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One area of agreement on the fiscal framework, which is at an advanced stage of development, was early budget engagement. I have engaged directly with COSLA and Katie Hagmann in particular on early budget engagement to set out the areas of common agreement.

There is common agreement against those priorities. We looked at how we could set out a timetable for engagement that would help us to get to a place that was always going to be about compromise but is the best place that we can get to within the fiscal constraints that there are. We both have that objective.

First, let me acknowledge the bleedin’ obvious—that local government did not like the council tax freeze. There is no point in me sitting here arguing that it somehow welcomed the freeze; it did not, and we understand the reasons for that.

The council tax freeze was deployed to support pressed households at a time of cost of living pressures—which continue, but which were particularly acute. We then got into a lot of detailed discussion around the quantum to settle on to meet the cost of the freeze, and in fact, we ended up increasing that quantum.

We are now into the discussions about 2025-26. It is important to get a balance of supports for local government. We are keen for local government to have more fiscal levers, and we have made some good progress on them. Ian Storrie outlined some, and others—such as the cruise ship levy—are in the wings.

Local government has an ambition to have more powers at its disposal, which I am very sympathetic to. Obviously, it needs to be within a due diligence prudent framework, but there is a very strong argument for that journey to continue.

There are various moving parts to what will be a package, which will be quantum of the settlement, powers, flexibilities and all of that, against a backdrop of an incredibly difficult fiscal environment. We have to manage all of that so that we can, I hope, get to a place that is a reasonable landing spot.

I think that it is evident to everybody that the reduction in the Scottish Government’s block capital grant from the UK Government has a profound impact on capital spending, whether it is our own capital spending or what we are able to deliver to local authorities for their budgets. I would emphasise the fiscal rules and the spending review. “Briefing” might be too strong a word, but there have been indications that there may be some openness to thinking about a more flexible approach to the fiscal rules around capital borrowing. Whether or not that will transpire, I do not know, and we cannot rely on it.

You mentioned housing. The point that was made to the chancellor was that it would be good to get an indication of what the UK Government’s approach will be to financial transactions. As you know, financial transactions underpinned the affordable housing supply programme, and they were cut by 62 per cent, which will have an impact. We were therefore keen to push the UK Government to have another look at the use of financial transactions. We do not know the answer on that yet, but we have been clear that we could use financial transactions effectively in the housing space and in the Scottish National Investment Bank space.

On being imaginative, given that we do not know where all that will land, we are exploring what we can do beyond traditional capital departmental expenditure limit—CDEL—funding. We are looking at things such as outcomes-based funding. For example, the school estate programme—the learning estate investment programme, or LEIP—was done through revenue-based funding and has transformed the school estate. We are looking at whether there is something in that space that we could do. We are looking at the growth accelerator model, which we have used in Edinburgh, Dundee and elsewhere as a way of releasing investment. We are exploring all those avenues to see how we can work together with local government to use all the potential levers.

There is also the private sector. The Cabinet Secretary for Social Justice, Shirley-Anne Somerville, and the Minister for Housing, Paul McLennan, have been looking at how to use about £100 million to try to lever in £500 million for building for mid-market rent—I think that that is the aim.

There is not one solution here, but we need to be imaginative and open to pushing the boundaries of what can be done on all those things.

Transformation and reform are absolutely critical. There are really good examples of the public sector doing things differently, for example by using digital and delivering services in a different way. All that is really good.

We have seen good examples in local government as well. For example, the transformation in Glasgow of social work services for children has led to a 50 per cent reduction in the number of kids going into care. Thirty-one local authorities should be beating their path to Glasgow’s door. The last I was told, 16 of them had. That is good, but I would have expected more with something as transformational as that.

It is not rocket science: it is a question of services working alongside the families and asking them what they need to break the cycle of the issues that impact on the family, such as addiction and so on, which put kids at risk of going into care. The services have worked alongside the families, supported them and got help in place—and look at the results.

We really need to be in that sort of landscape: supporting and incentivising local government to share best practice. We also need to ask them some of the hard questions, such as why they are not using that best practice, which is not unreasonable to ask. Members around this table and beyond might ask the same of some of their local authorities.

