Chamber and committees

I will resist setting out any expectations, because that completely flies in the face of giving local authorities discretion. However, on average, a 1 per cent increase in council tax raises about £30 million, so 3 per cent would raise about £90 million, which is what we used to fund the freeze last year. That is the kind of ballpark figure that you are talking about when you reference 3 per cent.

That is probably one of the most pertinent questions, right now. The committee will know that, alongside the budget that we published in December, we published our consultation for the spending review. That review will, as the convener has referenced, provide certainty for all parts of the public sector on what their budgets will look like for the next three to four years.

I am conscious that when it comes to long-term reform and prudent use of public finances, being able to plan longer than annually is absolutely essential. We had already taken steps to do that on a capital basis last year, but with the UK Government spending review having been published on 27 October, we can now proceed.

The key is that the consultation process should be as engaging as possible; I do not want the review to be a Government document that is published without input from our partners. I have already had a number of conversations with COSLA’s finance spokesperson, Gail Macgregor, on how we can ensure—notwithstanding some of the uncertainties that face local government in the light of changing personnel, situations with elections and so forth—that over the next six months we engage considerably with local government through my relationship with her.

The other part to consider, which was referenced by the previous witnesses, is that we have been in long-standing discussions on building a fiscal framework for local government. The letter to COSLA that was published alongside the budget confirms our commitment to undertaking intensive collaborative work on that framework. It is unfortunate, but understandable, that a lot of local government and Scottish Government time has been consumed by the mission to deal with Covid. I hope that that intensive work on a framework will allow for more flexibilities and more empowerment for local government officers to make decisions that are best suited to their local authority areas.

I question the basis for your figures. I do not recognise those figures. I will go back to my opening comments. In fact, do not use my words—use the words of the Scottish Fiscal Commission, which has said:

“Overall the Scottish Budget ... is 2.6 per cent lower”

next year than it is this year, and that,

“after accounting for inflation the reduction is 5.2 per cent.”

At the same time, I have protected in cash terms the local government core budget as well as delivering a 5 per cent increase to the overall settlement. I question Miles Briggs’s figures, as they are not entirely consistent with what the Scottish Fiscal Commission has said.

I appreciate that there is a lot of experience and expertise around the committee when it comes to local government—I have said so when I have been in front of the committee previously. Elena Whitham has extensive experience of local government.

I will take a brief step back from the question to say that nobody disputes that the budget is hugely challenging overall. In the light of those challenges, I made a conscious decision to identify three priorities that we could really get behind and focus on and in which we could maximise our efforts.

As I said in my opening remarks, the first priority is child poverty, because the pandemic has had a hugely detrimental impact on some of the most vulnerable people in society. The second priority is continuing to tackle Covid, because—despite the fact that there were no Covid consequentials—Covid is clearly still with us, and that effort goes hand in hand with economic recovery. The third priority is tackling climate change and helping us to shift our investment in that regard.

How does the local government budget come into that? We cannot achieve any of those three aims without local government—of that there is no doubt. Local government is not only a valued partner rhetorically; I engage with local authorities and rely on them, and I work with them every day—certainly, my teams do.

The local government settlement in the budget can be characterised in two ways. First, the core budget is protected in cash terms. I understand that inflation is having a significant impact on all budget lines, but I cannot inflation proof any budget line when inflation is running at 5 per cent or more, because the overall budget that I receive is not inflation proofed.

Secondly, there is real-terms growth to the overall settlement. I have referenced certain elements, but I will just note that there is £68.2 million for child payment bridging payments, an additional £64 million of resource and £30 million of capital to facilitate the expansion of free school meals, £353.9 million for health and social care integration and £200 million on top of that from health and social care consequentials.

All of that goes towards the three big objectives. I think that people in local government would identify that education and social care are parts of their core remit and would therefore agree that it is fair to say that providing support for teachers and social care helps. However, I do not and will never dispute that these are challenging times. I have huge respect for local government leaders who, like me, have to make difficult decisions in order to reach a balanced position and invest in their priorities.

Where I was disputing your comments was on the point that our budget settlement allows for inflation proofing of all budgets—it does not. Our overall quantum does not allow us to inflation proof all budgets. The £371 million that COSLA has cited takes into account the impact of inflation. I am open and up-front about the fact that I cannot inflation proof all budgets.

