Council Leader writes to First Minister

Dear First Minister

Council Tax Freeze – Financial Sustainability East Lothian Council

I am writing to you following on from your recent announcement to support a Council Tax freeze for 2024/25 to express my extreme disappointment at both the way in which this announcement was made particularly in the context of the recently signed Verity House agreement, and the impact that this may have on the on-going financial sustainability of this Council and the provision of vital and essential local services.

This announcement, alongside the absence of critical resource investment to support authorities such as East Lothian who are at the forefront in supporting economic development and growth directly aligned to national policy, is now placing this Council in the most severe financial challenge it has ever faced, with the very real possibility that we will not be able to sustain critical service delivery in the short term.

We have continued to raise the financial implications we are facing relating to supporting our growth obligations for a considerable period, including the most recent meeting with the Deputy First Minister in August, who was able to visibly see what East Lothian is supporting in terms of economic growth.  She was also presented with the very stark financial reality facing this Council and was also presented with a series of ‘specific asks’ and commitment to explore jointly how we can support this, both in the immediate and medium term.  Our population growth remains directly aligned to national housing land supply allocation targets, and the benefits of economic growth and the positive impact it derives is not just benefitting the communities of East Lothian but is supporting the regional and national economy as a whole and helping to support vital public services. 

We have responsibly and proactively been innovative and sustained the impact of a growing population for over 20 years, but we are now at a stage where the cumulative scale from building additional housing is resulting in the creation of new schools and increased demand across a range of services.  This infrastructure requires significant on-going revenue investment, which needs to be resourced at the same time as all of the wider external pressures we are all facing.  The necessary revenue increase aligned to supporting population growth including the running of brand new schools is not flowing through in the national funding settlement, and this, alongside the continued pressures on local government funding is simply leaving this Council in an almost impossible financial situation to sustain.

This Council is facing a significant unfunded pressure this year after applying reserves in excess of £10m, a funding gap of over £27m next year, and a cumulative funding gap in excess of £71m over the next 5 years.  Given the size of this Council, this is effectively requiring us to remove around a quarter of our annual running costs, which is simply not sustainable without there being a significant and detrimental impact to the community as a whole and our continued ability to sustain growth of this scale.  

Your announcement to freeze Council Tax next year, and how this was delivered without any prior discussion with local government, does not only have a detrimental impact on the national relationship between Scottish and Local Government in the context of the recently signed Verity House agreement, but locally it has also taken away one of the very real flexibilities we have available to support increased revenue and meet our statutory obligations to deliver a balanced and sustainable budget for next year.  This also has wider recurring impact which is vitally important in considering the on-going financial sustainability of this authority.  

The funding gap we are now facing next year alone is equivalent to a 32% Council tax increase and given you have announced that a Council Tax freeze will be fully funded, this additional funding will need to be commensurate to the size of our financial gap we are facing.  We must also ensure that this is delivered alongside a clear commitment that this additional funding will be provided on a on a recurring basis.

Yours sincerely

Norman Hampshire

Leader 

East Lothian Council