Chamber and committees

That is exactly what the education assurance board is for. I think that it has been set up: if it has not been set up, it will be shortly. That will allow the Scottish Government and local government, with other partners in education, to take forward that issue in a meaningful way and to get the shared reality that we all want. What is the right number? What is the best way to spend money? What will achieve the outcomes that really matter on attainment, which ultimately will help to drive down poverty levels?

No one is suggesting that there is anything easy in the budget this year. There have been really difficult decisions for the Scottish Government—for the Deputy First Minister, in particular—in looking at all the challenges across the Scottish public service. Equally, it will be challenging for our local government colleagues. It would be disingenuous of me to tell local authorities how they should allocate their budgets. Differing decisions will be made based on local circumstances.

We have increased the discretionary budget by £1 million, which is un-ring-fenced. I want to go much further than that, but it is difficult for us to do that without the work on the fiscal framework and the accountability and assurance framework, which ensure that not just the Scottish Government but Parliament have confidence. That will give us the two-way trust that Councillor Hagmann talked about. It has to be two-way trust. That is why so much effort is being put in to those discussions with COSLA.

I am trying to remember, but I think that Glasgow City Council made that point last week. However, I think that it is selling itself a bit short. Some amazing work is going on across local authorities, but generally it is when they work in partnership with other public services that we can really see the difference and great results being achieved.

I am going to give a shout-out to three local authorities that I think are showing the innovation that is happening across the country. Glasgow City Council and Dundee City Council have their pathfinder work, in which they are supporting families out of poverty by testing innovative models of person-centred service provision. Once that work has been completed, we will see whether it can be applied to other authorities. I should say that the models in Glasgow and Dundee are not the same; they are different; as a result, we would be looking for local adaptations to such innovation. The other authority that I will highlight is Clackmannanshire Council, whose family wellbeing partnership is testing and embedding wellbeing and capability approaches to tackling poverty.

No one is saying that managing the budget is easy—that is for sure—but on the suggestion that there is no time for innovation, I say that this is absolutely the time for innovation. Since I have been an MSP, we have been talking about how we shift resources from reactive to preventative approaches, and we are starting to see that work happening. It was always going to be difficult, but it is happening. The work in Dundee, Glasgow and Clackmannanshire is all about prevention and saving individuals from future trauma and, in turn, saving public services in the future.

I have given three examples of the preventative work that is happening. There are many more such examples across Scotland.

That point that local government has made is absolutely reasonable. Let us take a step back: in the aftermath of the Smith commission, there are significant additional responsibilities across a range of public services in Scotland that need to be funded from our devolved budget. On top of that, there are significant costs from a range of mitigations that the Parliament considers to be necessary to protect communities across Scotland from the worst ravages of Westminster. It is also worth noting that, in a lot of those areas, there is shared responsibility. We need to balance our available budget to get the best outcomes. For example, the £457.3 million—almost £0.5 billion—that is budgeted for the Scottish child payment is removing thousands of children from poverty and is working in synergy with anti-poverty actions that are being taken by many local authorities.

We need to look at the budget as a whole and we need to know that we are all doing more. If anyone hears a suggestion from me or any other Government minister that this has been a budget of easy decisions, that is not the case. There have been difficult decisions in the budget for the Scottish Government and there will be difficult decisions for local authority leaders in setting their budgets. We all want to do the best for our communities with the limited resources that we have.

It is good that you mentioned the report that the Accounts Commission published today. The report concludes—well, this is the conclusion that I take from it—that Scottish local government is in a very different position from local government in England, where a number of local authorities have, effectively, gone bankrupt. The report states that

“auditors did not identify any councils in Scotland as being”

fiscally

“unsustainable in the short term.”

It is clear that we need to work to ensure that we continue that position. The fiscal framework will help with that.

We have prioritised local government in the budget, so a larger share of Scotland’s discretionary budget is now going to local authorities, but they will still have tough decisions to make, as they go forward. Part of the approach to dealing with that will involve public service reform, which has to happen across Scotland unless something changes with regard to the quantum of budgets.

This year, the autumn statement reflected a budget that prioritised tax cuts for the richest, rather than investing in public services. We have had to try to adapt to that. The statement was far tougher than anyone had expected, and that is difficult for the whole of the public service, including local authorities.

It is one of the workstreams that we agreed to take forward in the Verity house agreement. It is a partnership, so we need to ensure that that is the case.

Ultimately, I would see an accountability and assurance framework as sitting alongside the fiscal framework, to give assurance not only to the Scottish Government, but to the Parliament, in those areas in which we have shared accountability. That will be important in respect of the Accounts Commission’s work. That work is on-going, and given that it is a partnership, I would not want to be too prescriptive.

Yes, we absolutely have. The figure is just under £1 billion, and we have set out in detail the areas that we have un-ring-fenced. I totally get that local government wants us to go further—I want us to go further, too—but we must have the outcomes and the accountability and assurance framework in place so that not only Government but this Parliament has confidence going forward and we can build that trust that Katie Hagmann talked about earlier. That is a really important part of the work that we are doing around the fiscal framework; indeed, it is one of the workstreams set out in the Verity house agreement. We need those things to be in place.

