Chamber and committees

Thank you for the question, as this is an issue that local government has raised with me quite frequently.

I want to make two points, the first of which is that we are waiting for the outcome of the review to try to provide local government with certainty now. There was a request that we provide additional certainty, and I have confirmed to COSLA that I am content to do so. COSLA had raised with us the English model, in which changes can be proactively and prospectively made to capital accounting, and we are already giving an additional two-year flexibility in that respect. I have also confirmed to COSLA that I am willing to extend that further in the same vein as the English model, in which councils have additional discretion on what is the best model to use.

It is still important that we carry out the review, because there are questions to explore about what the most prudent and sustainable approach might be over the long term and how we ensure that it is consistent not just with other public bodies but with our standards, too.

The short answer is yes, but the way we budget involves trying to get a sense for the full year. What we do not want for the budget is to spend and then have to save, save, save and get more money at the last minute because money is suddenly getting cut. That is an ineffective way of budgeting, so my team and I manage the year’s budget by trying to get a sense from every portfolio of what they want to achieve. Most of these projects are not just for one year; they are multiyear projects. Building a new hospital is multiyear. You cannot just turn on the tap for two months and hope that that delivers a project. We try to manage that demand over a longer period, because very few projects can be delivered with, for example, just a month’s extra funding in one year.

The key is being able to carry forward and being able to manage our money over several years. Having that arbitrary break at the end of the financial year and not being allowed to carry capital forward leads to very ineffective budgeting, because it causes you to spend an amount in one month that should be spent over several months in the next financial year.

I will make two points. Whether or not I agree with the SFC, the value of its forecasts is that I have to live with them. I have to live within its forecasts, particularly for revenue but also for spend. That is another area in which there are impacts from higher inflation, which goes back to your earlier question, so we are monitoring that. We will continue to provide the support that we are, quite rightly, obliged to provide for demand-led payments.

I do not want to sound like a broken record, but it is precisely because of that volatility that we need the requisite tools to manage it. After all, any demand-led payment creates a risk for the Scottish Government in managing it within our fixed and balanced budget. The SFC is right to say that I cannot increase the size of the cake, and if one slice of it is bigger than was originally intended, that increase needs to come from elsewhere in the Scottish Government. That is the level of risk and volatility that I have to manage within a balanced and fixed budget.

That is right. I agree that it is by nature demand led. We make a big effort to promote uptake, because we believe that it is right for people to get the help that they need, but that clearly impacts on demand and the budget. We will fund that need and demand, because it is important that, as a fair and kind society, we protect the most vulnerable.

Thank you for clarifying the question. There is quite extensive engagement on the banking issue through, for example, the banking forum where we engage with the banks and the UK Government.

With regard to the nitty-gritty of how it happens, I have had quadrilateral meetings with my counterparts in Wales, Northern Ireland and the UK Government. The agenda in the latter meeting included items on access to loan funding and on what the banks were doing or not that we would like them to do. We have direct engagement with the UK Government on banking through active face-to-face conversation.

With regard to access to cash, we have made the point about extending some of the schemes that we think should be extended.

There is a general commitment to work together on supporting businesses. I think that it was the Scottish Financial Enterprise that said that businesses are facing a wall of liabilities right now, and we discussed that point at length with the Chief Secretary to the Treasury and my counterparts in the other devolved Governments in the last quadrilateral meeting.

Everything that relates to the Green deal has now been published and we have not sacrificed our commitments. The A9 is still going to be dualled, and the A96 is referred to in the co-operation agreement in terms of the priorities for the next few years. As far as I am concerned, as someone who represents a rural area, there are no consequences for the projects that I, as a local MSP, am fighting for—I usually lobby myself, which does not work very well. I am fighting for investment in local communities, and that will continue to be the case. What I am trying to say, in a roundabout way, is that what makes the biggest impact is not deals but our having the cash—the actual, hard money—to invest.

I will pause there, because I want to talk about the report about our missing out on funding, about which I was quite confused. There is an irony at the heart of a report about the UK Government, in essence, using the United Kingdom Internal Market Act 2020 to try to spend directly in areas of devolved competence, which then says that we are not engaging sufficiently. It seems ironic that, after having joined the Welsh and Northern Irish in saying that the United Kingdom Internal Market Bill was an attack on devolved competence, we are being accused of not engaging sufficiently.

Our big problem with levelling up, the unionisation of spend and so on is that we are usually kept in the dark. Occasionally we are brought into the light to be told what is happening, but that is a rare experience, as far as I am concerned.

It is really difficult to prioritise our spend when another Government is spending in devolved areas. As far as I can see, all local authorities are considering whether to bid for things such as the levelling-up fund, so there is a big question for us. For example, fair distribution is at the heart of the Convention of Scottish Local Authorities’ methodology, to ensure that every local authority gets a fair share of the capital that is available, so if some areas are getting substantially more, directly from the UK Government, does that mean that we should compensate the other local authorities and give them capital that would otherwise have been shared fairly across local authorities? Where we are already spending on, for example, the key roles that were mentioned in the news report to which you referred, but some areas are now to get money directly from the UK Government, should we use the funding for other priority projects, which have not yet been funded? It is extremely difficult to determine how to use our limited capital funding as far as we can for hospital projects, roads and schools when the UK Government is making decisions about capital spend that we are not sighted on.

