Chamber and committees

First, let me reiterate that that is a guide—it will not be the final budget or settlement for local government. When I pointed out what had happened at the previous comparable point, which was the 2022 spending review, I said that the figure for what, at that point, was a flat cash outlook, was £10.7 billion for 2026-27, compared to £14 billion now—a difference of almost £3 billion. Obviously, the flat cash outlook that was foreseen is not what transpired. The shift might not be of that magnitude, because that also takes into account what happened when there was a change of UK Government, when the Chancellor of the Exchequer reset budgets, because they had not been set in line with inflation. That resetting of budgets was very welcome. There is that element but, even setting that aside, there would still have been a material change compared with the spending review.

The other point is that the portfolio approach that was adopted for the spending review does not take into account the impact of in-year transfers. Despite the flat cash outlook, there will be in-year transfers that make that position look different.

Finally, there is the truth that, as in the rest of the public sector, there will have to be transformation and a different approach to the way in which services are delivered. The health service is being challenged to do that at pace, as are all our public bodies. Head count will need to be reduced for operating and corporate costs.

Local government will have to find its path and look at things such as shared services. The three Ayrshire councils are very far ahead on that; they are in advanced discussions about taking a fairly maximalist approach to sharing services across the three councils. Other groups of local authorities are looking at that, too, and some local authorities provide services for their neighbours, from which there have been considerable savings. That is before we get into digital, automation and all that. We want to support local government to up the pace of change, because the rest of the public sector is doing just that.

On the areas that you referred to, we have made a clear commitment on passing on health resource consequentials. We have put in additional funding to tackle waiting lists in the national health service, and that all flows through. Our social security legislation demands inflationary uplifts to social security spending, as agreed to unanimously by the Parliament, so some of the costs are fixed, if you like.

All I can say is that we will make sure that we work with local government on all those things, but local government will have to play its part in changing the way in which things are done.

As I said, I have provided more than £0.25 billion in extra revenue to support local services. I do not underestimate the challenged financial environment that everybody is facing. However, if we look at the settlements for local government over the years, that is a pretty big increase in completely discretionary and flexible funding. Actually, I think that it might be one of the highest general revenue grants—

The targeted revaluation is only at the higher end, to create the two new high-value property bands. That is not being done to replace the consultation on wider reform and transformation in how local taxation is to be taken forward. I am still keen to build political consensus on that—that still stands.

I guess that our policy builds on the mansion tax proposals down south. Given the different property base in Scotland, we have taken the view that it would apply to houses with a valuation of over £1 million. That would make the system fairer. We know that the difference in council tax liability is not fair, the further people go up the bands proportionate to their income. Creating the two new high-value property bands will help to make that fairer while the wider consultation is on-going.

The measure will not apply until 2028, so there is time for discussion with COSLA and local government about how it will work in practice. They may wish to consider distributional impacts. Clearly, some local authorities will be bigger beneficiaries than others. It is up to local government whether it uses a different distribution formula to take account of that, but there is plenty of time to discuss that and work it out. The revenue estimates from all that will be published once the policy is finalised, but the aim will be a fairer contribution from the highest-value properties. Local government will get to keep the money, unlike the position down south.

I will bring in Ian Storrie in a second. My understanding is that part of the issue, or the stooshie, if you like, down south has been because the Covid supports have come to an end, which is where the 40 per cent relief for the RHL sector emanated from. The sector ended up with an equivalent relief of between 10 and 12 per cent, I think, for permanent support—it is not based on the same system, but that is the percentage that it translates to. We have done an analysis on various sectors both north and south of the border and it is fair to say that our offer of 15 per cent compares reasonably well to some of the reliefs.

I should also say that the permanent change in England has been subsidised by an increase in the very high property rates in the city of London. They are able to garner a lot of additional revenue from that, but we do not have that property base in Scotland, so we could not have the equivalent. Our reliefs are having to come out of the public purse, rather than being subsidised by very high property rates. It is very important to put that on the record.

Within the percentage increase, is there a difference between retail, hospitality and leisure that may cut that 12.23 per cent?

I think that it is part of the overall commitment to sport. I will bring in Ellen Leaver in a moment, but I should correct myself and make it clear that this is not a one-off but a multiyear commitment. It is an important intervention with regard to safety and other such issues.

It is part of the wider sport offer, Ellen, isn’t it?

But it will mean additional funding for local government that currently is not in the local government settlement. This goes back to the point that when we have policy development—whether in the child poverty space or the sport space—a lot of the funding will find its way to local government once agreements are made on delivery and what will be delivered. That is a good example of why local government funding can be more complex.

We want to get to a sensible arrangement without too much red tape around it. We want to keep things as straightforward as possible. A lot of delivery will be done through school provision. The outcome is the important thing, and that is making sure that kids learn to swim.

We have tried to learn about what worked from last year. The process has to be on the power of the proposition. There is no point in scattering £30 million across the place and letting a thousand flowers bloom; it has to be about those who have a proposition and can show how it could be done.

12:45

We have been having discussions with, and giving encouragement, to local authorities that we think could benefit. With, for example, the Falkirk, Clackmannanshire and Stirling scenario, we have been in discussion with the councils for quite some time and have been encouraging them to think about such an approach. After all, one of those local authorities is one of the smallest in Scotland, and it has a fragility, because of its size and capacity.

There are, for sure, some really good people within that local authority, but the issue is the scale, and there has to be collaboration with neighbours. That council is up for it, but it needs the others to be willing dance partners in order to get on with it.

There is a lot of scope here. The invest to save money is only to oil the wheels—the momentum has to lie with the local authorities themselves.

We put that table in for that very reason—so that we could point to it and say, “Here is the position.” I have been really clear about the employer national insurance contribution and the pay issues. Between them, we are talking about more than £250 million. However, if we compare the budget to the ABR, those two elements—a quarter of a billion pounds, in-year—which came after the budget was published, will shift the comparison. Further, we do not know what additional funding may end up coming through in 2026-27. We have to have a fixed point in order to compare like with like.

With other budgets, it is more straightforward. Although there might be a little bit of in-year movement, it is not of the magnitude that we have with local government. It is around the edges, and that is fine. However, for local government, in-year movements are material, which is why we have tried to set that out.