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The fiscal framework is designed to move us forward and get away from what had been an annual ask from COSLA that set the scene for what was never going to be a quantum that met that demand. It was a joint endeavour to get a more constructive discussion.

There are complexities in the fiscal framework. I do not know how much Katie Hagmann spoke about rules-based funding. We have been exploring that, and Ellen Leaver or Ian Storrie can tell you a lot more about the detail of the discussions at official level. It sounds like a simple thing, but it is not without its challenges. We need to test some of that thinking, and we may look at shadow components of things over 2025-26 before coming to a fixed position.

I will give you one complexity. If rules-based funding landed at a place where the rules were met and the funding was agreed, what would happen if there were events during the financial year that caused local government to turn to the Scottish Government? Where would that sit in a rules-based framework?

I think that local government is very cognisant of the ups and downs and of the fact that things are not always neatly packaged at the start of the financial year. Events happen and they need to be responded to. I do not know whether Ian Storrie or Ellen Leaver wants to come in.

If we can get to a position in which the UK Government provides certainty on multiyear funding—we are being told that that is the aspiration—and I can see what those multiyear envelopes will be like, of course I would want to work with local government to deliver multiyear funding for it. I would be delighted to be able to do so, because I know that that would open up a whole range of opportunities, some of which I mentioned earlier.

I recognise that that is an issue for local government and COSLA, and they raise it with me regularly. However, I also note that we have made significant progress on it. Alongside the fiscal framework that we talked about earlier, we have an accountability framework. That looks at how we are collectively accountable for delivery on homelessness or teachers and narrowing the poverty-related attainment gap, for example, without ring fencing.

The framework is at an advanced stage. We have removed £1 billion of ring fencing, mainly in early learning and childcare, as a goodwill gesture in advance of the accountability framework being signed off. We said that doing that was a risk, but we wanted to set a direction of travel, and £1 billion was baselined into the local government budget. Of the £14 billion local government settlement, about £250 million is ring fenced in year.

Local government spends £4 billion on education and £3.5 billion on social care. Those are big chunks of its budget. Those areas are a joint priority. I do not think that there would be many calls from any political party here or in local government to say that we should not be spending £4 billion on education or £3.5 billion on social care, because they are key priorities for local government and for us.

We end up getting quite focused on the small amount of the in-year ring fenced funding that is left—I think that it is £250 million—which covers things such as pupil equity funding, the attainment funding and the £145.5 million for teachers. To be honest, having money going directly to schools so that headteachers can decide what they do with it has been quite innovative. Headteachers will say that they have been able to support pupils and families in ways that they would not have been able to otherwise.

There is a balance to be struck: we have to ask what we are trying to achieve and, if we think that those are good things, I presume that, collectively, we would want them to continue. I am not pushing back on the principle, but if we can agree that we would want to continue to empower headteachers and enable some funding to go directly to them to provide support for families, I would not want to lose that. It would be a shame if we were to move away from that.

Those are the types of discussions that we will have about the budget. Normally, if there is a new burden, as local government would describe it, or a new funding stream to deliver A, B and C, there would be a negotiation as to what that would look like. Local government will provide a lot of information about what it would cost, as it will not cost the same in each area, and we see where that lands. The process can be quite backwards and forwards. A landing spot for delivery will then be reached, because the policy is seen as something new that the Scottish Government is asking local government to do. We do not just put a finger in the air and say, “Oh, we think that that’s enough”. There is quite a lot of negotiation. Ellen, do you want to come in?

I raised that at the finance interministerial standing committee—FISC. Whatever we thought about the levelling-up funding—we would all have our views on funding a roundabout, for example—there is now a collective view that that money needs to be spent more strategically and efficiently. However, I made it very clear that money that had been promised had to be delivered, because, as you have pointed out, projects have been scoped, plans had been made, and what communities, towns and cities expected to receive needs to be delivered. After that, there is a need for a more strategic and efficient use of our collective resources.

Again, all the devolved nations made it very clear that things such as shared prosperity funding need to be routed through the devolved Administrations, because that will make sure that the money is spent in the most efficient, effective and strategic way rather than in little bits here and there.

There was no real pushback on that. However, there is still a question about what happens to what has happened so far. It would not be fair to remove that funding. The sooner that there is clarity and certainty, the better. We can then move on to a better way of working together on those strategic issues.

