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I am very keen to move into a multiyear funding space. First, however, we need to see the outcome of the UK Government spending review. We are expecting the resource and capital spending review around June: I need to see the envelopes that the Scottish Government is likely to receive in order then to be able to make multiyear commitments to local government. I am really keen to do so, because—to go back to the point about reform and sustainability—it is much easier to make the changes that need to be made if we have a line of sight of more than one year of budget, which would mean that we could plan changes over what would, in this case, be a three-year cycle with a review every two years. That is one of the better announcements that the Chancellor of the Exchequer has made.

I am keen to move into that space with the third sector, too, but I need assurance from the spending review outcome with regard to knowing what the broad envelopes are likely to be. Given some of the uncertainty—as I might describe it—around some of the chancellor’s plans, I want to ensure that we have certainty before we make that commitment.

First, my intention is to publish the fiscal framework alongside the local government settlement next month, if we can reach agreement on it with COSLA. My officials will know more about this, because they have been working on it in great detail, but one of the issues is about the rules-based framework. Although it seems to be quite straightforward, once you start to explore the pros and cons it becomes anything but. Local government has looked at the pros and cons and is mindful of them. One of the issues with a rules-based framework is whether, if there were to be in-year shifts, that would be it. You cannot have it both ways: you cannot have a rule, then have different set of rules after in-year changes are made. There are a lot of pros and cons. Ian Storrie or Ellen Leaver might want to come in on that.

Yes. Ian Storrie articulated that very well. It is about the way that we are doing business already. It is about the relationship rather than a thing. I have seen many COSLA responses to budgets over the years, and, although this response is not without challenge to us, it is probably one of the most constructive responses. It recognises what we have delivered in the budget while setting out some additional asks. That is, perhaps, a reflection of the earlier and more meaningful budget engagement, which is part of the framework.

First of all, as I said when I last spoke to the committee, the SLARC recommendations were important, although I recognise that when it comes to encouraging people into local government they are one part of the picture and not the whole picture.

The uplift in the general revenue grant for 2025-26 will ensure that implementing the recommendations is affordable within the local government settlement. Ring fencing the funding would have sat at odds with the premise that COSLA and local government do not want ring fencing: they are very much against ring fencing. That is why it is within the settlement.

Regulations will be laid shortly—later this week, on 23 January—that will implement the changes related to pay and banding that were recommended by SLARC. The changes will take effect from 1 April. Other recommendations relate to expenses and the introduction of severance payments. Those recommendations sit better with local government, but my officials are engaging with COSLA on them, because there are questions about how they would be implemented in a fair way. There are differing views within local government on that, so we need to work through it.

The first set of regulations will be laid this week, and we will make further regulations to implement any agreed changes as and when they are required—but not before the next planned local government elections.

We have managed to secure an agreement with local government to maintain teacher numbers at 2023 levels. That is in recognition of the fact that £145 million was in the system—which has now been uprated to £186 million—to maintain teachers.

I would imagine that everyone on this committee will recognise the value of ensuring that we have an adequate number of teachers in our schools. There are issues that are current and that are being debated in this Parliament around closing the poverty-related attainment gap and tackling behaviour in our classrooms. It is difficult to see how we would do that with fewer teachers. There is a shared ambition to ensure that we have adequate teaching staff in our schools. In order to stabilise that position, we have an agreement with local government to maintain teacher numbers at 2023 levels.

In addition to that, we have put more money into additional support needs, because we have recognised that, particularly since Covid, there has been an uptick in the number of children with additional support needs.

There is a balance to be struck here. There are Government priorities relating to education and closing the poverty-related attainment gap. Do we maintain some control and influence over how those are delivered, or do we not?

In terms of policy, education policy has been explicitly aimed at closing the poverty-related attainment gap. Teaching staff are not the only workforce in this space and other workforces have a critical impact on it as well, but teachers are at the heart of reducing or closing the poverty-related attainment gap. Therefore, I do not think that it is unreasonable for the Government to say to local government that the funding that we provide for that purpose has to deliver those outcomes, and one outcome has to be that we maintain the teaching staff to deliver that priority.

It is finely balanced. We recognise that local government might have a differing view on these matters, but we have managed to get to a compromise position that recognises the view of local government as well as the policy view of the Scottish Government on an issue that has been debated in the Parliament on a number of occasions.

It is for local government to decide how it utilises its resources, but the Convention of Scottish Local Authorities is very much in agreement with us on the need for reform. I encourage local authorities to look across boundaries at providing shared services. There are some good examples of that, but we are scratching the surface of what could be delivered through shared services across local authorities. Quite a lot is happening in planning in that regard, because of the difficulty in attracting planning resource in some local authorities, but far more could be done to share services.

You will be aware that we have established an invest to save fund and have provided up to £30 million for it. I have not said that local government’s share of the fund is £X, but I encourage local government to make proposals. We want proposals that will maximise the return on investment and that represent fundamental game-changing reforms that will make a difference to the way in which local services are provided. Financial sustainability is an element of that, because we need to ensure that services can be sustained.

