Verity House Agreement: What is it and has it been broken?

The Verity House Agreement was only signed this summer, but was it broken when the First Minister announced a freeze on council tax without warning Cosla? Holyrood explains...

What is it?

Named after the building in which Cosla – that’s the Convention of Scottish Local Authorities – is headquartered, the Verity House Agreement is a deal between the Scottish Government and local authorities that seeks to smooth out the relationship between layers of government. It follows years of tension between Holyrood and local councils over budgets, ring-fencing, and control of services.

It was signed at the end of June this year by First Minister Humza Yousaf, Deputy First Minister Shona Robison, Local Government Minister Joe FitzPatrick, Cosla’s president and vice-president Shona Morrison and Steven Heddle, and the leader of each party group represented at Cosla.

Okay, so what’s in it?

Primarily the deal is about funding and powers, so it includes commitments on creating a new fiscal framework and regular reviews of budgets and what councils control. It also outlines how the government and Cosla would approach the shared priorities of tackling poverty, just transition, and delivering sustainable public services. There’s a heavy emphasis on boosting engagement, with a ‘Leadership Sounding Board’ led by the DFM created.

Why was it needed?

The tussle over budgets came to a head this year – Cosla accused the Scottish Government of creating “a funding crisis in local government the likes of which have never been seen before” – but disagreements have been an ongoing issue over many years. The Scottish Government always insists it has increased councils’ budgets consistently every year, but councils always warn of inevitable cuts to services because they aren’t provided with enough. An Accounts Commission overview of local government concluded in May that finances were under “severe strain”.

“An increasing proportion of funding is ringfenced or directed for national policy initiatives. While this is important to help deliver national priorities, it prevents councils from making decisions about how funds can be used at a local level, to meet local need. Councils have had to make significant savings to balance their budgets. Increasingly difficult choices about spending priorities and service provision are having to be made,” it added.

The report called for “urgent action to finalise the new deal for local government” – a call that was heeded not long after.

Where did the agreement come from?

Yousaf committed to “negotiate a Bute House-type agreement with local government” during the race to become the SNP’s leader and first minister at the start of the year. He repeated that pledge when he outlined his priorities to parliament, alongside promises to hand councils more tax-raising powers in the form of a visitor levy and new council tax controls.

It was broadly welcomed at the time, with Morrison hailing the agreement as “a clear signal that both parties want to reset the relationship between central and local government”. She added it was about creating a “partnership of equals”.

That all sounds good… what’s the recent row about?

Well, fewer than four months after Verity House was signed one of its central points appears to have been broken. A clause in the agreement says: “A robust and regular process for early budget engagement will be embedded in the fiscal framework, with an underlying principle of ‘no surprises’.”

Yet when Yousaf used his SNP conference speech to announce council tax would be frozen for the next year, he failed to mention it first to Cosla.

In a fiery statement the day after, Cosla’s presidential team said there was “no agreement to freeze council tax next year” and that there was “real anger” about the way it had been announced. “We deplore the way the announcement was made and its substance, both of which fly in the face of the Verity House Agreement which we all recently signed,” the statement said.

So what happens now?

Despite the anger, Cosla’s leaders said they would “explore the implications arising and what the Scottish Government might propose” going forward on council tax. They met with the deputy first minister in the days after the announcement.

Yousaf has said the freeze would be fully funded by the Scottish Government, but the cost of that is unclear. Local authorities wouldn’t typically be deciding how much to raise council tax by until the new year. The Fraser of Allander Institute (FAI) calculated that if councils raised tax by five per cent, last year’s average, the cost of the freeze would be £148m. But councils may have wished to go further, and the FAI said an eight per cent increase would cost £417m.

As for the Verity House Agreement, it remains in place. But regardless of whether the Scottish and local government do come to some agreement over council tax, there is no doubt that Yousaf’s latest move has shaken confidence that the agreement is worth the paper it’s written on.