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Significant challenges ahead for local services in Orkney

Photo: Close-up of stacked coins with a blurred clock. Source: Pixabay (stock)
Photo: Close-up of stacked coins with a blurred clock. Source: Pixabay (stock)

COSLA, the organisation which represents Scotland’s local authorities, has welcomed the Draft Scottish Budget published on Wednesday 4 December.

By The Orkney News

At a meeting on Friday 7 December, representatives of the Convention of Scottish Local Authorities (COSLA) said that Scotland’s councils face significant pressures on the services they provide.

The UK Labour government’s rise in National Insurance will also have a considerable impact on both the council as an employer and on other organisations which provide services locally.

Orkney Islands Council (OIC) has launched a survey to ask the public what changes might be considered to the services provided in the islands.

OIC intend to save £9m over the next year or so. Orkney has been using its reserves to support services but councillors agreed to cut this contribution back.  

For the period 2024/25, £20 million will be drawn from the Strategic Reserve Fund. Current proposals see the draw reducing to £18 million for 2025/26 – with further reductions planned for the future. With rising costs ahead this cut will have unprecedented negative consequences for service provision.

Three main areas are being looked at:

  • Increasing charges for some services for those that use them directly
  • Changing the way that services are provided to be more cost effective
  • Increasing the income the council receives from sources including Council Tax, government grants, new projects or levies that the council may choose to take forward or apply.

The survey includes a question on potential council tax increases. The highest level of increase could see Band D properties paying up to an additional £22.82 a month in order to protect council services.

Click on this link for the survey: Our Budget Challenge

Rise in National Insurance

The UK Labour government’s increase of employers’ National Insurance contributions is estimated to take over £2 billion out of the Scottish economy next year. National Insurance is a tax controlled by the UK government – the devolved countries have no power over this and it will have very costly consequences across all sectors in Scotland.

The Secondary Threshold of National Insurance is currently set at £9,100 a year, and will be reduced to £5,000 a year. The Secondary Threshold of £5,000 a year will be in effect from 6 April 2025 until 5 April 2028. Thereafter the Secondary Threshold will be increased in line with Consumer Prices Index (CPI). The Office for Budget Responsibility (OBR) judged that the increase in costs to businesses would lead to lower wages and profits. Around 250,000 employers will see their Secondary Class 1 NICs liability decrease and around 940,000 will see it increase. Around 820,000 employers will see no change.

Charities are not exempt from the rise in National Insurance. It is estimated that it will cost the Third Sector in the UK £1.4billion a year. The Third Sector is an important provider of services locally especially in helping elderly and vulnerable islanders.

The voluntary sector is already facing significant challenges including the rise in energy costs. It employs around 133,000 people in Scotland – 5% of Scotland’s workforce. It delivers vital public services – like social care and youth work, as well as a host of essential services that people and communities across Scotland rely on.

SCVO, the organisation representing Scotland’s voluntary sector, estimates that these changes to National Insurance will cost voluntary sector employers in Scotland £75 million per year, plus inflation. These additional costs put the sector’s essential services, jobs, and organisations at risk.

 The SPCA, Scotland’s oldest and largest animal welfare charity, estimates that the sudden cost they will face will be £400,000 per year.   

 COSLA’s President Councillor Shona Morrison said:

“COSLA welcomes the Scottish government’s efforts to provide local government with a real terms funding increase for the coming year.  At a time where public services have been squeezed to the brink following year-on-year real terms cuts, this additional funding is welcomed.

“However, this will not stop councils from having to make difficult decisions to protect services given ongoing pressures, including inflationary increases, pay awards and the significant strain on social care.

“The draft Budget also includes a number of asks which add to the challenge. As the budget process progresses, we will continue to negotiate for the increase in the revenue we need to continue delivering the services that matter most to people, including in social care, as well as an increase and additional flexibility of capital funding as the budget process progresses.”

“Employer’s National Insurance Contributions are also a significant pressing risk for local government and councils cannot be expected to meet the cost arising from these changes. COSLA will seek to work constructively with both governments on this and will also press for confirmation of funding as soon as possible to inform council budget setting.

“We also welcome that, in the spirit of the Verity House Agreement, the Scottish government has committed to there being no cap or freeze on Council Tax. It is important that there continues to be a recognition of the principle that decisions on Council Tax are for individual local authorities to take, in a way that reflects local needs and priorities.”