 Rib yarwch, a pob caf яw tiyearleid Thanks to the 23rd solidaroun meeting Australia in 2020 in the .. Finance and Public Administration Committee. The first item on our agenda is to take evidence from the Minister for Public Finance, Planning and Community chatting wealth on the Scottish landfill tax prescribed landfill site activities in Government order…. Amendment Order 2022. Mr Arffaul is joined today by Robert Souter, Senior Tax Policy Advisor at the Scottish Government. We welcome both to the meeting and invite Mr Arffaul to make a short opening statement. Mr Arffaungs, thank you. The Landfill Tax Scotland Act 2014 provides for Scottish ministers to prescribe specific landfill site activities with the effect that they will be treated as a taxable disposal, regardless of whether they meet the free conditions set out in section 3 of the Landfill Tax Scotland Act 2014. Those powers are exercised through the Landfill Tax Prescribed Landfill Site Activities Order 2014. The Scottish Landfill Tax Prescribed Landfill Site Activities Amendment Order 2022 provides additional confirmation regarding when a taxable disposal has been made and ensures that there is clarity for taxpayers and their customers. The amendment order amends the existing prescription for cell bonds to specify that the use of material to construct or maintain a cell wall is a taxable activity. It provides that in addition to the current list of prescribed activities, any other use of material in a landfill cell will be taxable, though with certain listed exceptions. Although additional landfill site activities are prescribed, the effect of the amendment order is to confirm what the Scottish Government considers to be the existing scope of the tax. It is intended to provide additional certainty for taxpayers and their customers. In order to minimise any potential period of uncertainty, as provided for in the landfill tax Scotland Act 2014, the amendment order was introduced using a provisional affirmative procedure and took effect from 1 July 2022. The Scottish Government's view is that the amendment order also ensures that the scope of landfill tax in Scotland continues to be consistent with that in the rest of the UK. On that note, I am happy to conclude and take any questions that the committee may have. Okay, thank you very much. I take it the latter is just to avoid what we would call a waste tourism. Would that be correct? There has obviously been a number of considerations that play into having that consistency with the rest of the UK. However, yes, that is why in terms of the way in which landfill tax operates. Indeed, as the committee will be familiar with the setting of rates on landfill tax, avoiding waste tourism has obviously been a key concern in taking those decisions. The Delegated Powers and Law Reform Committee said that it would be helpful for the Scottish Government to provide a full explanation of the reason for the timing of the instrument. Someone, if you can just help us with that. Certainly, and I would note that the DPLR committee on the report accepted the reasons that we did provide. Fundamentally, we had consulted on this amendment order as a proposal in November and December of last year. We, as the committee would appreciate, took some time to consider the responses that we received via that consultation and also to engage in further discussion with stakeholders. There was any decision from the upper tribunal of Scotland that was publicised in May of this year and, naturally, we would have wanted to take further time to consider that as well. In effect, the first practicable date to make and lay the order was the first of July of this year. It was felt that, given the need to provide certainty and clarity to taxpayers and their customers, it would not have been appropriate to wait until after the summer recess had concluded. I think that we have accepted that there was a slight issue about the scrutiny and you rightly have given the reasons for that. It does raise a slightly wider point, which is something that the DPLR has raised with other issues. If there is a problem about the timescale because of recess or other factors, it is important that there is effective scrutiny. I wonder whether you can assure us that the issue will be dealt with by the Scottish Minister. Is it generally about the scrutiny aspect of these very technical things? Absolutely. I very much appreciate that point. It is only given the unique circumstances pertaining to this amendment order that we found ourselves laying it on the first of July, but we are committed to ensuring that, where possible, we can provide maximum opportunity for parliaments to scrutinise all legislation. On the same point, the DPLR committee has not been happy in the past about the number of made affirmative procedures. I get it that there is an argument here for that. There has also been the suggestion that we could use an expedited procedure, which would mean that it would not be made affirmative. It would still be subject to Parliament, but Parliament would agree to look at an issue more quickly than normal. Was that not an option in this case? The options that were available to us were those set out in section 6 of the landfill tax Scotland act. What we did was consistent with the order making power in those provisions. As to use more generally by ministers of provisional affirmative procedure, that would be a question more appropriately addressed to the Minister for Parliamentary Business in that case. However, I would just reiterate the points that I made to the convener. It tends to be in very specific circumstances that we would only require to use the affirmative procedure and it is one that we would only use if it is felt that it is absolutely required to do so. I thank you for that answer, but convener, if I could just make the point. I mean, I think that the Covid committee looked at this in quite a lot of depth, as well as the DPLR committee. There is scope for this kind of expedited procedure so that committees would agree to take a bit less time and look at something more urgently if it is urgent, but I accept that that is not always possible. Any further questions from members of the committee? That is the exhaustive questions minister. We will now move on to item 2, which is formal consideration of the motion on the instrument. I invite the minister to move motion S6M-05325 that the Finance and Public Administration Committee recommends that the Scottish landfill tax prescribed landfill site activities, amendment order 2022, be approved. Members of any further comments? I now put the question on the motion. The question is that motion S6M-05325 be agreed to. Are we all agreed? We are all agreed. The next item on our agenda is our first pre-budget evidence session on Scotland's public finances in 2023-24, focusing primarily on the impact of the cost of living and public service reform. I welcome to the meeting Stephen Boyle, Auditor General for Scotland, Charlotte Barber, vice-president of the Chartered Institute of Taxation and Susan Murray, director at the David