Local Government, Housing and Planning Committee

Meeting date: Tuesday, September 5, 2023

Official Report 678KB pdf

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New Deal with Local Government

We turn to agenda item 4, which is evidence on the new deal with local government that was agreed between the Scottish Government and COSLA and published in June. We are joined again by Joe FitzPatrick, Minister for Local Government Empowerment and Planning. The minister is supported for this item by Ellen Leaver, deputy director of the local government and analytical services division at the Scottish Government. Councillor Heddle also joins us for this item and is supported this time by Sarah Watters, who is director of membership and resources at COSLA.

Mr FitzPatrick and Councillor Heddle intend to make short opening statements; I invite Mr FitzPatrick to go first, followed by Councillor Heddle. I will then go to questions from members.

I thank the committee for the opportunity to make some brief opening remarks. We collectively recognise that the two spheres of government play a vital role in delivering sustainable public services that our communities across Scotland rely on. Building, maintaining and valuing a strong working relationship with local government is therefore a key priority for this Government.

As the committee will be aware, the need for a reset of the relationship between local and national Government was first set out in the resource spending review last year. The First Minister reiterated the commitment to a new deal with local government in his policy prospectus, “Equality, opportunity, community: New leadership—A fresh start”, in April and again on 30 June, when he, the Deputy First Minister and I signed a partnership agreement to be known as the Verity house agreement, alongside the COSLA presidential team and political group leaders.

I believe that the Verity house agreement will better enable both spheres of government to work effectively together to achieve improved outcomes for communities across Scotland. However, the agreement marks only the beginning of the new deal with local government. COSLA and the Scottish Government are working jointly at pace on a new fiscal framework and shared work programme, including an outcomes and accountability framework, to underpin the Verity house agreement. Taken together, those should balance greater flexibility over local financial arrangements with clearer accountability, while demonstrating strong delivery of better outcomes for people and communities. If we can get the new deal right, I believe that it will make a positive difference to our communities and the lives of the people whom we serve.

I echo the minister’s remarks, and I acknowledge that we are in the early days of the Verity house agreement, so we very much anticipate on-going discussions with the committee as the agreement matures and becomes the default mode of operation.

The agreement will set the tone for positive joint working in a range of key areas, including the community planning agenda, which we have just discussed, and where we need to work together to ensure that local community planning partnerships are able to maximise the role that they can play in strengthening local democracy and acting on decisions made locally in the way that the convener highlighted in the previous evidence session.

Signing the Verity house agreement at the end of June marks a positive step in our shared task of resetting the relationship between local and national government, which the minister just mentioned. I, too, believe that as we make progress, the agreement will enable us to secure one of COSLA’s key priorities, which is a renewed relationship with the Scottish Government that is based on trust and mutual respect.

Having said that, I am encouraged by the impact that the agreement has already had on working relationships, even before it was signed. We recently held several engagements involving officials from both spheres of government, and that momentum is set to continue in the future.

In addition, as Mr FitzPatrick said, the agreement marks only the beginning, and is just one element of a new deal. I sense fresh optimism and willingness among politicians and officials alike to make the most of this opportunity. I am looking forward to seeing communities across Scotland reaping the rewards that will come from our spheres of government working together to secure all the empowerments that we want to see devolved to the local level.

I am heartened to hear about the progress that has been made since we were all together in May in Edinburgh for the evidence session that the committee held on the new deal. It is great to see that things are moving along swiftly. We are passionate about keeping an eye on the issue—obviously, local government is in our title, so it is important for us to support the process as much as possible.

The new deal highlights three shared priorities for the Government and COSLA—tackling poverty, a just transition to net zero and sustainable public services—and notes that there will be a focus on achieving “better outcomes”. I am interested to hear from you both about what discussions you have had on how you achieve those outcomes, and also how the priorities were identified and agreed.

11:00  

It would be good if Sarah Watters and Ellen Leaver could contribute on that issue, because they have been very much involved in the actual day-to-day work on that. The three shared priorities roughly align with the priorities in the resource spending review. Obviously, there was a degree of work, which Sarah and Ellen will have been involved in, to look at the priorities in the spending review and take something back to the politicians. However, I do not think that there was a particular argument around the three priorities, because they make sense. That is shown by the fact that the Verity house agreement, with those three priorities, was supported not only by the Scottish Government and the COSLA presidential leader, but by political leaders across the COSLA organisation—all parties were able to sign up to that.

I guess that that is the strength of looking at top-level outcomes and the difference that we are trying to make. On many of the issues, whatever our political perspective and our differences about how we get there, we share a common desire to improve the lives of people in Scotland, and the three priorities help us with that.

Do you have anything to add, Councillor Heddle?

On the identification of the priorities, Mr FitzPatrick essentially explained where they came from. The priorities also chimed very well with the priorities that we have articulated in our COSLA plan. They are so fundamental that it would be difficult to argue with them, and many good things will flow from them, should we be successful in tackling the three issues. On the face of it, they are fairly simply expressed ambitions, but they are absolutely fundamental to the wellbeing and future of this country. We have not really had any disagreement on the priorities. Pretty much from the start, it has been agreed that they are the fundamental things that we need to work on. They are about tackling poverty to eliminate inequality, recognising the existential threat of the climate crisis and the need to be able to provide the services that matter so much to our communities.

