Finance and Public Administration Committee

Meeting date: Tuesday, October 1, 2024

Official Report 747KB pdf

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Pre-budget Scrutiny 2025-26

Good morning, and welcome to the 27th meeting in 2024 of the Finance and Public Administration Committee.

Before we start, I put on record our thanks to the Estonian MPs, organisations and officials who met us during our short fact-finding visit to Tallinn last week. There is a lot for us to learn from Estonia’s success story in digitalisation and public service reform, and we will draw on that learning as we continue our pre-budget scrutiny. I thank our clerking team for its first-class organisation and preparation for the visit, which ensured that we met the right people at the right time, that visits went smoothly and that we were all adequately fed and watered. We will publish a summary note about the visit in due course.

The first item on our agenda is to continue taking evidence on managing Scotland’s public finances, a strategic approach. I welcome Councillor Katie Hagmann, resources spokesperson for the Convention of Scottish Local Authorities; Jamie Robertson, chair of the Chartered Institute of Public Finance and Accountancy directors of finance; Malcolm Burr, chief executive of Comhairle nan Eilean Siar; and David Robertson, chief executive of Scottish Borders Council. Thank you all for your written submissions. I have to say that COSLA’s submission was exceptional—it was 41 pages and included 171 paragraphs, and it made for a very interesting Sunday.

We have about 90 minutes for the session. If witnesses would like to be brought into the discussion at any point, please indicate that to the clerks and I can then bring them in.

I will start with COSLA’s submission. Katie Hagmann, in addition to providing a very detailed submission, you have added a wee summary. One of the things that you mention in the summary and, indeed, frequently throughout the submission is the need to provide “adequate, sustainable and flexible funding” for local government. Can you expand on that? It is a rather vague statement. Can you give us a wee bit of a steer on where you feel that local government funding should sit in the forthcoming Scottish budget?

Thank you for giving me the opportunity to come and speak to you all. It is important that we have sustainable public sector services and funding. That was one of the key cornerstones of the Verity house agreement, which was a joint agreement between local government and the Scottish Government. We are all aware of the challenging financial situation that is faced by all our communities, our citizens and the services that we provide. It is therefore vital that we look to the future and ensure that providing sustainability is at the heart of what we do.

Local government is at the heart of our communities. Our citizens and residents are all looking for a cohesive package, with the very best opportunities provided for those who are suffering from poverty, attainment for our young people and sustainable services for our elderly population.

If we want to move forward cohesively together, we need to have some challenging conversations. We need to ensure that we provide in the best way that we can with our limited resources.

Right, but you have not told me what those resources should be. What should the Scottish Government do about the local government settlement? Obviously, you are looking for funding to be increased and, from reading your submission, I know that you think that it needs to be increased quite significantly in a number of areas. We will discuss prevention and taxes later, but I want a wee bit more detail on what you mean.

I will come to David Robertson shortly, because Scottish Borders Council talked about the same issue in its submission. It said:

“addressing shared priorities, and unlocking both the potential and the best outcomes for communities requires adequate funding from central government.”

Throughout our submission, we say that we would like there to be multiyear budgets, which is COSLA’s long-standing position. That would give us some certainty and allow us to plan for the future for our workforces and our third sector partners, which are key in delivering some services. Therefore, multiyear settlements are certainly an ambition for local government.

There is also an opportunity to further empower local government. There is a commitment to look at council tax reform and other ways of revenue raising, and we would like that work to progress. Ensuring that that goes forward is vital for sustainability. There are opportunities for local revenue raising. The visitor levy is a good example. We could also explore the proposed new infrastructure levy. Just last week, COSLA leaders were happy to support that exploration.

Those are a couple of examples of what could support local government and of ways of working with the Scottish Government to deliver for the future.

Clearly, you are not prepared to say what you feel the settlement from the Scottish Government should be. The committee is trying to pin that down, because it is very difficult for us to make recommendations to Scottish ministers about the Scottish local government financial settlement if local government does not tell us what budget it requires for next year.

I am quite happy to share that the Accounts Commission has estimated that there is a £780 million gap for 2026-27. I think that that is in the report that we submitted. If you are looking for a figure, that independent figure from the Accounts Commission should help with your recommendations.

That is very helpful. It would be fair to say that, over the next two years, you are looking for a £780 million uplift. That is great.

David Robertson, you also talked about the need for adequate funding, but you said that

“the level of taxation which is collected, set, and spent locally is lower in Scotland than in international comparator nations.”

You make the argument, which Katie Hagmann has just made, that there should be more levers, but I am not really sure what you mean by that. Do you mean that a higher proportion of local government spend should be raised directly by local government? I think that you are saying that. However, you also seem to say that the amount of revenue that is collected should also increase substantially. Therefore, you are basically saying that, as well as having more powers, you should be able to impose greater taxes on the public, which I am sure would not necessarily be very popular with people. For example, we hear a lot about council tax revaluation, and there is some sympathy with that in the committee, but not if it is seen as a way of just grabbing more money from local people rather than as a rebalancing process. Where do you stand on that?

In our evidence to the committee, we are arguing that we need adequate sustainable finances. At the moment, 80 per cent of the council’s revenue comes directly from the Scottish Government, and 20 per cent of our net revenue is levied locally through council tax. We would like more money to be raised by the council and determined locally. A number of levers are coming into the system. There is the visitor levy and discussion of an infrastructure levy, and other tools are being made available to local government.

We completely accept that taxes are not popular, but the reality is that we need an adequate sustainable level of funding to support the public services that people value. Over the past few years, there have not been real-terms increases in council tax funding, so we are having to make significant reductions year on year to balance the books. One way of balancing that equation would be to raise more revenue locally.

Are you saying that local people in the Scottish Borders should pay more in taxes, or are you saying that the money should go to the council instead of to Holyrood or Westminster?

We are saying not that people in the Borders should pay more taxes but that the tax base and local councils’ revenue funding should be appropriate to fund local services. That is the position that we adopt.

I should really call you all by your first names, because we have two Robertsons on the panel, which makes things a little confusing.

No relation.

Jamie Robertson, what is CIPFA’s view on that? It seems that there is broad support for the visitor levy, but there are issues. It is great for Edinburgh and, I imagine, for Katie Hagmann’s Dumfries and Galloway region, but I do not know that North Lanarkshire, Clackmannanshire and certain other local authorities would necessarily be able to generate additional funding in that way. Would it cause a funding imbalance across Scottish local authorities if, for example, Edinburgh were to get £30 million, £40 million or £50 million a year and North Lanarkshire were to get only a few hundred thousand pounds a year, or even less?

The conversation on the overall level of funding is a difficult one. However, such levies seek to generate income to offset the additional costs incurred in dealing specifically with, for example, cruise ships or visitors, and to invest in infrastructure. The approach should be proportionate and based on the activities of each council. It is important that we align the key asks from the Verity house agreement to each council’s financial sustainability. We should ensure that local government is empowered to raise local levies to invest in, say, climate change or early intervention measures. There will be differences in the visitor levy across Scotland. However, having overall flexibility in empowering local authorities could result in their taking various options that would enable them to thrive and would support their joint ambitions with the Scottish Government.

Malcolm Burr, the Western Isles—if I can use its English name—is not necessarily a prosperous area. How would people there feel about additional taxes being raised locally to pay for services?

That is an interesting question. Recently, we undertook a ward-based consultation. There was not, of course, a triumphant welcome for any new taxation. There was not disquiet either, but a deep understanding that revenue has to come from somewhere. If there is no prospect of its coming from the Scottish Government or through traditional sources, we must do something ourselves.

Like many councils in the Highlands and Islands, and probably the rest of rural Scotland, my council lacks other options. We cannot outsource services, because there is no market to outsource to. We cannot physically share services across 27 miles of sea. My main suggestion for what we could do—it is one that I have pursued for years—is serious public service reform. Perhaps we will come on to that later in our discussion.

In the meantime, there is an understanding that we have to look to our own resources, which might include above-inflation rises in council tax, using our existing freedoms. We will need more of those if, to build on what David Robertson said, we are to raise our own revenue. That will not be transformational, though, in an area with 27,000 people.

