Chamber and committees

I will check and come back to the committee—I do not remember what the figure was, but there was a lot of interest.

I have two things to say about that. First, those bodies might have been further advanced in their thinking to be able to put in the proposition, which had to be quite detailed and robust. Secondly, no part of the public sector is going to be able to stand back and say, “This is not for me.”

We are trying to build on the progress that we have made previously. We are keen to hear ideas and have discussions about where there might be landing space for support for the budget. There are relationships to build on from last year’s budget, when we secured the support of Liberal Democrat and Green colleagues, but we will continue to have discussions with others.

I am mindful that Mr Hoy’s colleague Liz Smith will be keen to get support for her Schools (Residential Outdoor Education) (Scotland) Bill, for example, so that may bring a different approach to the budget.

We will have to have an honest conversation with local government. I am conscious of the conversation that we have just had about the fiscal framework and about there being no surprises. The shared service space is a massive opportunity for local government, so there is a discussion to be had about what lies best where. Some activities might be best done on a regional basis, and some might be best done on a once-for-Scotland basis.

The same issues apply to planning, although that is a little more complex because of planning authority rules. We have developed the national hub to supplement the role of local government in planning decisions, because local authorities are all battling for the same people and fishing in the same pond of a small number of individuals. You see people moving between authorities.

To be honest, it would get me into some difficulty under the Verity house agreement if I said to local government, “You have to share services here,” but councils really need to begin to think about shared services. There are good examples, including waste management services that are provided by one authority to others, which has saved a lot of money. However, that needs to happen by default. Local authorities need to look at whether they can provide a service on a regional basis, because the fiscal position requires them to consider that.

We will continue to have such discussions. Trading standards is a good example of where we might be coming to the point at which there is no choice but to share the service, but we need to do it on a planned basis rather than as a result of service failure.

I am keen to continue to have those discussions and to look at ways of encouraging and incentivising such thinking.

We have had deep dives within each of the portfolios, looking at line-by-line spending decisions, including in the culture space. Those discussions are very active. Although there is an increasing profile of investment in culture, those organisations absolutely need to ensure that they are fiscally sustainable and are delivering value for money. For example, could they be looking at whether something could be done in the shared service space? Could the national performance companies share personnel? They need to look at all that in the same way as any other organisation would.

Creative Scotland is going through its review. It needs to be active on fiscal sustainability. A lot of organisations could be more effective at attracting private sector funding, for example, and it could support them to have the means to go about that. Some organisations are very effective in that area, while others are not. It could look at sharing best practice in attracting investment from elsewhere, as well as in organisations using the core funding that they receive. So, the short answer is yes; organisations should absolutely look at all of that.

I recognise the issue about the marginal rate. It is very difficult to do anything about it in the current climate, given how much it would cost, but I do not dismiss that.

The first thing to say about the tax system is that the more people understand it, the higher the compliance rates. There is some complexity in the system, and people do not always understand how the Scottish tax system is different, or even that we have a Scottish tax system and what that system is. We have been doing work to raise awareness of what the Scottish tax system is and what people’s obligations are, because we want to drive high levels of compliance with that system.

Aligned with that is the issue of stability. We have provided stability on income tax for the remainder of this session of Parliament. That will help people to manage their finances, and it will help businesses to plan and to make investment decisions with confidence, knowing what the future holds. That is why we made that decision.

I should say that, for the first time, the MTFS identifies areas of research interest on tax to support the gathering of evidence and the evaluation of tax policy, because we want to ensure that, whether on enhanced compliance, taxpayer communications or tax legislation, we have the best available evidence for future decisions. As you know, we are considering future reforms in relation to land values, in particular, and we have asked the Scottish Land Commission to look at that. However, those are matters for the future rather than the immediate term.

Earlier, I mentioned that we are looking at how to generate additional tax revenues, partly to ensure that our economy is growing. We have some good indicators on the Scottish economy, even though times are tough. There are UK Government policies, such as the policy on ENICs, that have had a dampening effect on recruitment and the growth of companies. The ENICs increases have definitely had an impact on vacancy rates. As a counter to that, some sectors in Scotland are doing extremely well. We want to make sure that, through NSET, our policies, our support and our agencies are facing in the same direction to help those sectors to continue to grow and to do well. Many of them do very well on the global stage, not just in a UK context.

That was a long-winded answer. We are looking at certainty, compliance and the growth of the economy.

My final point is that one lever that we do not have, which is critical to many of our sectors, is the one that relates to skills and migration. Many sectors tell us all the time that they cannot get the people they need and that it is more difficult for them to recruit from elsewhere. That is a major impediment.

On the positive side, we still have net in-migration to Scotland from the rest of the UK across all tax bands. That is a good thing, but we would like to do more in that space, because there are sectors that want to recruit.

Yes, absolutely. It is one of my busiest times.

That came up in our previous session. A further example is prioritisation within portfolios. For example, in the health portfolio, clear priority has been given to patient-facing front-line health boards that have received, and will continue to receive, a real-terms uplift, whereas non-patient-facing health boards have flat cash and a higher level of efficiency savings. We are saying, “Right folks, patient-facing front-line health boards need to be the priority. Other areas of the national health service will have to do things differently to drive efficiency savings, such as looking at shared services and so on.” Even within portfolios, we are trying to ensure that priority is given to front-line services.

The 20 per cent target for the reduction in corporate staff numbers is sending a clear message that corporate functions in the public sector need to be done differently. Staff numbers need to reduce and services need to use digital innovation and automation in order to release savings for front-line services. That needs to permeate through every part of the public sector and every portfolio interest. That is the principle of what we are working towards.

I recognise the importance of our further education and higher education sectors. The college sector received an increase in teaching funding in the 2025-26 budget—

Work continues on that, convener. There is a slight frustration in that we are in agreement on 95 per cent of the framework and a lot is already being applied in practice. I referred in the meeting four weeks ago to there being early engagement, an open-book approach and so on. Those are all principles of the framework. Most recently, the approach on local government pay was very much in line with the framework, so there is a little bit of frustration about not securing agreement to publish—although those discussions are on-going—because of the issue of rules-based funding.

I have been in discussions with the Convention of Scottish Local Authorities about the limitations of, and difficulties with, rules-based funding. The employer national insurance contributions issue is a very good example. If you stick to rules-based funding, it can be to your disadvantage when something such as an increase in ENIC arises unexpectedly.

We agree on 95 per cent of the framework. I hope that we can reach a position where we can secure full agreement and have a framework for the way that we do business. We can continue to discuss future funding formulas as well, but that should not stop us grasping and securing the progress that has been made, not least on the process around the budget, which I think local government itself has said has been the best for many years. We are still in the process, but I am hoping that we can get through it.