Thanks for underscoring the fact that it is difficult to argue against the three priorities.

Mr FitzPatrick suggested that Ellen Leaver and Sarah Watters might want to come in with a bit more detail, so I will start with Ellen. One of my challenges in facilitating the meeting is that I tend to go to the people in the room, but I am mindful about the need to go to people online. However, first I will go to Ellen, who is in the room, and then to Sarah.

I echo what the minister and Councillor Heddle said. There was never any sense of disagreement—the three priorities were very naturally arrived at, reflecting first on the resource spending review and the commitment to a reset, as well as the wider context of the resource spending review. In the discussions over the past 12 months and more since the resource spending review—among officials and among ministers and politicians, and through the multiple governance structures that we have in place to support the relationship—the focus has been on how we go about that relationship. The sense of coalescing around the three priorities came very early and fairly easily to provide that focus point.

It sounds like a constructive process.

Sarah, do you have anything to add?

I think that you mentioned the Covid recovery strategy, which was something that both spheres of government jointly signed up to. The three priorities in that were financial security for low-income households, wellbeing of children and young people, and good green jobs and fair work. The person-centred service focus was threaded through the Covid recovery strategy. Combined with the resource spending review, the priorities just seemed the natural place to go.

Given the resource constraints and demand pressures, reform is never far away from all the agendas. I echo what colleagues have said. Those were the key areas that the priorities flowed from.

Thank you for reminding us about the Covid recovery strategy, which is an important part of the background.

Willie Coffey has some questions.

Joe, you and I are the two members here today who were around at the time of the historic concordat in 2007. You will recall that that concordat was connected to the structures within the national performance framework. The new deal does not connect with the national performance framework, but you mentioned an outcomes framework. Can you give us some insight into how we will measure progress and outcomes this time?

The NPF is still there and still exists, but it is probably useful at this point to recognise that the new deal is not only the Verity house agreement. It is important to say that because those terms are sometimes used as if they mean the same thing.

The Verity house agreement is part of the new deal with local government and is the partnership agreement. There are three other aspects underneath that, one of which is important to what we are talking about here. The first aspect is the fiscal framework, the second is the completion of the local governance review, which we have talked about, and the final strand is the joint work programme, which has an outcomes and accountability framework. That is really important and is the big difference between the Verity house agreement and the concordat.

The concordat served a really important purpose and was transformational at the time. In our new deal with local government, we are learning from some of the challenges of that concordat. Let us be honest: the lack of an outcomes and accountability framework meant that, over time, we reverted to old ways and ring fencing was used as an easy way of ticking a box and sometimes of being accountable to this committee. It is really important that we get the outcomes and accountability framework right. It is not something that we can do overnight, but the Verity house agreement gives us a set of agreed ways of working to achieve an outcomes and accountability framework that we hope will stand us in good stead well into the future.

I recognise what you have said. Are all the participant councils in COSLA signed up to the new deal? The issue before was that not all councils carried that through, which led to a reliance on ring fencing that none of us would want to see now. Do you have a broad sense that there is agreement among the participating councils?

I have met the leaders of all Scotland’s local authorities and, as part of that, with the leaders of all the political groups. The appetite is clear. Folk see a real opportunity to reset not only for this year and next year but for the long term, and to reset the way in which the Scottish Government and local government work together to benefit our communities.

There is an appetite for change across the parties in a way that did not exist before. That may be due to the fact that there may be a little less flag waving than there was with the concordat. It is clear that we are on a journey and that there is a lot of work to do. The Verity house agreement is a really important part of that process and an important partnership agreement, but it in no way concludes the new deal with local government. It is a starting point to a deal that is about how we are going to work together while respecting both democratic mandates.

Thank you. I would appreciate hearing Councillor Heddle’s view on that. What might make this more successful than the 2007 concordat?

The previous concordat was welcomed by councils at the time. I, too, was around at that time—I was a new councillor in 2007. The fundamental principles of the concordat in relation to local government’s need to take the totality of the resource and apply it to a smaller set of defined outcomes is not dissimilar to what is being spoken about here. As Mr FitzPatrick says, the Verity house agreement goes further—and there is more to the new deal than just the Verity house agreement. What the previous concordat lacked was accountability and the accountability framework that is proposed here.

Mr FitzPatrick made a very good point about how the agreement relates to the national performance framework. Local government and the Scottish Government are co-signatories to the national performance framework. In the spirit of proportionate reporting, we will want to see where the national performance framework indicators and local government benchmarking framework indicators that we already have in place will map, or can be amended to fit, the monitoring and accountability framework that is to be developed.

On the buy-in, there has been unanimous support for the Verity house agreement at our leaders meetings. All the group leaders co-signed the agreement at the end of May. We all recognise how good it could be for our communities if we can make it work. At this stage, the buy-in is good, although it can never be taken for granted. We anticipate that there will be areas where we disagree, perhaps within local government or between local government and the Scottish Government, and we will need to resolve those respectfully and with understanding in the manner that is outlined in the Verity house agreement.