Still on local taxation, we know about cruise ship levies, visitor levies and even workforce parking levies. I would not think that any of those would have a massive impact on local authority finances. Which other areas would you like local government to look at, Malcolm? You mentioned reform. If we were to reform local government finance, which other areas should local authorities have control over? Would they include a local sales tax, for example?

09:15  

The discussions on the fiscal framework should be as wide as they can be. We should look at models of funding local government elsewhere.

It is, however, also about structure—I hate to come back to structure. If our statutory position remains as it is and we are not able to undertake serious public service reform in a way that will free up resources, and revenue is not coming from elsewhere, we must look at raising revenue in ways that we have not raised it before, which has, largely, been through council tax and charges. Individual things such as visitor levies will be welcome, I should add, but they will simply fill holes from reduced spending over the years.

I feel obliged to draw the committee’s attention to the Scottish Parliament information centre’s briefing on the state of local government, which shows that my council’s reductions over the past 10 years have been in the order of, in real terms, 14 per cent. That leaves gaps to be filled.

David Robertson, you heard at the beginning that we had a trip to Estonia last week to look at what it is doing in relation to digitisation of public services. Incidentally, Estonia is doing that because, after independence from the Soviet Union, it had a budget of only €130 million for the whole country. It couldnae afford to set up offices in rural towns and had to do everything somehow differently, and it ended up doing it digitally. Is Scottish Borders Council looking at that sort of service delivery?

That is something that we are investing in very heavily with the resources that we have. We have done significant pieces of work in relation to, for example, our care services. We provided mobile technology to all our care staff, which we estimate has improved the efficiency of the service—that is, the number of care visits that people could provide—by around 16 per cent.

Our 400 in-house care staff can all be scheduled and rostered online using mobile devices. That has also improved the quality of the service, because we were able to limit the number of people going in and out of the houses of those requiring care, which was also a benefit.

We are investing very heavily in our customer services technology, including for online payments, feedback, fault reporting and all those kind of things. We have transformed our council core systems in human resources, payroll, finance, and procurement. We have done all that. We have also tried to implement iPad mobile technology in our schools to deliver better education outcomes.

We see huge potential in that area. It requires huge investment: however, in terms of delivering savings, it is an area of prime focus for the organisation. We have done a huge amount of work on it over the past few years, with lots more to do.

Katie Hagmann, Estonia has only 1.3 million people in 79 municipalities, whereas we have 5.4 million people in 32 municipalities, so municipalities there have about a tenth of the population of ours. It has one connected digital system, called X-Road. Is the Convention of Scottish Local Authorities working with local authorities to ensure compatibility of systems in order to ensure that the savings that are made can be made at the national level and will therefore benefit local authorities directly?

The digital office has come under the umbrella of COSLA recently. A huge amount of work is being done across all local authorities through the work of the digital office. I sit jointly with the Minister for Public Finance, Ivan McKee, to look at digital strategy, so joint work is also happening between local government and the Scottish Government. I am aware that a critical report came out that called out both the Scottish Government and local authorities, saying that we were not doing enough on digital. Certainly, there has to be a refocusing on that space. I am absolutely committed to that, as are COSLA leaders. It is a subject that comes up.

One of the other opportunities that we are looking at is the advancement of artificial intelligence and how we can utilise it in the future. However, that obviously also brings concerns from some people. How do we ensure that we harness new technology in a safe way that can support our communities and bring them along with us?

Lots of savings could be made by moving everything online, but we have to be mindful that many of our communities might be excluded from the digital world. Also, many people in our communities value face-to-face customer services, so we want to ensure that nobody is left behind or left disempowered.

There is work that has to be done—indeed, work is being done, as David Robertson has outlined, especially across the care sector. It is vital that we move forward, but there is absolutely room for improvement, and we will continue to work towards that.

I am heartened to hear that COSLA is engaging with all 32 local authorities to ensure that we have one system that can operate across the country. Would the national health service be linked to such a system? Using Estonia as an example again, I note that one of the advantages of its system is that it connects the entire public sector together. You have talked about care, but obviously there is a very strong interaction between health and care in this respect.

There is no one system that all local authorities are using, although I know that there is an ambition to take that approach. Certainly, there are opportunities that can be taken forward. Planning, for example, seems to be a good area to start with.

There is the joint strategy between the Scottish Government and local government, but perhaps I can take things back a stage to highlight the digital partnership board that we have in local government and on which we are bringing together various partners including Scotland Excel, the Improvement Service and SEEMiS. We, as local authorities, are bringing in all those partners so that we can have one cohesive voice. Work is being done in that space, but, as I have said, more work definitely needs to be done, going forward.

Another area that you have highlighted frequently throughout the submission is preventative spend and early intervention. You say that there needs to be

“a refocus on prevention and early intervention spend”

and that

“Now more than ever, there needs to be investment in ‘upstream’ services that help to prevent problems rather than focusing spend on responding to them.”

I think that we would agree with that. I have mentioned to other witnesses and panels that in the 2011 to 2016 parliamentary session John Swinney allocated £500 million to try to embed preventative spend, but the difficulty was that there was no corresponding disinvestment in programmes that were—shall we say?—providing less value for money. What is COSLA doing to try to ensure that we move down the road of disinvesting in areas that provide less value for money in order to focus on the areas that provide the most?

That is a really challenging area, because we are not at the stage of doing that sort of preventative spend. Until we reach that point, it is almost impossible to stop delivering the services that catch people after they have fallen, so to speak.

It is really challenging. Councils have a legal responsibility to set a balanced budget, which means that every single year, some really awful decisions have to be taken. That will be no different next year, when councils set their budgets and their council tax. I am aware of leaders up and down the country who are grappling with proposals that officers are bringing forward to try to balance next year’s budgets.

At this point, it is not really possible to say that we can identify areas that we are okay with disinvesting in, because we have been cutting for the past 10 years; indeed, we are at the point where any cuts are going to have huge detrimental impacts on our community.

Of course, that does not mean that we should not be investing in the upstream services that the submission talks about. Public Health Scotland has done a huge amount of work to demonstrate the value of preventative spend and how much it will save. However, we are at a difficult point: when should we stop spending on the here and now, to invest for the future? As I said at the start of the session, we in local government and our services are right on the front line. Our communities are right there in front of us, and it becomes an impossible task just to look people in the eye and say, “Actually, we’re going to stop doing these things that are really making a huge difference to you.”

Jamie Robertson, another issue that comes out quite forcefully in the submission is flexibility. For example, on page 19, there is a really interesting graph after paragraph 78 that shows that, since 2010-11, there has actually been a significant increase in education spend—21.2 per cent in real terms—while adult social care spending has gone up by 29.4 per cent, and spending on looked-after children by 17.5 per cent. However, that has been matched by huge reductions in other areas—35 per cent in street cleaning, 27 per cent in tourism, 20 per cent in culture and leisure and 26.6 per cent in planning. There are a couple of other figures in there, too.

The submission also says that

“Scotland has a significantly lower pupil/teacher ratio than the rest of UK”,

with 13.2 children per teacher

“compared to 18 in England ... but does not have better educational outcomes.”

I think that I know what you are going to say in answer to this question, but just for the record, how important is it for local authorities to have the flexibility to decide for themselves how many teachers they employ, for example, and whether money should be able to be deployed elsewhere, if required?

That analysis is crucial to understanding the differential in what is, in effect, ring-fenced spend within local authorities. Spend on teachers is effectively ring fenced, because of the pupil to teacher ratios, and there is directed spend for health and social care partnerships, which comes out in the finance circular every year. That paragraph of the submission speaks to the disproportionate effects on other services of having those kinds of protected or directed spend areas.

As flexibility with regard to pupil to teacher ratios is an incredibly political issue, I will defer to Councillor Hagmann for a response to that. Equally, though, we have seen the efficacy of bringing children into schools and ensuring that they are present at school fit, fed, active and ready to learn. That is not necessarily part of the pupil to teacher ratio issue, but it is about having the ability to invest in additional support teachers and officers in order to get into the school environment children who have been fed.

That is where some positive benefits accrue, because it is about ensuring better and much-improved outcomes for children. Having an artificial ratio in that respect does not provide flexibility for councils, and it is a material sum in our overall budget that, when you are looking at financial gaps of £700 million, will need to be borne by other services. My service in East Dunbartonshire Council costs £3 million, and given that we are facing a £10 million budget cut, that will necessarily result in all that finance being removed from the system. It is all about priorities and balance, but there should also be flexibility to enable us to meet shared aspirations with the Scottish Government.

