Seòmar agus comataidhean

Thanks for the opportunity to come to the committee to talk about reform and associated matters, the budget and anything else that the committee may wish to ask about.

I understand the value and importance of multiyear envelopes and having a line of sight on the funding over the spending review period—not just for local government, I hasten to add, but for other parts of the public sector and third sector organisations as well.

We have not been able to provide that before because we have had only single-year budgets and, therefore, it has been incredibly difficult. We will, of course, have to wait for the autumn budget at the end of November to know whether any changes to spending review assumptions will be set out by the UK Government, and whether those will have any unknown impact on our assumptions going forward. There are a lot of caveats to the size of the pie to consider before we start to discuss what that looks like over the spending review period.

I understand the importance of flexibility. Prior to the 2025-26 budget, ring fencing had been removed, but the 2025-26 budget delivered a baseline of a further £524.9 million of funding. That is almost £1.5 billion in the past two years, which was prior to agreement on an assurance and accountability framework, because those two things go hand in hand. We give flexibility, and there are areas in which there are clear Government and, most often, joint objectives, but we need an assurance and accountability framework to make sure that all those things are delivered, because ministers in this place will be asked about the delivery of key areas of policy that are delivered primarily by local government.

I am keen to look at how much further we can go on that and to work with local government to see whether we can make further progress.

Indeed.

I have not seen that particular podcast, but we are always up for good ideas. I will pick that up with one of my colleagues; Ivan McKee leads on planning. We have looked at reform through the planning hub and being able to supplement some of the challenging big planning applications that local authorities will be faced with. The whole idea of the planning hub is that it is a transformation and a vehicle to support some of the pressures that local authorities are facing. If technical digital solutions can help with that process, I am all for it. If Tom Hunter has not been contacted, I will make sure that he is, and we will follow up to see whether that can be looked at in more detail.

Yes. As the fund evolves, the situation will not be fixed. We will learn lessons from how this first tranche of funding has been delivered and will consider what impediments there have been and whether anything needs to change with regard to flexibility. We are not set on having exactly the same arrangements again. We want to encourage people. As I said earlier, I am keen for this to be seen as an on-going process, not as a one-off event. Transformation will take many years and so we need to make sure of our support for what needs to be done.

The process involves more than just that fund. The Improvement Service has a huge role to play, as do SOLACE and all the professional advisers. That support for transformation can come in the form of funding or it can come in kind and through the use of the expertise of those who have already gone through the process and can share their practice. Glasgow City Council has done good work around reducing the number of children in care, for example, and I am aware that a lot of local authorities have been knocking on Glasgow’s door to find out how that was done, because they see the value of reducing the number of children in care and of doing things differently.

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.

Ellen, would you like to answer, as you have been closer to the detail?

I contend that local government has been given a fair funding settlement; it has received a real-terms increase, meaning that the pressures of inflation, which have impacted all parts of the public sector, have been recognised. The funding is the funding; a real-terms settlement and more flexibility have been provided. I am keen to look at further flexibilities, and we are keen to work with local government on that, but, ultimately, the decisions of each individual local authority and the priorities that they set are for them as autonomous bodies elected by their local population.

Returning to reform, I note that one reason why I am keen to support local government reform relates to Meghan Gallacher’s point about how services are delivered. We need more shared services across local government boundaries and we need better use of digital and automation to provide better or more easily accessible services to the public. All those things are challenges for all parts of the public sector, and we are keen to work with local authorities, many of whom are getting on with looking at all that. We are keen to support that work because it is how we will make the money go further.

On the outlook—you can see what has been set out by the UK Government—there is an average increase in funding of 0.8 per cent over the spending review period. There is not lots of money sitting about doing nothing; it has all been allocated, and the outlook is very tight, indeed. Decisions need to be made because, if, beyond the real-terms increases that we have already given to local government, we were to give further funding to local government, it would have to come from somewhere. Would it come from health? Would it come from other parts of the budget? Those challenges will be set out in the spending review. We will set out our choices, and it is up to others to set out alternative choices.

On your comment about the pressures facing the public sector, we talked about inflationary pressures, pay inflation and everything costing more, and that is before we get on to demographics. There are pressures on services, not just in local government but in health because of demographic changes, and there will be more demands on all public services as a result.

