Chamber and committees

Yes, potentially. It is a good point on police and fire pensions, for example. We have finally managed to get agreement to move funding into AME. We were carrying all the volatility and all the risk, so we have been able to shift that into AME, which gives us no fiscal benefit apart from future proofing against risk. It is a good thing, and we have moved forward with that.

Your point is well made. Although there have been constraints, UK Government departments have traditionally relied on reserve claims. I understand why the new UK Labour Government has put in place some pretty rigid restrictions—we had the chaos of the previous UK Tory Government underfunding budgets and relying entirely on reserve claims, and we ended up having to have emergency budgets because we found out what funding we had only late in the day. Those changes are welcome, but the fundamental point remains that, when we consider the peaks and troughs in the spending review outlook—2027-28 will be particularly difficult—the only lever that we have been able to deploy has been the one that we have created ourselves: the ScotWind fund.

I will bring Ellen Leaver in to say more, but we have regular discussions with COSLA and with individual local authorities. For a number of years, we have ensured that we have a clear picture of any individual local authorities that are in more difficult situations than others. We have some very small local authorities and, without getting into the reasons why local authority boundaries are as they are, a small number of authorities have council tax bases that make it very challenging indeed to provide the range of services that are required by an authority of their size. We have been working with some of those authorities to look at how they might share services with neighbouring authorities and we have supported some authorities with ambitious change programmes. Local authorities are not all in the same position. Some can make economies of scale.

Of course. I will make sure that the cabinet secretary for culture is aware of the discussion that has taken place this morning about those matters, as we will do for any issues that have come up for other portfolios. I am sure that you will make the most of the opportunity on Thursday morning to address those issues in more detail.

I have taken the view that it was important to set out the funding in the draft budget. Is there a wad of cash somewhere that has not been allocated? No.

One reason why it was important to engage with the Opposition in the lead-up to the draft budget was to try to reflect the key things that were asked for in it—although not everybody’s asks will be reflected and we cannot meet all the demand. I have tried to do that, particularly with what the Greens and the Liberal Democrats asked for. Those elements are all reflected in the draft budget.

We have engaged with local government on the potential for delivering complex care in a different way. One problem for health and social care partnerships is unforeseen high-tariff packages coming in, which can be costly for health and social care partnerships. They can slow down the process of the person coming out of hospital, because it is known that the package will disrupt the assumptions that have been made. Sometimes, those people do not have the best experience of getting back into the community, and they do not always get the package that they require, given their complexities.

Therefore, Neil Gray has embarked on discussing with COSLA whether we could deliver complex care in a different way, where the Scottish Government supports a split with local government on some of those high-tariff packages. The criteria would need to be set out very clearly—a high bar would be needed—but we could support the costs on an agreed split to avoid those disruptive, eye-wateringly high-tariff packages.

Most importantly, that would be better for the people involved, because they could be supported to get home, into the community, or into an appropriate setting more quickly. Delays in that area are some of the longest delays in hospital. There is more work to be done, but the principle is that we could support that.

This is maybe an answer that you were not expecting: on whether there is a wheen of money in a sofa somewhere, the answer is no, but we are talking to local government about supporting them in the social care space in a way that can avoid the expensive packages all falling on local government.

I will bring in Ellen Leaver, as that also relates to the position on capital in 2025-26.

In recognition of the capital constraints, I have been keen to reach what I guess you could call accelerator deals with individual local authorities on infrastructure priorities. We have been quite successful in doing that in the past. We have a very successful example in Granton, here in Edinburgh, and we are considering working with West Lothian Council on Winchburgh station. We are considering the three island authorities’ essential infrastructure investment.

It is essentially by using local government borrowing that we will provide support, with other funding streams coming into play, and build a package to help address the constraints in capital by growing the pot in those ways. I have been clear with COSLA that I am open to considering what else we can do in that space.

I will bring in Richard McCallum on the detail but, as I said in my opening statement, we have the overall position of what we call the taxonomy of the climate-moving elements of the budget. That level has gone up—it is above £5 billion now and it covers, across government, the areas that will make the difference in terms of the investment.

I invite Richard McCallum to provide a bit more detail.

I will certainly make sure that the committee gets that documentation. It lays out a significant amount of detail. The backdrop of capital declining by 0.3 per cent over the spending review period is challenging. As I have said, with the infrastructure investment pipeline, we have tried to be clear about those projects that are moving forward. We are also trying to be innovative in other funding streams to grow that envelope because relying on the capital departmental expenditure limit alone is restrictive, given the fall-off of capital.

That is why we are looking at revenue finance—in the primary care space and the college estate, for example—to try to grow that pot, because of the very point that you are making about the importance of infrastructure. CDEL is going to decline over the course of the spending review and that is reflected in what can be done by when.

I have sympathy for you on that point. We know that construction inflation is running higher than GDP. In October 2025, annual construction inflation was at 4.4 per cent, and that builds on all the other increases over the years, especially the post-Covid years.

That impacts on bangs for bucks. Every £1 million that is invested in infrastructure buys significantly less now than it did 10 years ago. Every Government is facing that reality, which is why we are trying to grow the pot by looking at revenue finance.

08:45

I will come on to those points, because there was a lot of detail in there but, first, I point out that all commentators have acknowledged that there is a real-terms increase. There is a difference of opinion on what the real-terms increase is, and I am very happy to set out why we say that it is 2 per cent.

I draw your attention to what the Scottish Parliament information centre has said. As in the past, it has said that, if you compare budget to budget, as we should, because of the in-year transfers, you find a cash and real-terms increase to the overall revenue allocation to local government. All that is set out in table 4.15, which shows that the overall settlement increases by £650.9 million. That is a cash increase of 4.3 per cent, or 2 per cent in real terms.

The reason why it is difficult to compare to the ABR is because of in-year transfers. In 2025-26, we had in-year transfers of £144 million for employer national insurance contributions and £109 million for pay. If you compare the budget to the ABR, the ABR will of course be inflated because of those in-year transfers of resources.

There might well be in-year transfers of resources for 2026-27, but we do not know that yet. That is why we contend that, for local government, because of that flow of funding in-year, some of which can be predicted and some of which cannot—no one predicted the employer national insurance contribution issue—we should compare budget to budget, as SPICe has said should be done. It is important to recognise those two elements of in-year funding on ENICs and pay in 2025-26. SPICe has recognised that.

That is why my contention is that there is a 2 per cent increase in real terms, when we compare this budget to the 2025-26 draft budget.