Hume Institute. We are going to move straight to questions. Stephen, the first thing that I am going to ask you is that in regard to your submission, you said that the Scottish Government needs to plan how it manages the long-term sustainability of social security spending and be clearer on how it will improve outcomes for Scottish people. Is that happening, particularly with reference to how the national strategy for economic transformation is helping to grow the economy? The committee will be familiar with that. Audit Scotland published a report on social security Scotland earlier this year. We noted that the Scottish Government, the Agency for Social Security Scotland, had made progress during a challenging period, particularly in the pandemic, and had continued to roll out devolved benefit arrangements in Scotland. You rightly highlighted a couple of the conclusions on the report. One is about the long-term financial implications of the increasing benefit arrangements in Scotland and the divergence between Scotland's benefit arrangements compared with the rest of the UK. That will, unless carefully managed—and we expect that it will be carefully managed—create fiscal pressures on the Scottish budget. We note that, and that is one of the recommendations in the report. It is still being through evidence arrangements with other committees, so we will wait to see the outcome of that. We also point to the other finding that you referenced about the longer-term impact of devolved benefit arrangements in the country early producing intended outcomes. We recognise that it is still relatively early days in the roll-out of benefits. It is probably too soon to say that we can be confident—or the Agency can be confident—yet on the impact of its new spending and additional spending on devolved benefits. You did not refer to the national strategy for economic transformation in that response. I am just wondering if you can touch on that. Probably not much further, I can say, in terms of whether that is actually happening yet, convener. We have further work planned on the continued roll-out of benefit arrangements, but we have not yet mapped the roll-out to the national strategy for economic transformation yet, which is something that we can keep in mind for our further work programme. People can obviously jump in if they wish to add anything. I have to say in terms of submissions that they are all quite distinct, so I do not think that there is going to be a lot of overlap in the questioning from myself, but there might be one or two. If you feel that you wish to make a contribution, I should have said earlier, please feel free to do so. However, you say that you wish to draw attention to dividend taxation in particular, that this is set at a UK level as an, I quote, standing invitation to higher-rate Scottish business income taxpayers to remain within lower UK tax rates by incorporating their businesses and paying co-operation and dividend tax rather than Scottish-earned income tax rates. So are you aware of what the current impact of this is in terms of revenue lost to Scotland and what is the potential for it to be a serious issue? I do not have precise figures about how much it does or does not happen, but in terms of being a tax adviser, one of the key questions we will always look at with a self-employed business is whether you should be unincorporated or incorporated, and that has always been the case whether you were advising in times gone by on UK taxes or more so now in terms of Scottish taxes, and a lot of the issue attaches to the question of national insurance. So perhaps if the national insurance rate goes down on Friday, that might or might not lessen the considerations. The issue, and I do not know if Susan might have information about the ways in which people work, which will also help to inform this, but the issue is around those who have their own businesses. HMRC works hard to stop people being artificially incorporated, and it would be interesting to see where that goes, because I think that there will be more focus on how people work and how their taxes time goes by with this new UK Government. That is my sense of it, but at this immediate moment I do not have precise numbers, but I do think that it is very standard tax planning in a sole trader's business to decide whether to incorporate it or not, and part of that decision is whether you are rewarded in terms of the capital that goes into it from dividends or you are rewarded for your actual work, which is Scottish taxes. That has a tax consequence for the person who is paying taxes, and it has a slightly wider context in Scotland than it does south of the border, because south of the border the issue would just be whether you get an income tax or a corporation tax, whereas here it is a question of whether you have income tax on salaries or dividends are going into the UK and presumably they flow back through the block grant adjustment, but that is not very visible, is it? No, it is not. One of the things that you have said is that this is an obvious area to consider further devolution, whether that would be considered or not by the UK Government. It is uncertain whether increasingly differential tax rates between Scotland and the rest of the UK will reduce the attractiveness to higher earners coming to Scotland. This was talked about years ago as you will be well aware. I am just wondering what research has been done over the years about that, because I have seen research from other countries that has said that if there is a two or three percent differential, it does not really make much difference to behave. You are not going to move everything because of a two or three percent difference, but if it is six, seven, eight percent you might actually do that. Is there any research that has been done as to where the tipping point might be with regard to Scotland and the rest of the UK? I think that a lot of the research that has been done on any of those kind of issues is that you cannot mean to tell where the tipping point is until you have gone past it and it is a bit late to retrieve it. I think that that is one of the issues around all this. I think that there are also two issues here. One is for people who are located in Scotland, you might well not get up and move for a sake of two or three percentage points or whatever it might be, and of course the discrepancy gets wider the higher up the income scale you go. However, what you might have your discrepancies are for those who might or might not come into Scotland and relocate your business. If you are going to be a doctor in Newcastle or Edinburgh, it might influence your decision, say. Yes, I appreciate that. I will be asking another question. Stephen, you want to come in on this issue. Just to draw the committee's attention, this is a regular feature of the conversation that the Public Audit Committee has in respect of the Scottish rate of income tax that the work that the National Audit Office undertakes on the arrangements for the income tax collection arrangements and the assurance that companies