Chamber and committees

Yes.

No—that is not what I said. I said that we will create the headroom that we will need to enable us to progress our policies. What I do not know, though, is what else might transpire on the block grant in the future, and whether there will be changes to the outlook or to consequentials. Those are all additional elements that could be factored in, but we cannot assume any of them so we must, on that basis, set out what we know and how we will manage the fiscal position in the future.

The point that I am making is that there are things that we do not know that might have material impacts on what we set out. We need to manage that: impacts could be positive or negative. All I am saying is that that is a material factor. If we can set out our plans and say that we will do A, B, C and D but we then get to the autumn statement and something changes in a negative way, that will clearly have an impact on what we have set out.

I will make that point. The uncertainty does not help; it is really challenging all round. I commit to engaging with the committee as early and as much as I can, through the budget setting process for 2024-25.

There are two roads that we could go down. We could increase ministerial decision making over what local government spends its money on and increase ring fencing, or we could give local authorities more fiscal flexibility in deciding whether to spend more money on ASN teachers or other areas that they see as being priorities. We are at a crossroads, and those are the two routes.

My view is that giving local authorities more flexibility in their budgets will allow them to set the priorities for their local areas. Local authorities might well want to prioritise ASN teachers. However, we cannot have it both ways. In Parliament, we quite often hear calls for local government to have more flexibility in its funding, but there are then calls for ministers to be held to account for, for example, the number of ASN teachers or staff in each local authority area. We have to agree some fundamental principles, which will be set out in the partnership agreement and the fiscal framework.

On the overall local government settlement, I do not want to diminish the challenges that local authorities face, but we have to recognise that we have increased the resources that are available to local government in 2023-24 by more than £793 million. That represents a real-terms increase of £376 million, or 3 per cent. However, inflation and pay deals are impacting on local government in the same way as they are impacting on the Scottish Government, so we included £100 million in the budget to help local authorities with the pay deal for teachers.

It is not easy to wrestle with those things. There is no easy answer—if there was, it would have been done. We are at a crossroads, and my view is that giving local authorities more financial flexibility in how they spend and raise their money is a better road to go down than increasing ring fencing and Government direction.

I will maybe ask my officials to come in on that. The NDR is a hugely important and core part of local government funding, so we need to make sure that it continues to bring in much-needed resourcing. We have a strong package of reliefs, which is worth an estimated £749 million in 2023-24. Of course, there will be an important balance to strike on where we go with NDR in the future. That is why a consultative group has been brought together, under Tom Arthur, to look at how we go forward with NDR.

I assume that the 10 per cent increase is related to growth. Is that something that we should get back to the committee on?

As I said earlier, the lens that each programme will be examined through is the lens of the core missions. Do our programmes reduce poverty? Do they help to grow the economy in a sustainable way? Do they help us to reach net zero? Do they sustain the public finances? There will inevitably be a bit of political oversight of some of that. We will work through all of that.

On business taxes—you spoke about NDR—I mentioned the sub-group that is looking at NDR, which Tom Arthur is chairing. I guess that there is an opportunity to look at whether the supports are the right supports. Are there supports that need to be more focused? What does the business community itself feel and want as regards the priorities? Not everything is a priority and not everything can be agreed, so we need to get a sense of what the key priorities are and what delivers from the point of view of sustaining small businesses, which are the bedrock of the Scottish economy, and our key sectors.

All of that will be worked through. As I said, one of the key asks from business has been around maintaining the lowest poundage in the UK, which has been an important support for business.

At the end of this process, we need to reach a position that is balanced, that delivers on all those key objectives and that is affordable. Some quite challenging decisions will have to be taken. There are many asks of Government, from every stakeholder and every part of society. We need to land that in a space that is fair and consistent, and that achieves the objectives that we have set out.

There are also issues with regard to the use of the reserve and so on. We do not envisage air departure tax being part of the discussions. The issue of VAT and assignment has been around for some time, and a lot of work has been done on some of the challenges with assignment.

I would describe assignment as very challenging. Where assignments have no direct relationship to Scotland’s economic performance, we are really looking at a kind of statistical exercise, and that has inherent risks. We would be very loth to take all the risks without having any of the policy levers, so those discussions are on-going.

To be fair, the UK Government recognises the complexity of the issue and the risks. Therefore, we are trying to find a way forward that does not provide just another area of difficulty, and I am hopeful that we can get some agreement on that.

We will write back to the committee with details of why we think that that has increased, if that is okay.

If only we could!

You are right to point out that that was the position. The Scottish budget for 2023-24 set out that it is for individual public bodies to ensure that workforce plans and projections are affordable in 2023-24 and for the medium term. We are really looking for public bodies to ensure that their workforce numbers and models are within their financial envelopes.

If we were to take a policy of returning to pre-Covid levels across the whole public sector, that would be a bit of a blunt tool. In recognition of the fact that some areas of the public sector will, by necessity, have to continue to grow—the health service is one example, and social security, when it is delivering its programmes, is another—the policy needs to be more nuanced than that.

Essentially, we have said that public bodies’ workforce numbers need to be affordable within their financial envelopes. We have set out some workforce scenarios in the MTFS, with low growth being 0.3 per cent and high growth being 2.2 per cent. That is in recognition of the fact that some parts of the public sector will continue to grow. The approach is more nuanced. However, the overall message is that the public sector must ensure that its workforce is affordable and that projections are within the financial envelope.