I repeat Councillor Heddle’s point on buy-in. Not a month went by in the first half of 2023 when we did not speak to our political group leaders about the agreement, through our leadership sounding board. Every month, we discussed the tone and content of the Verity house agreement, focusing on how we could develop jointly the way in which we would work together. As Councillor Heddle said, to get to 30 June, we got the buy-in from the group leaders, who eventually went on to sign the agreement. That was no mean feat.

We are now working jointly with Scottish Government to develop what we are going to do. Similarly, we are involving professional associations from across Scottish councils and we will continue in that vein, which is really positive.

In the past, considerable amounts of local government budgets have been ring fenced to deliver Scottish Government priorities. If councils have that independence, what assurances are there that there will be a positive impact on the delivery of shared priorities and outcomes? What mechanisms are in place to ensure that the Scottish Government does not roll back such independence?

That is an important question. That is why our approach is not to say that the Verity house agreement means that it is all completed. There is a lot of work to do to get it right in a respectful way, with COSLA and the Scottish Government working together. The work that Sarah Watters mentioned is happening now in order to get the outcome framework right. Part of the work that is on-going relates to finding a better way to take the fiscal framework forward and identifying where we could have different arrangements in order to agree our shared outcomes.

I would like to go a bit deeper on that. What would the Scottish Government’s role be if a local authority were failing to make progress on shared priorities or if services in key devolved areas such as education or social care were perceived to be underperforming? Have you got as far as that in the agreement work?

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The starting point is respect for our different democratic mandates, because this cannot ever feel to local government that the Scottish Government is coming in to check its homework. An important part of the outcomes framework will be increasing transparency in a way that works for all of us; by that, I mean not overreporting but ensuring transparency and clear lines of accountability so that people know who is accountable for what part of decision making. That will allow our electors to challenge us and local government’s electorate to challenge it. It is important that we get that right; it will take time, but that work is on-going.

Thanks very much. Did you want to follow up on anything, Councillor Heddle?

This goes back to Mr Coffey’s question about the accountability framework. We have made the point—and it has been accepted in the Verity house agreement—that the default position from this point onwards should be no ring fencing or directed funding, unless there is a clear joint understanding of the rationale for such a move. That is based on our feeling that, if we had the flexibility to allocate our limited funding in our local authority areas and across our services, we would be able to achieve the best value and the best balance of outcomes for our communities as well as the ambitions that we share with the Scottish Government.

Mr FitzPatrick made the very good point that we are accountable not solely to the Scottish Government, this committee, the Accounts Commission or Audit Scotland but to our own electorate, who will very much hold us to account to deliver services as best we can. If we are not delivering the services that people expect, we need to explain why and how and hope that there is a degree of understanding.

With regard to some of the areas that have been highlighted, the minister talked about marking our homework, but we have regular education inspections and our social services are inspected by the Care Inspectorate. There are mechanisms in place, along with Audit Scotland and the Accounts Commission, to keep an eye on local government and how we are delivering services.

The key thing is going to be the accountability and outcomes framework that we were talking about in response to the previous question. We need to be able to get that right, because the quid pro quo of the presumption of local by default, national by agreement and no ring fencing is an improvement in, rather than a diminution of, services. However, the issue needs to be looked at in the context of the totality of the services that we provide.

Minister, you indicated that you wanted to come back in.

Actually, Councillor Heddle has just made the point that I forgot to make about independent scrutiny and the range of bodies that play that role.

Teamwork, right? It is great.

I see that Pam Gosal wants to come back in.

Under the new Verity house agreement, councils will have more flexibility to spend as they see fit. We have already talked about that; we have heard that it is very welcome, and it sounds great.

However, my question is about where accountability will lie. As we all know, it was recently revealed that councils are expected to make cuts of around £300 million. If, for example, a council were to decide to access funding from the education budget and attainment were to begin to fall, who would be accountable? Would it be the Scottish Government, which left councils no choice but to make those cuts, or would it be the council for taking money out of the education budget?

It is important that we develop clear lines of accountability and make clear who is accountable for what, and that is part of the work that we are doing.

Part of the question was about local government finance and it is appropriate to recognise that all public services currently face massive inflation, including energy price inflation, and that that causes challenges for all aspects of public service. To respond to your point, the Accounts Commission’s report makes it clear that we have increased local government funding over the years, but that does not by any means take away the challenges that local government is facing.

It is appropriate that we have a mature and transparent conversation so that we can show who is accountable, how the money has been spent, which outcomes have been achieved and where accountability lies if outcomes are not being achieved. It will be important to get that accountability framework right.

I do not want to spoil the teamwork, but the Accounts Commission also noted that local government funding had decreased over the years in real terms, which is clearly a problem for us.

Regarding accountability, various functions and services are devolved to local government and the accountability for those lies with us in the first instance. It is important to acknowledge that. We have to tell our communities why things are the way they are and they will hold us to account if we do not have a good explanation.

We have made the point in the past that there is a risk of the Scottish Government feeling that it has ownership of all problems, including our own, and feeling that it must address those problems directly, which leads to ring fencing and directional budgets. From our perspective, that creates a situation where we have to rob Peter to pay Paul. If you want to know what ring fencing and direction of spend means, one often-cited example would be the condition of roads. That area is not protected, so it takes the brunt of cuts.

I freely admit that local government will find itself more accountable, but appropriately so, for the services that it provides as part of the agreement.

