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I could probably spend a good half hour talking about local government finance, and we had a long discussion at the Local Government, Housing and Planning Committee on Tuesday about that. Suffice it to say that, in the context of total Barnett consequentials being only £800 million, the £570 million that has been allocated to local government is tough and challenging for local authorities, but, in that context, perhaps that is not an unreasonable settlement.

The Accounts Commission verified that figure of £570 million. It also pointed to reserves and said that local authorities should keep under constant review priorities for the use of those reserves. Some decisions around the priorities of individual local authorities might have been taken some time ago, and, in the midst of a cost of living crisis, those should always be kept under review.

The other thing that the Accounts Commission pointed to was reform. I mentioned the need for us all to look across the public sector, particularly in relation to years 3 and 4 of this budgetary cycle and at the projected finance that is coming down the line from the UK Government. This is the time to make moves towards reform, because years 3 and 4 will be very challenging.

We are trying to give local authorities maximum flexibility to make decisions on where they spend their money by removing as much ring fencing as possible. It will then be down to each local authority to decide where it spends money and to support revenue-raising opportunities; of course, local authorities have complete freedom around council tax levels. I go back to the exchange that I had with Miles Briggs about the discrete areas of funding that we would want local authorities to continue to spend on in relation to those joint priorities.

Those are not easy things to balance, but we hope and expect that local authorities see the value for money in the third sector investment that they make. The many projects that are delivered are very good value for money, and I think that local government recognises that as much as we do.

We will continue to have those discussions with local government and the third sector, but the context and background to the issue has to be acknowledged.

We try to be as transparent with information and figures as we can be, and we can certainly look at whether there is more that we can do in that space.

Let me first take the issue of the affordable housing supply programme budget. We had a bit of an exchange about that at the Local Government, Housing and Planning Committee on Tuesday, so I hope that Miles Briggs will not mind me going over some of the key points on it again.

Let me be clear that the £3.5 billion for the affordable housing programme remains £3.5 billion. There is no change to that, but the profiling of it was always going to ebb and flow depending on the availability of resources.

The capital resources that are available to us are very much restrained by the UK Government’s decisions. The capital availability remains at the same cash level, but there has been a 3.4 per cent real-terms reduction in our UK Government capital allocation between 2022-23 and 2023-24. Context is important. If you add into that the impact of high inflation, that means that every pound that is available for the affordable housing supply programme in the coming year is worth less than it was last year and much less than it was the year before. Context is important, but the £3.5 billion remains the same.

On the funding that is available for the coming year, there is a £37 million reduction on the previously published capital spending review figure, which is 4.7 per cent. However, we are taking steps to mitigate that because we know the importance of the programme. We are doing that in three ways. First, additional financial transactions are available to the value of £17.6 million. Secondly, we have a £15 million transfer from the net zero budget to help with net zero heating systems in the affordable housing supply programme. Thirdly, we will have additional money from the charitable bonds receipts. Taking all of that together, the gap will be reduced to a very small figure, if anything at all.

Actually, the main problem is inflation. I met Shelter and other colleagues at the homelessness prevention and strategy group meeting yesterday, and they all said the same: that the major problem is inflation and therefore the value of that money. The Scottish Federation of Housing Associations said exactly the same and that the ability to deliver projects on budget is really constrained because of inflation and interest rates.

On homelessness, more than £12 million is included in the budget to support the continued progress of actions in our ending homelessness together action plan. On top of the homelessness funding provided through the local government settlement, we are investing £100 million up to 2026-27 to continue to transform the homelessness system. That is in addition to a budget of £30.5 million, which is an increase to local authorities for homelessness prevention activity in 2023-24. That funding will be distributed using a revised formula that better represents the drivers of need in homelessness and which recognises local authority efforts to reduce the use of temporary accommodation.

Miles Briggs will be aware of the work that is going on with the task and finish group, of which Shelter is a co-chair, in order to give me some recommendations around what needs to change. The prioritisation of funding and, in particular, grants available to the third sector needs to pivot towards two clear priorities: first, temporary accommodation and reducing the number of people in temporary accommodation, and, secondly, the prevention of homelessness. I think that you will see a far sharper focus on those priorities with the funding that is going in.

If Pam Duncan-Glancy wants to write to me with the details of the organisation that she is referring to, I would be happy to come back with a more detailed response.