We are very supportive of the single island authority model, the most advanced work on which has been done by the Western Isles. The model is based on a simple concept. If relatively small communities are trying to attract people to work in local government and the national health service and are, as is the case, quite often competing for the same people in management and front-line staff, a single island authority model makes perfect sense. The governance issues—which are not insubstantial, particularly given that the governance arrangements for the health service are different from those for local authorities—are being worked through. That shows ambition of thought, which is why we are keen to support such work. Thinking outside the box merits our support.

First, COSLA’s analysis of the estimated cost to local government is £265 million, although I note that the Fraser of Allander Institute said that it was more like £220 million. It depends on what local government has included. Some have included arm’s-length organisations and social care commissioned services and so on. We are working with COSLA to get to the fine-tuning of its requirements.

Having said that, we have three pieces of communication to which we have had no response from the Treasury. The most recent was the joint letter from the First Minister and the president of COSLA that was signed by 48 other organisations and made the point that anything short of full funding would not be acceptable. A figure was put into the public domain that had an upper amount of £320 million, which is at least £200 million short of what core public services will require and it does not take into account any commissioned services, general practitioner services or anything like that—it is just core. We have yet to have a confirmed figure from the Treasury, and we have yet to have a reply to our substantive request to the Treasury.

Once there is a final figure, I have said that we will give a fair distribution of that. Clearly, given the figures that I set out at the beginning of this answer compared with what the worst-case scenario might be from the Treasury, local government could not get 100 per cent of its employer national insurance contributions funded, otherwise there would be nothing left for the rest of the public sector. I want to be fair to local government in the distribution.

I should end on an optimistic note. I have not given up on pushing the Treasury for fairer coverage of employer national insurance contributions. We have asked for the full cost to Scotland’s public sector to be covered, rather than just a Barnett share, which would not recognise that we have invested in our public sector and the pay of our public servants over the years. It remains outstanding.

The agreement with the City of Edinburgh Council for Granton is for outcomes-based funding. The Government will help to unlock funding for site remediation, up-front infrastructure and other enabling works that are required for the development at Granton to proceed. The guarantee is that we will pay the revenue costs of that investment from 2028-29 onwards, on the condition that the development meets pre-agreed outcomes.

The City of Edinburgh Council and the Scottish Futures Trust have been working on the detail of the deal to get it landed. The Granton project is important because phase 1 aims to unlock more than 800 new homes and we know how important they are in the Edinburgh area.

Mark Griffin asked whether that could be done elsewhere, and I think that it could. The Granton project is extensive because of the size of the area that is being developed. There are component parts—a transport element, a housing element and a regeneration element—so there is money coming from different parts of Government. I am happy to follow up with more detail on the various bits of that, if the committee would find it helpful.

In principle, I do not see why we could not come to similar agreements with other local authorities. I have made the offer to COSLA that we could work together on the proposition of what the priorities are and where we need to see growth in affordable housing so that we could bring together a similar deal elsewhere. I do not see why such a funding model could not apply in a rural setting. I also think that there is potential for more than one local authority to come together in partnership to agree a similar deal. It is an innovative way to lever in additional investment beyond the traditional routes, and I am keen to see it being further explored.

No, we will not look at any kind of cap. We are working in partnership with local government, which is why the last letter was co-signed by the First Minister and the president of COSLA. We are all on the same page about needing a fair recognition from the UK Government of employer national insurance costs. COSLA absolutely recognises that if that is not forthcoming, the available quantum will have to be distributed fairly. It understands that that does not mean that 100 per cent of its employer national insurance contributions will be covered.

Through the budget statement that I set out—the £15 billion for local government and the record levels of investment in health—we have built some resilience into budgets, but that is an opportunity cost. For every million pounds that has to go on employer national insurance contributions, there is a million poundss that will not go on front-line services or on resolving this year’s pay disputes—I am getting ahead of myself; I hope that there will be no disputes—or helping with pay negotiations. Those are opportunity costs but, as I say, the final landing space remains to be seen.

I recognise the pressures on social care. It is a whole-system pressure, at the end of the day. I am also aware of the COSLA finance spokesperson’s most recent correspondence.

In the draft budget on 4 December, I set out almost £2.2 billion of investment in social care and integration. That exceeds our commitment to increase funding by 25 per cent over this parliamentary session—it exceeds that commitment by more than £350 million. On social care investment, therefore, we have delivered what we said that we would deliver. That includes £125 million to fund the real living wage uplift for adult social care workers in commissioned services. We have funded that because we recognise that those services are profoundly fragile if they cannot hold on to staff, and the real living wage is therefore important.

That level of investment does not mean, of course, that there are no pressures. There are still pressures and that is why we are taking a whole-system approach. The First Minister has talked extensively about the interventions to improve the performance of partnerships, because there is variation in that regard that is sometimes quite difficult to explain. With the resources that we have in the system, those partnerships need to be working effectively to reduce delayed discharge and address all the other matters.

There is a worry around employer national insurance contributions for social care commissioned services, as COSLA estimates that the rise will cost around £85 million. We will continue to discuss that with COSLA, because the last thing that we want is for social care commissioned services to cease because of that rise in contributions, as that would impact on the whole system. We are still discussing those matters to ensure that that situation does not come to pass.