To continue that theme, I recognise that you are involved in a process of co-design of some of the aspects that you have outlined. Councillor Heddle, you have talked about things being local by default and national by agreement. Have you discussed what mechanisms would be put in place to resolve any disagreements between national and local government? Have you explored yet what you would do when there is a disagreement about the rationale for a national approach? Are those mechanisms in place?

We are in the early days of the agreement. We have to recognise that it is a work in progress and that lots of things still need to be bottomed out.

If you refer to the agreement, you will see that the first section sets out how we should carry things forward and work together by starting from a position of trust and mutual respect. If we do disagree on issues, we will deal with matters constructively and in a spirit of co-operation, through the engagement mechanisms that are described in section D of the agreement, which sets out the forms of dialogue that are to take place. That will happen primarily between the First Minister and the COSLA president but also through the leadership sounding board and groups of Cabinet members.

That is augmented by the almost continual dialogue that I can already see happening between our respective officers. Sarah Watters might want to come in on that. The positive thing that I want to emphasise is that our dialogue is already much better than it was and that the prospect of being able to resolve things in an informed and mutually respectful way has been greatly enhanced.

It is great to hear that the dialogue is much improved. Minister, would you like to come in?

There is not much to add. Having that spirit of partnership at the centre of all of our interactions is crucial. Clearly, there will need to be a mechanism for how we deal with disagreement, but, if we have that spirit of partnership as a starting point, I hope that disagreements will be the exception rather than the rule.

The only thing that I will add is that a lot of the engagement mechanisms build on what is already in place and has been working well. Those mechanisms might have been in place for some time, or we might have established them as part of the process of negotiating the Verity house agreement. We have decided on the mechanisms that are relevant, and they are embedded in the agreement. That is particularly the case in relation to the joint meeting, to which Councillor Heddle referred, between COSLA’s leadership sounding board and senior Cabinet ministers. That was a key part of the process that resulted in the Verity house agreement, and we think that there is merit in continuing it.

Minister, the new deal states that the local government settlement will be simplified and consolidated. Will you expand on how you are progressing towards a settlement and on the benefits that that approach will deliver?

A fair bit of work is already taking place to develop the fiscal framework. Part of that work involves looking at all the areas of ring fencing and direction and at where there are opportunities to relax that.

The starting point is that, going forward, we should not have ring fencing. About 7 per cent of council funding is currently ring fenced. However, in the spirit of partnership, it is fair to recognise that, even when funds are not ring fenced, there is often a degree of direction. If you speak to senior council officials, they will tell you that, even when there is no ring fencing, the reporting is sometimes overly burdensome. If we can find mechanisms that give us assurance on outcomes, we can remove some of the unnecessary bureaucracy. That is a work in progress, but a significant amount of progress has been made, and we hope to have made some progress for this year’s budget.

Councillors would very much welcome that. As I mentioned, I was a councillor previously, so I get it.

We heard that some councils are unhappy with the current funding formula. Will the fiscal framework and related work address those concerns?

As has been mentioned, one of the new deal’s stated priorities is tackling poverty. Some people feel that the current funding formula does not recognise or give enough weight to poverty and deprivation levels. Will you consider that issue?

Such matters have to be taken forward in collaboration with our partners. It would be absolutely wrong, and against the spirit of the Verity house agreement, for the Government to say that we will change the funding formula unilaterally. Any changes in that regard must be made in partnership.

By giving local authorities more flexibility in how they use their budgets, I hope that many of them will choose to use that flexibility to tackle poverty. That is one of the three outcomes that we have agreed, so it absolutely should be a consideration. I know that my local authority—Dundee City Council—took the decision to fund many anti-poverty measures beyond the statutory requirements because of the city’s particular circumstances. If we give local authorities more flexibility, they will be able to make the choices that work for their areas. That is the principle of subsidiarity. Such decisions can be made at the correct level, and we can respect the democratic mandate that our local government colleagues have in their own right.

Ellen Leaver might be able to say a little bit more about the work on the fiscal framework.

I am happy to do so. I am sure that Councillor Heddle and Sarah Watters will have a view on the matter—obviously, it is for them to give the views of local government—but we have had long discussions about the fiscal framework, and we continue to have those negotiations.

The questions about quantum and how we come to that figure are key, but distribution is an element of how the local government settlement is delivered to councils. It is something that is relevant to the discussion, but those are live negotiations, and the minister has succinctly made the point about the purpose being to empower local government to make those decisions locally. Our ambition is to get to a point in relation to the fiscal framework where that is as smooth and transparent as possible.

11:30  

There are two aspects: the simplified quantum and the consolidated quantum. The consolidated quantum involves the removal of ring fencing and directed spend. In local government, we feel that there is a lot of that. We have the ability to vary only about 30 per cent of our budgets, which is the element that is not ring fenced or directed—Sarah Watters might be able to correct me on that figure, but that is my recollection of what it is.

Simplifying the quantum should enable us to have a shared understanding of what it all means. At present, every year, we have a post-budget bun fight where the figures that are presented by the Scottish Government are at odds with the figures that are presented by local government in terms of their interpretation. If we want to carry forward a mutually respectful relationship, we need to get away from that, which is why this is a key aspect of what needs to be done.