that Audit Scotland provides. As Charlotte said, there is no strong evidence to suggest that taxpayer behaviour of Scottish taxpayers is being influenced strongly by the differential that exists between Scottish income tax rates and the rest of the UK. One of the features of the discussion that perhaps sticks in my mind is not so much about whether people will move from Edinburgh to Newcastle but rather the identification of primary residents for those individuals who are able to choose which residents that might be. However, if that is something of interest to the committee, we can share some of that material. I think that it would be useful because I think that it is the people who are on the most mobile also are the people who pay the highest level of taxation or who could be liable for the highest level of taxation that is obviously significant interest. Now, Susan, in terms of your submission, I am intrigued that you mention open data and say that, and I quote, over 95 per cent of data that could be open is still locked up at an annual cost to the Scottish economy of just over £2 billion that was struck by the size and scale of that figure. I think that you meant the wider Scottish economy not just to public sector but, if that is the case, what is the split? How can or should this be opened up and over what timescale do you envisage that happening? We wrote a document earlier this year with open data Scotland who are the experts in this area and what they did was analyse not just Scottish Government data but local authority data and work out how much was locked up and how much it could not be got at. The reason we came to working in this partnership was that we were trying to map something and everyone had told me, oh, the data is there, it is really easy, just do it. We managed to get a funder, to 50 per cent funder post. We got a whizzy data analyst in from CodeClan, they were amazing and then we tried to collect the data of local government websites and realised that it was all under copyright which we were kind of a bit shocked by because we weren't aware we thought it was beyond our local government licenses. The further we got into that project the more we realised it wasn't as easy and as simple as we thought it was going to be and so we wrote that all up and that's all on a data website called GitHub. So we wrote the process there, we haven't been able to take that project further forward because the funding ran out so everything's there for someone to pick up if they want to but we formed this relationship with Open Data Scotland and the more we learnt about how much data was locked up and people were beginning to try and monetise it it was the opposite of what was going on in some other countries where they've opened everything up and said to people here's the data go play with it and see what you can do and so that's leading to some really interesting innovation. So I think the case study in the briefing that I can forward up with the committee afterwards if they'd like is on the Helsinki region info share which has got some really good things that have come out of opening up but you can't always plan what people are going to do with your data and I think that's the kind of so once you put creative people in a room with data they can do interesting things with it. So I think there's data from the pandemic when people were experimenting with websites and what was available the use of the Scottish land register more than doubled in about six months I think and they were just they hadn't been advertising it it was just people started experimenting with what was on the web and seeing what was there and more things have come out of that. It just seems a colossal sum of money to be honest and I mean 95 per cent being locked up also seems a very high percentage. I'm just wondering how you come to those figures and again the split between the private and public sectors on that. Yeah so it's all detailed in the paper it's quite complicated so I can send that through afterwards. Given the amount of money involved in the pressure on our finances I think it's complicated or not I think it's something we have to look at is it not? Okay I think so I think it's it's worse it's definitely worth looking at it's something that this time last year if you'd asked me about it I was completely in the dark on how other countries were doing it and how we were doing it and how we'd written a strategy that said we were going to do it but we're not quite doing it so the Scottish Government website is covered by what's called an open government license but even within that there's different portals that aren't as easy to access and so it's it's very complicated I'm sorry I can't explain it in much more detail but I can tell you who to call if you want to so Ian Watt of the Open Data Scotland is amazing on it and that's who you wrote the paper with. They used to say where there's muck, there's brass now it seems to be data. Things certainly have moved on from an hour lad Steven. Your reference audit Scotland's report addressing climate change in Scotland which contains in my quote a high level summary of key improvements needed across the public sector of Scotland is to reach its climate ambitions. Can you provide some examples of those and the cost and delivery timescale? Probably not in the detail convener that you would want this afternoon and I think it's not that there isn't ambition or clearly one of the government's priorities but I think that the collective understanding of what it will take to deliver net zero is still evolving across the public sector and our work is continuing in this area and we're thinking really carefully about where we best position the public audit response in terms of climate ambitions. Our next item of work is going to look at some of the leadership and governance around net zero and climate ambitions and it's something that we'll be publishing next year. We know that public bodies have individually produced action plans the extent to which those will be delivered really matters that there's openness, transparency about it and where they sit alongside other priorities but probably not able to give you a precise answer today convener. You see you're just teasing us really aren't you? You put these things in, you throw these fabulous quotes into these submissions and I think oh that's great I'm going to ask about that and see what it's going to mean for the 2023-24 budget and then you tell me and I'm not trying to ask this because this is a way that work is on going as with a previous question work is on going it's kind of a bit frustrating from a finance perspective and we're actually looking to you know make recommendations in terms of the 23-24 budget so is there any possibility we would get any more meat on the bones in the weeks ahead? So not in terms of the timescales for the committee's budget scrutiny for this year. I think if I'm making the answer that all public bodies government itself should have a clear expectation about their longer term financial planning and what that means for the