There is a lot of pressure on MSPs about teacher numbers: the Educational Institute of Scotland has called for 3,500 more. I recall that we were all lobbied about that earlier this year. There are also frequent calls in the chamber for more teachers, despite the falling number of children in our schools.

Malcolm, what impact is the straitjacket of ring fencing having on your local authority? Those of us who were here in the days of the historic concordat in November 2007 might recall that the Scottish Government was seeking to eliminate that sort of thing, but it has gradually crept back in over the past 15 years or so.

Yes—I, too, have been around for that long. I was actually a great fan of the concordat approach, and I think that it should be revived between Government and each council.

However, it is hard for us to be told—rightly—to be radical, transformative and collaborative while at the same time we are being told, “Here’s one group of employees whose numbers absolutely have to be protected.” It is a strange message, if it is not linked to evidence on outcomes.

We have always tried to protect our teacher numbers, which are inflated locally because we have small schools on small islands. The numbers are slightly higher than average, but last year we were on the line.

09:30  

There are other ways of doing education—e-Sgoil is one of them. The Covid pandemic showed that there is a place for online education, to which the teaching profession can be resistant.

However, no area should be exempt from scrutiny and proper evaluation of alternatives. We cannot afford to do that, and it applies to other aspects of ring fencing as well.

Flexibility is a really important issue. David Robertson, how is ring fencing impacting on the Borders?

The reality behind ring fencing is that the more the budget is directed to specific areas and the more it is targeted at things such as teacher numbers, the less flexibility we have to deliver other local services. The impact is on quality-of-life services and communities. People are noticing the potholes in the roads, the lack of grass cutting and area maintenance, and the decreases in the general quality of the built environment and in their ability to access library services. The more we ring fence, protect and direct specific areas of spend, the less flexibility we have in other areas of the budget.

With regard to flexibility, we are looking at about 20 per cent of our overall spend in order to make all the savings that we have to make through our central support costs and area-based services, because all the other aspects of the budget are being tied up, whether that is in repaying capital debt or employing teachers and other groups of staff. Our flexibility in what we do is being constrained year on year. We are increasingly forced into making reductions that, ideally, we would not wish to make. Unfortunately, to ensure that the authorities remain financially sustainable, those are the types of areas that we are going into. We are closing public toilets, we are reducing our grass maintenance and we are reducing the types of services that people notice.

The political perspective is that the Scottish Government gets blamed if teacher numbers fall. If it gives local authorities flexibility to change teacher numbers and there are, therefore, fewer teachers, the Government gets the blame, rather than the local authority that takes the decision, despite local government having its own level of democratic accountability.

You are smiling, Mr Robertson, because you know that that is exactly the case.

As an organisation, we firmly believe in employing as many teachers as we can, but we want to make sure that those teachers are properly resourced and supported. We do not believe that the focus should be simply on the number of teachers that we employ. As you have indicated, convener, the number of pupils that we are educating is falling, and we have significant challenges with the number of buildings that we currently operate in Borders.

The reality behind that is that it is headteachers who run schools. They do so through devolved school management schemes, so they are empowered to deliver and manage their schools. Therefore, it is right that those headteachers should be allowed to employ the number of teachers that they require within the overall resource envelope. Those teachers have to teach in good-quality buildings with appropriate resources, supported by a range of professional staff. We do not think that it is right to focus simply on the number of teachers that we have, which seems to be the polarised debate that is going on in education.

Teachers can also be used peripatetically.

Colleagues are keen to come in, so I will move on to my final question, which is about capital spend. Katie Hagmann, you have talked about the challenges to housing supply and the delivery of homelessness services. Paragraph 63 of the joint submission states in bold:

“To mitigate against the development of poverty and improve health outcomes Local Government need sustainable investment in affordable housing.”

What does that mean in cash terms? How can the Scottish Government do that when it faces a 20 per cent reduction in capital over five years?

That is a valid point, and local government is mindful that the budget has been cut for Scottish Government. We are not immune to that information.

Up to 10 local authorities have declared housing emergencies. We have, rightly, welcomed a lot of refugees and people who are seeking asylum in the UK. We have issues across our local authorities, such as reinforced autoclaved aerated concrete, and local authorities are grappling with a host of problems in our capital budgets.

Clearly, we want to invest for the future. There was mention of the school estate. We want to deliver the best educational experience for our young people and we want to invest in our schooling. In local government, we have borrowing abilities, but we have to be mindful that anything that we borrow will have to be paid back. That affects our revenue in the future. I will turn to one of my colleagues to give specific numbers.

It is vital that we look to the future. We are in election cycles, so we have to make decisions year on year, but some of the investments that we make will have long-term ramifications. Sometimes, brave decisions need to be taken, especially if we are looking to support our local economies and provide the very best opportunities.

There also has to be a realistic understanding of the term “transformation” and how that affects our estate and where we have capital investment. We have a huge number of buildings, some of which we might not need and some of which might be useful in the community. Where there are community opportunities, local authorities are supporting community asset transfers for other projects that the council is perhaps not best placed to take forward. There are a whole load of areas that we can look at, but, ultimately, we need that capital investment in order to provide for the future.

Jamie Robertson, because of prudential borrowing, local authorities have greater flexibility in borrowing than the Scottish Government does. There has been a significant reduction in borrowing from £1.23 billion in 2019-20 to £690 million in 2021-22, with a slight up-kick to £820 million in 2022-23. The figures for last year are not in your submission, but it says:

“Councils have found themselves in a position of having to place greater reliance on borrowing as a source of capital funding to sustain and invest in their infrastructure to meet the needs and priorities of communities and boost local economies.”

Clearly, there is greater reliance on borrowing. Do you feel that that will continue to be the case and that borrowing will have to play a bigger role, or will there be a reduction in borrowing across local authorities, as there has been in the past three or four years?

As Councillor Hagmann set out, the consequential impact of borrowing is that it increases overall expenditure because debt has to be repaid, and there is both a principal and an interest element of that debt.

Audit Scotland has identified in its budget setting report that, when councils set their capital budgets, there is increased recourse to borrowing. That is in order to have good-quality assets that deliver shared outcomes and council priorities. However, with increasing interest rates and build costs, that has the potential to be unsustainable. As directors of finance, we are set by the burdens of the prudential code, so we need to ensure that all borrowing is affordable, sustainable and prudent.

The local government benchmarking framework has indicated that debt, as a proportion of revenue, has decreased in recent years, which is a result of specific interventions, such as fiscal flexibilities. However, overall debt is increasing and will continue to increase in order to deliver council priorities, but there will come a point where that becomes unsustainable, and each council might set a cap on its overall affordability.

I indicated that I wanted to come in because I want to give you a live example. East Dunbartonshire Council is looking to invest in affordable housing. We have done some work on 15-unit accommodation for affordable housing purposes. The cost within that affordable housing programme is £420,000 for each unit, which could be borrowed through the housing revenue account and ultimately repaid by tenants. That includes the funding towards net carbon heating, Silva building regulation standards, automatic fire-suppression systems, digitally enabled households and electric vehicle charging points. The cost of developing affordable housing is significant—

I think that you want to get another quote for that.

In order to meet all the obligations, affordable housing is a significant investment for councils.

For councils, I think that the overall debt repayments have been suppressed in previous years as a result of the actions that section 95 officers have recommended as prudent and affordable within the loans fund repayments and the service concession arrangements. However, there is a significant risk should councils continue to invest without recourse to the savings that are required to generate reductions elsewhere. A £10 million financial gap and £2 million, £3 million, £4 million or £5 million-worth of additional debt to create capital borrowing is financially unsustainable in the short, medium and long term.

Thank you. I will open up the session. The first colleague to ask questions is Michael Marra.

Councillor Hagmann, it is nine weeks until the budget announcement in Holyrood. How are the discussions going?

With regard to the early engagement, there has been a commitment from Scottish Government, which has been repeated in many forums. I have dates in my diary to meet the Cabinet Secretary for Finance and Local Government.