Fundamentally, we cannot get away from the fact that local government needs more money if it is to be able to carry forward its aspirations, because, at present, we are struggling even to provide all the services that we wish to. Since 2013, we have lost a significant chunk of our workforce and it really is a struggle. I have been a councillor for 17 years, and I think that it is as hard as it has ever been to come up with a budget that is not going to devastate the services that we provide for our community.

However, regardless of the amount of money that we get, the removal of ring fencing and directed spend will enable us to prioritise it appropriately according to the needs and aspirations of our community.

Sarah Watters, would you like to make any further points?

As you know, the local government settlement is extremely complicated. It is made more complicated not only by the existence of ring fencing but by the in-year transfers that come from different portfolios. Part of the work that Ellen Leaver and I are doing involves consolidating some of that so that we do not face the annual questions about whether a certain portfolio will transfer in some money and, instead, we have certainty about the money coming in because it is the funding for a function that local government will carry out.

On the funding formula, that would very much be a decision that leaders would have to take, because it would impact all councils. As Councillor Heddle said, there is an issue with the overall quantum, but we do not want local government tearing itself apart in relation to how the money is distributed. As Joe FitzPatrick said, if councils have more flexibility in the way in which they can use resources, that will aid their budgeting as much as redistributing money would.

In 2018—I think—we reviewed the funding formula and looked at the funding floor. At that point, professional advisers who advise leaders said that stability was extremely important, so it is worth noting that, with redistribution, there could be volatility.

Councillor Heddle mentioned that we get into a post-budget bun fight every year about ring fencing and so on. Currently, COSLA’s position is that around 65 per cent of our budget is not able to be used for local priorities and instead goes on things such as teachers’ pay and pensions and all the other things that councils have to provide for. As part of our work on the fiscal framework, we are really working hard to get that common understanding of the challenges on both sides. Some of that challenge comes from the fact that, although the Scottish Government has a top-line budget of figure of around £59.4 billion—that was last year’s figure, I think—not all of that is at the discretion of the Scottish Government, as there are sums that come out of that that have to be factored in. We want to get to the point with the budget engagement between Councillor Hagmann, the Deputy First Minister and Mr Arthur where there is that common understanding on each side. We have struggled to do that in the past, but we are really working hard to get to that position.

It is interesting to hear that level of detail and to hear about the common understanding that is being worked on. I imagine that part of the demonstration of success—it might not happen this year, because it is early days, but it might happen in the future—will be that we will not have the bun fights, because so much co-design has been done up front to lead into the budget discussions.

I will bring in Ivan McKee.

I would like to turn to public sector reform. The new deal talks about

“working constructively and quickly to remove barriers which hinder flexibility”,

with a focus on enabling innovation and whole-system improvement. Clearly, that gives an opportunity not just to improve service levels but—reflecting back on the previous question—to potentially find ways to do things more efficiently and effectively by taking down barriers and removing duplication between the Scottish Government and local government. I would like to explore a wee bit further what is happening in that regard. Are there any examples of barriers or opportunities being identified and the process to tackle and remove those?

I will pass that to Ellen Leaver, if that is okay.

The Verity house agreement contains a commitment to a shared approach to public service reform, and there are discussions about a joint programme to look at public service reform with local government and what that means. I think that Sarah Watters has been more closely involved in those discussions than I have been, as that sits with some of my colleagues. That process is very much focused on the person-centred approach, which was central to the Covid recovery strategy, and involves learning from the range of pathfinder and project approaches that have taken place across the country.

It is about building on that and looking at where we can scale up the learning from those pathfinders, start to see things take place and build on that in local government. It is also about being very conscious, in our decisions as the Scottish Government and in the public bodies landscape, of how public service reform can impact on local government. To go back to what was mentioned in the earlier session, we need to think about the role of the partners in community planning partnerships. We need to see the issue holistically.

Sarah Watters will perhaps have more to say on the detail, but we would be happy to take that back to colleagues and arrange for a letter to the committee setting out more of the information on that programme.

Thanks for that. That sounds relatively top level, so it would be good to get into some of the specifics of where opportunities have been identified and quantified, and what work is happening to take those forward.

Councillor Heddle, do you want to comment on that?

Ellen Leaver has beaten me to the punch in mentioning the Covid recovery strategy as a template for where we could go. I want to highlight the on-going work that the community planning improvement board is doing on three main areas, which are climate change, financial security for low-income households and the wellbeing of children and young people. The board leads on that work, and I hope that it will feed into this aspect of the Verity house agreement.

Sarah Watters, do you want to comment on any of the specifics?

A lot of what you are alluding to and asking for information on is coming through the officer discussions that we are having. We have held a set of workshops between senior Scottish Government deputy directors et cetera, COSLA staff, the Society of Local Authority Chief Executives and Senior Managers, and directors of finance. In those workshops, many of the barriers to reform have come up. Through the shared work programme, we will have to develop solutions to the things that are getting in the way, such as data sharing issues, accounting regulations and funding flexibilities. We have to work through those things.

COSLA wrote to the Finance and Public Administration Committee with much more detail on that, so we could perhaps share that letter with you. One of the key concerns that we raised in our submission to that committee was that there will be some key touch points between wider public service reform of the 129-odd bodies that are part of the Scottish Government’s programme and local government. In the resource spending review, local government was invited to take a complementary approach to public service reform. Local government is doing a huge amount in that area and, as I said, the letter articulates some of that. However, there are some touch points around things that the police and fire services, Skills Development Scotland and all the other bodies will do that will have an impact locally.

