Chamber and committees

I am very aware of that, and it was a difficult decision. We thought long and hard about the options but, given that the UK budget is so late and given the requirement for the Scottish Fiscal Commission to provide the critical information and analysis that it provides, it was not going to be possible to do that in a shorter timeframe.

I referred to unknowns. We do not know whether there will be changes to taxation at the end of November that could impact on the Scottish Government. Those might add a layer of complexity as we might require to take some time to analyse and come to our conclusions on them. The timeframe is unfortunately challenging.

I have been engaging with political parties around this, and I am keen to continue to try to see if we can reach early agreement around the draft budget so that any changes beyond that are not major. If we are able to do that, that will give local government more clarity about the envelopes that it can assume, which will allow it to plan and move forward on that basis. However, it will require the good will of other parties to reach more or less the landing space for the draft budget, with only minor changes beyond that. I am engaging in good faith with Opposition spokespeople on that basis. So far, discussions have been quite positive, so we will see where we get to with that.

I reiterate the fact that there has been a real-terms increase to local government funding against a difficult financial backdrop across all public services. I cited the figures earlier; those are independently verified by the Accounts Commission, which confirmed the real-terms increase. However, the whole public sector is facing pressures from inflationary impacts on the costs of delivering every single service, whether by local government or the health service. Of course, pay, too, is driven by inflation, and we have been working with local government to navigate that challenge.

I should say and put on record that I very much recognise and value the significant contribution that all local government workers make to delivering public services across Scotland. I am pleased that we have managed to support local government in getting to the fair and affordable two-year pay offer that COSLA made earlier in the year. That will give some stability and the opportunity for local government to engage with staff around the reforms that they might wish to take forward in local government. We have given funding flexibilities and additional funding to help COSLA to make an offer such as that and to prevent costly industrial actions. We have been working with local government, with a difficult financial backdrop, to manage the issues.

In the spending review, we as a Government will set out our choices and the envelopes that we think are affordable and appropriate for all parts of the public sector. The Scottish Fiscal Commission has challenged the Opposition parties to set out their envelopes as an alternative if they feel that the envelopes that we set out are not adequate to meet needs, whether in local government or health. Those alternatives would mean difficult choices, but those choices are there for others to make. We will set out our budget envelopes, and we will be judged on those.

The whole public sector is having to reform, which is why we have set out a clear reform strategy. Doing things in the same way as we have always done them will not be sustainable, which is why we have such a focus on public service reform. We recognise the issue and need to ensure that, through reform, the funding goes further. Of course, local government will have to play its part in that, as well.

It is very close. We were pleased to see local government represented at the Minister for Public Finance’s recent PSR operational summit on 14 October, with more than 140 public service leaders attending. Local government is absolutely at the heart of the reform agenda, in terms of not just local authorities’ relationships with one another but, as I said earlier, their relationship with the wider public sector. There is real scope for sharing back-office functions, support and estate—perhaps taking a place-based approach in that. Progress has been made, but loads more can be done in that space. I assure the committee that local government is very much at the heart of things, which is exactly where it should be.

Transformation means that services need to be provided in a way that maintains service quality but looks to deliver things more efficiently and effectively and makes resources go further.

I have mentioned already the opportunity for shared services; I am thinking, in particular, about those areas in which it is difficult to recruit—areas that come to mind include planning. There are already good examples of local authorities sharing waste management services and back-office functions. There are many opportunities to do that.

On the use of digital, from the first round of the invest to save fund, there are good examples of local authorities’ digital solutions. Glasgow City Council, for example, received £100,000 for its smart and connected social places programme, which looks at digital solutions to enhance public services and deliver efficiency gains in housing and health and social care. Perth and Kinross Council received £500,000 to reduce energy costs and deliver a reduction in environmental impact. Falkirk and Clackmannanshire Councils were given £2 million to look at closer collaboration and shared services. There are many other examples from the fund. Those areas are ripe for looking at.

I should add that that work does not just need to be between local authorities. Transformation can happen within local government and health, and the single authority model is being looked at in some areas of the country, particularly where the health and local government boundaries are coterminous; other public sector bodies within the localities are also being looked at.

The trajectory of funding and all the pressures on public finances is what we need to consider to ensure that public services can be sustained going forward. Every part of the public sector is having to look at this.

I am happy to do that.

COSLA and local government in general have an important role to play through the Improvement Service. The whole idea of the Improvement Service was that there would be collaboration around good practice, because why would you not want to roll that out?

This issue is not particular to local government—I have also seen people in the health service not wanting to do something a certain way because that approach was invented elsewhere. Also, it is true that change is difficult, and sometimes there are barriers to change. However, that is no reason not to do it. If another local authority, health board or whatever has shown that a service can be delivered in a way that is more sustainable and cost effective, why would you not want to do the same? That is the cultural change that is required, and leadership will be needed to ensure that that happens.

