Seòmar agus comataidhean

First of all, congratulations.

No, of course not.

The 0.8 per cent a year is lower. I think that average growth is 1.5 per cent for UK departments; had the funding for that day-to-day spend grown in line with the UK Government’s overall spending, we would have had, I think, £1.1 billion more to spend on our priorities over the next three years.

The situation is without a doubt challenging, which is why we have set out what we have set out in the fiscal sustainability delivery plan—that is, the need for us to reform and to drive efficiencies, particularly in relation to corporate costs. Incidentally, the UK Government is doing exactly the same on workforce and corporate costs, but we are very constrained.

I know that, in its report, the committee made a very timely point about the constraints of the fiscal framework—I could not agree more with that. As of yesterday, we have a new Chief Secretary to the Treasury; I have had a meeting with my Northern Irish and Welsh counterparts, and we are keen to engage quickly, because there are a number of issues in train. One is a more fundamental review of the fiscal framework, which we have asked for and want to pursue. However, there are other short-term changes that could really help. For example, being able to borrow more than would just cover the cost of reconciliations would help to smooth out particular peaks and troughs.

There are a number of real constraints in the fiscal framework, and it is time that we addressed them. We do not want to wait until 2028, which is the next formal review period—we are keen to pursue the issue as early as possible.

In practice, and leaving aside the formality of it, the fiscal framework underpinned much of the discussion with local government in the lead up to the 2025-26 budget. There was early engagement, with no surprises and with an open-book approach. That was how we conducted discussions and negotiations for the 2025-26 budget, which may be why that budget received a more positive response from local government than budgets had in some other years. The Accounts Commission has confirmed that there has been a real-terms increase in local government funding for two years in a row.

There have been issues with formal adoption and with the desire from local government to have a rules-based framework, but that has been only one aspect of our discussions, and we have agreed on 95 per cent of everything. I wrote to local government, asking councils to agree on the 95 per cent so that we can codify elements of the framework and can follow the same principles with the 2026-27 budget.

I do not want to put words into local government’s mouth, but I think that formal adoption has been held back by the issue of rules-based funding. We have spoken about that here before: we do not believe that we can agree to that because there are so many unknown quantities with a rules-based approach. For example, it would already have been blown out of the water because of the change to employer national insurance contributions, which that approach could not have encompassed. Would a rules-based formula apply only when it suited and not when it did not? Local government was given a lot of money following the decision to fund a portion of those contributions. That is one example, and there are many others, of ideas that sound good but that unravel very quickly in practice when there are issues such as ENICs.

We are asking local government to codify the good stuff, including the open book, early engagement and the way that the budget has been handled, because that has led to a good result. I think that we should be able to bank that and to move on.

I assure you that it was not written on the back of a fag packet. Anyone who knows Ivan McKee would know that it would be far from that. He is very methodical and detailed, which is not always welcomed but is the right approach to take, and—

We have taken an approach that is very much focused on delivery. The priority areas that the First Minister set out when he came into office gave a greater focus to areas that are to be prioritised for the funding that is available to us. Within those themes, we have gone through all areas of spend in each portfolio area and pivoted to those priorities. A lot of that has required difficult decisions to be made about things that we cannot take forward and things that we might have to return to in the future should finances allow us, so that we can focus on the priorities and ensure that we can fund them.

It is fair to say that there is the opportunity in the fiscal sustainability delivery plan, through efficiency and doing things differently, to ensure that the money goes further, even with those priorities. That is what we have set out, to ensure that every pound that is invested is invested in the most productive way. That work continues—Ivan McKee is leading on that. I know that he is keen to come back to the committee and discuss those plans in more detail. I just wanted to assure the committee that that work has gone on in detail across all portfolio areas.

Let me give you one example, which was quite contentious. It was about how far we could go with free school meals. We have agreed to prioritise those children who are most in need, linking the further roll-out to those who are in receipt of the Scottish child payment. We will not be able to roll out the universal offer as far as we had perhaps initially wanted to, and we feel that, with our limited resources, we have to prioritise those children who are most in need. Rolling out free school meals to Scottish child payment recipients is a good way of doing that, and we know that it will help to continue to reduce child poverty levels.

That is one example. There are many others, but that is an example where the decision was a difficult one to take. We were criticised for it but, in a climate of constrained funding, we made that decision.

That is a fair point of challenge. There must be a mixture of elements. For example, we know from all the analysis of child poverty that there are three pillars to tackling child poverty: money in people’s pockets, services and support in kind—things such as childcare and wraparound services—and work and employability. Therefore, there is not one solution, but money in people’s pockets matters, and all the analysis shows that the main driver of lower child poverty rates in Scotland is money in people’s pockets through the Scottish child payment.

There is a lot of important work going on in relation to employability, particularly with regard to supporting families. A lot of discrete work is being done by third sector organisations, and that is having really good results—

I agree that work is the best way out of poverty, and it is important that we acknowledge that there is a lot of in-work poverty. A lot of people who are in poverty are working, and some of the supports that we provide are helping to support people’s household incomes. There is a wider debate to be had about wages being too low and whether the living wage is set at the right level. We have the statutory national minimum wage, and we have the Scottish living wage, but, for sure, we want to move to a higher-wage economy, because there are real issues in relation to in-work poverty, as we have discussed many times before.

With regard to the successes, each programme is analysed to establish its success rate, which will be based on how sustained someone’s employment is—how long they remain in a job—so that information is available, and we can provide it to the committee, if that would be helpful. For example, approximately 20 per cent of participants in the no one left behind programme are economically inactive at their start date; they are then tracked through the programme to see their outcomes and how long they are sustained in employment. We can provide that information, and it is fair to say that that should be part of the analysis to establish whether a programme continues to be funded. We do not want to fund programmes that do not work.

Some of those programmes are quite discrete. For example, a number of them work intensively with women. The MsMissMrs programme provides a lot of intensive support and has good outcomes, but it works with people for a long time.

I should have said at the start that we should remember that 80 per cent of the funding that goes into social security comes from the UK Government through the block grant, and UK social security is also increasing. The additional investment on top of that funding is where the choice comes in with regard to things such as the Scottish child payment. The bulk of the funding comes through the block grant.

I do not think that there is anything too alarming.