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I will let Ian Storrie talk about the complex matter of switching from capital to revenue.

You mentioned RAAC, and it is important that we touch on that. It is slightly separate. Previously, we have set out that we will give consideration to funding for RAAC once we fully understand the scope and nature of what we are dealing with. Work to gather information across the public service is continuing. I would also point out that Scotland is not dealing with the issue in isolation; the cabinet secretary is in regular communication with her UK counterparts about it.

As for the wider capital budget, there has been a 10 per cent real-terms cut, added to which are the challenges in the construction supply chain such as shortages and high inflation. All of that makes it impossible for us to deliver on all the capital projects that we had hoped to deliver on. There was no inflation protection in the capital budget and, as I have said, we are now looking at a 10 per cent fall in real terms.

In no way could local authorities be immune from that. It will be challenging, and we will need to prioritise the things that most support our wider-term priorities, to keep us looking forward sustainably. We will need to come back to the Parliament with a refreshed multiyear capital allocation projection, focusing on the maximum impact that our capital investments can have on delivering the priorities of the Government and the Parliament. However, there is no way that we can have that kind of cut and not feel the impact.

A number of capital projects are already legally committed, so they have to go ahead, which will leave less money. Some cuts in other parts of the budget have been felt much more strongly. I am not going to pretend that there is a magic wand that I can wave to make this go away, because there is not.

The short answer is because the Parliament tells us that we have to. The agreement between the Scottish Government and the Finance and Public Administration Committee is absolutely clear that we have to compare like with like—comparing pre-budget with pre-budget and outturn with outturn. It is a matter of comparing apples with apples. We are investing record funding in local government, with £14 billion going to local authorities, including for the council tax freeze. If we compare budget with budget, as is required, that represents an increase of £795.7 million, which is equivalent to a 6 per cent cash-terms increase or 4.3 per cent in real terms. The resource budget has increased by £840.3 million since 2023-24, which is 6.8 per cent in cash terms and 5.0 per cent in real terms.

I repeat that the way that we have presented the figures, in which we compare budget with budget, is as prescribed by the Parliament in our agreement with the Finance and Public Administration Committee.

I think so, and that is what we are all hoping the fiscal framework will help us to do. As we heard from COSLA, that has perhaps proved to be more complex than some people first thought. It is important to get that right. We—COSLA and the Scottish Government—are doing the work: we are working in good faith to take that forward. I would not be surprised if the Finance and Public Administration Committee took an interest in the matter once the fiscal framework is concluded, but it may be more for this committee to consider it once we get to that point.

COSLA has articulated how it got to its figures, but that does not align with the view of the Finance and Public Administration Committee and the Parliament on comparing like with like, and on clarity.

This goes back to Pam Gosal’s question. Hard decisions will have to be made; indeed, the Scottish Government has had to make hard decisions. I am not pretending that setting a budget will be an easy process for any council; councils will have to make difficult decisions, too.

We have supported our local authority colleagues as much as we can by increasing the share of the discretionary budget that we have, so we have prioritised local government. I do not think that anyone is pretending that the settlements anywhere meet our aspirations, but we have to face the reality of what was delivered to us in the autumn statement, and we have to set a budget that works.

That is exactly what the education assurance board is for. I think that it has been set up: if it has not been set up, it will be shortly. That will allow the Scottish Government and local government, with other partners in education, to take forward that issue in a meaningful way and to get the shared reality that we all want. What is the right number? What is the best way to spend money? What will achieve the outcomes that really matter on attainment, which ultimately will help to drive down poverty levels?

No one is suggesting that there is anything easy in the budget this year. There have been really difficult decisions for the Scottish Government—for the Deputy First Minister, in particular—in looking at all the challenges across the Scottish public service. Equally, it will be challenging for our local government colleagues. It would be disingenuous of me to tell local authorities how they should allocate their budgets. Differing decisions will be made based on local circumstances.

