Chamber and committees

All decisions around how local government spends its money are for local government to make. As you well know, I do not tell local government how to spend the core budget—that is entirely up to it.

It is across the public sector, and I have not put a figure on it. That is your figure—or other people’s. I have suggested that we need to get back to pre-Covid levels.

However, let us take the expansion of early learning and childcare, which is one area of local government. The policy has seen a workforce expansion in local government and that needs to continue. However, in other areas of the public sector—it is for the public sector to answer this question—as a result of Covid, there might have been an increase in head count that they no longer need. There may be other parts of local government, as in other parts of the public sector, that will need to see increases as we come out of the pandemic. That is why we are being very flexible.

In the discussion around public sector efficiency, local government is unique, because ultimately, it is local government that makes the decisions, rather than me. I set the spending parameters; I do not dictate to local government how to spend that money.

There are three reasons why the outlook right now is challenging across the board. First, our budget from last year has been cut by 5.2 per cent, and it is forecast to grow by 2 per cent in real terms, if social security devolution is excluded. The challenge for every part of the public sector is captured in the fact that less money is available. On top of that, inflation is at 9 per cent and is forecast to go to 11 per cent. That reduces our spending power. On top of that, if there is an increase in one budget line, there must be an equal and opposite decrease in another budget line.

My job has been to treat as fairly as possible all parts of the public sector, including universities, because I know how important they are. Again, that demonstrates the point that we have been discussing: I cannot spend a penny more than what I will receive or raise according to the SFC’s forecasts.

The fundamental challenge with some of the discussion is that, if we are more effective at serving the citizens, by extension, we will have more efficient public bodies. What is not to appreciate about improving outcomes for citizens and businesses and ensuring that every penny of resource that we spend delivers our objectives?

I think that the greatest contributor to child poverty over the past 10 years has been UK Government austerity, and that view has been backed up most recently by a report from the University of Glasgow. We will do all we can to mitigate it, but we are limited in what we can do. We will continue to invest our money through a different approach to social security, but, ultimately, much of what we spend is on mitigation. If you fix that issue at source, we could probably redeploy the funding elsewhere.

That is a statement of fact, yes.

No, that is a very reasonable assumption to make. My question to you would be: if I had given significant increases on the four lines that you are asking about, would you have been here asking me about four other lines that had been severely cut?

We set out public sector pay policy in advance of every budget. I have been clear in this year’s budget that I cannot inflation-proof public sector pay policy, because of the high level of inflation and the fact that it is due to rise.

I am conscious of the SFC’s forecast on inflation, which it thinks will average 8 per cent across 2022-23 before falling back in line with the Bank of England’s 2 per cent forecast from 2024-25. That is in very stark contrast with the inflation assumptions that the UK Government used to underpin its spending review in October 2021. Therefore, the difficulty for me in answering your question when it comes to the years beyond this year and perhaps next year is that the funding pot that is available to me is based on assumptions that were made last autumn and have been completely overridden by the inflationary outlook that is inherent in the SFC’s forecast.

I am happy to bring in anyone else who wants to come in; I do not know whether your question has been sufficiently answered.

That is the necessity of the art of resource spending review. Again, we cannot afford not to make those reforms. The four pillars of the reform agenda in the resource spending review include procurement. The agenda is to encourage public bodies to look at four areas where we might drive efficiencies. The first is on estates, which you have already touched on. The second is on shared services; the third is on procurement, and the fourth is on brand management.

The RSR does not, in one go, give all the answers as to how we are going to achieve that, but it sets out a plan—over the next few years—for driving that reform. The reason why we need a resource spending review to do that is that it is difficult to drive reform within one year and difficult to do it within annual budgets, so we need to have that longer-term perspective of a three or four-year spending review. The changes that we make in year 1 might be expensive, but we will see the benefits in year 4.

I am actually talking about private investment. At the 26th United Nations climate change conference of the parties—COP26—the Glasgow Financial Alliance for Net Zero told us that there are $130 trillion-worth of assets under management right now that are looking for a home in significant infrastructure projects and other things to help with the transition. I am talking about the substantial sums of private sector funding that are available.