On the fiscal framework, I know that there has been a lot of discussion, but there has been express disappointment that we do not have a fiscal framework right now. That is not to say that there has not been a huge amount of work and a huge amount of learning on both sides—by Scottish Government, from looking at local government, and by local government, from its understanding of Scottish Government budgets. A huge amount of background work has been going on and leaders are being kept up to date with that, and there will be a substantive update at the next COSLA leaders meeting. There is very much an open dialogue.

I have been in post for only two and a half years, so I cannot compare the situation with what happened prior to my taking up this position. However, from my experience, there has been an open dialogue. Throughout the pay negotiations, for example, I had regular updates from and contact with the finance secretary.

You have been in post for two and a half years, so this will be your third time in this process. Is that right? Or the second time, perhaps? Let us say the third time.

I will say yes.

Is it the same as in previous years? Do you have a better understanding of the strategic approach that is being taken this year?

My reflection is that there has been a lot more dialogue. The proof will be in what actually happens as we move forward. We can talk endlessly, but we need to know what will happen with the budget. As you say, we are coming up to those crucial dates.

We are nine weeks out. I understand that the budget that is set at UK Government level will substantially inform what happens afterwards, but the reality is that that will involve percentage points of difference. The Institute for Fiscal Studies has said in recent weeks that the Government should be using this budget strategically to have conversations with local government and other service providers in order to take long-term decisions. I feel that, nine weeks out, if there were strategic decisions to be taken on some of the things that you call for in your document and on what the Government should be clear about—what should be stopped as policy and what the focus should be—that should be the substance of the conversations. Is that the case? Do you think that it will be a strategic budget?

09:45  

I hope that it is a strategic budget. With regard to the dates, we have been made aware that the local government circular will not be published until 12 December, which is quite late. Some of those dates are outwith the control of both the Scottish Government and local government, because it comes down to the data points that we need to work with.

The discussion of multiyear budgets has been raised. The cabinet secretary has been open and said that they will be looking at the settlement from Westminster and that, where there are opportunities, she will take those, where that is possible.

The cabinet secretary has been quite clear to us that the medium-term financial strategy will come alongside the spending review, which will happen in the spring, so I think that multiyear budgets are probably for that point. However, with regard to decisions to be taken this year, have you told the cabinet secretary the things that you think you should stop doing?

Yes, absolutely. For example, comments were made earlier about teacher numbers. That is a well-trailed argument that we have been making. The pay bill for teachers is our single biggest spend—it is around £4 billion a year. Therefore, when we have falling pupil numbers and we are fully committed to reducing the poverty-related attainment gap, we should not focus purely on teacher numbers when local government provides a whole host of other services. Those types of conversations are happening, and we hope that they are reflected in the decisions that are made in the future.

With regard to the submission that you provided to the committee—as the convener said, it is very useful—it seems to me that there is a real frustration with some of the short-term decisions that are being taken. Your submission states:

“Scottish Government policy and spending decisions that run counter to the VHA”—

that is the Verity house agreement—

“such as the council tax freeze and maintaining ... teacher numbers, will prevent councils from achieving better outcomes for their communities.”

That is really about ad hoc, on-the-hoof policy decisions that are taken outwith the cycle of negotiation. Do you have confidence that, this year, we will not see that kind of approach to budgeting from the Government? Is it saying to you that there is a long-term approach?

We are making the case as best we can. Ultimately, those will be decisions for the Scottish Government and for ministers to grapple with in relation to the budget. With regard to the example of the council tax freeze, yes, it was funded at 5 per cent, but some local authorities were budgeting for a rise of more than 5 per cent. Therefore, in effect, it was not fully funded. That policy has been spoken about to a great extent, and the argument that there should be no council tax freeze in the future is being made at every opportunity by every leader and, I would imagine, by every COSLA spokesperson.

One of the recurring themes that the committee has heard about over recent months, particularly from the cabinet secretary, has been the challenge of meeting the public sector pay bill. Compared to the rest of the country, a significantly higher proportion of the working public in Scotland works in public services and we have a higher wage level already. Therefore, one of the key issues that the cabinet secretary is grappling with is that a 5 per cent increase on our pay bill is significantly higher than a 5 per cent increase on the pay bill of the rest of the country. I will put this question to all the witnesses: where do you see the trade-offs between pay rises and head count? Teacher numbers has been used as an example. Is that a choice that councils are having to make or that you anticipate that you will have to make?

With regard to balancing the budget, yes, that is a trade-off. Pay is our largest cost, and we are having to manage our workforce appropriately, in line with the services that we have to deliver and the resources that we have in order to deliver them. Therefore, increasingly, we are holding vacancies in other areas. We are not filling posts and we are reorganising our services and bringing things together in order to sustain areas of the workforce such as the number of teachers that we are told that we need to employ.

Therefore, we are making changes in terms of our strategic workforce planning in areas where we can deliver those changes, including bringing in new technology in order not to recruit as many people as we had before. However, the reality behind many council services is that they require people—they require carers, refuse collection drivers and operatives in the street, for example—and we are increasingly creaking with regard to our workforce planning. If we restrict large areas of the staffing budget and determine that we need to employ a particular number of teachers, for example, that ultimately has an impact on the number of social workers, care staff and all the rest of it that we can employ.

That is an exercise that can go on for only so long—I must be very clear about that. My council has gone from around 1,900 employees in 2010 to just under 1,600 now—a loss of 262 full-time-equivalent posts in an island community. That is around 400 people’s jobs, if you consider that some are full time and some are part time. As David Robertson said, it is not possible to keep doing that without reducing statutory services to a level that everyone around this table would find unacceptable. That is the place that we are now having to go in our thinking. It is not an exercise that can go on and on. To a certain extent, the budget is sustained by vacancies, which is not healthy either.

I concur with my colleagues’ points, and it is worth noting—I think that this is also in our submission—that councils will make assumptions on pay, which will generate their medium-term financial strategy. They will make assumptions on pay over a number of years, and part of the challenge, which is recognised in the joint submission, is the impact of pay expectations exceeding those assumptions for councils that had previously been budgeted for.

For my council, that has precipitated the issuing by the chief executive of a non-essential spend and business-critical spend memo to curtail in-year spend. We have a vacancy freeze and our recruitment processes are slowed—we are filling essential posts only—which is having a significant impact on the delivery of statutory services in my function with regard to financial statements, accounts and all the things that are required to support front-line services and the delivery of council services.

It sounds to me as though we are reaching the end of the road with regard to head count reduction before it affects legal requirements. Is that correct?

That is my view. Head count reduction affects legal requirements and councils’ capacity to provide community leadership as well as services.

The convener touched on some of the other issues regarding council tax reform, including revaluation, extra bands, changes to the reduction schemes and so on, which you cover in your submission. That work is on-going, and you have said that you want to see that accelerated in the coming months. We are nine weeks out from the budget, so will any of that be done in time?

I can confirm that we have meetings in the diary for the continuation of the working group, but it is just that—a working group—and we are not at the point of making any announcements. That work has slowed down due to a change of ministerial positions, and that is the reality that we are working with. However, COSLA and council leaders are committed to that reform taking place across council tax.

Given that we are nine weeks out from the budget and these are long-term discussions that have gone on for a decade and more, it does not seem realistic that we will see proposals coming forward in time for the Government to change anything this side of the ledger.

I do not have any proposals at this point—

Okay, so there are no proposals—

—but, as I said, there is still the commitment to work together.

You mentioned the fiscal framework, which was meant to be agreed by June 2023. Do you think that we will have a fiscal framework in place in nine weeks’ time?

I think that the wording of the Verity house agreement was to aspire to have a fiscal framework. It was never set in stone.

It is fair to say that we have not met that aspiration, have we?.

We have not, but we are still working towards it. In the same way, we have not met the aspiration of pay of £15 per hour for our local government workforce. That was a request by our trade union partners, and we agreed that we would work with Scottish Government on that. However, again, the Scottish Government was very clear that the funding would have to flow from Westminster in order for that aspiration to be met.

There are no proposals on the table, so you do not aspire to get this done in nine weeks, do you? That would be—

We always aspire to reach our targets. I am an optimist.

You are an optimist, but could we be a little more pragmatic about it? We are trying to understand the restrictions on the budget and how that will work. Realistically, I do not think that anyone on the panel would say that they think that we will have a fiscal framework in nine weeks’ time. Could we have hands up for that?

