Seòmar agus comataidhean

We will work with public sector employers. I have been at pains not to set an arbitrary target—although figures have dominated the press coverage—or to dictate to public bodies what they need to do. Over the next few months, in advance of the upcoming budget, we will engage with them and, most importantly, with trade unions, on where the workforce needs to reset. It is based on a freezing of the pay bill that does not equate to a freezing of pay levels. That is what is driving the need for reform.

I hope that Mr Lumsden will accept that there is a fundamental difference in my relationship with, for example, a public body such as Transport Scotland, and my relationship with local government.

The choice that I have made is to increase employability and skills funding and to protect other budget lines.

No, it is not. However, as I have said, the outlook is very difficult across the public sector. From the local government perspective, we obviously need to do this work hand in hand with the work on the fiscal framework, and we need to recognise that the resource spending review is not a budget. I can well imagine that, in future budgets, local government will, for example, have a significant uplift through the education and social security lines as a bare minimum.

I am not sure that I am advising or advocating that—unless you are quoting something that I said earlier. What we are saying to local government is, “Here are the spending parameters over the next few years”. That allows them to plan, but it will not replace annual budgets; it gives them the parameters, but not all the details. Future budgets will need to update the details.

Incidentally, there is a lot that we can learn from local government, particularly in the way that it works together and the way that COSLA facilitates a lot of sharing of best practice. You are right to say that there is a lot for us to learn. However, to all intents and purposes, local government is fully autonomous. We set the spending parameters, but ultimately, it is for local authorities to determine how they spend that money.

Local authorities have to make choices within the spending parameters that they have. I do not dictate to local government how it uses its funding—that is for local government to determine. All I can do through the resource spending review is to set out the parameters; it is for local government to decide what it does with that core budget. Obviously, there is additional funding on top of that for education and social security, which we have more influence over. However, inside the core spending parameters, it is for local government to determine how that money is spent.

Our immediate priority is to embed fair work. It goes back to questions about poverty and productivity. If you have fair work conditions and people are in secure, well-paid employment and get paid a reasonable wage, that delivers multiple benefits for our economy and the overall cost of the public sector.

Our primary focus right now is to embed fair work principles. Employers also want to focus on that, because, at a time of high demand and more supply, they have to distinguish themselves. Having said that, we are particularly exposed by the fact that a lot of the highest earners are in very few industries. That means that a downturn in oil and gas has a disproportionately large impact on our tax revenues and economic outlook, so there is an argument to make sure that we diversify, while also taking into account the impact that that has.

There is no black hole in public finances.

If we get it right, it will have a huge and hugely positive impact. The resource spending review covers the period that is just short of half way to the national strategy for economic transformation outcomes, which we aim to deliver over 10 years. If we get that right and invest our funding in achieving outcomes and objectives, rather than in maintaining the status quo, we can shift the dial on those things. If we just defend the status quo, we will get the same outcomes, but I think that all of us have an aspiration and ambition to actually deliver what the resource spending review sets out in relation to economic growth, resilient public services and tackling child poverty.

I have been quite open and honest about the need to freeze the pay bill, but not pay levels. I do not think that there is anyone who does not accept that there has been a lot of change in the public sector over the past two, difficult, years. Inevitably, some areas have had significant and rapid increases in head count because of Covid that are no longer required. Indeed, there were initial teething challenges around Brexit that resulted in spikes.

It is about having a general reset rather than setting arbitrary targets, which is what the UK Government has done. Your questions stemmed from a local government perspective. I am saying, loudly and clearly, that I do not tell local government what to do, and nor should I, in the way that I can work more effectively with other public sector employers.

I am saying that the resource spending review is not a budget. We have used what the SFC called reasonable assumptions to set our budget. However, we are setting a budget based predominantly on the UK Government spending review of autumn last year, which is completely out of date—it has not been updated to reflect inflation. Therefore, the numbers will fluctuate further.