We have increased the discretionary budget by £1 million, which is un-ring-fenced. I want to go much further than that, but it is difficult for us to do that without the work on the fiscal framework and the accountability and assurance framework, which ensure that not just the Scottish Government but Parliament have confidence. That will give us the two-way trust that Councillor Hagmann talked about. It has to be two-way trust. That is why so much effort is being put in to those discussions with COSLA.

I am trying to remember, but I think that Glasgow City Council made that point last week. However, I think that it is selling itself a bit short. Some amazing work is going on across local authorities, but generally it is when they work in partnership with other public services that we can really see the difference and great results being achieved.

I am going to give a shout-out to three local authorities that I think are showing the innovation that is happening across the country. Glasgow City Council and Dundee City Council have their pathfinder work, in which they are supporting families out of poverty by testing innovative models of person-centred service provision. Once that work has been completed, we will see whether it can be applied to other authorities. I should say that the models in Glasgow and Dundee are not the same; they are different; as a result, we would be looking for local adaptations to such innovation. The other authority that I will highlight is Clackmannanshire Council, whose family wellbeing partnership is testing and embedding wellbeing and capability approaches to tackling poverty.

No one is saying that managing the budget is easy—that is for sure—but on the suggestion that there is no time for innovation, I say that this is absolutely the time for innovation. Since I have been an MSP, we have been talking about how we shift resources from reactive to preventative approaches, and we are starting to see that work happening. It was always going to be difficult, but it is happening. The work in Dundee, Glasgow and Clackmannanshire is all about prevention and saving individuals from future trauma and, in turn, saving public services in the future.

I have given three examples of the preventative work that is happening. There are many more such examples across Scotland.

That point that local government has made is absolutely reasonable. Let us take a step back: in the aftermath of the Smith commission, there are significant additional responsibilities across a range of public services in Scotland that need to be funded from our devolved budget. On top of that, there are significant costs from a range of mitigations that the Parliament considers to be necessary to protect communities across Scotland from the worst ravages of Westminster. It is also worth noting that, in a lot of those areas, there is shared responsibility. We need to balance our available budget to get the best outcomes. For example, the £457.3 million—almost £0.5 billion—that is budgeted for the Scottish child payment is removing thousands of children from poverty and is working in synergy with anti-poverty actions that are being taken by many local authorities.

We need to look at the budget as a whole and we need to know that we are all doing more. If anyone hears a suggestion from me or any other Government minister that this has been a budget of easy decisions, that is not the case. There have been difficult decisions in the budget for the Scottish Government and there will be difficult decisions for local authority leaders in setting their budgets. We all want to do the best for our communities with the limited resources that we have.

It is good that you mentioned the report that the Accounts Commission published today. The report concludes—well, this is the conclusion that I take from it—that Scottish local government is in a very different position from local government in England, where a number of local authorities have, effectively, gone bankrupt. The report states that

“auditors did not identify any councils in Scotland as being”

fiscally

“unsustainable in the short term.”

It is clear that we need to work to ensure that we continue that position. The fiscal framework will help with that.

We have prioritised local government in the budget, so a larger share of Scotland’s discretionary budget is now going to local authorities, but they will still have tough decisions to make, as they go forward. Part of the approach to dealing with that will involve public service reform, which has to happen across Scotland unless something changes with regard to the quantum of budgets.

This year, the autumn statement reflected a budget that prioritised tax cuts for the richest, rather than investing in public services. We have had to try to adapt to that. The statement was far tougher than anyone had expected, and that is difficult for the whole of the public service, including local authorities.

It is one of the workstreams that we agreed to take forward in the Verity house agreement. It is a partnership, so we need to ensure that that is the case.

Ultimately, I would see an accountability and assurance framework as sitting alongside the fiscal framework, to give assurance not only to the Scottish Government, but to the Parliament, in those areas in which we have shared accountability. That will be important in respect of the Accounts Commission’s work. That work is on-going, and given that it is a partnership, I would not want to be too prescriptive.