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Priorities for Session 6 - CIPFA Chartered Institute of Public Finance and Accountancy - 09 August 2021

Good afternoon,

I refer to the letter I received early in July requesting views from the Cipfa Director of Finance Section (the DOF section) on our priorities and areas of innovative practices arising over the last 18 months.

The DOF section considered the areas of priority for engaging with the Scottish Government over the medium term back in May therefore your request is timely given we held a workshop and summarised the output in the attached document. This allowed most DOF to engage and contribute to the priority areas which were later summarised and agreed. I have used this template to guide discussions with civil servants in recent months.

In addition to this there are some areas that it would be useful to highlight given your request. There are summarised below.

Our main concern at this point in time is the core recurring funding for Local Government. Councils received substantial one off funding at the end of last financial year and this has resulted in a significant increase in Council reserves. However this is not a substitute for recurring funding as it can only be used once and there is existing pressures on council’s core funding as a consequence of budget settlements in recent years and increasing demand for services. Councils are currently making sure the use of the one off funding carried through reserves and received in the last budget settlement are put to good use in order to deliver on joint ambitions and respond to the legacy of the pandemic.

A strong commitment has been made to invest in the NHS over the next 5 years however in order to improve the health of the nation and tackle inequalities investment is required in local government services. We have previously highlighted the need to widen the focus of investment to encompass health and well being as areas such as improving housing and attainment, preventing poverty and other preventative areas are critical in order to ease the pressure on the NHS. Local Government has a key role to play and sustainable funding is key in allowing the planning and delivery of key services.

Councils have an important role to play in economic recovery and this is even more critical given the impact of the pandemic. Councils are major employers, play an important role in supporting communities along with investing in key infrastructure and areas of service delivery. In order to do this a scale of resource is required along with flexibility to take local decisions and have discretion about how resources are deployed. It is important that we provide councils with both the resources and mechanisms to maximise investment and at the same time ensure that funding is provided so that the investment is sustainable. A review of capital accounting is currently underway and it is imperative that the outcome of this review does not restrict future investment given the priority that needs to be given to economic recovery. There is a need to provide resources and mechanisms to enhance exiting
infrastructure which is vast challenging to maintain and at the same time to invest in new assets in areas such as housing, education and providing low carbon solutions.

Over the last 18 months Councils have responded at short notice to ensure that support was provided to businesses, individuals and families. This has often required the need to think at pace and use innovation in order to make sure support was delivered quickly. Whether this was delivering welfare payments, business grants, school holiday payments, self isolation payments, etc. Councils responded well to the challenge and played a critical role in finding solutions. These areas are still placing pressure on councils to respond both to the pandemic and business as usual. The one off resources have helped us to do this however we need to consolidate activity and ensure that there is room for effective planning going forward. Early engagement on Scottish Government aspirations along with the ability for Councils to influence what is practical to be delivered would be helpful. Greater collaboration would help shape interventions and ensure that the impact was maximised for individuals, businesses and families. It would also help Councils to outline any constraints that should be considered before policies are developed and at the same time create a space for innovation that can be developed on a joint basis.

Local Government are keen to see an increased level of certainty regarding funding going forward and for there to be less restrictions and reporting on individual pots of
money. The change in approach adopted at the end of last financial year in relation to general Covid funding was welcome however this needs to be sustained going
forward. The 100 day commitments has led to further small pots of monies in recent months whilst it is recognised that this approach was used to deliver on manifesto
commitments a new way of working between both governments that focuses on outcomes rather than inputs would be welcome.

We plan to discuss this further at our Executive Committee next week and if there are any changes I will highlight these. I hope you find the comments and narrative helpful and I look forward to the DOF section engaging further in order that innovative practices can be advanced that serve Scotland well.

Annex Information

Medium Term Priorities

Areas Highlighted by Wider Section

1. Medium Term Approach to Financial Planning
• Improve the current budget process by working in collaboration with Scottish Government and Cosla
• Ensure funding is sustainable, provides stability and is fair
• Make the case for multi-year settlements even if year 2 and 3 are indicative
• Collaborate with Scottish Government on Strategic Financial Planning

2. Improve Collaboration/Partnership working with Scottish Government
• Promote Local Government as part of the solution
• Work in a partnership and co- produce solutions
• Increase influence in policy areas including climate change, review of adult social care and future funding of ELC

3. Continue Engagement on Fiscal Flexibilities and need for Statutory Mitigation
• Capture and communicate the financial implications of all options
• Recognise the role of Local Government in reform and recovery (economic recovery, tackling inequality/improving health and rebuilding communities)
• Make the case to ensure sufficient funding is available to tackle post pandemic environment

4. Make the Case for Increased Investment in Infrastructure
• Growing demand to maintain existing assets e.g. roads, schools etc.
• Promote the positive impact that Local Government investment will have on economic recovery
• Highlight impact on need to invest in low carbon solutions

5. Support the Development of a Fiscal Framework for Local Government
• Develop a rules based approach to the level of Local Government funding
• Council Tax – removal of limitations on increases and input to any review on replacement
• Non-Domestic Rates – inform debate on limited scope for NDR to generate additional revenue and inform consideration on localisation of NDR
• Consider additional discretionary taxes