delivery of their net zero obligations so we would expect that that information will be available as consistent with some of the other comments that we've made in the submission that public bodies government as well need to have clear costed and plans for the delivery of budget whether it's efficiency savings or climate change obligations. Okay Susan, in your submission you called for more spending on public transport can you specify how much more and what should be allocated to buses, ferries and rail and where this funding can be sourced from? So I saw that in the committee briefing I'm not quite sure that was exact my exact wording and what we were saying was if your priorities which are clearly stated were to reduce child poverty and your net zero targets then one of the things that would help for that is more public spending and more public transport spending but there's got to be a give and take you know where's the money going to come from and I think they're at the moment I think I have so many questions over exactly how much money there's going to be because we've got a big fiscal event on Friday and and I think it's really hard to answer questions to say what you're going to take money off of when you don't know quite how things are going to pan out and on what timescale changes might might happen and even announcements that have already taken place so I haven't I don't know if I can say this but I happened to bump into David Bell while I was waiting to come to committee and I said to him I don't quite understand so the bank has bonus announcement has been bothering me because what does that mean for the fiscal framework so if the average if the average median salary goes down although as David pointed out salaries don't tend to go down so and but the bonus goes up does that mean that it's actually better the bankers bonus thing for the fiscal framework than not and so this yeah so there's so many movable parts at the moment I I don't know the exact amount to spend on public transport but I think I don't know the exact amount for anything at the moment because so much of it is moving and and it just feels like how on earth you do scrutiny it is is up it's really really tricky well that's what we're trying to grasp and that's what we're relying on obviously what this is and that's why when so examples from other places in the world they've done a nine nine euro fare in in in Germany and that's had a phenomenal drive in the economy in terms of you know people that have got money to spend have taken days out there's a great quote and I think it's on a bbc article this morning from an 80 year old who's done a trip of a lifetime around Germany you know so there are there are things we could do with the kind of travel card that was available in cop 26 that could make it easier for people to travel but how how is that going to work with encouraging people back into the office which is obviously you know there's a push there but at the moment some organisations have enabled free car parking spaces because they've got big car parks that aren't being used so they're staff are now driving to it when they used to get public transport so there's so many things that are moving at the moment that are happening in different ways to what they used to it's really really really tricky you know and people some people are still reluctant to use the buses because they feel it is more chance of catching things so there's so much going on I think so if you can't put pound shillies and pens on it or anything of that nature what areas should be transport be prioritised over because I mean at the best I think we can envisage would be a static budget you know probably declining in real terms but probably maybe static cash terms maybe slightly higher in cash terms so we have to prioritise so if you're saying that we should spend more on public transport the reason I'm asking because you specifically said it in your submission what should it be prioritised over yeah I think it's a really tricky question because everything in there and if you look at all the submissions you've got everyone wants their area to be spent on you know there's no one saying don't spend on on anything what we're trying to do is look across the piece and say if these are your priorities then prioritising the child payment the net zero targets and the health and social care spending meet the priorities that have been set in the budget which is what the question was that you asked do these priorities and we we kind of think they they do but what are you going to do prioritise and the things that were announced last week in the revised budget if that's the right term in the spending announcements you know it's difficult to see at the moment what detail is you know there are big numbers of what might be cut but actually what programs will be cut is is tricky to know so you know when we were looking at the numbers there's there is support there to help people claim additional benefits you know so the uptake of pension credit is really really low you know i think the committee's talked about that before down at 40 percent you know if you could get more people to take up that then that would be a good use of money you know because then they might not be claiming something else and you know so there's everything seems to have got a balance you know because it's going to go up and down depending on what your intervention is okay charlotte straightforward question i think for you which is current levels of wage increase assuming no change in higher tax thresholds in scotland and how many more scotish tax payers will be caught in fiscal drag from next april well that's an interesting one isn't it because i'm despite liking tax and being a tax adviser i'm not necessarily that jeed up on wages and where wages will go but obviously if you set your thresholds and you don't increase them then there's quite significant fiscal drag and i think all the surveys and research that's been done recently that i've been looking at says you know the more there's inflation the more there'll be fiscal drag i you also read other things that question that because the inflation's coming through food and petrol and energy and i'm not sure whether wages are keeping up with that i don't know if you've been doing work on that season but i do think they are i mean i think it's quite clear that they're not but if wages are not keeping up to the same extent then clearly you know you're not going to have wages going up and therefore taking in more tax are you well i mean if even if inflation's 10% and wages go up 7% on average that's still going to take a huge chunk of people into higher taxes and then they'll be liable with that so that extra pay increase they may get a more higher portion of it is going to be there for taking in taxes absolutely and the reason i'm asking for this is because obviously that although that will be not particularly welcomed by the people for whom that impacts have won for the scotish government it will mean additional revenue for all the plethora of organisations who understandably