Chamber and committees

That is in case the date changes.

The council tax position in England has been set out previously. On the future position, there has been more flexibility on council tax setting here. We have moved away from the freeze that was previously in place and councils have more flexibility on the rate that they set.

The financial challenges that local authorities face are the same as those that are faced by the public sector more broadly. The policies that we have put in place on issues such as the attainment challenge funding and pupil equity funding have been important levers.

Dundee City Council has put in place an extensive package to support people through the cost of living crisis. For example, the food insecurity network provides for and supports organisations that are literally putting food on people’s tables. In tough times local authorities have to make tough decisions. However, looking to the future, that is one of the reasons why we need the new partnership agreement and the new fiscal framework with local government.

There are two aspects to that. First, local authorities need more flexibility in how they spend their money, so we need to reconsider ring fencing. That does not mean that all ring fencing will go overnight, but we acknowledge that local authorities have lots of pockets of funding, all of which have to be reported on and some of which are very constraining, so that probably does not make a lot of sense. The partnership agreement will set out the principles of how we will work together, and the fiscal framework will set out details of how that will work.

Our giving that flexibility will mean that local authorities will, over time, have more levers at their disposal. That is the second aspect. I am keen to work with local authorities to find out what other fiscal levers they might wish to have. A few relate to second homes, empty properties and a visitor levy, but there might be other levers that local authorities want to discuss, and I am keen to have that discussion with them.

It depends on whom you speak to, though. Stakeholders who are recipients of care are really keen for progress to be made on things such as national consistency, standards and other improvements. Where challenges exist, local government’s view is that it does not want to lose control over the service that it provides. I think that we can find a way forward through all that. I guess that the money that is required will relate to what the service will look like and what the timeframe for its delivery will be; we have to get that bit right before the money comes into play. I suspect that there will need to be a new financial memorandum, which will, of course, be there for all to see in advance of stage 1.

We are discussing the review, which is imminent, with the UK Government, but our priorities as we head into it are to ensure that the block grant adjustment methodology continues to protect the Scottish budget from potentially slower population growth in Scotland, which is important; to secure greater budgetary flexibility and the appropriate and required budget management tools more generally; and to retain protection from economic shocks that affect the Scottish and UK economies equally. It is about ensuring that we have the appropriate suite of policy levers and that we are not unduly exposed to risks outside of our control.

Those are the starting points. As the committee will appreciate, it is a negotiation, and negotiations require give and take both ways, but those will be the central areas on which we will require to see progress. Whether we can get something in place for next year’s budget depends on those negotiations, which we are entering into in good faith.

The committee will also appreciate that negotiation requires a private space, which the UK Government has very much asked for. However, once that negotiation has reached a certain point, I will obviously want to provide more information to the committee, and to Parliament more generally, as soon as I am able to. However, that can be difficult. I guess what I am saying is that we cannot have a running commentary on a negotiation.

I will ask officials to come in on the pilot.

It is fair to say that pay negotiations are quite often not just about pay; other elements relating to terms and conditions will be brought in. The four-day week has become far more of a live issue, not least because people’s ways of working have changed. Many more people work from home. I go back to Michelle Thomson’s point about productivity. It is not just the public sector that is looking at the issue; some private businesses are looking at it, too. Essentially, if staff can maintain or improve their productivity over four days rather than five, why not give that flexibility to them? The issue is current, a lot of employers are considering it and there is the public sector pilot. Does Alison Cumming want to give an update on that?

The leadership role sits with each cabinet secretary to look at all the programmes in their area, check them against the core missions and consider how far they go in delivering the objectives. We then look collectively at all that and think about what the picture tells us and what decisions we should make in the light of the challenging financial outlook and the need to reduce poverty, deliver on net zero, have sustainable public services and ensure that our economy is as vibrant as possible. We need to work through all that, with the initial phase being the leadership role that each cabinet secretary applies to it.

We are still in discussions with His Majesty’s Treasury about a suitable date for publication of the report. As it was jointly commissioned, we will obviously need to agree jointly the publication date, but we are committed to publishing it. There is no question about that—it is just a matter of when.

We are in the foothills of those negotiations; they are imminent, and we have been having correspondence backwards and forwards to try to shape the discussion. I am keen to be as open as I can, but I am mindful that the negotiation is quite tricky. We have our asks, and the UK Government will no doubt have its asks, too. However, I give a commitment that I will try to provide the committee with as much information on the detail as quickly as I can.

In 2022, the Scottish economy grew by 4.9 per cent compared to 4.1 per cent in the UK. The latest ONS data—it is not just the SFC that says this—show that earnings are growing faster in Scotland than they are in any other part of the UK. I think that the annual growth to April for median earnings was 9 per cent in Scotland and the next highest was 8 per cent.

Scottish earnings are forecast to grow faster than those in the rest of the UK. As you mentioned, the SFC forecasts that average earnings will grow by 4.6 per cent this year, compared to the OBR’s forecast of 4.1 per cent for the UK. The SFC will have done a lot of detailed analysis of the Scottish economy, and we should have confidence in its forecasts.

Let us look at the tax data. I keep coming back to that because it is hard evidence—it is what we know. The provisional in-year pay-as-you-earn tax data for the first 11 months of 2022-23 suggest that growth in Scottish PAYE income tax receipts has outperformed that in the rest of the UK. That is not a forecast; it is actual evidence.

We are not being complacent—we have to keep an eye on the situation—but there is cause for some optimism.

Of course, but any forecasts always have an element of risk and caution. The HMRC data show a trend in actual, here-and-now evidence that gives us some cause for optimism that the forecasts will show that trend continuing. However, we cannot be complacent.

NRS and Scottish Water were set the same challenge as other public bodies—that of ensuring that they can live within their budgets, which are under strain. They therefore need to drive their own efficiencies and consume their own smoke, if you like. However, they also need to improve outcomes, and that is quite a challenge.

Scottish Water has carried out a huge programme of efficiency and reform. NRS is similarly focused on digital opportunities. They were not forced to do that, but they have had the leadership in their organisations to recognise the need to do that. We need to make sure that that work progresses at that pace, not at the pace of the slowest. There is an organisation that brings together the leadership of all the public bodies, and work is being done to share that best practice and to ask, “How did they do it? What did they do? How can we do it?”

Public bodies know that there is no option, given the financial outlook, other than to make sure that they get on with the reform that they need to do. It might look a bit different in each organisation, but some of the principles are the same, and that work needs to be done at pace.

Ultimately, ministers will have responsibility for oversight to make sure that that happens at pace. I have talked in bilateral meetings with my colleagues about the need for pace here. Ministers are aware of the need to ensure that every organisation gets to the point of being as efficient and productive as it can be and having the best outcomes for the people it serves.