Local government delivers many things that are joint responsibilities of it and this Parliament and this Parliament, too, has its priorities. The point is that respect needs to go both ways. We need to recognise that this Parliament and local government have roles and responsibilities. Having that accountability and assurance framework would be the big win from the new deal, as it would lead to an understanding around what we are trying to achieve and what outcomes will make a difference to the people of Scotland. I want us to go further, for sure, but we have un-ring-fenced nearly £1 billion.

Ian Storrie might want to come in here.

I certainly hope so, and we are working on having more flexibility. As you have said, there are some shared responsibilities. For instance, this Parliament has taken the decision that it wants to provide free school meals, but can we be less prescriptive about how local authorities deliver that policy so that they can look at their local priorities and work out what works for their areas? We clearly have a direction of travel; we are just not there yet. Indeed, nobody from Government has ever suggested that ring fencing would just disappear overnight. In the future, we do not want to have ring fencing without agreement.

Pam Gosal talked about speaking to lots of council leaders; I have been speaking to lots of council leaders, too. Often they ask for more money for X, Y or Z and, often, what they are talking about is more ring-fenced pots of money for specific things that they know will help their local authorities. I absolutely get that. I come back to the point that that is why outcomes and an accountability and assurance framework will be so crucial to having an agreed fiscal framework, if we are going to make the difference that we want to make.

The complexity of that shows the challenges of Scotland’s current fiscal situation. My solution is that we should have the full powers of a normal independent country, but we will leave that for another debate.

Thank you, convener, and happy new year to all members. I thank the committee for inviting me to participate in the session today. I am particularly grateful for the invite as it provides me with an opportunity to discuss how important our relationship with local government colleagues is in relation to fiscal matters, and how the Scottish Government has been working to ensure that local government views are included in the broader priorities of Government as part of the budget.

In line with the Verity house agreement principles, this year has marked the beginning of a more meaningful pre-budget engagement process between local and national Government, which I was pleased was recognised by local government heads of finance during their session with the committee last Tuesday. I heard Councillor Hagmann refer to that in her evidence to the committee earlier today.

I also take the opportunity to highlight that pre-budget engagement with local government largely mirrored discussions that were undertaken with cabinet secretaries in relation to their portfolio interests. However, as those cabinet secretaries highlighted, in the face of a deeply challenging financial situation following the UK Government’s autumn statement, the budget was inevitably unable to fully meet all of local government’s asks.

Although we appreciate that local government will have hoped for a more favourable settlement, we continue to do all that we can to mitigate more than a decade of UK Government underinvestment in public services.

Despite the financial challenges that we have faced, we are delivering record funding of more than £13.9 billion to local authorities, and are making available a further £144 million to support reaching an agreement with councils to freeze council tax in 2024-25. Critically, in the most difficult budget since devolution, we have prioritised local government, and its settlement share of the discretionary budget has increased. The analysis to support that has been placed in SPICe.

In the first budget since the Verity house agreement was signed, we have already baselined almost £1 billion of funding across health, education, justice, net zero and social justice, prior to reaching an agreement on an accountability and assurance framework. That is a significant step for ministers, and we hope that it demonstrates both our commitment to the principles of the partnership agreement and a willingness to place trust in local government to make more decisions locally that will enable better outcomes for communities across Scotland.

In the past year, we have worked in partnership with local government to agree greater flexibilities, including on the visitor levy and on increased discretionary powers over tax treatment of secondary and empty homes. That could raise an estimated £35 million for local authorities, should they decide to use those powers.

We will continue to work with COSLA to empower councils through a new fiscal framework, with an initial joint progress report published on 14 December 2023. The Scottish Government has also committed to empowering local government through increasing discretion to determine and set fees and charges locally. In the coming year, that will include joint work on building warrants and planning fees.

Although inflation is slowly falling, the damage that has been caused by the UK Government’s economic agenda of austerity and Brexit has hurt everyone, particularly our most vulnerable households. We believe that, at a time when rising prices are putting significant strain on household finances, a council tax freeze will give households some certainty over the next year. By funding a freeze, we have helped councils to maintain their services while ensuring that households are protected from increasing budgets. I know that local authorities share our desire to help people across Scotland during these difficult times and the Scottish Government is hopeful that councils will be able to support that policy initiative locally.

I assure the committee that we will continue to work with COSLA to conclude the new deal with local government and provide councils with greater flexibility in future years, once the necessary accountability and assurance arrangements are in place. I believe that that will enable local government to better tackle local challenges in ways that work for them, thereby achieving our three shared priorities of tackling poverty, transforming the economy through a just transition to net zero and delivering sustainable, person-centred public services.

As has often been said both by ministers and by local government, this is the beginning of a journey. As with the building of any new relationships, there will be challenges and missteps along the way. However, if we can successfully achieve the goals of the Verity house agreement, that can only be to the benefit of everyone whom we jointly serve.