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One area of agreement on the fiscal framework, which is at an advanced stage of development, was early budget engagement. I have engaged directly with COSLA and Katie Hagmann in particular on early budget engagement to set out the areas of common agreement.

There is common agreement against those priorities. We looked at how we could set out a timetable for engagement that would help us to get to a place that was always going to be about compromise but is the best place that we can get to within the fiscal constraints that there are. We both have that objective.

First, let me acknowledge the bleedin’ obvious—that local government did not like the council tax freeze. There is no point in me sitting here arguing that it somehow welcomed the freeze; it did not, and we understand the reasons for that.

The council tax freeze was deployed to support pressed households at a time of cost of living pressures—which continue, but which were particularly acute. We then got into a lot of detailed discussion around the quantum to settle on to meet the cost of the freeze, and in fact, we ended up increasing that quantum.

We are now into the discussions about 2025-26. It is important to get a balance of supports for local government. We are keen for local government to have more fiscal levers, and we have made some good progress on them. Ian Storrie outlined some, and others—such as the cruise ship levy—are in the wings.

Local government has an ambition to have more powers at its disposal, which I am very sympathetic to. Obviously, it needs to be within a due diligence prudent framework, but there is a very strong argument for that journey to continue.

There are various moving parts to what will be a package, which will be quantum of the settlement, powers, flexibilities and all of that, against a backdrop of an incredibly difficult fiscal environment. We have to manage all of that so that we can, I hope, get to a place that is a reasonable landing spot.

I think that it is evident to everybody that the reduction in the Scottish Government’s block capital grant from the UK Government has a profound impact on capital spending, whether it is our own capital spending or what we are able to deliver to local authorities for their budgets. I would emphasise the fiscal rules and the spending review. “Briefing” might be too strong a word, but there have been indications that there may be some openness to thinking about a more flexible approach to the fiscal rules around capital borrowing. Whether or not that will transpire, I do not know, and we cannot rely on it.

You mentioned housing. The point that was made to the chancellor was that it would be good to get an indication of what the UK Government’s approach will be to financial transactions. As you know, financial transactions underpinned the affordable housing supply programme, and they were cut by 62 per cent, which will have an impact. We were therefore keen to push the UK Government to have another look at the use of financial transactions. We do not know the answer on that yet, but we have been clear that we could use financial transactions effectively in the housing space and in the Scottish National Investment Bank space.

On being imaginative, given that we do not know where all that will land, we are exploring what we can do beyond traditional capital departmental expenditure limit—CDEL—funding. We are looking at things such as outcomes-based funding. For example, the school estate programme—the learning estate investment programme, or LEIP—was done through revenue-based funding and has transformed the school estate. We are looking at whether there is something in that space that we could do. We are looking at the growth accelerator model, which we have used in Edinburgh, Dundee and elsewhere as a way of releasing investment. We are exploring all those avenues to see how we can work together with local government to use all the potential levers.

There is also the private sector. The Cabinet Secretary for Social Justice, Shirley-Anne Somerville, and the Minister for Housing, Paul McLennan, have been looking at how to use about £100 million to try to lever in £500 million for building for mid-market rent—I think that that is the aim.

There is not one solution here, but we need to be imaginative and open to pushing the boundaries of what can be done on all those things.

Transformation and reform are absolutely critical. There are really good examples of the public sector doing things differently, for example by using digital and delivering services in a different way. All that is really good.

We have seen good examples in local government as well. For example, the transformation in Glasgow of social work services for children has led to a 50 per cent reduction in the number of kids going into care. Thirty-one local authorities should be beating their path to Glasgow’s door. The last I was told, 16 of them had. That is good, but I would have expected more with something as transformational as that.

It is not rocket science: it is a question of services working alongside the families and asking them what they need to break the cycle of the issues that impact on the family, such as addiction and so on, which put kids at risk of going into care. The services have worked alongside the families, supported them and got help in place—and look at the results.

We really need to be in that sort of landscape: supporting and incentivising local government to share best practice. We also need to ask them some of the hard questions, such as why they are not using that best practice, which is not unreasonable to ask. Members around this table and beyond might ask the same of some of their local authorities.

We need pace. Some local authorities will always be trailblazers and want to get out there, and some might never be, but we need to see an appetite for change. It is about the sustainability of services, which will have to look different over the next 10, 15 and 20 years with an ageing population and so on. We need to really step up all that work.

The Improvement Service—that is it. The name completely went out of my head. We fund a lot of the capacity within COSLA to help it to support local government in doing some of the work. A lot of good work is going on, so we are trying behind the scenes to build some capacity to help it.

I will take that away to reassure myself that we are able to—

The tax strategy will be linked to the economic strategy in looking at all of that. We must make sure that those are linked, and the key reason for doing so is that there has to be coherence. Indeed, I have been meeting the Deputy First Minister to ensure that we can describe all of that and that our economic and tax strategies are all pointing in the same direction. That is the work that we have been doing.

You are right about that group—although it is actually meeting this month—but I would not want that point to be a signal that there has been a lack of activity. There has been a lot of activity on the recommendations that the working group made. As you are aware, the visitor levy and other things that emanated from the group have been taken forward in between its meetings.

There was significant interruption after the group last met, which I think was in April, as we had an election, a change of First Minister and all the engagement with COSLA. I meet COSLA at least once a week at the moment, and all the people who are in the joint working group are the folk who are in the room when I meet COSLA. It is fair to say that I probably meet them more than anyone else at the moment but, given my local government hat, that is understandable.

One key aspect of the fiscal framework, although it is not formally in place yet, is early engagement on the budget, and that has happened. Katie Hagmann and I have met on, I think, three or four occasions to talk about the budget. In fact, I have a note here that tells me that there have been three meetings on budget matters, with the fourth due this week, which I think is about right. We also have broader engagement on some of the important strategic issues.

There has been no lack of engagement. What is discussed and the outcome from that are probably more important than the forum in which that happens.

I will start with the easier bit, which is the progress that is being made on the principles of more flexibility and more financial powers. We are progressing those in the here and now. Fundamental council tax reform is harder and will take longer to do, so it is important to get on with some of the fiscal empowerment with more levers.

In part, the issue depends on whether we can build a degree of cross-party consensus about the ambition on council tax reform. We have been round the houses on what a fundamental replacement would look like. I would want to try to get a level of cross-party agreement on what the most important changes would be. If we could get to that stage by the end of the current parliamentary session, that would stand the next Parliament in better stead to make further progress on reform.

I do not think that that space is the joint working group, because it does a range of other things, such as looking at the visitor levy and all the detail around that. It is probably external to that. I guess that it is a case of trying to forge some discussions in this place that could perhaps go outwith the budget discussions, and looking at what opportunities exist. Given that we are going to be in a better place with multiyear budgets, is there a landing space for more significant reform to council tax, so that we could have some general agreement around the principle of it? That is easy to say and much harder to achieve, but, without it, it is difficult to see how we could move forward with significant reform.

I am keen to take the views of external stakeholders on that, and I know that you are also keen that there should be a bit of civic society involvement in the process. I am mindful of the fact that we could reach a position of saying that we think A, B and C, but the fact of the matter is that it might not garner enough political support in this place. I am keen to have some honest discussion about where a landing space might be, and I make an open invitation on that. I do not think that anyone would say that the council tax is perfect and that no important changes need to be made. If we take that as a starting point, we would need to consider what changes we could largely agree on in principle.