Chamber and committees

First of all, I recognise that back-office functions, as we describe them, are of course critical to front-line delivery. However, there is sometimes the ability to share some of those functions. In the local government space, each local authority, to a greater or lesser extent, has people who are there to support the education function, the corporate function and various other functions of local authorities.

One question is whether those functions could support, and be shared across, more than one local authority. That is being done. Aberdeen and Aberdeenshire councils already share some education support functions. In the west of Scotland, there are shared services around waste management, where one local authority is contracted to another to provide those services. That has saved a lot of money. My point is that we need to see that everywhere. We see good practice but, if it was to happen everywhere, what would that look like, in terms of making sure that the money that is available can sustain the services that need to be sustained?

I go back to the demographic challenge. On social care, yes, there is a requirement to change how social care is delivered, and there is scope to do that but, given those demographic challenges, that budget will not reduce; it will have to continue to increase. If we accept that, we need to look at how services are delivered. Willing volunteers are now coming to the table who want to look at that. It is tricky, because you are talking about giving up a bit of power, trust, accountability and all of that. However, some local authorities have got on and done it, so it can be done.

The pot that we announced is just shy of £30 million, and bids have come in from across the public sector. As I said, the criteria would give priority to reform in areas such as digital, shared services, upstream prevention and so on.

I would welcome bids that take a place-based approach and involve, for example, corporate functions being shared with other public sector bodies. Issues with some governance arrangements would have to be overcome but, if back-office functions can be shared across more than one public body, I am all for that.

On estates, we must recognise that working patterns have changed—you mentioned earlier the effect of Covid—and people are unlikely to go back to the working practices of the past. That means that the estate can look different because people are working differently, and there are huge possibilities around the sharing of space, with people coming together to provide services all under one roof.

We should not think about this just in sectoral terms. If people present us with good, fully worked-through ideas and can show that they will make savings and can be delivered, we are all ears.

I recognise the point that Meghan Gallacher is making about council tax payers and fairness. I point out for context that the provision in the budget for local government did see a further real-terms increase in funding in 2025-26, after increases in revenue funding in both of the past two financial years. It is not just us who are saying that; that has been independently verified by the Accounts Commission. As a longer-term context, the total local government finance settlement has increased by almost 50 per cent between 2013-14 and 2025-26. That is the background context.

I should say that I fully recognise that costs have increased for every part of the public sector. The role of inflation means that everything costs more, and of course pay has increased because of inflationary pressures. I absolutely accept all of that.

We said to local government that, because it was a reasonable settlement, we hoped that council tax increases would be kept to a minimum. There was a real difference in council tax rises across the country, as I am sure Meghan Gallacher will be aware. We will set out our position on this at the budget, but you have heard this morning from local government, which of course will argue strongly against any freezes or caps and will set out why it is against such moves. We have funded freezes and caps in the past, but we are also keen to give local government the flexibility that it requires.

We are also addressing some issues with particular local authorities—Meghan Gallacher mentioned one in particular. Some of our smaller local authorities have a fragility, and that is why we are keen to work with them in the reform space and to look at things such as shared services, where costs can be better managed by two or three local authorities coming together. We think that that is a good example of reform. The invest to save fund, which I am sure we will come on to, is there to help oil the wheels of such changes.

We will come to our conclusions on this, but we understand the impact on council tax payers, and that is why we gave that real-terms uplift to local government over the past few years.

I am sorry to interrupt. We all need to set out our principles. I have set out two principles. The first is that we would not support a proposal that would lead to a significant increase in council tax in any particular area, and the second is that any proposed solution must be revenue neutral. I am keen to hear what other parties’ principles are. I would like all the various principles to be set out honestly and openly, because I would like to find out where there might be some landing spaces, given the principles that we have all set out. I have set out my principles.

Beyond that, I am willing to look at where there might be a landing space for us to make progress. In the past, the process has stalled because we have not been able to reach enough political agreement on some of those principles. Every party has an opportunity to respond to the consultation. COSLA will meet every political party. We have a chance to develop our own policies in the manifesto space, but let us start by setting out our principles. I have set out two, and I am keen for other parties to set out their principles.

A significant increase is an increase that is unaffordable, astronomical, high or unreasonable. It is not possible to put figures on it, but we all recognise that we do not want to hike up people’s council tax simply because they happen to live in an area in which—through no fault of their own—there have been big increases in property values. For example, I would not support a proposal that would penalise people in Edinburgh and the Lothians simply because there happen to have been big increases in property values in the region.

That is an example of the type of details that we would want to work through. We would want to consider what “reasonable” means and what the mitigations would be. One option would be to mitigate over a number of years any increase in costs that people might face. If we were able to reach an agreement on a particular system, we could mitigate any such increases by means of a transition over a number of years that meant that those increases were modest and not significant in any reasonable person’s estimation.

However, we are miles away from being at that point. At the moment, we are having a debate with a view to finding a consensus, instead of trying to find areas of division by challenging one another on what we intend to do and outing one another as wanting to do this or that.

Incidentally, the example that one of your colleagues highlighted this morning involved an increase at the extreme end of a 14-band model that I have not agreed to—it is an option, but I have not agreed to it—which would affect properties worth more than £1.8 million. No one should start from the position, “This is what you’re trying to do.” I am not trying to do that; it is not my proposition. It is genuinely the case that, the more we try to do that, the less chance we will have of finding common cause and doing something about the 1991 property valuations. Let us not start with areas of division but try to find areas in which some principles can be set out on which we can agree. That is my plea and suggestion.