That is why we need to prioritise getting funds to the front line. We have been pretty explicit about that. When we set out the public service reform strategy and the fiscal sustainability delivery plan, those were all about reduction in corporate costs through doing things differently. Digital has a huge role to play in that, as do shared services. It is also about rationalising the estate and getting as much money into front-line public services. However, those front-line public services can also be delivered in a different way.

The invest to save fund is not the only thing that is happening. We expect all public services to be getting on with this agenda, anyway. The invest to save fund is about helping to oil the wheels of some of that change. For example, if you have a twin track of an existing service but you want to transform something somewhere else, that might take a bit of investment to make it happen.

We have been explicit that the priorities are shared services, integrated working, digital innovation and community empowerment, with the opportunity for communities to take on assets. Some of the assets that local government and other public bodies have are either surplus to requirements or are coming under pressure because of funding pressures. Communities have quite often taken on such assets and made them work in a way that was not possible through statutory services. I am a big supporter of that.

The invest to save fund was the starter for 10 to find the level of interest—it was a bidding-in fund. As I mentioned, I am keen to keep an invest to save proposition going through the spending review because, if the public sector knows that it will not be a one-off or one-year fund, bodies might work on projects that will take two or three years to deliver, which might be more ambitious.

We know from the work that Ivan McKee has done that the return on investment must be set out clearly and has to be deliverable and tangible. The projects that will be funded will be those that show a return, and that money can then be reinvested. It is about getting a gearing effect going. The level of interest has been huge, and we want to see more of that.

First of all, I recognise that back-office functions, as we describe them, are of course critical to front-line delivery. However, there is sometimes the ability to share some of those functions. In the local government space, each local authority, to a greater or lesser extent, has people who are there to support the education function, the corporate function and various other functions of local authorities.

One question is whether those functions could support, and be shared across, more than one local authority. That is being done. Aberdeen and Aberdeenshire councils already share some education support functions. In the west of Scotland, there are shared services around waste management, where one local authority is contracted to another to provide those services. That has saved a lot of money. My point is that we need to see that everywhere. We see good practice but, if it was to happen everywhere, what would that look like, in terms of making sure that the money that is available can sustain the services that need to be sustained?

I go back to the demographic challenge. On social care, yes, there is a requirement to change how social care is delivered, and there is scope to do that but, given those demographic challenges, that budget will not reduce; it will have to continue to increase. If we accept that, we need to look at how services are delivered. Willing volunteers are now coming to the table who want to look at that. It is tricky, because you are talking about giving up a bit of power, trust, accountability and all of that. However, some local authorities have got on and done it, so it can be done.

AI is a tool; it does not operate on its own. We need to ensure that it is a tool that we can use to make improvements and to carry out tasks that previously would have been quite labour intensive. I am keen that people look to develop skills that enable them to do more complex tasks while more simple tasks are done through automation, and for AI to be used as a tool to provide information to help people make judgments about services.

Aberdeen City Council used £1.2 million from the invest to save fund to address increasing demands and pressures from an ageing population with complex care needs by developing advanced digital tools to enhance care efficiency and quality, ensuring that services are flexible, comprehensive and person centred. You need to understand your service users—who they are and what their needs are—and how you overlay that with the best use of your workforce, and automation, AI and digital tools can be absolutely critical to ensuring that you are optimising your workforce to deliver the task at hand.

That process will be overseen by people, particularly if the end user is someone who is vulnerable or older. We are not talking about removing that interface of people providing intimate care in people’s homes, for example. We are talking about using tools to enable services to be more efficient with regard to who goes where, when, to whom and why. We are also looking at things such as dementia tools that can enhance the service that is delivered by people to keep people safe in their own homes. Some of those initiatives have been around for a while; they have not just been developed. The potential for optimising services and ensuring that they are being delivered in the most efficient way is an opportunity that we should not turn our backs on. Other countries are embracing it. We are not unique, so we need to embrace it too, not just in local government but in the health service as well, in order to get the most out of the funding that we have and to try to release people to take on some of the more complex roles that there will be.

Also, as I said—we make no bones about this—we need to reduce the size and cost of the whole public sector in Scotland, because it is not sustainable. Every part of the public sector has to play its part in making sure that we can afford the public sector that we have and, importantly, we can prioritise and redirect funding to the front line to support social care and other growing areas of demand. We have no choice. We need to do that.