want additional funding given where we are at the moment so that's why i was trying to ask that question. I think generally fiscal drag and freezing allowances doesn't tend to feel as painful to people as actually saying you're putting something up so but that comes to political presentation doesn't it and i think that's often an easier one but of course the other thing we have to look at are the moving parts and i'm going to echo what Susan says we don't know where we'll sit for what might or might not be announced on Friday and you know you could measure fiscal drag per se here now but mixed in with that is the balance of how people view things isn't it vis-à-vis south of the border and where they might be and whether the personal alliance is put up or this is put up for because of course the personal alliance is the one that most affects scotish income tax and who actually pays it in the first place. Final question to yourself Susan which is you talked about barriers to work need to be removed which specific barriers do you think need to be removed as a priority? Can I add something to the last one first? Of course you can. I don't know if you've noticed so ONS stats that came out last week they had a number of over 65s returning to work which is the first time they've seen that in fairly significant numbers so that's generally part time but for over 65s almost supplementing pensions i think that's an interesting phenomenon you know is it going to continue and i think one of the things we've not touched on yet is behaviour in terms of tax you know we've talked a bit about fiscal drag but the cost of living crisis impacting on how people do they want to go and earn more money and they might but also the other ONS number that came out was the largest increase in employment rate it was one of scotland was one of the places so you know that they're good signs um sorry i've forgotten the question now. Well the question base that was about the barriers you're suggesting barriers being removed and asking you what barriers should be removed. One of the biggest barriers is people with someone disabled in their household being a carer is a really big barrier and there was a report i'm going to get the name of it how early this year that i was just reading this morning about how people the effectiveness of the support around an individual that was maybe furthest from the workplace and although the take-up had been lower the effectiveness of the support had been deemed to be really really good and it had long-term consequences for those households so i think those those are good signs if we can get people that are furthest from the workplace back into work but with a package of support around them then that's got to be good long term. Okay thank you and steven my last question to you is i was just going to read it there and i quote over 40 different financial outputs published by 10 government departments of public bodies so how can these be rationalised and made more transparent and what savings it might ensue. So there's a report convener that the committee may be familiar with that the Scottish Exchequer department within the Scottish government produced a discovery report that looked at the some of the publication arrangements in touch on some of the your earlier interest in open data and transparency that that's a good start we would say it's important that there is i think a recognition of the scale of the the challenge that exists timescales for this we know is that will be 2025 before the government has set out how it intends to rationalise and move to a clearer set of financial documentation open data we hope that we go along alongside that timescales so that i can imagine that the committee will be interested in that whether that's moving at a pace that you would want to rationalise it you'll be familiar convener that for many years we've called for greater transparency particularly during the pandemic between spending arrangements budgets and then reported financial information the pandemic itself was an event where the traditional budget setting arrangements and financial reporting didn't lend itself to spending that covers across multiple departments within government we think there are other live examples cost of living might very well be one itself as with climate change and the government's other priorities child poverty will all request spending across a number of different departments to move towards this that's as much as we know at the moment convener that in terms of where the government is progressing so welcome the recognition and planned improvements and keen to see progress on this front i mean i recall in a previous life the mclelland report in which we talked about rationalising it across scotland is that not really happened at all it doesn't seem to have from from this if even financial reporting has got 40 different outputs i mean i can imagine there are a few but possibly annoyingly but 40 i mean i would i would just add if i mean so looking at the one of the key features of the resource spending review was on that with the fiscal environment that country is in will require efficiency savings and that these will need to be costed with clear timescales and responsibilities around them alongside the committee's other interest in public sector reform is that that has to be done in a way that is clear and transparent so that the impact is also known the anticipated outcomes are clearly set out for for users of public services and for public bodies themselves as well so i think you know whether it's referencing learning from mclelland report or from the recent review that's been undertaken there is something of a pace required convener to support public and parliamentary understanding of the decisions and the changes that are coming absolutely and to generate savings which i know no one seems to be putting any pounds shillings and pens on anything today i notice but the last question uh from myself before we open out to colleagues around the table is to yourself shalla and it's a very straightforward one in your submission you call for the devolved taxes legislation working group to be reconvened as soon as possible so who should chair it oh that's an interesting question uh well uh the last time it met it was convened by the clerk of the predecessor committee and that worked well and i guess it's a decision that perhaps need made between yourselves and the Scottish government because there were equal members of the Scottish government this due to support from this committee and external representatives in that devolved taxes legislative working group and if it's stepping to the side of the moment i was involved in the Welsh finance committee's deliberation on a similar kind of exercise and it's actually quite a tricky question so i think it probably would best be served with political leadership politically so the minister perhaps do you think yes yourself i must admit i hadn't kind of given it specific thought as to who i would nominate as chair so there's off the top of my head the reason i asked