The fiscal framework may not be complete, but a significant amount of work has been done. As I said earlier, Scottish Government officials have a far greater understanding of the challenges that local government is facing. Equally, local government members have learned more so that they can understand the levers that the Scottish Government is working with. As such, it is unfair to say that we are not going to make it and that we have failed, because significant progress has been made. Just because we have not crossed the finish line, that does not mean that we have not made significant progress along the road.

I tend to disagree, I have to say. We are going to see cuts to services, and we have just had a third year of chaotic in-year budget cuts that are affecting the ability of all services to deliver outcomes for people across the country. By the sounds of things, there will be large increases in council tax. There are consequences to the fiscal framework not being complete. The reality is about whether it gets done, not whether there are meetings going into the diary to discuss it. The situation has gone on for years. The ask is for Government to take a strategic approach to the budget. All the evidence that you have given us indicates that, so far—although I am sure that the diary secretaries are working very hard to get time in diaries—there are not any proposals on the table about anything strategic. Is that not the case?

We have been working in exceptional times. The cost of living crisis and inflation rates have all had an impact. Certainly, it is easy to forget that we have lived through a pandemic, and its ramifications are also being felt. All those things will affect the budgets.

If I can interrupt, your submission says that it was the Government’s choice to increase spending outwith the block grant allocation by £1 billion in other areas of the budget. That is a choice that the Government has made. You are very critical of the Government in your helpful submission, but now, in evidence, we are hearing that the circumstances are different. You are telling us that there are choices to be made, and that the Government is not making the strategic choices. It has not put any proposals on the table, and we are nine weeks out. Is that not the case?

There are always political choices to be made and, certainly, the Scottish Government will make them. I am here to present the evidence from local government. We are fully committed to working jointly and we have been clear about some of the nuances of what we want with, for example, teacher numbers; no council tax freeze; and the continuation of joint collaborative working for sustainable public service investment. We have not mentioned our aspirations for net zero, but we are committed to it, which feeds into the earlier discussion about our capital spend. In order to meet our net zero targets, we need to accelerate that spend.

It would be wonderful if there was a simple resolution to the budgets. Unfortunately, there is not, but I would hope that the evidence that we have provided in our submissions and what we have covered in this meeting will give you some areas for exploration.

Good morning. In the first instance, I want to check something with you, Councillor Hagmann, about the joint working group on sources of local government funding and council tax reform, which you mentioned. How many times has that met since the change in the Administration?

It has not met. Meetings are being arranged in the diary.

From all your written submissions and the evidence that we have heard, it feels as though there are not a lot of new ideas for fiscal empowerment for councils. The infrastructure levy was agreed to in the Planning (Scotland) Act 2019; the cruise ship levy was announced last year; and the Visitor Levy (Scotland) Act 2024 has been passed by the Parliament. What new proposals will local government put on the table to add to the agenda? What new powers do you want on which you will be seeking agreement from the Scottish Government?

The infrastructure levy has only just been tabled in the last local government leaders meeting. Although it may have been on the Scottish Government’s agenda, as yet, we have not had joint dialogue about it. Certainly, local government is looking to explore that. It is not one that we have—

I am sorry to cut across you, but I want to clarify that. The infrastructure levy is a power in the 2019 act. We now need to pass the regulations to enable it to take effect before 2026, because the power has a sunset clause. My point is that Parliament agreed to the concept of an infrastructure levy when it put it in that act in 2019.

I am looking for proposals for new powers. Local government talks a lot about needing to be far more empowered to raise its own money—I agree with you absolutely—but I am interested in hearing what new proposals you are putting on the table. What new powers do you want local government to have?

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I do not have a set of proposals before you today that say, “This is what we want to do.” I can say that we are working across local authorities, with our leaders and with the likes of the Improvement Service. Issues certainly exist around recruitment, retention and the workforce of the future and we are looking to develop opportunities in all those areas.

As for examples of what we would like to do, we need to take forward that discussion in the working group. People get hung up on the fact that the working group’s title refers to “council tax reform”, but it also mentions other sources of local revenue raising. We need to explore that area further and we need more momentum around it.

Do other colleagues have any proposals, or has anything been discussed in your local authorities that could be introduced as brand-new powers?

From my authority’s perspective, no. Nationally, we are currently spending more than £13 billion on local authority services. To be honest, I do not think that we need any more powers beyond those that are being discussed. The key for us is flexibility and the ability to direct the overall resource that we currently control to meet local priorities at local level while we take forward reform to areas such as council tax and consider the implications of new powers such as the infrastructure levy.

We are not saying that we have a lot of proposals for new powers that we need. At the moment, we have a huge array of legislative power to act on behalf of our communities, but the key issues for us are about flexibility, reducing direction and ring fencing and allowing local priorities to be funded.

Your question links very much to public service reform. One can look to other jurisdictions—not least Estonia and some of the Scandinavian countries—for different models of delivering local services and being accountable for them, in which much more harmony exists between local and national taxation. That consideration brings in options such as local income tax, which has been looked at in the past. The discussion must not just look at the fiscal framework but at how we will sustain and deliver local services in a way that also allows for local democracy and community empowerment. It is part of that debate.

I think that it was you, Malcolm—although it might have been David Robertson—who mentioned more flexibility on fees and charges. I cannot remember whose submission it was, but there was certainly something in COSLA’s submission on building warrant fees and planning fees, which have been discussed for some time.

Would it be beneficial for local authorities to have more flexibility around fees and charges in other areas? One example that has been brought up previously is parking fines, which are set nationally but around which some councillors have argued that they would rather set the rates themselves. Are there any examples of a nationally set fee, charge or fine that you must administer but around which you would rather have greater flexibility?

There are no particular examples, but the principle must be that there should be local determination of local charges and accountability for them.

As David Robertson and Malcolm Burr have said, it is about the effective application of the fiscal levers that councils can use. It is about the council tax, local discretion, fees and charges and teacher numbers. It is about removing those fiscal blockers to enable councils to determine and to deliver on their priorities locally.

My next question is perhaps for Councillor Hagmann in the first instance, but others might have views on it. When the budget was published last year, the finance secretary confirmed that she would engage in discussions with local government to explore the potential for a power of general competence. Have those discussions moved on at all in the period since? Have you been engaged specifically on that?

I have not been engaged specifically on that, but I know that the presidential team and the vice-president of COSLA have been taking forward some of those discussions, so I would not be able to comment.

I accept that that is not your remit in COSLA, councillor, but what are the witnesses’ views on what that power could look like? The idea of a power of general competence—certainly, as it was announced—found pretty broad consensus but, when you start discussing it, you find that everybody has a different idea of what it actually means. For example, local authorities in England have very limited power to create new revenue-raising levers, so they could not necessarily create their own visitor levy, but they have significant power when it comes to their ability to invest, which has resulted in a couple of local authorities in England making catastrophic investments and going essentially bankrupt—Thanet being the worst example.

What would an effective power of general competence look like? Is it about being able to create your own revenue-raising powers—you would not need to wait for Parliament to create a visitor levy, for example—or is it about having a greater ability to invest at some level, with safeguards?

I have not taken forward that area, so some of my colleagues might be able to advise a bit more. However, it comes down to this principle, which some of the discussions that have been had show: some levers that we would like to have are not necessarily in the gift of the Scottish Government, because it has not been given them from Westminster. We are effectively working without being able to get all the opportunities that are potentially available. I know that discussions have been happening, but I do not have the detail, unfortunately.

Jamie, were you looking to come in on that point?

The CIPFA directors of finance are discussing the matter with colleagues at the Scottish Government and civil servants, to understand the power of general competence, what it can effectively mean and what benefits can accrue from councils being able to do what they can reasonably do. There is general recourse to legislation in areas of taxation, but perhaps not levies.

There are other burdens on section 95 officers in relation to the prudential code, which we have spoken about previously. We have to act with prudence and sustainability to ensure that any investments that are undertaken do not have disproportionate risk—some conversations about risky investments have been had with civil servants already—but I do not think that the directors of finance would be looking to do that, and we certainly could not do so easily, or at all, within the prudential code.

Thanks very much.

A power of general competence was agreed in the first session of Parliament when Wendy Alexander was the minister. Although it might not have been implemented, it was certainly agreed by the Parliament, as anyone who checks the Official Report will be able to confirm.

