Seòmar agus comataidhean

As you pointed out, we consulted on the matter, and we are looking at primary legislation on a general power of competence or something similar. One option would be to use the local democracy bill that is currently planned for year 2 of the next session of Parliament, but I recognise that that is quite far down the line.

Given that timescale, we are looking at more immediate measures that could be introduced through secondary legislation in the current financial year or early in the next financial year to deliver greater empowerment for local authorities to innovate while we consider future primary legislation. I am happy to come back to the committee with more detail.

We know from talking to local government that it is keen to have some of those flexibilities. During today’s session, we have talked a lot about revenue raising. We recognise that there are some commercial opportunities in areas that local government operates in where there could potentially be options for them to take forward within a framework. Work is on-going on that. I do not know whether Ellen Leaver has anything to add.

We absolutely must be proactive and think differently. That requires leadership at all levels and it requires a willingness to do things differently. We need to oil the wheels of that, and that is why we have the invest to save fund, which is in its first iteration. I put it on record that I am keen for that to be a strand through the spending review, as it can be a supportive vehicle for further change.

We are not starting from scratch on reform. Over the years, we have seen major reform in the justice system that reduced the number of young people being prosecuted in adult courts. We have seen investment in childcare, which helps parents to get back to work. We have seen the reform of policing with the introduction of a single body that has demonstrated the ability to respond, particularly with serious organised crime. In local government, we have seen shared services in many parts of the country.

However, we are only scratching the surface of the potential. We must all realise that reform is not a nice to do; it is absolutely fundamental, because the spending outlook is very tight indeed. We therefore need to look at the investment that is already in the system, whether it is for local government or health and social care, and consider how we maximise the resource that goes the front line. We need to do things differently through automation and digital to ensure that the money goes as far as possible and we continue to provide good-quality services. That is the challenge.

We can see great examples of that being done and efficiencies being created so that the money can be reinvested. I want the savings through the invest to save fund to be a catalyst for more transformation across the public sector, as there is far more scope.

There is always the coalition of the willing. In every part of the public sector, you always get those who are first out of the starting blocks and you then get those who are a bit slower to come to the table, but the whole public sector needs to go in that direction.

It is a complex formula that is designed to make an objective assessment of need. It uses the most up-to-date information and looks at indicators such as population, which you referred to, as well as rurality and deprivation.

The formula is kept under constant review, and is agreed with COSLA on behalf of the 32 local authorities, which sometimes have 32 different interests. That is the challenge. Trying to get everybody to agree changes when there will be winners and losers is incredibly difficult. I am always open to suggestions about how we can improve the funding formula, but any proposals for change need to be generated through COSLA in the first instance, and we need to try to come to a consensus that recognises some of that.

We have tried to work with local authorities in different ways through things such as the whole family wellbeing fund. We are working with local authorities to try to address deprivation and do upstream prevention work, and some funding streams try to recognise some of that. We have also worked with our island authorities to recognise some of their needs and costs. We have tried to do that directly with island authorities.

We have recognised some of the challenges. However, on the core funding formula, if I was to pitch up and say, “I will decide,” I can imagine that I would hear 32 voices, some of which might be happy and some of which would definitely not be happy. I come back to the point that there is always room for improvement, but it would certainly not be in the spirit of the Verity house agreement if I were to overrule local government consensus on the issue. However, we continue to discuss the matter. Around the edges and around some of those other funds, we might be able to address some of the issues that you have referred to.

I am very aware of that, and it was a difficult decision. We thought long and hard about the options but, given that the UK budget is so late and given the requirement for the Scottish Fiscal Commission to provide the critical information and analysis that it provides, it was not going to be possible to do that in a shorter timeframe.

I referred to unknowns. We do not know whether there will be changes to taxation at the end of November that could impact on the Scottish Government. Those might add a layer of complexity as we might require to take some time to analyse and come to our conclusions on them. The timeframe is unfortunately challenging.

I have been engaging with political parties around this, and I am keen to continue to try to see if we can reach early agreement around the draft budget so that any changes beyond that are not major. If we are able to do that, that will give local government more clarity about the envelopes that it can assume, which will allow it to plan and move forward on that basis. However, it will require the good will of other parties to reach more or less the landing space for the draft budget, with only minor changes beyond that. I am engaging in good faith with Opposition spokespeople on that basis. So far, discussions have been quite positive, so we will see where we get to with that.

I reiterate the fact that there has been a real-terms increase to local government funding against a difficult financial backdrop across all public services. I cited the figures earlier; those are independently verified by the Accounts Commission, which confirmed the real-terms increase. However, the whole public sector is facing pressures from inflationary impacts on the costs of delivering every single service, whether by local government or the health service. Of course, pay, too, is driven by inflation, and we have been working with local government to navigate that challenge.

I should say and put on record that I very much recognise and value the significant contribution that all local government workers make to delivering public services across Scotland. I am pleased that we have managed to support local government in getting to the fair and affordable two-year pay offer that COSLA made earlier in the year. That will give some stability and the opportunity for local government to engage with staff around the reforms that they might wish to take forward in local government. We have given funding flexibilities and additional funding to help COSLA to make an offer such as that and to prevent costly industrial actions. We have been working with local government, with a difficult financial backdrop, to manage the issues.

