clear, council tax makes up roughly 20% to 30% of local authority budgets in Scotland. It is a relatively small but crucial funding lever for councils that are under immense financial strain.

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The Scottish Government has indicated that local authorities will have new income streams such as a tourism tax or workplace parking levy, both controversial with businesses, to bring in more money – but these policies are likely still years in the making.

The Verity House Agreement also spelt out a pledge from the Scottish Government to curb funding being allocated for ring-fenced policies which are priorities of SNP ministers, such as the expansion of free childcare.

Councils have argued, fairly legitimately, that core budgets for key frontline services have been squeezed by the Scottish Government in favour of money being allocated for ring-fenced policies.

Local authorities are legally obliged to set a balanced budget, so without the ability to raise council tax, councillors will have little option but to cut services, jobs or raise fees and charges.

Neither of those options is palatable to the public, but neither is paying higher council tax.

A stark report from Audit Scotland in May warned that “councils have never faced such a challenging situation” and insisted that “radical change, through greater collaboration, is urgently needed if councils are to maintain services”.

That looks a mile away from the latest move from Mr Yousaf, given the decision to halt council tax rises was taken 24 to 48 hours before his keynote speech, meaning Cosla ad council leaders were not consulted.

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Scottish councils and Cosla ultimately disagree with whether local authorities have seen cuts to funding over the last decade.

Audit Scotland found that from 2013/14 until 2023/24, “revenue funding to local government has increased by 2.6% in real terms”.

But the spending watchdog added that “funding of local government has not kept pace with other parts of the Scottish budget for many years”.

It is clear that Scottish councils are being asked to do more with stretched finances – social care alone is a timebomb amid an ageing population, while schools and roads will need both capital and revenue funding to sustain them at acceptable levels to the public.

Local authority funding is a complex issue – big, expensive elements like public sector pay increases put even more strain on budgets.

But many authorities are getting to the point where all the low-hanging fruit has been cut – leaving largely core services for the chop.

Councils will soon be sitting down to set their budgets for next year with unenviable choices about where the axe will fall on services – and councillors, not ministers, will be in the firing line for the inevitable backlash from the public that will follow.