As an aside before I get into my main questions, I was interested in a figure that Jamie Robertson quoted as an example. I think that you said that building a house in East Dunbartonshire costs £420,000. You could have my flat for £100,000, although admittedly it is not in East Dunbartonshire and would therefore not do you a lot of good. However, that raises the question of whether local councils are a bit too keen on doing everything in a gold-plated way and absolutely perfectly. Would it not be better to use that money to buy four flats off the shelf? They would not be perfect, but we have a housing emergency and you would get four families off the streets.

We do that. We have a range of options in our housing programme to bring houses into effective use for affordable housing, for example, through open-market purchases, which happen frequently and for which we have a specific budget. However, the costs of retrofitting those off-the-shelf, off-market purchases for net zero or the updated silver building standards are obviously significant.

We have a blended approach to the development of our housing estate. It sits within overall affordability in the housing capital programme, which is significantly tested with regard to how we meet those aspirations and the costs that would have to fall on the rent payers.

That site in East Dunbartonshire is a challenging one to develop, because it sits between a canal and the Antonine wall. There are therefore specific reasons for that cost, but it was given as an example of the pressures that we face, given the reduced recourse to packages of land to develop houses. Those are the challenges that councils—and, ergo, our rent payers—face.

Thanks. That is helpful.

My next question, which is about priorities, is for Councillor Hagmann, but other witnesses might want to come in, too. Clearly, we all have a fixed amount of money; the question is how we spend it. When I sat on the Social Justice and Social Security Committee, submissions to us said that, in this year’s budget, there was an increase of something like £900 million for social security, which includes the Scottish child payment and, I think, a slightly more generous adult disability payment. Has that been a good priority for the use of money? Is it a good one going forward, or could we use the money in a better way?

I am here to represent local government, so I will always say that investment in that area is a good use of funds. Others have been keen to say that the increased child payment is having a direct effect on families and individuals, so it is not for me to make that case. However, my local authority is now considering whole-family support and different ways of supporting communities. There are uncomfortable and difficult choices to make, and discussions to be had, on universality of funds and whether we should try to do everything for everybody. No one wants to be the one to tell someone that we will have to take away what they have had in the past. However, the current fiscal situation means that we will have to face those really challenging discussions.

I hate to labour this point, but we value our teachers, who do an incredible job. Personally, I would not want to stand up in front of a class and deliver the education curriculum, so I have huge admiration for our teachers. However, if we are to support all our young people and learners and close the poverty-related attainment gap, which we have all agreed should be our focus, we need learning assistants, breakfast clubs, after-school clubs and libraries to offer safe havens for them. That is a really challenging aspect.

Since you have brought up the Scottish child payment again, I ask our other witnesses to respond to that point from a technical point of view. Is that payment, or any other benefit, taking any pressure off local authority finances, because families are a little bit better off and so do not have to come to you with their needs? Is it too early to say that, Mr Robertson?

l will answer that with reference to the Scottish welfare fund. During the Covid pandemic, and then the cost of living crisis, we have seen a significant increase in demand. That is borne out by the local government benchmarking framework, which shows an increase in applications for community care grants and crisis payments. Local authorities are overspending their allocations and topping them up to ensure that there are sufficient funds for people who are at the sharp end of the cost of living crisis.

We see an increase in demand, and in particular a sustained increase in demand for hardship funds. Many councils are moving to awarding in only the most severe cases—those that meet the “high most compelling” priority criteria. One of the ways in which local authorities can manage their budgets is by targeting funding to the most critical areas of need, and we are seeing that. Therefore, actually, we are seeing sustained significant demand.

In relation to capital spending, I think that housing, which we have already mentioned, should be a priority. Is the Government spending too much on roads—in particular, on the A9?

The evidence that we submitted to the committee shows that we are not spending as much on our roads and on infrastructure as we would like to. The A9 project does not come under local authorities’ responsibility, so I will not comment on that, although I take this opportunity to remind everybody that the A75, which is a Euro route, runs right through my area of Dumfries and Galloway, but that is not what we are here to talk about.

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The issue is how we approach our budgets. Are we being person centred and thinking about the whole person? The reality is that we need to invest in our roads and our infrastructure, but should that be prioritised over our young people? There are really difficult choices to be made.

Such questions come up in the Parliament, and it is very easy to point the finger and say that local government should be doing this or that. However, we all have a collective joint responsibility to our citizens and communities with regard to what the expectations should be.

Mr Burr, you can come in on any of the questions that have been asked, but, on a completely different note, I want to ask you about the idea of a single island authority. Would that save money, or would it just make things a bit more efficient?

Having a single island authority is not about saving money, although I think that it would. With any merger of service delivery and administration, there is always a small saving, usually of between 3 and 5 per cent, and that money would certainly need to be ploughed back into front-line services—there is no question about that.

However, that is not primarily what a single island authority is about. It is about taking an outcome-focused approach, with the focus on improving lives and maintaining or improving good outcomes. It is also about community empowerment.

If you look at a map of Scotland, you can see that my area covers the same distance as Glasgow to Aberdeen. It is a long way from Barra to Stornoway. We tested this again recently and found that all our communities wish there to be a single authority. People say, “Why don’t you just get on with it? Why don’t you just merge the council, the health board and the housing partnership?” We know that that is not easy, but the pace of the work has increased in recent months, which is very welcome.

I will take information technology as an example. You would still have to link to national IT services in the NHS and COSLA, so you would not really save in that area, would you?

There would probably be savings on management costs at the higher level. I will pick on directors of finance, as that is what we are talking about. We have finance officers in NHS Western Isles, in Comhairle nan Eilean Siar, in Hebridean Housing Partnership and in other areas, so I think that, in time, there would be some efficiency savings. That is not the primary motivation, but it has become an increasingly strong motivation, because, as I have said, other options such as outsourcing are not really available to islands councils. The community provides a huge amount of support and services in the Western Isles—we have one of the highest rates of volunteering anywhere—but we cannot ask communities to take on more and more, particularly if it has a statutory flavour to it.

A single island authority is our answer to that. It is not about saving costs, but I have no doubt that it would free up some funding.

Mr Robertson, you might want to comment on anything that has been said, but I have a question about something that I picked up in the Scottish Borders Council’s submission. Can you explain what the problem is with bid funding? Instead of having to bid for funds, what would be a better approach?

We would prefer resources to go through settlement, distribution and allocation processes, with funding being provided in line with agreed protocols and following engagement with the Scottish Government and COSLA’s settlement and distribution group.

The fundamental problem with bidding is the time and resources that bids take without there being any certainty of outcome. We feel that bidding potentially pits one area against another and that, ultimately, given the pressure on resources, it is a bit of a waste of time when we could just agree the outcome that we were trying to achieve and then, through an established settlement and distribution process, allocate resources where they were needed.

John Mason asked about sufficiency of capital. It is worth highlighting that, as the submission points out, Scottish local authorities have about £55 billion-worth of assets. We estimate the deterioration in those assets by proxy, through how our assets depreciate. This is a very extreme example, but if we depreciate them over 50 years, we see a deterioration in our capital assets of about £1.1 million a year. We receive £800 million in capital funding each year, and that does not take into account all the additional capital spending that we need to invest in our school estate or whatever.

Is the depreciation not £1.1 billion?

Yes, the write-down of the assets every year is about £1.1 billion, if, as a very extreme and specific example, we look at depreciation over 50 years.

In other words, the capital grant is less than the depreciation of the asset base, which, in effect, means that there is deterioration in the overall asset base. We are really cognisant of that. However, that does not even cover the roads, which are not included on our balance sheet. By the time that you add all that into the mix, you can see that the deterioration in councils’ capital assets is exceptionally challenging, unless there is recourse to funding, which has a revenue implication.

Councillor Hagmann, how easy is it for your officers to identify the areas in local government in which you have had the greatest success in making efficiency savings while improving services, despite having to make some tough choices? Is it easy in local government to identify the areas in which you have had the greatest success in delivering better services?

COSLA has its thematic boards on which representatives from each of the 32 local authorities sit, and we are able to have dialogue across authorities and bring forward ideas in that space. We are hugely reliant on our professional advisers, who certainly bring recommendations to us.

We provide a huge amount of services—indeed, I think that someone touched earlier on our local authority head count. Scotland’s local authorities provide a huge amount of direct services that are not necessarily replicated in other parts of the UK, and we have to be cognisant of the range of services that we provide.

