Seòmar agus comataidhean

It is good that you mentioned the report that the Accounts Commission published today. The report concludes—well, this is the conclusion that I take from it—that Scottish local government is in a very different position from local government in England, where a number of local authorities have, effectively, gone bankrupt. The report states that

“auditors did not identify any councils in Scotland as being”

fiscally

“unsustainable in the short term.”

It is clear that we need to work to ensure that we continue that position. The fiscal framework will help with that.

We have prioritised local government in the budget, so a larger share of Scotland’s discretionary budget is now going to local authorities, but they will still have tough decisions to make, as they go forward. Part of the approach to dealing with that will involve public service reform, which has to happen across Scotland unless something changes with regard to the quantum of budgets.

This year, the autumn statement reflected a budget that prioritised tax cuts for the richest, rather than investing in public services. We have had to try to adapt to that. The statement was far tougher than anyone had expected, and that is difficult for the whole of the public service, including local authorities.

It is one of the workstreams that we agreed to take forward in the Verity house agreement. It is a partnership, so we need to ensure that that is the case.

Ultimately, I would see an accountability and assurance framework as sitting alongside the fiscal framework, to give assurance not only to the Scottish Government, but to the Parliament, in those areas in which we have shared accountability. That will be important in respect of the Accounts Commission’s work. That work is on-going, and given that it is a partnership, I would not want to be too prescriptive.

Yes, we absolutely have. The figure is just under £1 billion, and we have set out in detail the areas that we have un-ring-fenced. I totally get that local government wants us to go further—I want us to go further, too—but we must have the outcomes and the accountability and assurance framework in place so that not only Government but this Parliament has confidence going forward and we can build that trust that Katie Hagmann talked about earlier. That is a really important part of the work that we are doing around the fiscal framework; indeed, it is one of the workstreams set out in the Verity house agreement. We need those things to be in place.

Local government delivers many things that are joint responsibilities of it and this Parliament and this Parliament, too, has its priorities. The point is that respect needs to go both ways. We need to recognise that this Parliament and local government have roles and responsibilities. Having that accountability and assurance framework would be the big win from the new deal, as it would lead to an understanding around what we are trying to achieve and what outcomes will make a difference to the people of Scotland. I want us to go further, for sure, but we have un-ring-fenced nearly £1 billion.

Ian Storrie might want to come in here.

I certainly hope so, and we are working on having more flexibility. As you have said, there are some shared responsibilities. For instance, this Parliament has taken the decision that it wants to provide free school meals, but can we be less prescriptive about how local authorities deliver that policy so that they can look at their local priorities and work out what works for their areas? We clearly have a direction of travel; we are just not there yet. Indeed, nobody from Government has ever suggested that ring fencing would just disappear overnight. In the future, we do not want to have ring fencing without agreement.

Pam Gosal talked about speaking to lots of council leaders; I have been speaking to lots of council leaders, too. Often they ask for more money for X, Y or Z and, often, what they are talking about is more ring-fenced pots of money for specific things that they know will help their local authorities. I absolutely get that. I come back to the point that that is why outcomes and an accountability and assurance framework will be so crucial to having an agreed fiscal framework, if we are going to make the difference that we want to make.

The complexity of that shows the challenges of Scotland’s current fiscal situation. My solution is that we should have the full powers of a normal independent country, but we will leave that for another debate.

Thank you, convener, and happy new year to all members. I thank the committee for inviting me to participate in the session today. I am particularly grateful for the invite as it provides me with an opportunity to discuss how important our relationship with local government colleagues is in relation to fiscal matters, and how the Scottish Government has been working to ensure that local government views are included in the broader priorities of Government as part of the budget.

In line with the Verity house agreement principles, this year has marked the beginning of a more meaningful pre-budget engagement process between local and national Government, which I was pleased was recognised by local government heads of finance during their session with the committee last Tuesday. I heard Councillor Hagmann refer to that in her evidence to the committee earlier today.

I also take the opportunity to highlight that pre-budget engagement with local government largely mirrored discussions that were undertaken with cabinet secretaries in relation to their portfolio interests. However, as those cabinet secretaries highlighted, in the face of a deeply challenging financial situation following the UK Government’s autumn statement, the budget was inevitably unable to fully meet all of local government’s asks.

Although we appreciate that local government will have hoped for a more favourable settlement, we continue to do all that we can to mitigate more than a decade of UK Government underinvestment in public services.

Despite the financial challenges that we have faced, we are delivering record funding of more than £13.9 billion to local authorities, and are making available a further £144 million to support reaching an agreement with councils to freeze council tax in 2024-25. Critically, in the most difficult budget since devolution, we have prioritised local government, and its settlement share of the discretionary budget has increased. The analysis to support that has been placed in SPICe.

In the first budget since the Verity house agreement was signed, we have already baselined almost £1 billion of funding across health, education, justice, net zero and social justice, prior to reaching an agreement on an accountability and assurance framework. That is a significant step for ministers, and we hope that it demonstrates both our commitment to the principles of the partnership agreement and a willingness to place trust in local government to make more decisions locally that will enable better outcomes for communities across Scotland.

In the past year, we have worked in partnership with local government to agree greater flexibilities, including on the visitor levy and on increased discretionary powers over tax treatment of secondary and empty homes. That could raise an estimated £35 million for local authorities, should they decide to use those powers.