In the spending review, we as a Government will set out our choices and the envelopes that we think are affordable and appropriate for all parts of the public sector. The Scottish Fiscal Commission has challenged the Opposition parties to set out their envelopes as an alternative if they feel that the envelopes that we set out are not adequate to meet needs, whether in local government or health. Those alternatives would mean difficult choices, but those choices are there for others to make. We will set out our budget envelopes, and we will be judged on those.

The whole public sector is having to reform, which is why we have set out a clear reform strategy. Doing things in the same way as we have always done them will not be sustainable, which is why we have such a focus on public service reform. We recognise the issue and need to ensure that, through reform, the funding goes further. Of course, local government will have to play its part in that, as well.

It is very close. We were pleased to see local government represented at the Minister for Public Finance’s recent PSR operational summit on 14 October, with more than 140 public service leaders attending. Local government is absolutely at the heart of the reform agenda, in terms of not just local authorities’ relationships with one another but, as I said earlier, their relationship with the wider public sector. There is real scope for sharing back-office functions, support and estate—perhaps taking a place-based approach in that. Progress has been made, but loads more can be done in that space. I assure the committee that local government is very much at the heart of things, which is exactly where it should be.

Transformation means that services need to be provided in a way that maintains service quality but looks to deliver things more efficiently and effectively and makes resources go further.

I have mentioned already the opportunity for shared services; I am thinking, in particular, about those areas in which it is difficult to recruit—areas that come to mind include planning. There are already good examples of local authorities sharing waste management services and back-office functions. There are many opportunities to do that.

On the use of digital, from the first round of the invest to save fund, there are good examples of local authorities’ digital solutions. Glasgow City Council, for example, received £100,000 for its smart and connected social places programme, which looks at digital solutions to enhance public services and deliver efficiency gains in housing and health and social care. Perth and Kinross Council received £500,000 to reduce energy costs and deliver a reduction in environmental impact. Falkirk and Clackmannanshire Councils were given £2 million to look at closer collaboration and shared services. There are many other examples from the fund. Those areas are ripe for looking at.

I should add that that work does not just need to be between local authorities. Transformation can happen within local government and health, and the single authority model is being looked at in some areas of the country, particularly where the health and local government boundaries are coterminous; other public sector bodies within the localities are also being looked at.

The trajectory of funding and all the pressures on public finances is what we need to consider to ensure that public services can be sustained going forward. Every part of the public sector is having to look at this.

I am happy to do that.

COSLA and local government in general have an important role to play through the Improvement Service. The whole idea of the Improvement Service was that there would be collaboration around good practice, because why would you not want to roll that out?

This issue is not particular to local government—I have also seen people in the health service not wanting to do something a certain way because that approach was invented elsewhere. Also, it is true that change is difficult, and sometimes there are barriers to change. However, that is no reason not to do it. If another local authority, health board or whatever has shown that a service can be delivered in a way that is more sustainable and cost effective, why would you not want to do the same? That is the cultural change that is required, and leadership will be needed to ensure that that happens.

I do not believe there is any part of the public sector that cannot be improved and transformed, particularly given the tools that are now at our disposal in terms of digital technology and automation. We can do things differently to help to release resources and people to do other tasks.

Let me make some high-level points first.

The consultation sets out a range of options. I have been clear before and I will be clear again that none of them is ours or endorsed by the Scottish Government. The consultation is putting out choices to see whether there is a potential political consensus to be built.

I was looking at some of the comments, and I note that every single party in the Scottish Parliament has said that continuing with valuations at 1991 levels is not sustainable or correct. The question then is what we can do about that and whether there is a landing space for doing things differently and taking forward reform.

It will take a lot of time, and we have talked about at least a decade for substantial reforms. Some things could be done sooner than that—around the number of bands, for example, even within the existing valuation system.

Looking at a couple of the headlines this morning, can we agree on what changes should happen? There has been some predictable political opportunism and misinformation—if I can say so—from some outlets. Does that bode well? I guess that it is a question of whether we are up for a serious discussion about reform. We could go for another decade without any change if there is no political consensus to do something.

Let me take the opportunity to reassure the public. One clear principle that we have stated is that any proposal that on its own would lead to a significant increase in council tax in any particular area would not be acceptable to us. We would not support that. Some of the lurid numbers being bandied about based on a consultation do not help to inform the public.

The work the IFS has done is good and factual. The options are in the consultation, although we could look at other options such as local revaluations. They are far more complex to do but they would address some of the issues such as the increase in property prices in Edinburgh and the Lothians, as each area would take as a starting point an understanding of its growth. That is more complex to do, but it is an option. Frankly, if there was a landing space around such an option, it would merit further discussion.

I point out again—because of the misinformation—that our position and our contention as a Government is that any exercise should be revenue neutral. The idea that council tax reform is some mad revenue-raising approach from the Scottish Government to take people’s money could not be further from the truth. One principle we would not budge from is that the reform has to be revenue neutral. It is not about raising more money; it is about having a system that is fairer.

The consultation is out. We are keen to hear what the public have to say, and we are keen to hear what other parties have to say. I know that COSLA is engaging with each of the parties as part of its manifesto development for next year. That can only be good. The report will come out next year on the back of the consultation, which will end at the end of January, and it will then be for parties to decide what they do with that and whether they put forward a proposition in their manifesto. Then the public will decide and judge how important they see it as an issue.

In truth, it will be for Parliament in the next session to look at whether there is a landing space. This consultation is putting out options to see whether work can be done to create a landing space in the next session of Parliament.