We absolutely need to work out what works best and whether we can replicate the things that are working well across the board. There are opportunities that we can take forward through the work of the thematic boards and that sort of joint working.

How far down the road do you think that work is? If I were a member of the Scottish Government, I would be asking local authorities to identify areas in which they were making efficiency savings while delivering better public services.

We have a working group that is looking at innovation across local government, and our professional advisers are looking at councils of the future and how we take that work forward. That work sits with the Society of Local Authority Chief Executives and Senior Managers and is being progressed. COSLA has a mechanism to ensure that that sort of thing can come through COSLA systems.

What are you doing just now to identify areas in which the outcomes of the decisions that you make in local government are better than they have been in the past? Is that work not on-going? I would have thought that, with public sector reform, it would be very important to know exactly where there had been successes. Is that not an important discussion for local government and central Government to have?

Local government benchmarking captures a lot of the data on what is working and where we are, and that is done nationally, bringing in all 32 local authorities. That provides clear data that allows us to say, “This is working particularly well”, and all local councils have access to it. It is a key indicator that we need to look at.

Are those discussions part of the work that you are doing right now with central Government on identifying where we might be able to make savings without causing any detrimental damage to services? I would have thought that that would be a critical question to answer.

Absolutely. I am the spokesperson for resources, but we have spokespeople looking at the economy and the environment, and I know that Councillor Macgregor has regular contact with ministers to take forward discussions on exactly the subject of those comments. Councillor Tony Buchanan is doing the same in education, Councillor Maureen Chalmers is doing that across our communities and Councillor Paul Kelly is doing that in health. The spokespeople are working in their portfolios, highlighting the opportunities, where we want to expand and what is working well. That is the power of having various spokespeople with different remits, because we are all able to go into our area of specialist knowledge to take things forward.

I understand that, and it is a fair point to make, but is there good collaboration between the 32 local authorities, whereby the work of those who are successful with particular services is fed back to the spokespeople so that you can flag up areas in which there has been a bit more success?

Absolutely. We have professionals who advise us all the time, and each of them works in their area. It sounds very much as though we are working in silos, and, yes, each professional group is, but we have the opportunity to come together. My colleagues can probably provide some examples of exactly how that happens, particularly across the directors of finance.

Councillor Hagmann referred to local government benchmarking, which is a key piece of work that is undertaken by all 32 councils. I have the pleasure of supporting the board as part of that work. Satisfaction indicators have generally been quite high. I think that this year was the first time that satisfaction has tailed off slightly. The local government benchmarking framework has a number of indicators, and we work with all councils to ensure betterment through those indicators. In the Local Government (Scotland) Act 1973, there is a duty of best value, which specifies continual improvement in local government. That is audited by Audit Scotland, and the reports go to the Accounts Commission on an individual council basis.

I will give a specific example. The LGBF board is looking at pilot studies of areas that are potential outliers in performance, and there is a peer-led collaborative process that assists each local authority to look at learning from other areas to see whether tangible improvements can be made. The most recent study looked at the time taken to process claims. To ensure that people get their Scottish welfare fund payments, the time taken for the application forms to go through the system is key. A collaborative piece of work was done in Falkirk Council to understand what happened within its structures that meant that the times were longer than those in other councils. That work has had a real positive impact. That is the sort of work that is happening as part of a peer-led collaborative process. That is coming through the LGBF board and being reported by the Accounts Commission as part of the best value regime. That is the sort of thing that feeds through to COSLA. I hope that that provides you with a bit of an example.

That is helpful, but I am interested in whether there are areas in local government in which we are making good progress. It is important to know what they are, because that will provide a lead as to where else we might make some changes that could benefit revenue but also improve outcomes at the end of the day. That is a critical part of scrutinising the budget, because we want to know whether money is being spent well and whether it is giving us the right returns.

Good morning. My first question is for you, Jamie Robertson, because you talked about empowering councils. I think that everybody touched on that, but you mentioned it at the beginning of the meeting.

I recently met organisations and individuals in the tourism and hospitality sector in Fort William. You will appreciate that a large part of my casework over the past few months and years has related to the visitor levy. One of the many concerns that those organisations and individuals raised was how the levy would impact not only them and their businesses but other businesses, such as restaurants and cabs. It has a wider impact than just those who visit an area.

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In empowering communities, are we really only shifting the tax burden to those communities, people and businesses? Is that a pattern? What kind of impact is that likely to have on those economies? You could see a situation in which the levy benefits the national Government, because it can refocus money on its priorities, whatever those happen to be, and local authorities will be able to fill large gaps in income, but local communities and economies will suffer.

I read through previous submissions on the levy, and I noted a significant amount of concern. There must be due cognisance of the unintended consequences of increasing levies, which is something that councils would and should consider in the application of local levies to ensure that income from the levy is reinvested and grows the overall economy. The directors of finance were lucky to have a presentation on the forthcoming tax strategy, which I think will be published at the same time as the budget. It is a case of consulting the directors of finance and getting a sense of what those unintended consequences might be, whether it is council tax or a local levy. Therefore, that is under active consideration.

We do not have the potential for a visitor tax or a cruise ship levy in East Dunbartonshire, but I anticipate that, as part of any implementation and equality impact assessments that happen as part of the process, the impact on local communities and businesses would be given due consideration, to ensure that any funds that are raised locally can be invested locally—because that must be the key aim.

Another concern, which you raise, is about confidence in where that money will be invested. The Highland region is obviously a huge region that has one area where a large part of the population is focused, Inverness, and lots of peripheral communities. A large amount of the tax is likely to be raised in some of those peripheral communities and, from speaking to people in that region, I know that they do not have confidence that that money will go back into those areas or even into the tourism infrastructure. The concern is that the money will just go into local authority revenue. How can those concerns be addressed?

I can speak on that, as I led a great deal of the work on the visitor levy on behalf of local government. It is fair to say that there has been a huge amount of scrutiny of the levy, and concerns have been raised. Some of the amendments to the bill addressed those concerns. It is fair to say that, in every meeting that I had with the minister, I said that local government wanted these powers and wanted to be able to implement them straight away. The consistent message that we got back was that, in order to bring businesses on board and allay some of the concerns, we needed to slow it down so that there is a long lead-in time for the introduction and implementation of any visitor levy.

We had an expert group that fed into that. That group included COSLA officials, but representatives from the tourism industry, including VisitScotland and accommodation providers, such as Airbnb, were able to feed into it. As part of any implementation, there must be—it is mandated—a local forum, which will allow businesses to feed into the process directly. Therefore, a lot of safeguards have been put in place, should any local authority wish to take the levy forward. The City of Edinburgh Council is leading on that at this point. Much of this is about sharing information, because there are concerns. However, if you start to break those concerns down, some of the processes that have been brought in as result of parliamentary scrutiny should allay some of those fears.

The visitor levy is one part of this, but the wider issue is the principle of moving the tax burden away from Scottish Government provision, funded through general taxation, and on to communities, because it is local people and businesses that will be affected. Does that concern you?

That is why we have to have good communication and a local forum. It is fair to say that local government provides a huge amount of support to our businesses, and we want to grow our economies. That is absolutely a priority for local government, because we want to attract investment. Certainly, when new powers are brought in, we are always mindful of the unintended consequences. We have a real strength in that, because we can look across the work of other local authorities, at best practice and at the local government benchmarking framework to see what is working. There is huge power in being able to share information, but we also need to recognise that each local authority is very different.

I am happy to move on to my next point, unless David Robertson or Malcolm Burr wants to come in.

Not particularly.

Malcolm Burr will not get off, because my next question is for him. It is quite brief. You talked about the budget being sustained by vacancies. Much of my casework is about people in my region, the Highlands and Islands, not being able to access the full care provision that they have been allocated.

I do not know whether you are able to evaluate the situation—not so much the vacancies for which the council can slow down recruitment or keep open, but things such as care costs that have a direct impact. Can you estimate how much worse the situation would be, or what your budget constraints would be, if you were delivering the services that you should be delivering?

All those posts are budgeted for, so those savings that help us out every year are unplanned. I would not want to imply that they are part of the budget strategy. However, because there is a certain level of vacancies in social care across the Highlands and Islands, that has come to be the reality. In theory, it must put additional pressure on residential care if we cannot provide home care, or if we cannot provide home care to the desired degree.

