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Last year, amendment regulations were laid in response to the financial pressures faced by local authorities as a result of the pandemic. The Scottish Government worked jointly with the Convention of Scottish Local Authorities to identify ways for local government to address the funding pressure. The amendment sought through the Local Authority (Capital Finance and Accounting) (Scotland) (Coronavirus) Amendment Regulations 2021 allowed a local authority to reduce the amount of any of the statutory repayments that it was due to make to the statutory loans fund in either the financial year 2020-21 or 2021-22, but not both. That would reduce the expenditure of a local authority in that financial year, thus creating additional financial capacity to meet Covid-19 costs.

Given the on-going challenges of responding to the pandemic, COSLA requested a further one-year extension to that flexibility to allow a local authority to reduce repayments to the statutory loans fund in 2022-23. Again, councils can make use of that flexibility only in one financial year. Most councils did not utilise that flexibility in either 2020-21 or 2021-22, but they have indicated that they may choose to use this flexibility in 2022-23.

Under normal circumstances, that is not something that ministers would support. Requiring the repayments to be made in the financial year when they are due is prudent financial management. It ensures that both current and future taxpayers are charged for their share of the capital expenditure costs of assets being used to deliver services. However, these are not normal circumstances, and it seems right to allow the flexibility to be extended through the amendments made in the draft regulations before you. We have made it clear to local government that the flexibility should be used only as necessary to address funding pressures arising from the pandemic, and it may not be used to grow reserves.

The 2021 regulations include a provision to ensure that future changes to loans fund accounting arrangements can be delivered through statutory guidance, rather than requiring further amendments to regulations. That change, which was due to come into force on 1 April 2022, is to allow future harmonisation between accounting standards and statutory arrangements. In order to facilitate the extension to the loans fund repayment flexibility, the draft regulations defer by one year the effect of that provision in the 2021 regulations.

Separately, the draft regulations change the audit completion deadline for local government 2021-22 annual accounts, as requested by Audit Scotland, in order to address the continuing challenges resulting from the delay in auditing the 2019-20 and 2020-21 accounts. Both Audit Scotland and councils are keen to return to the original statutory deadlines for 2022-23.

In summary, the draft regulations provide a financial flexibility that has been asked for and will be welcomed by local authorities. The extension of the audit deadline will alleviate some of the strain on council staff and auditors.

I encourage the committee to support the instrument.

As you will be aware, a number of factors, one of which is the pandemic, are impacting on the availability of materials. Price is one implication of that, but issues with the availability and sourcing of materials due to supply chain and logistical challenges have inhibited the deployment of the money. We are committed to constructing 110,000 houses over the next 10 years as part of the Bute house agreement and consistent with our ambitions in “Housing to 2040”. We are absolutely committed to delivering the resource necessary to realise those ambitions but, as I think the committee will understand, our capacity to build houses—and, subsequently, to spend money on building houses—is constrained by the availability of materials. Of course, that challenge is not unique to Scotland or, indeed, the UK; it is global.

We will monitor the position very carefully. As I said last week in the chamber—echoing the First Minister’s comments in the local government finance order debate—we are ready and willing to play our part in Scotland. In the broader context of the crisis in Ukraine, we have been clear about what we would like the UK Government to do with regard to waiving visas and maximising the number of people coming to the UK. Should the UK Government make any funding available to support that effort, we will of course deploy it to maximum effect to support people coming to Scotland.

That is a fair and reasonable question. With this not-so-brief guide to the spring budget revision, we have tried to provide as much context and information as possible, and as you have correctly identified, we reflect the respective practices of the Treasury and the Scottish Government. As for the potential for a more unified approach, we are happy to reflect on that.

Scott, is there any technical commentary that you would want to make?

Yes, that is correct. To touch on that point, I am confident that we will be in a position not only to ensure that we are within budget but that we are able to take that carry forward into the reserve, which was part of the budget process. That resource will be found, as I mentioned, from a stronger than forecast performance of devolved taxes and emerging underspend in some demand-led areas. As it stands, we are confident that we will not only be able to spend within our budget limit but will have that carry forward in the reserve to meet next year’s budget requirements.

The broader point that I seek to make is that we need to spend, as you are aware, and we cannot exceed our expenditure limits as set by Treasury. We have a reserve totalling £700 million. Looking at the quantum of the Scottish budget as a whole, we have that very limited space in which to land. We cannot go over. We cannot overspend and we cannot underspend beyond what we can take forward in the reserve—and I am sure that members would rightly be criticising why resource had been lost. That is an extremely challenging set of circumstances. The way that I and others have articulated it is that it is like trying to land a 747 on a postage stamp.

As we move into the latter part of the year we, then have fiscal events including the autumn budget and potentially more in-year funding announced. We then have supplementary estimates. This year, we did not have confirmation of what the supps were going to be until about three weeks after we published the SBR. That creates an incredibly challenging set of circumstances in which to operate, and that compounds the existing challenges that we are all aware of, which meet any government or organisation managing its finances towards year end.

I take the point that you make about needing to provide as much clarity as possible, and I am happy to reflect on that. As I hope the way in which we have presented this information would indicate, I am committed to doing as much as possible to aid transparency and understanding, and I recognise the points that have been raised.

Do you wish to add anything, Scott?

This is an important point, and I will ask Scott Mackay to come in on it.

I would be happy to provide you with an up-to-date picture. As Niall Caldwell said, that is a conservative estimate. I would be happy to give you a rounded picture of the support that has been provided, if that would be helpful.

It expires at the end of next year.

Yes.