is because it was in your submission so i thought i would take it yes i think the group worked really well before it's one of the most interesting groups i've been involved in and it's a it's a really difficult tricky kind of issue but i think it's really important because well for a number of reasons i don't think it's appropriate the professional bodies don't think it's appropriate for primary legislation your tax law to be changed using secondary legislation and everybody always responds by saying well we've got that already for the rates increases decreases rates i think are slightly different because you can see if it's 10 or 11 percent i mean it's crystal clear you pay more or you pay less but anything else actually imposes upon the citizen and i think that's part of your requirements around accountability and it's why tax is devolved and so changing that should be done after due deliberation and i think too with secondary legislation you know most of the regulations that come in here i'm sure you probably look at them think well i can see the sense of it but i might try and improve it of course you can't because it's all or nothing around secondary legislation and i think that that doesn't help get it as good as it can be and that was one of our kind of things that we wanted wasn't it when Scottish Taxes first came into place with the fleet of foot and make it fit for purpose and all those kind of phrases so i think having that devolved taxes legislative working group back it worked well there was a lot of interesting debate and i think it's time to move it on and even if you didn't use the finance bill i was waiting for you to mention those two words finance and bill yes well there you go i got them in do you want me to say them again no i'm sure others will ask a tax committee that you could have that too no but if you had something like a regular process that came through this committee more visibly i think it would help to inform people about their taxes and that's a part of what we want to do in a budget it's not just what you spend but how you get the money to spend it and how much you get to spend it okay well thank you very much for answering my opening questions i'm not going to allow colleagues in from around the table on the first to ask questions will be deputy convener daniel to be followed by john thank you very much i just add i think that the community will be delighted that you arrived at the right answer by suggesting that he should convene that body i'm sort of in a sense approach the budget decisions we have very much you know with my old small business you know owners hat and looking at it i think we can look at all sorts of things in terms of the complexity but actually a lot of it boils down to brass tax of what what's the expenditure from the government what's what's optional what's not what's fixed what's variable you know i'm looking at the the submission from from audit Scotland and one thing is very clear with payroll at £22 billion that the head count that the scotish government is carrying both you know directly and also indirectly is its single biggest cost indeed it contrasts with some of the other things which are mentioned both in submissions from the bodies in front of us and others of a billion pounds of procurement or 1.5 billion pounds of procurement at any age but that small beer compared to that so i'm just wondering what you know your steven boyle thoughts are about what what the government's options are regarding head count and critically the statement in your submission saying that it's assuming that that the workforce will continue to grow at 1 per cent a year through mtfs now that stands to my mind in contrast with statements the government have made about reducing head count to pre-covid level so i was just wondering what what handles does the government have on its head count and where do you think the government's thinking is in terms of how it manages head count over the the coming years good afternoon mr johnson there's you're right in terms of our submission you know we do highlight that the pay bill is collectively the single largest item of expenditure it's hugely significant even in terms of other items of large expenditure within the Scottish budget we note the major reference to the medium-term financial strategy that talks about you know the pay award two percent and a one percent growth across the workforce if that varies by it's a three percent pay award and two and a half percent growth it results in a further £1.3 billion of expenditure by 20 6 27 if there is a steady or flat pay bill for the Scottish public sector and given the level of pay awards that are being discussed some are settled and some not yet with public sector workers the inevitably that would mean a reduction in the head count of the Scottish public sector workforce some of that can be done through natural wastage people retired jobs not backfilled and so forth but co-ordinating that perhaps alongside or the government's other plans for public sector reform what that might mean so there is done in a co-ordinated transparent way is the basis of our submission to the committee we'd also note that this won't necessarily all be done on a cost reduction basis in any organisation particularly with the level of worker rights and protections that exist is that there may be cost of money have to be spent incentives given to public sector workers in the short term to lead to longer term reductions but it's important I think the point I would emphasise the most that it's not just done on a piecemeal basis that this is actually co-ordinated and fully connected to service delivery requirements expectations what outcomes are still anticipated from government spending that is alongside the priorities and full and proper connections to the national outcomes at the same time so I think your managing finances is complicated and indeed I'm going to come on to the 40 financial reports shortly but I would suggest that managing people is even more complicated and difficult you know I think that that you're sort of hinting that 3% pay growth which is the assumption is I think that's the the higher scenario that's in the MTFS I think that has been superseded somewhat even by most recent pay of wars of around 5% so can I clarify I mean are you saying that the working assumption government is that the sensitive payroll bill will remain fixed and therefore that it's going to have to manage the headcount accordingly and then secondly are there the systems and processes in place to enable them to do that because I my fear is I think this is being implied or stated in broad terms but but you know actually without this sort of the detailed work behind the scenes it could lead to some quite brutal outcomes for people working in the public sector taking your questions in turn I we are drawing our submission on the medium-term financial strategy so that clearly was of a time when inflation assumptions weren't as they're now running at and what that might mean for pay award as colleagues have mentioned with the fiscal event