That brings us back to community planning as the key driver of local resource decision making and working through some of those person-centred service challenges. National bodies could take decisions about reform that actually make no sense locally on the ground for the delivery of a service in a particular place.

We are working closely with Màiri McAllan’s team to ensure that we do not create tensions between national programmes for public service reform and local approaches to person-centred services. We have to ensure that those touch points make sense and that local government is fully involved, as is articulated in the Verity house agreement.

I understand that, and I can see the importance of it. I suppose that what I am not hearing, and which I might have expected to hear, is that areas of duplication have been identified. You mentioned data sharing and the opportunities with regard to the ability to move data, common approaches to digital and so on. There are overlaps between the work of different agencies, Government and local government, where people are all in the same space trying to do the same thing. Clearly, in an era where there are cost challenges, identifying and freeing up resource from those areas has to be a prize worth seeking.

Local government is doing a huge amount in the area of shared services. Even within COSLA, we have the Digital Office, Trading Standards Scotland, Business Gateway and myjobscotland services, which are shared by local government across Scotland. As I have said, the letter that we sent to the Finance and Public Administration Committee goes into more detail on that.

I look forward to seeing that.

My other question concerns the situation with the UK Government in this regard. We are increasingly seeing a situation in which the UK Government is seeking to engage with local government through a variety of mechanisms. Has that been considered in the discussion on the new deal, or has the question of how that relationship potentially cuts across some of the work that you are doing been left out of scope?

The new deal in the Verity house agreement is between local government and the Scottish Government, so those are all factors that we need to be alert to as we move forward.

Okay. So that elephant in the room is being considered.

Well, the agreement is between the Scottish Government and local government.

Okay. Thank you.

Did you want to ask another question?

No, that is fine.

Great. I will bring in Willie Coffey.

I will stick with the scrutiny function for a moment, as I have a couple of questions on it.

This is a new deal and a new arrangement, and it is about enhanced representation, let us say, with our COSLA colleagues. Does that imply that there could or should be a rebalancing of the scrutiny function? As a member of the Public Audit Committee, I know that we get some sight of the reports from the Accounts Commission and Audit Scotland about performance in local government, but there is by no means the same degree of direct scrutiny that the Parliament has of Government in Scotland. Does there need to be a bit of a rebalancing, or are the mechanisms that are already in place sufficient?

I do not think that it is unreasonable for the bodies mentioned by Councillor Heddle that carry out independent scrutiny—scrutiny that goes wider than that by, say, Audit Scotland and the Accounts Commission—to check their processes. The Accounts Commission, in particular, is likely to do that.

However, it is important that those of us with a democratic mandate to serve our constituents in this Parliament respect the democratic mandate that local councillors receive in their elections. If we all sign up to that, we can have appropriate scrutiny. If a policy area is shared, let us have those lines of accountability and ensure that Scottish ministers are challenged on the policy areas that we have set. Ultimately, though, local government will be challenged by its electorate on the decisions that it is making—and there might well be different decisions in different localities.

11:45  

Thanks for that. Councillor Heddle, COSLA has an increased role in national policy development. Does that suggest that people like the members of this committee should seek to scrutinise that aspect of your work more effectively to ensure that the outcomes of the framework agreement are being delivered, or are you satisfied that the current scrutiny models are sufficient?

At this point we are satisfied that we have appropriate scrutiny. However, we recognise that it is a work in progress. We overtly recognise that in section C of the Verity house agreement, on accountability and assurance, which says:

“Audit Scotland and the Accounts Commission Scotland will be invited to support and provide independent evaluation of progress.”

We have already had high level discussions with the Accounts Commission on that. Moreover, the Local Government, Housing and Planning Committee already exists and has the ability to scrutinise local government as it sees fit.

At this point, we have to respect the fact that the agreement between local government and the Scottish Government is voluntary. Looking at the way in which we work in partnership, I would point out that a system of scrutiny is already applied to what we do. Working together differently should mean that, in general, things work better. I am sorry for being vague, but it is important to recognise that this is a journey rather than a destination.

Joe FitzPatrick made a good point, which I will pick up on: the principles in the Verity house agreement are underpinned by the European Charter of Local Self-Government, which we are keen to see legislated for, too. Alongside that sits the principle of subsidiarity, which respects the devolution of powers to the appropriate level.

I seek your indulgence not to become too heavy handed in respect of scrutiny at this point, and I assure the committee that local government will do its utmost to live up to the things that we are promising.

Okay. Thank you for both those responses.

Recently, the First Minister said that any issues relating to pay negotiations are for COSLA, councils and their employees. However, I have sat here long enough to have heard previous First Ministers, finance secretaries and local government ministers say the same thing, only to get involved in negotiations when strikes cause school closures and the rubbish starts mounting.

Given that councils rely overwhelmingly on the Scottish Government for the vast majority of their funding and the majority of that funding is spent on wages, what should be the Government’s position in supporting pay negotiations? Does it mean just getting around the table or does it mean putting more money on the table to ensure that local services remain sustainable?