I do not believe there is any part of the public sector that cannot be improved and transformed, particularly given the tools that are now at our disposal in terms of digital technology and automation. We can do things differently to help to release resources and people to do other tasks.

Let me make some high-level points first.

The consultation sets out a range of options. I have been clear before and I will be clear again that none of them is ours or endorsed by the Scottish Government. The consultation is putting out choices to see whether there is a potential political consensus to be built.

I was looking at some of the comments, and I note that every single party in the Scottish Parliament has said that continuing with valuations at 1991 levels is not sustainable or correct. The question then is what we can do about that and whether there is a landing space for doing things differently and taking forward reform.

It will take a lot of time, and we have talked about at least a decade for substantial reforms. Some things could be done sooner than that—around the number of bands, for example, even within the existing valuation system.

Looking at a couple of the headlines this morning, can we agree on what changes should happen? There has been some predictable political opportunism and misinformation—if I can say so—from some outlets. Does that bode well? I guess that it is a question of whether we are up for a serious discussion about reform. We could go for another decade without any change if there is no political consensus to do something.

Let me take the opportunity to reassure the public. One clear principle that we have stated is that any proposal that on its own would lead to a significant increase in council tax in any particular area would not be acceptable to us. We would not support that. Some of the lurid numbers being bandied about based on a consultation do not help to inform the public.

The work the IFS has done is good and factual. The options are in the consultation, although we could look at other options such as local revaluations. They are far more complex to do but they would address some of the issues such as the increase in property prices in Edinburgh and the Lothians, as each area would take as a starting point an understanding of its growth. That is more complex to do, but it is an option. Frankly, if there was a landing space around such an option, it would merit further discussion.

I point out again—because of the misinformation—that our position and our contention as a Government is that any exercise should be revenue neutral. The idea that council tax reform is some mad revenue-raising approach from the Scottish Government to take people’s money could not be further from the truth. One principle we would not budge from is that the reform has to be revenue neutral. It is not about raising more money; it is about having a system that is fairer.

The consultation is out. We are keen to hear what the public have to say, and we are keen to hear what other parties have to say. I know that COSLA is engaging with each of the parties as part of its manifesto development for next year. That can only be good. The report will come out next year on the back of the consultation, which will end at the end of January, and it will then be for parties to decide what they do with that and whether they put forward a proposition in their manifesto. Then the public will decide and judge how important they see it as an issue.

In truth, it will be for Parliament in the next session to look at whether there is a landing space. This consultation is putting out options to see whether work can be done to create a landing space in the next session of Parliament.

Yes. As the fund evolves, the situation will not be fixed. We will learn lessons from how this first tranche of funding has been delivered and will consider what impediments there have been and whether anything needs to change with regard to flexibility. We are not set on having exactly the same arrangements again. We want to encourage people. As I said earlier, I am keen for this to be seen as an on-going process, not as a one-off event. Transformation will take many years and so we need to make sure of our support for what needs to be done.

The process involves more than just that fund. The Improvement Service has a huge role to play, as do SOLACE and all the professional advisers. That support for transformation can come in the form of funding or it can come in kind and through the use of the expertise of those who have already gone through the process and can share their practice. Glasgow City Council has done good work around reducing the number of children in care, for example, and I am aware that a lot of local authorities have been knocking on Glasgow’s door to find out how that was done, because they see the value of reducing the number of children in care and of doing things differently.

Thanks for the opportunity to come to the committee to talk about reform and associated matters, the budget and anything else that the committee may wish to ask about.

I understand the value and importance of multiyear envelopes and having a line of sight on the funding over the spending review period—not just for local government, I hasten to add, but for other parts of the public sector and third sector organisations as well.

We have not been able to provide that before because we have had only single-year budgets and, therefore, it has been incredibly difficult. We will, of course, have to wait for the autumn budget at the end of November to know whether any changes to spending review assumptions will be set out by the UK Government, and whether those will have any unknown impact on our assumptions going forward. There are a lot of caveats to the size of the pie to consider before we start to discuss what that looks like over the spending review period.

I understand the importance of flexibility. Prior to the 2025-26 budget, ring fencing had been removed, but the 2025-26 budget delivered a baseline of a further £524.9 million of funding. That is almost £1.5 billion in the past two years, which was prior to agreement on an assurance and accountability framework, because those two things go hand in hand. We give flexibility, and there are areas in which there are clear Government and, most often, joint objectives, but we need an assurance and accountability framework to make sure that all those things are delivered, because ministers in this place will be asked about the delivery of key areas of policy that are delivered primarily by local government.

I am keen to look at how much further we can go on that and to work with local government to see whether we can make further progress.

Indeed.