With the overall quantum that we have received, which obviously has been stripped of all Covid consequentials and has not been inflation proofed, we have tried to be as fair as possible in distributing the funding. I go back to Shona Robison’s point that, if you think that there are areas where funding should be increased, which is a perfectly legitimate position, I need to know where that money comes from, because I have maximised the spending power in the budget for next year.

The work is hugely important—it is one of my top priorities. I would like it to be completed as a matter of urgency, so that local government, COSLA and the Scottish Government are happy with it. You will know that we have also committed to a citizens assembly on sources of local government funding, which will look at taxation, too. Work has begun to prepare for that.

If I remember correctly, it was two years ago that I ensured that, for the first time, there was specific additional money for ferries in the local government settlement, which was warmly welcomed, particularly by those in the northern isles.

The local government settlement is distributed in full under a needs-based formula. That is discussed and agreed each year with COSLA on behalf of all 32 local authority members. As part of the overall methodology, the islands receive the special islands needs allowance and, as I heard a witness on the previous panel mention, additional funding is embedded in the methodology to meet the additional costs of providing services in island communities. The provision in the core methodology and the special islands needs allowance means that there is additional funding in the process to recognise the additional needs.

I am open to any review of or changes to the methodology. That would need to be the result of a request by COSLA—I would not impose it on COSLA. If I received such a request—because, for example, some local authorities felt that the approach did not take account of their unique circumstances—I would be open to an intensive piece of work being done to review the methodology.

I will resist answering that question, for one very good reason, which I will unpack. Local authorities have long asked for flexible and discretionary tax-setting powers, so my saying what I expect of them would run the risk of undermining that position. However, just as I have to make tax decisions that reflect the challenges that face households and our particular budget needs, so I would expect local authorities to do likewise and to take into account the burdens that are on households now, as well as the need to fund local services.

Miles Briggs will know that for years—perhaps for 14 years, although neither of us has been in Parliament for as long as that—local authorities have requested the discretion to set council tax rates, and they can do so this year. He will also know that, as a result of the freeze that we had for a number of years, band D council tax bills in Scotland are significantly lower than those in England and Wales. However, it is clearly a challenging time for households.

Tackling poverty and inequality is one of the three top priorities in the budget. In fact, such is our commitment and effort, we have perhaps not funded other things in order to maximise the support for tackling child poverty in particular and poverty and inequalities more generally. Shona Robison will be able to speak at length about the commitments in her portfolio. I can speak about the funding that backs that up to ensure that we are tackling poverty and inequality. Local government is the most critical partner in that. Whether we are talking about support in education, free school meals or doubling the Scottish child payment, those are all financial commitments that the Government is choosing to make. That means that there is less funding for other things but that is the right decision to make because of our commitment to end the scourge of poverty in Scotland.

Shona Robison is probably better equipped to speak about the policy commitments because it is her portfolio.

Actually, it is more than that—we have announced £375 million. As you will know, a lot of it is from the UK Government, and £200 million is from our budgets. That comes from a number of sources. I think that the First Minister has set out that some of it is from the health portfolio, through consequentials that were received earlier in the year, and it also comes from a requirement for every portfolio to contribute to the costs. Every portfolio is now managing budget pressures in order to get to a position of balance this year.

I cite the fact that, in previous budgets, some of the funding for the following year has been based on carry forward. For example, as we come towards the end of the financial year, we can sometimes look ahead and identify where there might be late money that we can carry forward. In this year’s budget, there is no forecast headroom at all that can be carried forward into next year’s budget. From that perspective, this is an unusual year. The fact that no funding has been identified that we can carry forward illustrates just how challenging next year’s budget will be and how challenging this year’s budget is.

I will make one brief final point. One advantage of having an early budget is that we can give more certainty to taxpayers, local authorities and so on. However, there are drawbacks. The later you are in the financial year, the more certainty you have of where you will land in the current financial year. Because we set the budget so early, we base it on forecasts, which this year say that there is no headroom available to carry forward to next year.

If there are late consequentials, we expect supplementary estimates in the next few weeks from the UK Government when it finalises what this year’s budget looks like. If there is anything available from that, we will either need to use it for pressures this year or there might be something that we can do into next year, but that will be quite late on in the process.