It is important to emphasise that local government pay negotiations are a matter for local government as the employers, and for the unions. It is enshrined in the Verity house agreement that that is the correct procedure and that the Scottish Government should not interfere in the process. However, in line with the Verity house agreement and despite the cuts that it has received, the Scottish Government has already committed to £155 million to support a meaningful pay rise for local government workers.

We have done things differently this year. In previous years, there might have been a threat of strike action and then Government would have come in and provided additional funding. We have recognised the challenges that you have outlined and £155 million was provided up front to support COSLA in its role as employer.

There are three key strands to the Verity house agreement, one of which is sustainable public services. Who has ultimate responsibility for ensuring that those services remain sustainable? What is a sustainable service, if pay inflation reaches the point where public services stop being provided? Are we talking about services reaching a level at which Government and councils say, “We can provide X, Y and Z sustainably, but A, B and C will have to go,” or are we talking about sustaining the existing level of service? How is pay inflation impacting on that?

Pay inflation is a real challenge for all parts of the public sector. Local government, the Scottish Government and other public sector bodies are facing pay inflation driven by general inflation and the cost of living crisis. We are facing in-year challenges that we have never had to face before. I am trying to be as non-political as possible, but the impact of the mini-budget is being felt in every area of public service across Scotland and in the rest of the UK. That is a real challenge.

The Verity house agreement means that we can take those things forward together by working in partnership. What is right for one area might be different for another, which is why we want to empower local government to make choices and decisions. I hope that, instead of directing from central Government, we can allow local government to make the choices that will have the greatest impact on local areas.

As I mentioned earlier, my local authority, Dundee City Council, made a budget choice last year to provide extra funding for anti-poverty measures, because of particular challenges in the city. A huge amount of money has already been spent on mitigating Westminster policies. If we did not have to do that, the money could be deployed in different ways. Dundee City Council took difficult decisions not to do some things, because other things were thought to be really important. It is absolutely appropriate for such decisions to be made by politicians who are elected by their constituents to make them at local level, instead of their being directed by the Scottish Government in order to make life easier when we have to answer questions in front of committees such as this one.

Councillor Heddle, is it possible for local government to meet the Verity house agreement’s key commitment to sustainable public services while also meeting pay demands from local government staff?

That takes us back to the fundamental principle that local government should be adequately funded, which includes being able to pay our workforce in a way that is equitable and in line with other areas in the public sector. Our ability to do that fundamentally depends on how much money we get, and the next budget will be crucial to that.

I absolutely acknowledge the £155 million of Scottish Government funding that Mr FitzPatrick alluded to, which has enabled us to construct a pay offer for our workforce that we believe matches other parts of the public sector. That is a solution for this year, and it has yet to be accepted. In fact, it has been rejected. It is clearly a hot topic for local government, and we will be having a special leaders meeting to discuss pay this very afternoon.

Returning to your question, I think that it is undeniable that the overall quantum is fundamental to the services that we can provide, and I fully acknowledge that that is true for the Scottish Government as much as it is for local government. Ultimately, however, if local government is not adequately funded, we will not be able to do everything that we want or need to do.

Miles Briggs will ask a range of questions to wrap up the session.

I have a couple of questions regarding the scrutiny of the new deal, specifically the refreshed role and remit of the Scottish Government place directors. The committee has had no previous engagement with place directors—they seem to have been misplaced, for some reason. Can you outline their role and how you envisage that working in practice? What opportunities will there be for the Parliament to scrutinise the additional role that they will play?

Place directors have been around for a while. They try to understand, promote and support how public services work together, and that role has been reinforced in the Verity house agreement. I would not expect place directors to be accountable directly—that would be quite strange, because they are doing a piece of work; they are not making decisions as such.

Ellen, do you want to come in? I guess that you are a place director for some place.

I am indeed—I am a co-place director for Renfrewshire. Place directors were formerly known as location directors, so members might have heard of them in that terminology. They are senior civil servants who, alongside their regular job, are appointed to be a liaison and a point of contact and to participate in community planning meetings and other meetings with local councils and local partners. They engage regularly, and they are able to feed that local intelligence into local government, as well as taking it back to the Scottish Government through a range of discussions.

We recognise that the role has varied over time, with more or less focus. It works really well in some areas, much like community planning partnerships, as we discussed earlier, which are very much part of the process, too.

Again, there is a deliberate choice, as with the community planning references, to bring place directors into the engagement mechanisms in the Verity house agreement in order to reinforce the role and give it a place and more emphasis. I am not saying that it works brilliantly, but we explicitly reference that we need to look at how we make the most of it.

Much like community planning partnerships, if we did not have place directors, we would have had to invent them for the Verity house agreement, in order to be able to have the maximum impact and gather soft intelligence locally. That is why they are situated there, but we recognise that there is much more to build on.

Thank you. The committee might want to follow up on how that is taken forward.

The new deal states:

“The Strategic Review Group ... will provide assurance that Scottish and Local Government are maintaining all commitments set out in this agreement.”

What opportunities will there be for scrutiny of that group’s work? For example, will it be required to publish progress updates at regular intervals?

First, the strategic review group is not new—it involves the Deputy First Minister and the COSLA president meeting to look at, generally, all matters of shared interest. The outputs from that would probably normally be scrutinised through other parliamentary channels rather than directly through that channel.