We need pace. Some local authorities will always be trailblazers and want to get out there, and some might never be, but we need to see an appetite for change. It is about the sustainability of services, which will have to look different over the next 10, 15 and 20 years with an ageing population and so on. We need to really step up all that work.

The Improvement Service—that is it. The name completely went out of my head. We fund a lot of the capacity within COSLA to help it to support local government in doing some of the work. A lot of good work is going on, so we are trying behind the scenes to build some capacity to help it.

Has the issue been raised on a number of occasions? Yes—particularly at the time. On the desire from local government for no further freeze in 2025-26, I have said clearly that it is part of the budget discussions. It is about a package.

In the big picture of all the things that we are getting on with in the agreement space with local government, there is sometimes a lot of focus on the relatively small number of things—some of which might be significant—where there is disagreement. I hope that, through the budget process, we can move beyond some of those issues, because a lot is being delivered, and there is a lot that we can deliver jointly.

I see Katie Hagmann at least once a week—perhaps more often than that—and my officials see their counterparts in COSLA regularly. Perhaps this is not always understood, but a lot of joint engagement and detailed work goes on.

First and foremost, let me recognise that the negotiation is between COSLA and the unions, and it is really important to abide by that principle. Although we have supported local government pay this year and in previous years, it is important to reiterate that the negotiation is between those two parties.

I would very much like to get to a position in which we can move beyond what you have described. Clearly, it has been quite a difficult year, but we have provided additional funding, which was very difficult to identify. Collectively with COSLA, we had to make some very difficult decisions about what would be paused and what funding would need to be utilised for pay. The upside is that two of the three unions have now accepted the offer, and what happens with Unison remains to be seen.

The solution is multiyear funding. One of the better things that the new UK Labour Government has announced is a spring spending review of resource and capital funding, which will trigger multiyear funding, with three-year funding being reviewed every two years. That is how the system used to work, but that has not happened for many years.

Multiyear funding is important because it can help us with so many things, including reform and the ability to reach agreements on productivity and efficiency. A multiyear envelope also helps with pay, because we can then support multiyear pay deals and, in turn, local government. We cannot give out multiyear funding unless we have multiyear funding, but if we get multiyear settlements, we can provide local government with multiyear settlements, which will enable it to get to a more productive space in relation to multiyear pay deals and all the things that come with that, such as reform and doing things differently. It is hard—almost impossible, to be honest—to do all that with single-year budgets. That is the way forward.

The last year with single-year funding will be 2025-26, and we will have to do our best to minimise the chances of industrial action, which is costly to public services. We all want to avoid that, and the longer-term solution is to provide multiyear deals.

I cannot see the UK Government reining back from what has been a clear commitment, and I think that work is already under way on the UK spending review. What remains to be seen is what that looks like. I am sure that we will touch on capital today. We have had a cut to our capital budget, which will, unfortunately, reduce our ability to spend in that area.

The spending review, which covers resource and capital, gives the UK Government an opportunity to look a bit differently at the fiscal rules, particularly in relation to capital and borrowing, which could give us a different trajectory on capital availability. I would like nothing more than that. I can assure you that, at the meetings with the Chancellor of the Exchequer, we have raised that issue and that of financial transactions. Along with Welsh and Northern Irish counterparts, I met the Chief Secretary to the Treasury in Belfast last week. We were really clear about the need for a change in direction with more resource to sustain public services and more capital to invest in infrastructure.

We need to wait and see. I do not think that there will be any change to the principle of doing the review. The uncertainty is about what pops out the other end. We will be trying to influence and engage with all that as much as we possibly can.

I raised the importance of city deals and growth deals with the Chief Secretary to the Treasury. A couple of deals in Northern Ireland are also in that position. Clearly, there is a lot of anxiety locally about the deals. It is really a matter of timing. The deals that had already been signed were fine, and those that were in the process of being signed—which, in Scotland, captures Argyll and Bute—have been put on hold due to the budget and the spending review. We have said that it was really important that we give certainty to communities. We have already said that our share, which I think is £25 million, is there for the growth deal. Our call to the Chief Secretary to the Treasury was for the deal to be expedited as a matter of priority, because it needs to be resolved and certainty needs to be given. We have made our position clear and we will continue to pursue the matter.