Chamber and committees

We have to do that. That is why the three principles in the Verity house agreement are key to our moving forward, and why it was crucial for them to be agreed across all the parties. After all, preventative work is not for the here and now but for the long term, so we all need to buy into it.

Politically, there has been buy-in to the principles. Clearly, there are differences in views about how we will take things forward, but we all come from different parties, so there is an understanding that there will be differences in political views in certain areas. However, as far as the basic principles are concerned, there appears to be universal agreement across the Scottish political spectrum.

This year saw the least transparent process that we have ever experienced in relation to discussions with the UK Government about what was in the autumn statement. The lack of transparency was unheard of, in terms of the scale of what came to Scotland with no discussion. We know that other parts of the UK are facing those challenges, too; members will have heard comments from Welsh finance colleagues in that regard.

I will let Ian Storrie talk about the complex matter of switching from capital to revenue.

You mentioned RAAC, and it is important that we touch on that. It is slightly separate. Previously, we have set out that we will give consideration to funding for RAAC once we fully understand the scope and nature of what we are dealing with. Work to gather information across the public service is continuing. I would also point out that Scotland is not dealing with the issue in isolation; the cabinet secretary is in regular communication with her UK counterparts about it.

As for the wider capital budget, there has been a 10 per cent real-terms cut, added to which are the challenges in the construction supply chain such as shortages and high inflation. All of that makes it impossible for us to deliver on all the capital projects that we had hoped to deliver on. There was no inflation protection in the capital budget and, as I have said, we are now looking at a 10 per cent fall in real terms.

In no way could local authorities be immune from that. It will be challenging, and we will need to prioritise the things that most support our wider-term priorities, to keep us looking forward sustainably. We will need to come back to the Parliament with a refreshed multiyear capital allocation projection, focusing on the maximum impact that our capital investments can have on delivering the priorities of the Government and the Parliament. However, there is no way that we can have that kind of cut and not feel the impact.

A number of capital projects are already legally committed, so they have to go ahead, which will leave less money. Some cuts in other parts of the budget have been felt much more strongly. I am not going to pretend that there is a magic wand that I can wave to make this go away, because there is not.

The short answer is because the Parliament tells us that we have to. The agreement between the Scottish Government and the Finance and Public Administration Committee is absolutely clear that we have to compare like with like—comparing pre-budget with pre-budget and outturn with outturn. It is a matter of comparing apples with apples. We are investing record funding in local government, with £14 billion going to local authorities, including for the council tax freeze. If we compare budget with budget, as is required, that represents an increase of £795.7 million, which is equivalent to a 6 per cent cash-terms increase or 4.3 per cent in real terms. The resource budget has increased by £840.3 million since 2023-24, which is 6.8 per cent in cash terms and 5.0 per cent in real terms.

I repeat that the way that we have presented the figures, in which we compare budget with budget, is as prescribed by the Parliament in our agreement with the Finance and Public Administration Committee.

I think so, and that is what we are all hoping the fiscal framework will help us to do. As we heard from COSLA, that has perhaps proved to be more complex than some people first thought. It is important to get that right. We—COSLA and the Scottish Government—are doing the work: we are working in good faith to take that forward. I would not be surprised if the Finance and Public Administration Committee took an interest in the matter once the fiscal framework is concluded, but it may be more for this committee to consider it once we get to that point.

COSLA has articulated how it got to its figures, but that does not align with the view of the Finance and Public Administration Committee and the Parliament on comparing like with like, and on clarity.

Some of those points are absolutely right. What are the outcomes that we are trying to achieve? They are better education and better destinations for young people. The question is how we get there. It will be no surprise to hear me say that the Scottish Government is committed to supporting recruitment of teachers. We are providing local authorities with £145.5 million to protect teacher numbers. Our ambition is clear—it is to close the poverty-related attainment gap.

That is an example of an area of shared responsibility, which is why the work on the outcomes and accountability framework to go alongside the fiscal framework is so important. That work is on-going. In the Verity house agreement, there are specific areas of funding. There is £145.5 million in local government settlements to protect teacher numbers. That is a policy decision of the Scottish Government; I am not sure that I have heard any of the Opposition parties articulating a desire to reduce teacher numbers.

We need to look at the issue. We will make progress by working on the accountability and outcomes framework so that we all have the assurances that we need that the policies, particularly those that are shared between the Scottish Government, the Parliament and councils across Scotland, can move forward in a way that works for everyone.

This goes back to Pam Gosal’s question. Hard decisions will have to be made; indeed, the Scottish Government has had to make hard decisions. I am not pretending that setting a budget will be an easy process for any council; councils will have to make difficult decisions, too.

We have supported our local authority colleagues as much as we can by increasing the share of the discretionary budget that we have, so we have prioritised local government. I do not think that anyone is pretending that the settlements anywhere meet our aspirations, but we have to face the reality of what was delivered to us in the autumn statement, and we have to set a budget that works.

Ultimately, the Government will work with COSLA on any of these areas. Collaboration is key, and we have a shared desire to make progress. In the wider public service, we need to look at using technology better and doing things differently. The on-going work on wider public service reform is led by others, but it is key that we work collaboratively.

Councillor Hagmann has covered some of the main areas. A couple of the areas that she has flagged are ones in which we would hope to make progress.

Multiyear funding is absolutely an aspiration. It continues to be an aspiration, but there is the challenge regarding the settlement that the Scottish Government gets from the United Kingdom Government. That said, the medium-term financial strategy includes an increase in local government funding in cash terms of £1.5 billion from this year to 2027-28. There is a degree of certainty about where the Scottish Government wants to go to help local government planning, but, obviously, we have the challenge of the Scottish Government and the Scottish Parliament receiving their settlement on an annual basis, and that has to interface in the real world when we face the difficult challenge of setting the budget for Scotland.

We are committed to reviewing all the ring-fenced funds over time, but, going forward, there should be ring fencing only with agreement. Part of the process is to develop an assurance framework, which is a different way of doing stuff. We need to work together on that to get it right. Right now, about 7 per cent of investment is formally ring fenced, but, on top of that, local authorities spend a significant amount of money on statutory services, which removes flexibilities, but, within that, there is flexibility as to how that money is spent.

The first stage of the work that we are doing is to review all existing funds that are transferred to local government, outside of the general revenue and general capital grants. We are looking at how much of that can be baselined for the 2024-25 budget. The outcome of that work, which is on-going at the moment as part of the work that we are doing in developing the fiscal framework, will be seen in the budget when that is published. A lot of work has already been done, and a lot of work continues.

This is not backward looking; moving forward, there should not be ring fencing unless it is agreed. There will be times when the Scottish Government and COSLA agree that, for a particular reason, there should be a ring-fenced fund for one thing in particular, probably for a short time. Going forward, the expectation is that funding will not be ring fenced in the long term. The point is that that should happen with agreement.