of the end of the week and then the government Scottish government's intention to hold their own budget arrangements very shortly thereafter perhaps will give an opportunity for their response and more clarity what that might mean for the public sector pay bill so I don't have any further insight into the government's assumptions about the pay bill other than drawing on reference to the medium-term financial strategy and the resource spending review which clearly sets out an expectation for some parts of public sector service that there will be cash and real terms cuts and in some sectors that will be people that can't be anything other than so if there's not going to be an increase in the pay bill and they're still meeting pay award expectations it's difficult to see other than that will mean a reduction in headcount for public sector workers I think it's also safe to say that given the UK government's intention to reduce their civil service numbers to pre-covert and pre-Brexit numbers inevitably that will have a consequence for the devolved governments across the UK for what that means for their settlement it is the case and you know charlie rightly references not just about spending there could be in tax choices about what might mean to support that but I suppose we look to sit in our submission that if there are a reduction in headcount that will need to be really carefully managed not on a piecemeal basis that there is oversight within government clear and detail workforce planning that goes across sector and service delivery given the interconnected nature of public sector service. Indeed I think there's some very big questions posed by that and I think goes way beyond the the remit of just this committee but just moving on slightly I mean again you know given the complexity of what will need to be done and will need to be managed the ability to track what is actually being spent against what has been pledged in the in the budget it's critical again that comes back to my experience in small business now I guess my question is and I've posed it before but let me pose it again is one thing about the lack of clarity we have on the public record but to what extent are the systems internally for the Scottish Government to be able to do that because I think there are those are two distinct questions and while one is prostrating for us and I think there's public accountability issues I think there's what there's actually delivery issues of whether if those systems and processes are not in place within the Government to track their spend against what has been budgeted for I mean so are those systems in place in your view? So I'll hesitate to give you blanket assurance on that because I haven't done any recent audit work on the Government's systems for tracking the delivery of headcounts so this is with reference to a number of years ago when I was involved in the day-to-day audit of the Scottish Government and did see progress about their arrangements around workforce planning the quality of management information improved but forgive me I don't have that kind of current up-to-date insight into how that's operating I will of course speak to colleagues and see if we can support the committee with further detail around that and we can also and we are thinking about quite carefully over the next few months about what this means for audit work in terms of the Government's priorities through fiscal sustainability for public sector workforce in the country but to go back to your direct question I'm probably not able to give you the detail of answer you're looking for this afternoon. Thank you very much. I'll just pitch one last question to both Susan and Charlotte and I'm interested both by your written submissions what you've been saying this afternoon about things like public transport and I think impacts on tax you know and again we've already had reference that the unemployment rate in Scotland of course what that the detail missing from some of that is that we still have lower labour market participation rates in Scotland amongst both younger people and older people and so the question is this is do you think there's sufficient thinking in policy terms about actually the linkages between what programmes the government undertakes and its impacts on tax receipts are you given that we are now much more dependent on income tax growth is there sufficient joined up policy making to actually look at how we both get more people into the labour market and also grow wages for those that are already within it and I'm wondering if that was sort of lay at the heart of the public transport question and indeed the helping people back into work question that the David human institute ribs in the written submission so maybe we'll go to Susan first and then Charlotte and I have to say I've not audited or whatever the correct word is and every single policy the Scottish government doing as an outsider I see elements of joined upness so I see the the kind of Scotland is now campaign you know attracting people to come and work in Scotland if you remember the London underground Scotland's better quality of life come live here that seem to have fairly good results for a while I think from the numbers that I remember I think there seems to be there seems to be concerted effort I think to help people back into the labour market and I think the report I think it was fair it wasn't fair work it's got another name the report but it sounds like fair work that was reading this morning seemed like it'd been fairly successful in terms of the interventions that have been taken but I do know that in the budget cuts last week that were being like employment support was one of the things labelled so I don't know what's going to be cut and what's going to be there in future but I think you know we do have a demographic problem and we know we need to grow our tax base so that has to be constantly watched and I think regular tracking of the the data coming in to see who's joining or who's leaving the labour market is really really important the same question to you does the government sort of think of tax as money in and spend as money at and not make the link but it might be between the two well let me start by saying I've spent all my working life trying to encourage people to think about tax with perhaps a modicum of success I don't know but one of the reasons that we really would like the devolved taxes working group put back in place and to bring a kind of annual fiscal discussion to bear and in here more widely so than this budget review because a lot of this budget review to my way of thinking tends to be spending focused I think if you brought that tax more to life and you had more debate around it and more consideration of it that in itself would help it filter through better to being joined up between tax and spend John to be followed by Ross thanks very much convener there's been a lot so far so I'm going to try and build on some of that and the first one which the convener raised which I was also interested in was this idea of data being locked up