I think that it was David Duguid who made the comment about our missing out on money. I have certainly not rejected any money and I am not aware of ever having rejected any money. Scotland needs as much investment as possible. It seems a bit rich that we are being accused of not engaging by people who are trampling over the normal devolved processes for distributing funding.

I will start with the MTFS and then move on to the wider subject of the timetable. The original intention would have been to publish in May, but that was not possible, due to the election. I am interested in the committee’s view on that. There is on-going uncertainty because of the UK Government’s plan for a spending review. That spending review would be very helpful to inform our medium-term financial strategy. If we have it, we will be forecasting not on the basis of the best available evidence but on the latest data from the UK Government.

I think that there are no perfect timing options, given that the MTFS could not be published in May. It does not make sense to publish it in advance of the OBR forecasts. If OBR forecasts are published on 26 October or we have the promised UK spending review, it would be quite misleading to rely on OBR forecasts from the previous March. There continues to be a lot of movement in our economic and fiscal outlook, so block grant adjustments that were based on March forecasts would significantly overstate our budget.

That is the territory that I am in just now. I am happy to take the committee’s view on how we can spread out scrutiny of the budget, the MTFS and the resource spending review in a way that allows you to give the budget the appropriate attention that it needs, and I would be open to your views on how I can best work with the committee on that. I would intend, certainly for the 2022 MTFS, to revert back to its previous publication timetable in May, in line with the written agreement.

I hope that I have given you enough information without concluding a position right now, and you can perhaps take a view on that.

On the budget timetable, we have obviously had two years of significantly delayed budgets. There is no perfect time. If the UK Government publishes its budget first, we have the best available evidence that we need but, if there are any delays to the UK Government’s budget, we are left in a position of choosing whether to take inadequate and inaccurate information and base a budget on that in order to give security and certainty to businesses and local government, or to wait, increasing the delay of giving that certainty to local government but having the best available evidence. I would very much like to revert this year to what we did formerly, which would be to consider a budget in late autumn.

That would be my hope, but we really need the UK Government and the chancellor to confirm that. Until he confirms that, I am working off hints, suggestions and indications, rather than anything more concrete.

No, but I will take those two issues in turn. I think that it is important that I talk about local government pay, and I will then go back to talking about flexibility and ring fencing. As you know—I have said this repeatedly to COSLA, I have said it in public and the First Minister has confirmed this to COSLA, too—our budget has been fully deployed and there is no additional funding available for additional spend.

I am hugely grateful for the heroic efforts of all key workers, including those in local government, but matters of pay are for local government itself. Those matters are negotiated by the trade unions and COSLA through the Scottish joint council. We are not a member of the SJC, we have never taken part in pay negotiations and I do not intend to do so now. The point about managing budgets is a question for COSLA and local government.

On flexibility and the local government funding settlement, as I said a few moments ago, in last year’s budget, I was explicit that we were maximising the amount of non-ring fenced funding for local government. At the moment, the vast majority of the £11.7 billion that local government gets is not ring fenced. That includes some capital—£617 million—but the vast majority is for day-to-day services, and is not ring fenced. There is a general uplift. The last thing that I did before Parliament went into recess was provide an extra £275 million of non-recurring funding for Covid-related matters, and that was not ring fenced. Essentially, the vast majority of the funding is not ring fenced, and it is for local government to make decisions about how to spend it.

The irony in your question is that, on one hand, there is a general request for us to intervene in local government pay and, on the other hand, there is a request for us to provide maximum flexibility and discretion for local government. I intend to provide that maximum amount of discretion for local government without getting involved in matters of pay and how local authorities spend their budget.

There is certainly a growing understanding—although it is not yet universal—of the role of community wealth building. We in Parliament and in the public sector sometimes start to use such terms without necessarily explaining to the wider public what they mean, but there is a growing sense of the concept’s importance. With regard to its importance in the Scottish Government, we have seconded Neil McInroy, who was previously chief executive of the Centre for Local Economic Strategies, to a part-time role as strategic adviser to the Scottish Government as we develop our community wealth building programme.

As members will know, there are currently five pilot areas in which we have worked with local authorities to produce individual community wealth building action plans that reflect both their economic challenges and where we think that there are opportunities. Three of those plans have been published, and two are still in draft. The five pilot areas are Clackmannanshire, the south of Scotland, the Western Isles, Tay cities and Fife and the Glasgow city region; Elena Whitham also mentioned the £3 million for the Ayrshire region.

There are a lot of good examples. The key with the pilots, and with what is happening across the Ayrshire region, is to take best practice and roll it out. We are working with COSLA, the Scottish Local Authorities Economic Development Group and the Improvement Service to use community wealth building as a vehicle to deliver more locally bespoke and unique inclusive economic solutions, rather than having me, as economy secretary, come in and say that one size fits all, which we know is blatantly not the case. It is good to see a bottom-up approach being taken.