The strategic review group was actually established following the previous Scottish Parliament election. The current Deputy First Minister was then the Cabinet Secretary for Social Justice, Housing and Local Government. She took the view that we needed to increase our formal engagement mechanisms to create a space for regular discussions about issues that were coming up; to provide an escalation route if things were challenging; and to have a focused space in which to discuss our key priorities, such as tackling poverty, and how we can work together to advance those.

The intention was not to replace any of the portfolio or thematic groups that already existed elsewhere, but to provide overarching dialogue and engagement. As part of the Verity house agreement, we took the decision that we need to continue that and bake it into the agreement.

Thank you. It would be useful if we had a flow chart to show how all those strands connect.

The Verity house agreement reiterates the commitment to incorporate the European charter of local self-government into Scots law. Could you outline the timescale in which you expect that work to be completed and any parliamentary timescales that will be needed?

12:00  

We remain absolutely committed to supporting Mark Ruskell in bringing his bill forward at reconsideration stage, and the Verity house agreement is absolutely explicit in saying that we are committed to incorporating the charter. In fact, the language used in the agreement draws largely on it. Just because the European charter has not been enshrined in domestic legislation does not mean that we are not allowed to meet the aspirations of the legislation. Clearly, that was an aspiration of the Parliament.

Mr Ruskell took the view that we should wait until the United Nations Convention on the Rights of the Child (Incorporation) (Scotland) Bill was taken forward for reconsideration. We have had that announcement, and we will now continue to work at pace to bring the bill back for reconsideration, but this is a complex issue and we need to make sure that we get it right. It is an absolute commitment, and COSLA raises the matter at virtually every opportunity, because it is important to local government that the charter is enshrined in law in future. I hope that all members agree that it is important that we take that forward.

That is helpful. It would be helpful if you could keep the committee updated on that.

Sure.

Councillor Heddle, do you have any response to any of the questions?

I think that the provision relating to place directors in the Verity house agreement is very useful, and it clearly relates to paragraph 6 in the same agreement, on community planning partnerships, which it says

“will be recognised as a critical mechanism for the alignment of resource locally, focussed on prevention and early intervention, and delivering our shared priorities.”

The paragraph goes on to say:

“Scottish Government will ensure that those public bodies that can contribute to community planning, play their part, including in involving local third sector and community bodies in promoting and improving wellbeing.”

That is where the place directors come in, because they will be able to support or encourage our agency partners to progress with aligning their budgets and policies in order to support the work of CPPs on place. The committee has already recognised the need for agency partners to be empowered in that respect, so this will be a key area for place directors to come in.

We agree with you, but it is important for the committee to consider the place directors’ scrutiny role.

Minister, can you say a bit more about your plans to conclude the review by the end of this parliamentary year? Is it still expected to result in the local democracy bill being introduced in the current session?

As Tom Arthur said in the previous evidence session, we expect to get the output of the local governance review by the beginning of next year—I think that “early next year” was the language that he used. A really important on-going piece of work is the “Democracy matters” conversation, but an equally important piece of work involves looking at single authority models, with Orkney Islands Council, Western Isles Council and, I think, Argyll and Bute Council looking at whether such a model will work for them.

As I have been going around local authorities, I have been saying to them, “If there’s something that, two years ago, you thought might not work”—which is where Argyll and Bute Council was a few years ago—“and you want to look at it again, do not hesitate.” Argyll and Bute Council is likely to come forward with a single authority model that it thinks might help it get sustainability. These things need to be worked through in partnership, and that will, I hope, allow us to make the changes. I do not expect these things to be carbon copies of one another. If we end up with three single authority models, I expect that each will be unique and will work for what is right for the area.

I know that other island authorities, particularly Shetland Islands Council, do not want to take the same route. Instead, they talk about the partnerships that they have developed under the current arrangements, and we would hold them up as exemplars.

There is a lot of learning to be done, and any changes that we make in this respect will be looked at by other authorities. I hope that, even if we do not end up with a single authority, the work that we have done in looking at the issue will help us to improve the sustainability of public services as a whole.

On the single authority model, when we were up in Orkney, we had very constructive discussions with the council about its plans in that respect, but I did not think that it was quite clear where, if councils were to move towards such a model, any future discussions on a funding formula would take place, especially with regard to health and council funding. Is any work taking place on what that might look like?

Work is taking place on the overall issue, but you are probably jumping three steps ahead of things. Clearly, though, that will be part of the work that will need to take place. Equally, we will need to look at how we might resolve the issue of accountability with regard to matters that are the responsibility of Scottish Government ministers. We will do that in the spirit of partnership enshrined in the Verity house agreement, and I hope that that will help us to take things forward in a way that works for everyone.

Thank you.

That concludes our questions in what has been a very useful session. It sounds as if it is a case of “So far, so good”—you seem to have a constructive relationship, and the trust is there. That is tremendous, and we look forward to getting updates on how things are going.

I thank everyone who has given evidence today, particularly the minister and Councillor Heddle for staying for such a long meeting. You did well.

At the start of the meeting, we agreed to take the next items on the agenda in private. As that was the last public item, I close the public part of the meeting.

12:06 Meeting continued in private until 12:20.