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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.

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.

Yes. It is not my area of specialist knowledge, but all of the issues are considered as part of the energy requirements of our country going forward and the energy use that will be required in the modern world.

Data is just one part of that future, but it is a critical part. We could be at the forefront of much of the technology. We have some fantastic data centres and data capability—here in Edinburgh in particular, where we have innovation and partnering with universities that are at the forefront of using the knowledge for public good. I also point out that the work is not out on its own; it is about using the knowledge and capability for improving public services for the public good.

I am happy to write to you, convener, if you would like a little more assurance on the data centre issue in particular.

I recognise that those issues are not just for local government, as the national health service, for example, faces some of the same challenges.

The report that the Accounts Commission published in the summer was helpful. It called on councils to align workforce plans and strategic priorities, so that they can ensure that their workforces are the right size and shape and that their staff have the right skills. It is about having the right people in the right places.

We know that there are some critical workforce shortages in this area, and it is no surprise that they are mainly in social work and social care. Not every part of the workforce will be on a downward trajectory. If you look at social care and the investment that is required into the future, you can see that we will need more people to come and work in health and social care, so we need to ensure that the funds will be there to prioritise those frontline services, which will mean doing things differently elsewhere.

As we have touched on already, planning and environmental health are ripe for a shared-service approach. At the moment, councils try to hold on to those specialist staff but find that, often, they go to another local authority, perhaps because it is bigger and has a better rate of pay. Could we do something regionally in that space? Could some services be nationally provided? We absolutely need to be willing to have those discussions about whether every one of 32 local authorities needs every one of those departments. There is already some sharing of staff, which I welcome, but that needs to be the default across the board. Perhaps some larger local authorities could provide those services to smaller neighbouring local authorities. We need to get our heads into that space because, otherwise, councils will continue to fish for people in the same small pond rather than thinking about how they can deliver the services differently but more sustainably. That would be beneficial, as dealing with the costs of recruitment and backfilling gaps in the workforce with agency staff is an expensive way to deliver services.

The social care space also has some good examples of local authorities being able to recruit and retain staff more ably than others. People should look at how those local authorities have been able to hold on to staff and reduce agency costs. The same thing applies in the health service, although some health boards have managed that better than others. Again, where there is good practice and something has been shown to work, I would need some convincing about why that is not being adopted elsewhere, if I can be so blunt.

This is not some complex magic answer. A lot of the answers are already there, but they need to be scaled up and that approach needs to become the default for how services are provided.

Yes. We want to try to be helpful.

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

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.

The pot that we announced is just shy of £30 million, and bids have come in from across the public sector. As I said, the criteria would give priority to reform in areas such as digital, shared services, upstream prevention and so on.

I would welcome bids that take a place-based approach and involve, for example, corporate functions being shared with other public sector bodies. Issues with some governance arrangements would have to be overcome but, if back-office functions can be shared across more than one public body, I am all for that.

On estates, we must recognise that working patterns have changed—you mentioned earlier the effect of Covid—and people are unlikely to go back to the working practices of the past. That means that the estate can look different because people are working differently, and there are huge possibilities around the sharing of space, with people coming together to provide services all under one roof.

We should not think about this just in sectoral terms. If people present us with good, fully worked-through ideas and can show that they will make savings and can be delivered, we are all ears.

I recognise the point that Meghan Gallacher is making about council tax payers and fairness. I point out for context that the provision in the budget for local government did see a further real-terms increase in funding in 2025-26, after increases in revenue funding in both of the past two financial years. It is not just us who are saying that; that has been independently verified by the Accounts Commission. As a longer-term context, the total local government finance settlement has increased by almost 50 per cent between 2013-14 and 2025-26. That is the background context.

I should say that I fully recognise that costs have increased for every part of the public sector. The role of inflation means that everything costs more, and of course pay has increased because of inflationary pressures. I absolutely accept all of that.

We said to local government that, because it was a reasonable settlement, we hoped that council tax increases would be kept to a minimum. There was a real difference in council tax rises across the country, as I am sure Meghan Gallacher will be aware. We will set out our position on this at the budget, but you have heard this morning from local government, which of course will argue strongly against any freezes or caps and will set out why it is against such moves. We have funded freezes and caps in the past, but we are also keen to give local government the flexibility that it requires.

We are also addressing some issues with particular local authorities—Meghan Gallacher mentioned one in particular. Some of our smaller local authorities have a fragility, and that is why we are keen to work with them in the reform space and to look at things such as shared services, where costs can be better managed by two or three local authorities coming together. We think that that is a good example of reform. The invest to save fund, which I am sure we will come on to, is there to help oil the wheels of such changes.

We will come to our conclusions on this, but we understand the impact on council tax payers, and that is why we gave that real-terms uplift to local government over the past few years.