John Swinney has warned local authorities any attempt to raise council tax will be seen as an act of “bad faith” and lead to the withdrawal of their entire share of a £408 million support package.
Moray Council asked the Deputy First Minister if they would lose the whole package if they raised the levy or just a proportion of the £70 million set aside for the council tax freeze.
Mr Swinney responded with a letter to all councils warning he would claw back the funding in its entirety.
He told Holyrood’s local government committee: “The final offer letter on January 27 to the president of Cosla, which was copied to the leaders of all local authorities in Scotland, was essentially a final proposition which set out the funding available authority by authority.
“It required local authorities to – well, invited local authorities – to participate in accessing £408 million of resources that would fund three things:
“The investment of £250 million in the integration of health and social care activities at a local level.
“Secondly, the maintenance of the teaching population through the mechanism of the pupil-teacher ratio … and finally the council tax freeze.
“I invited them to indicate by February 9 if they were prepared to participate in that package of funding of £408 million.
“I have made it clear to local government that it is requirement that they participate in all three elements.
“I have indicated, however, that at a later stage in the year if an authority doesn’t perform effectively against each these elements, I reserve my right to claw back some of the resources associate with that topic.
“So, for example, a local authority signs up to protect teacher numbers but in fact doesn’t do so, I would reserve my right to claw back a proportion of the £88 million involved in the settlement in relation to teacher numbers.
“I have subsequently had correspondence from the leader of Moray Council.
“It has asked me the scenario: if a local authority was to sign up to all three elements of the package and then subsequently, at budget-setting date which would be in the next few weeks, decided not to freeze the council tax, would I just penalise them in relation to the council tax?
“Or would I withdraw the support – their share of the £408 million, the total package of support available?
“I have taken the opportunity of that scenario to clarify to all local authorities that if an authority told me on February 9 that they were going to sign up to all three elements, but then a couple of weeks later decided to increase the council tax, I would consider that to be an act of bad faith.
“I would withdraw the funding in relation to the whole £408 million.
“I have communicated that to the leader of Moray Council and to all local authority leaders just to avoid any lack of clarity over what my intention would be.
“Obviously I have now placed that on the parliamentary record which will have some significance in the consideration of local authorities.”