Part of that is about building the right number of houses of the right size in the right places. There are lots of issues around the size of homes and making sure that they are correct for larger families, and around accessible housing. Having the right plan is absolutely critical. Part of it is about building but, as you know, some of it is about bringing homes back into use. We are having lots of detailed discussions with local government about what it will take to get voids turned around more quickly. I think that there are 1,800 voids in the city of Edinburgh alone, or maybe it is 2,000—

That is where we get into the territory of what is appropriate. The Verity house agreement is about both spheres of government recognising each other’s roles; it is also a move away from ring fencing, as we talked about earlier. That does not mean that the expectation of reform and transformation goes away. There is a question about how we collectively hold each other to account for progress. The best way to do so is probably to highlight and champion best practice, and perhaps also to ask other authorities when they will use it.

There are also the external stakeholders who will say, “This is good practice; why is it not in place?”, and they will bring their own influence to bear. It is not in the spirit of the Verity house agreement to say, “If you don’t do this, we’re not going to give you your social work money”—that is just not where we are. However, if you are asking me whether I would like the pace to be picked up a bit, the answer is yes.

There might be ways of incentivising. The work that is done around the—I am going to get the name wrong.

I am mindful of that issue. In the past, for example, we have done a transformation fund and things that involve councils bidding in or partnering up, but I am not sure whether COSLA would be terribly welcoming of that approach. Its view would probably be, “Give us the money”.

We can agree on the key priorities and that we need to incentivise reform and more spending on prevention because—as we know—it is cheaper in the long run. However, it is hard to do that while authorities are also spending money on services in the here and now. It is a question of how they move beyond the here and now. Glasgow did that with its social work service. We supported some of the collaboration and we helped it to reshape its service while keeping the show on the road. It can be done. That did not cost huge amounts of money—it was a bit of money, but not a huge amount—and it was jointly agreed.

Dundee has done some work around the no-wrong-door approach, whereby all the agencies take off their badge and instead are in communities, asking families how they can be supported. It is not always a question of spending shedloads of money; sometimes, it is about doing things a bit differently.

We do not have in mind reaching a certain figure within 10 years or anything like that. It is more about evolution than a revolution.

Evolution includes the work around the levies and decriminalised parking enforcement regimes. There is a desire to move forward on the cruise ship levy, and there are also a lot of discussions around fees and charges. It is a case of taking it step by step.

There is a broader discussion to be had about local government’s desire for the power of general competence, which I mentioned earlier. I will bring in Ian Storrie or Ellen Leaver to talk about that. There has to be balance between what that means and what the framework around it is. There is a desire to look at what European local authorities have in place. Some have developed quite strong fiscal powers on land value, for example. I am open minded, but the detail is always more complex than the high-level aspiration.

Ellen or Ian, would you like to speak about that?

Thank you very much, convener, and thanks for inviting me to give evidence and for being so accommodating on the timing so that I could attend the Finance and Public Administration Committee meeting earlier.

The Scottish Government, along with local authorities and public sector bodies across Scotland, faces a very challenging fiscal environment. My statement to Parliament on 3 September outlined some of those challenges and highlighted the difficult decisions that we are taking to achieve financial balance this year.

The 2025-26 Scottish budget will also be challenging. The £22 billion shortfall in the UK public finances, as outlined in the Chancellor of the Exchequer’s statement at the end of July following the Treasury’s spending audit, will undoubtedly result in a difficult UK budget on 30 October. That will have significant implications for the Scottish budget, which will result in difficult decisions having to be taken.

Despite the severe financial challenges that are faced and the worst-case-scenario autumn statement last November, the local government settlement this financial year provided record funding of more than £14 billion to local authorities—a real-terms increase of 2.5 per cent—and local government received an increased share of the funding that was at ministers’ disposal. Independent analysis by the Scottish Parliament information centre confirms that local government’s share of the discretionary Scottish budget is not only higher in 2024-25 than it was in 2023-24 but higher than it was in 2013-14.

Through the Verity house agreement, we renewed our commitment to a relationship with local government that is based on mutual trust and respect, and we agreed to seek new ways of working together to ensure that the people of Scotland receive the high-quality public services that they expect and deserve.

The first year of the Verity house agreement has seen positive progress being made in the implementation of the agreement’s principle. Most notably, £1 billion was baselined into the local government 2024-25 settlement. Councils now have more powers and opportunities to raise their own revenue through, for example, the visitor levy, the workplace parking levy and changes to the council tax treatment of properties, and there is the joint delivery of pay uplifts to at least £12 an hour for children’s social care workers and childcare workers.

I remain committed to continuing to make progress against our shared priorities in partnership with local government and to ensuring that we work collectively to deliver sustainable public services across Scotland. I look forward to engaging with members today and answering any questions that the committee may have.