I am thankful that, in the Western Isles, we generally have our own employees and we do not rely on agency employees to a huge extent. It is still an attractive career, but not enough people are coming into it. In time, the vacancies will affect the models of care that we provide. I think that there will be more supported accommodation where people can live in their own accommodation but in a supported environment, rather than being provided with home care. It is hard to see home care being sustained at its current level in the next 10 to 20 years. I think that that is true across all of rural Scotland.

David, do you have anything to add?

The challenges with delivering care services are acute across the country and rural areas in particular struggle with it. Unlike Malcolm Burr in the Western Isles, we sometimes have to rely quite heavily on agency staff in order to sustain care. There are an increasing number of older people in our population relative to the rest of the population, which means that we have a lower working-age population and fewer people to provide care services. We are finding it increasingly difficult to recruit to those types of jobs in order to sustain levels of care. That is a major problem for us locally.

Would you say that the service that you are able to deliver at the moment will be sustainable over the next five, 10 or 15 years?

I have significant concerns about whether the care services that we are currently delivering in our local area are sustainable, given our population demographic, the cost of care and the ever-increasing demand for it. We will have to look at innovative ways of delivering care through technology at home and those types of things in order to sustain the quality and breadth of what we are currently providing.

Ross Greer has a brief supplementary.

My question is for Jamie Robertson. As an East Dunbartonshire resident, I totally get why, typically, the visitor levy would not necessarily be on the council’s radar. Given the news about Glasgow hosting the Commonwealth games, has any discussion taken place in East Dunbartonshire about the potential merits of a temporary levy, because I imagine that all of our local hotels, bed and breakfasts and other properties will be full for that period?

Or if Taylor Swift decided to come back to Scotland.

She would be very welcome.

That is an interesting question. To the best of my knowledge, that has not happened, but I understand that those developments are moving quickly.

The news about Glasgow hosting the Commonwealth Games came out only two weeks ago.

Thank you. That concludes questions from members. We are over our time and we have not been able to touch on reserves or climate change or much about economic productivity and economic growth.

I will raise one issue that was alluded to by Michael Marra and John Mason, which is the trade-off between expenditure on welfare as opposed to local authorities. In paragraph 49 of your submission, Katie, you talked about how the benefit budget has increased by £984 million in this financial year and said:

“The opportunity cost of these decisions needs to be considered.”

The funding could have gone to

“economic development and employability services which help to create jobs and support people facing barriers to the labour market to progress toward, into and sustain work in fairly paid jobs, thus reducing dependence on the welfare system and also improving health outcomes. This funding could have been used to create more affordable housing supporting people out of poverty, reducing homelessness and improving health and education outcomes.”

Has COSLA done a cost benefit analysis of how that £984 million could have been spent in local services? That is a key point of your submission.

The word “could” is used in that. It is about those difficult decisions and the options going forward.

On the specifics, I can give you a couple of statistics. We said, for example, that if the investment had been put into housing, we could have had other benefits. A Homes for Scotland report suggested that roughly 22,000 new homes were built in Scotland in 2019. That created £800 million of spend on goods, services and materials and accumulated £3.4 billion in direct, indirect and induced gross value added. There was £511 million in developer contributions, including £322 million for the affordable housing contribution and £179 million for the infrastructure contribution. Had the investment been in there—

You are looking at capital, but the £984 million is resource. It is not going into house construction or anything like that. Of course, the £984 million will, to an extent, have gone towards being spent in local shops. People are not likely to have spent it on cars or overseas holidays. That is why I am looking at whether specific work has been done on the opportunity cost. Maybe Jamie Robertson has some information on that from CIPFA.

We are looking to make recommendations to the Government on where we get the best bang for our buck in tune with the Government’s own priorities, one of which is eradicating child poverty. We look at local government, and you are saying that that money could be better spent on providing local services to support campaigns against poverty and delivering on all the areas that you have talked about—for example, enabling people to get back into work as, ultimately, the best way of reducing poverty is for someone to have a well-paid job, although not everyone in work has a well-paid job.

I am just asking whether you have anything hard and fast on the opportunity cost. It seems to me that you are advocating that, instead of putting additional funding into welfare in the next year—over and above what is currently going into it—that money should be redirected to local government.

We can certainly send you information on that following the committee meeting for your own reading.

At the COSLA conference, we had the excellence awards, in which key examples of best use of funds going through local authorities were highlighted. The overall winner of that was a project in Glasgow that supports mothers whose children have been taken into care and works out how best to support them for their future outcomes. Local authority projects are having huge ramifications and are offering positive outcomes to some of the most vulnerable people in our society. My local authority, Aberdeenshire Council, was given an award as well. We can share examples of such projects being provided by local government that are really making a difference and that affect vulnerable people in our communities.

10:45  

I do not have any empirical evidence to present to the committee. With social security, there is an instant injection of cash that affects our communities. From a local government perspective, putting that funding into ensuring that the policies on early years, teacher numbers and employability workstreams are fully funded and sustainable will enable the delivery of the shared aims across the piece. I recognise that that is a difficult decision, but it is one that needs to be made.

Providing that £980 million would provide a substantial number of jobs in local government, would it not?

Yes, it would.

Incidentally, on local government employment, Malcolm Burr mentioned the fact that the number of people that his authority employs has reduced from 1,900 to 1,600. However, the figures that I have show that, between the second quarter of 2018 and the second quarter of 2024, the local authority workforce in Scotland grew from 242,000 to 262,000, although I realise that about half of those jobs are probably in early learning and childcare. Across Scotland, the trend is upwards, not downwards, according to official Scottish Government figures.

Time is against us, so I will give our witnesses an opportunity to say one final thing to the committee about anything that they feel we have not covered and which they think we should incorporate in our report to the Scottish Government on our budget deliberations.

Katie, you went first, so you will have the last word. Which of the three gentlemen would like to go first? If you have nothing to add, you do not have to say anything, but if there is something that you feel we should include in our report, now is your opportunity to mention it. Malcolm, you seem to be keen to comment.

I make a plea for the steady implementation of public service reform. That should be accompanied by a clear timescale and clear milestones, along with the ability to take forward pilot projects on public service reform. In some of our areas, we will really struggle in the immediate future without significant change in that regard.

We did not go into the issue of local government reserves and the perception that we are squirreling money away for particular purposes. Reserves are a snapshot at the year end. They are influenced by a variety of factors, including the distribution of Government grants, sale and lease-back arrangements such as those that Glasgow City Council uses for its sporting assets, Covid grants coming out at the year end, service concessions, which have boosted reserve levels significantly on a one-off basis recently, and the reprofiling of loans fund debt. There are good reasons why local government reserves are spiky. Over time, those reserves will reduce significantly as pressures on councils grow, but they can be spent only once.

Uncommitted reserves make up only about a tenth of the actual reserves. However, uncommitted reserves are equivalent to 3.4 per cent of local government spend, which is still more than twice what the Scottish Government’s available reserve is.

I was going to make the same point as David Robertson: when we talk about reserves, we should make sure that there is absolute clarity on whether we are talking about usable reserves, unusable reserves, earmarked reserves or unallocated reserves. I recognise the percentage that you quoted, but that percentage accounts for only 12 days’ running costs for councils, so it is a small backstop. However, I recognise that, across the piece, the picture looks different.

In the case of the Scottish Government, we are talking about only a couple of days’ worth of running costs.

It is important to say that local government leaders across Scotland are absolutely committed to providing first-class, front-line, essential services to our communities. We are exactly that—an essential service—so it is very important that we continue to engage in dialogue and that we continue to make the case. COSLA will produce a lobbying document ahead of the budget announcements. In the past, I have met all the finance leads, whether in government or in opposition, and I am happy to do so again. If members have any specific questions, please get in touch and we will share—to the best of our ability—our knowledge and expertise with you all.

Thank you very much. That has been very helpful to the committee. We will hold our final evidence session in our inquiry on managing Scotland’s public finances, a strategic approach, at our next meeting, when we will hear from the Cabinet Secretary for Finance and Local Government.

We will now take a five-minute break to allow for a changeover of witnesses.

10:50 Meeting suspended.  

10:57 On resuming—