SNP told to find extra £150m for councils or lose Greens’ support

Nicola Sturgeon’s minority government has been told it must increase funding for Scottish councils by at least £150m to get its budget passed by Holyrood.

The Scottish Green party said its six MSPs would not support the Scottish government’s budget unless there was a real-terms rise in council funding.

The Scottish National party government is three votes short of a majority and the Greens’ opening demand increased pressure on Derek Mackay, the finance secretary, to revisit his offer to local authorities.

Public-sector trade unions are dismayed that Mackay did not increase funding for Scotland’s 32 councils to allow them to match an offer he made to other civil servants, police and nurses to increase their wages by up to 3%.

Andy Wightman, the Scottish Greens’ local government spokesman, told BBC Radio Scotland he estimated councils needed at least £150m extra to see a real-terms increase. Earlier this year, Mackay had to find £160m more for councils to win Green support for the current budget.

Wightman said local councils had been treated as “second cousins” for too long by the Scottish government. “We want a real-terms increase and that would involve somewhere in the region of £150m,” he said.

Richard Leonard, the Scottish Labour leader, told the Guardian that Mackay should have used his tax powers to raise the highest rates to 50p, to help fund real wage increases and protect Scotland against Treasury cuts.

“His budget was far too timid, didn’t take account of the times that we live in, didn’t appreciate the extent to which there is still a big financial hole in local government funding especially, and he fails to recognise there’s a longstanding deficit in the support his government over successive years have given to local government,” Leonard said.

Union leaders said Mackay’s pay pledge was already unravelling. Some public agencies such as the Scottish Environmental Protection Agency that were expected to implement that pay rise did not have extra money under the budget to cover the additional costs.

The pay rise for Scottish nurses is expected to come from extra Treasury funding, rather than existing Scottish government budgets, after the NHS pay review body for England and Wales set its pay rates for next year.

In his draft budget on Thursday, Mackay announced a new five-band income tax system for Scotland which included a 1p increase in the top two bands. That raised an extra £164m in addition to £202m from a freeze in the top band last April.

In combination with extra money from the Treasury and the postponement of plans to cut air passenger duty, Mackay was able to offer a 3% pay rise to public employees earning under £30,000 and 2% to those earning above that.

The teachers’ union EIS warned this effectively equalled a 2% pay award for teachers, which was unacceptable. “With education being the Scottish government’s stated number one priority, it is time for greater investment in teachers’ pay to stave off a future recruitment crisis,” said Larry Flanagan, the union’s general secretary.

The Scottish Fiscal Commission said Mackay’s pay offer only included about 260,000 of the half a million public-sector workers covered by Holyrood, many of whom are women in poorly paid positions.

The Scottish government said that about 79% of women would pay less tax next year because they were disproportionately in lower paid jobs. Prof Graeme Roy, an economist with the Fraser of Allander Institute, said any winners from this budget “will see little meaningful impact in their overall tax bill, relative to income”.

Dave Moxham, the deputy general secretary of the Scottish TUC, said: “Under this policy all public workers are facing another real-terms pay cut. For many nurses, many teachers and many firefighters the pay cut is particularly severe.

“Half of public workers are not covered by the policy at all. There is nothing in the proposals to help local government meet the terms of the policy for council workers.”

Dave Watson, a Scottish official with the public-sector union Unison, said pay policy “was moving in the right direction but it’s not been met with proportionate funding. What is absolutely clear is it is not funded at all for local government.”

Watson said it would cost councils roughly £210m to fund the pay deal, so the £150m extra being demanded by the Greens would be quickly swallowed up.