I will begin by agreeing with something that Meghan Gallacher said earlier this year. She said:

“I agree with Graham Simpson that it is absurd that we use valuations from 1991 … A wider piece of work would need to be undertaken … which would need to decide whether to introduce legislation on council tax reform.”—[Official Report, Local Government, Housing and Planning Committee, 6 May 2025; c 61.]

Therefore, we all seem to be in a space in which we agree that it is not correct for us to use the 1991 valuations, but we should not go straight from that to saying that we will put up council tax for people on the higher council tax bands, because that would immediately break any potential consensus.

I said earlier, and I repeat, that we would not be in favour of a proposal that, on its own, without any mitigations, would lead to a significant increase in council tax in any particular area. That is our starting point. We do not believe that the council tax of people in any particular area or on any particular council tax band should increase significantly. If there were to be changes, there would have to be mitigations over a number of years that would smooth out those changes.

We could go for a local revaluation, in which the starting point would be to reflect the higher prices of homes in that area. We could do that rather than have a national revaluation. That would take account of the point that has been made in relation to Edinburgh and the Lothians in particular, which I am very sympathetic to.

Rather than moving straight to a debate about whether we are going to do one thing or another, I point out that I am not advocating anything. I have said that we do not endorse any of the potential solutions that are set out in the consultation, for the very reason that, if we were to set out our position, someone would immediately disagree with it.

I am neutral and agnostic on what the solution is here, other than to say that I adhere to the principles that I have set out—that there should be no significant increase in council tax in any particular area and that any solution must be revenue neutral. Beyond that, I am up for a discussion about whether we can find some consensus on a landing zone.

It will take a number of years. Revaluation itself would take three years, and that does not have political agreement.

The first thing to do—before we get into what we do—is to see whether genuinely people think something needs to change. I could read out all the Opposition comments: no party in this place has not said that.

The next question is: where might there be a level of agreement? We will not agree on everything, but where is the potential for agreement? That is where the discussion will be taken forward, by someone other than me, and the next Parliament could begin to shape and plot out over a number of years the changes it would make.

The IFS pointed out that we could give soft landings to any change in a number of ways over a number of years. Gradual transitional arrangements could span as long as we wanted them to span, so that any changes take place gradually over a number of years, but we need to have a starting point. I have been clear—because I do not want political opportunism to scupper this reform—that we have to have a starting point of agreement. Otherwise, council tax reform will get lost in the noise of political opportunism. That is the challenge, and we are keen to hear what people have to say.

As you pointed out, we consulted on the matter, and we are looking at primary legislation on a general power of competence or something similar. One option would be to use the local democracy bill that is currently planned for year 2 of the next session of Parliament, but I recognise that that is quite far down the line.

Given that timescale, we are looking at more immediate measures that could be introduced through secondary legislation in the current financial year or early in the next financial year to deliver greater empowerment for local authorities to innovate while we consider future primary legislation. I am happy to come back to the committee with more detail.

We know from talking to local government that it is keen to have some of those flexibilities. During today’s session, we have talked a lot about revenue raising. We recognise that there are some commercial opportunities in areas that local government operates in where there could potentially be options for them to take forward within a framework. Work is on-going on that. I do not know whether Ellen Leaver has anything to add.

We absolutely must be proactive and think differently. That requires leadership at all levels and it requires a willingness to do things differently. We need to oil the wheels of that, and that is why we have the invest to save fund, which is in its first iteration. I put it on record that I am keen for that to be a strand through the spending review, as it can be a supportive vehicle for further change.

We are not starting from scratch on reform. Over the years, we have seen major reform in the justice system that reduced the number of young people being prosecuted in adult courts. We have seen investment in childcare, which helps parents to get back to work. We have seen the reform of policing with the introduction of a single body that has demonstrated the ability to respond, particularly with serious organised crime. In local government, we have seen shared services in many parts of the country.

However, we are only scratching the surface of the potential. We must all realise that reform is not a nice to do; it is absolutely fundamental, because the spending outlook is very tight indeed. We therefore need to look at the investment that is already in the system, whether it is for local government or health and social care, and consider how we maximise the resource that goes the front line. We need to do things differently through automation and digital to ensure that the money goes as far as possible and we continue to provide good-quality services. That is the challenge.

We can see great examples of that being done and efficiencies being created so that the money can be reinvested. I want the savings through the invest to save fund to be a catalyst for more transformation across the public sector, as there is far more scope.

There is always the coalition of the willing. In every part of the public sector, you always get those who are first out of the starting blocks and you then get those who are a bit slower to come to the table, but the whole public sector needs to go in that direction.

It is a complex formula that is designed to make an objective assessment of need. It uses the most up-to-date information and looks at indicators such as population, which you referred to, as well as rurality and deprivation.

The formula is kept under constant review, and is agreed with COSLA on behalf of the 32 local authorities, which sometimes have 32 different interests. That is the challenge. Trying to get everybody to agree changes when there will be winners and losers is incredibly difficult. I am always open to suggestions about how we can improve the funding formula, but any proposals for change need to be generated through COSLA in the first instance, and we need to try to come to a consensus that recognises some of that.

We have tried to work with local authorities in different ways through things such as the whole family wellbeing fund. We are working with local authorities to try to address deprivation and do upstream prevention work, and some funding streams try to recognise some of that. We have also worked with our island authorities to recognise some of their needs and costs. We have tried to do that directly with island authorities.

We have recognised some of the challenges. However, on the core funding formula, if I was to pitch up and say, “I will decide,” I can imagine that I would hear 32 voices, some of which might be happy and some of which would definitely not be happy. I come back to the point that there is always room for improvement, but it would certainly not be in the spirit of the Verity house agreement if I were to overrule local government consensus on the issue. However, we continue to discuss the matter. Around the edges and around some of those other funds, we might be able to address some of the issues that you have referred to.