We will continue to work with COSLA to empower councils through a new fiscal framework, with an initial joint progress report published on 14 December 2023. The Scottish Government has also committed to empowering local government through increasing discretion to determine and set fees and charges locally. In the coming year, that will include joint work on building warrants and planning fees.

Although inflation is slowly falling, the damage that has been caused by the UK Government’s economic agenda of austerity and Brexit has hurt everyone, particularly our most vulnerable households. We believe that, at a time when rising prices are putting significant strain on household finances, a council tax freeze will give households some certainty over the next year. By funding a freeze, we have helped councils to maintain their services while ensuring that households are protected from increasing budgets. I know that local authorities share our desire to help people across Scotland during these difficult times and the Scottish Government is hopeful that councils will be able to support that policy initiative locally.

I assure the committee that we will continue to work with COSLA to conclude the new deal with local government and provide councils with greater flexibility in future years, once the necessary accountability and assurance arrangements are in place. I believe that that will enable local government to better tackle local challenges in ways that work for them, thereby achieving our three shared priorities of tackling poverty, transforming the economy through a just transition to net zero and delivering sustainable, person-centred public services.

As has often been said both by ministers and by local government, this is the beginning of a journey. As with the building of any new relationships, there will be challenges and missteps along the way. However, if we can successfully achieve the goals of the Verity house agreement, that can only be to the benefit of everyone whom we jointly serve.

The sum of £144 million that we have set aside in the budget is equivalent to a 5 per cent council tax increase nationally; it provides the money that would have been raised by a 5 per cent increase. If councils agree to that, more than two million council tax payers will benefit from a council tax freeze in 2024-25, which will provide much-needed financial relief, especially for vulnerable households.

As I understand it, the Fraser of Allander Institute figures included an allowance for the multipliers. There was a joint COSLA and Scottish Government consultation on changes to the system of council tax multipliers; there was very little support for the changes. The analysis of consultation responses has been released today. Of the 32 councils, only four said that they supported the changes. Because the changes were not supported, they have not been taken forward.

The sum of £144 million funds a 5 per cent increase in council tax across Scotland. I heard that in the previous evidence session it was suggested that some councils were talking about a 10 per cent increase in council tax. That might almost have been able to fly last year, with inflation running at the levels that existed then, but inflation is expected to be around 3 per cent, so it would be difficult for councils to talk about that sort of increase.

I think that the 5 per cent allocation is fair for councils across Scotland to fully fund the council tax freeze. I hope that all councils will take that up and that all council tax payers will therefore benefit from it.

I am not sure that the public fully understand the challenges of what Scotland is facing, based on what was agreed in the autumn statement. There were some headlines, but there were also devastating 10 per cent cuts to capital, for instance, and those things cannot simply be wished away. We have to deal with them, and we have to have a balanced budget in Scotland.

I think that COSLA and local authority leaders take a view in public. It is COSLA’s job to argue for local government, so of course it will argue for more money for councils. Having spoken privately to political leaders across the spectrum, however, I think that there is a recognition of just how difficult the statement was.

It is clear that political decisions have to be made. We are at stage 1 of the budget process, and there are suggestions for how the budget could be moved forward. I know that the DFM will have discussions on that with finance leaders in all parties.

I know that a lot of local authorities took the decision to move their services into ALEOs in order to get a more favourable VAT position. Maybe it would be better if we were able to have fiscal arrangements on VAT and non-domestic rates that did not distinguish between different set-ups, so that things could be done in whatever way was best instead of having to try to work around the system to make what is effectively public money circulate in a different way.

Ultimately, those decisions are for local authorities. I know that it is never easy, and I urge local authorities, and colleagues in the Parliament—particularly when they are looking at things such as leisure facilities—to do so through the eye of preventative spend, as we talked about earlier. In doing that, we need to ensure that we account for all the benefit of that spend. Sometimes it is more difficult to do that, and we look at things simply as a cost and do not actually manage to report the benefit to the local community or to the local authority or other service provider.

Nobody is suggesting that that is an easy fix. I know that some local authorities are considering bringing their ALEOs back in-house to ensure that they are more integrated with the rest of the council services.

As you have said, we have talked about that before. In general, there are three areas where there are particular pressures: environmental health; planning services; and building standards. As we have discussed previously, significant work is going on in all three areas to improve that aspect.

In environmental health, for example, a lot of work is going on. In addition to the work that we are doing directly with local authorities, Food Standards Scotland has awarded the Society of Chief Officers of Environmental Health in Scotland £0.25 million to provide funding to Scottish local authorities for sponsorship of trainee food safety auditors and the new qualification pathway to the higher certificate in food control.

In relation to planning—and we have discussed this in depth previously—we are continuing to engage closely with COSLA and Heads of Planning Scotland to understand the pressures on planning services. Action to strengthen the future pipeline of skilled planners entering and being retained in the planning sector in Scotland is a high priority for us, and it is a core part of the delivery of national planning framework 4. There are a number of actions, which we talked about just a couple of months ago. Those actions are on-going, but we recognise the challenges in that regard.

The third area—which, again, is outwith my direct portfolio—is building standards, and again, we are working closely with local authorities on that. Given that one of the challenges in the building standards sector is the profession’s profile and esteem, there has been a lot of focus on that aspect. One specific piece of work involves the ambassadors network, which is helping promote job roles and improve the profession’s attractiveness. As a result of the new modern apprenticeship pathway, which was introduced just last year, apprentices are now starting to come through.

We are taking action in those three areas, working in partnership with local government. We cannot simply take forward that work on our own—we have to work in partnership, as the committee would expect.