We have tried to support third sector organisations with some of their cost of living pressures, but I have to be honest and say that, whether it is for organisations or households, I do not think that the Government can mitigate every increase in costs, including energy costs. We just do not have the resources to be able to do that in every circumstance. We have tried to help where we can, but we cannot mitigate every increase in costs for every organisation.

However, if Pam Duncan-Glancy wants to write to me with the details of that case, I will be happy to look into it in more detail.

We recognise the impact of rising operating costs across society, including on charities and voluntary organisations in the third sector. We continue to invest widely in the third sector and have committed to increasing multiyear funding wherever possible.

Under fairer funding principles, multiyear arrangements for third sector organisations are preferred where appropriate, so we want to move to multiyear grants being the default position, unless it is short-term, one-off funding for particular projects. When that is not the case, I would like to move to multiyear funding being the default, and I am committed to progressing that in my portfolio.

All cost factors are taken into account when considering proposals for third sector organisation grants, and it is for individual grant makers and funders to determine the value of individual grants. However, there is conditionality that is concerned with uplifting low-paid workers to at least the real living wage, which is an important part of the fair work principles. Any pay increase that an employer wishes to introduce above and beyond that is, of course, a matter for the employer concerned.

It is a challenge for the third sector—we cannot shy away from that—but it is important that we make progress. Multiyear funding will, at the very least, help third sector organisations to plan beyond year to year.

Indeed—that is all absolutely true. The current fiscal framework arrangements clearly constrain the extent to which we are able to respond to this or any other crisis. I said something about that earlier in relation to our largely fixed budget, our constrained borrowing powers and the reserved powers limit, all of which make things difficult. If we add inflation to that, we see that it is extremely difficult.

The fiscal framework review must ensure that, within our devolved responsibilities, the Scottish Government and the Scottish Parliament have the necessary fiscal flexibility to manage the risks that we face now, and will face in the future, and to support economic recovery. We have to get a different set of arrangements out of the review.

The framework is due to be reviewed after the completion of an independent report that was jointly commissioned by the UK and Scottish Governments, and agreement has been reached with our Treasury counterparts on the detailed arrangements for the review. When I said that we were in the foothills of the discussions, that is what I was alluding to. The final version of the report has been submitted to both Governments for consideration, but I understand that the timing and arrangements for publishing it are still under discussion.

I cannot emphasise enough how important it is that we get that right. I am sure that the committee will keep a watching brief on the progress that is being made.

In summary, it is important but it is not the only measurement. Nonetheless, it is something that we should keep an eye on.

We agree with the Child Poverty Action Group, and we have written to the UK Government on several occasions, calling for the two-child limit and the benefit cap to be scrapped. The Scottish Government is already mitigating the benefit cap through local authorities. However, we acknowledge that that would be more effective if it was done at source by the UK Government.

As a Government, we also agree that universal credit should be paid at the same amount, no matter the age of the person who is applying. That would help many people and families who are facing hardship as a result of the arbitrary age discrimination that the UK Government has introduced.

That is in sharp contrast to the significant level of support that the Scottish Government is providing to low-income parents. We have a lot of sympathy with what the Child Poverty Action Group is saying.

There has been a lot of independent analysis over the years. One of the most important reports has been the recent “Welfare reform report—Impact on families with children”, which was published in April last year. It estimated that

“Reversing key UK Government welfare reforms that have occurred since 2015 would bring an estimated 70,000 people out of poverty in Scotland, including 30,000 children, in 2023-24.”

That would very much help us to meet our child poverty targets.

Pam Duncan-Glancy makes a fair point. These are tough times for all sectors—whether it is local government, the third sector or public agencies—in terms of the quantum of finance that is available in the budget. Multiyear funding is important because it makes things easier by giving the certainty of funding availability. If we move to a position in which multiyear funding becomes the presumption and default, that will help with the planning of budgets.

We will work with third sector organisations to support them as much as we can. We need to look at how we can reform the way that we do things. That applies not just to Scottish Government agencies and public services but to local government. The Accounts Commission suggested that as a way forward, and that might have to apply to the third sector, too. We all have to look at, for example, the buildings, services and support structures that we use, to see whether they can be shared. We need to look at things differently. The pandemic has shown that different ways of working—which, before the pandemic, we might not have thought possible—have been achieved in a very short timeframe. In some ways, that flexible working can reduce infrastructure costs for organisations.

We need to continue to have those discussions, but I am not going to sit here and pretend that it is easy for any sector, including the third sector, which—as I said—we will try to support as much as we can.