and I just wondered if you could maybe expand on that a little bit more could you give us an example of data that's not available and if it was available how it would help the economy or whatever so the one that we were working with as the project that bought bought the whole paper together was we were trying to map all the community infrastructure across the country so things like village halls places that people have come together and what we found out is if we looked at the local government websites you couldn't scrape is the technical term you couldn't scrape that data off there legally because it's all copyrighted on most of the websites so just on that point yeah the existence of a community hall is copyrighted no only if you get that data off the local government website if you get it from google it's not right so you can get it from google but you don't know if it's accurate but you don't actually know if the data on the local government website is accurate or not so so there was a whole data issue that we were looking at it was just like it just have to say blew my mind that local government text on their websites was copyrighted whereas if the text on the Scottish Government website is an open government license so anyone can use it or quote it you know that kind of thing so so that's a tiny thing and it doesn't give you the monetisation of it um but what we were trying to do is if someone in their local community was wanting to do something what's the easiest way for them to find out about where they could do that and and how do you we were actually looking at how do we unpick SIMD data in the Scottish index of multiple deprivation because what we were worried about was generalisations in that data meaning that funders were making choices about where money was going and it might not actually correlate with the resources that were available to those communities so what we were trying to do was map data to see if the communities that were lowest in the SIMD had the lowest number of resources and unpick that and it was really difficult to do. I was still trying to get my head round this and I'll give it another go so if that information about community centres and such like was more available what what like more maybe more community organisations would be set up or would be able to it it could be I mean there could be an economic benefit but I think the thing about open data is you don't control what someone's going to do with it so I don't decide oh so and so needs that village hall data because they want to do x you make it available and then things happen but you might honestly you know what that thing might happen is and that's the tricky thing about open data I think so in the Helsinki region case study which is in the the paper that I'll send to the committee afterwards they didn't know what was going to happen when they made the data about the region available and I think that's the that's the really interesting thing about data you know and the more technical data analysts I speak to is you know when you put these amazing people in the room and their brains come together they go off at tangents that you couldn't imagine from the start and I think that you know they can drive the economy but not if you look it down because then they'll come up against barriers and that's where the problems come I am absolutely on for the data being available I just so would you say the 2 billion pounds is quite a rough figure I can tell you how it was calculated in an email I have to follow up after this but I can't off the top of my head remember how it was calculated but I when Ian did it I said that's massive we've got to double check that so we double checked it and then we triple checked it before we put it in the paper but I can't remember off the top of my head how we how we did that I'll leave it at that colleagues may want to follow up and that'd be helpful to get an email I think thank you moving on Audit Scotland in your submission you talk about the fiscal framework being intended to incentivise the Scottish Government Scottish economy is doing well tax revenues increase Scottish economy is not doing so well revenues don't increase I mean would you be prepared to say or do you think that actually the fiscal framework is weighted against Scotland at the moment that's not a position of view that we've reached and I think it's a committee know that the fiscal framework is under review so I'm inclined to leave that to experts who are in the midst of that review and read their conclusions with interest okay well unless anyone else wants to come in on that one does anyone else want to come in on that one no okay right okay we'll get it over realised that kind of sensitive issue I suppose the Chartered Institute and we've already mentioned the interaction between maybe income tax and corporation tax because people would incorporate but in fact in your paper you also mentioned various other taxes as well being in there like capital gains tax and national insurance and there's a whole kind of package in there now if that if more of these were to be devolved presumably we could come up with a more joined up system I was reading Reform Scotland paper recently I think it was during that was published about tax which was quite interesting so I mean would that would the argument that Chartered Institute be that it should be kind of a bit more neutral so that if somebody incorporated it shouldn't actually make any difference because they wouldn't or you know if you put your profits into shares and it's capital gains tax if I don't think some countries do this that all the taxes are kind of the same rate on any kind of income I think that what the Chartered Institute of Tax is looking for is I mean I mean Elizas is wishful thinking but as simple as possible and obviously you want to collect as much money as you can without enormous pain points or things that drive behaviours and so you want consistency you want forward planning you want it to be as simple as you can and one of the things that I think we find interesting with the devolution of income tax is that obviously once you've devolved income tax rates and bans then you have the option of changing them and if you change them then you have differentials and once you've got differentials there is more scope to say do you know will you go down this route or down that route so is those kind of considerations that need to go in the mix to get something because tax shouldn't be your kind of foremost driver should it no absolutely and I mean another maybe linked in with that a the David Hume Institute you talk about the size of the envelope and growing the tax base and are you thinking also widely or is that mainly income based taxes or are you thinking land based taxes or different taxes as well in that comment we were thinking about the employment based taxes that we've got at the moment and you know how do we stop the demographic effects that we're going to have on the workforce and the ageing you know issues that we're going to have going forward so how do we keep the labour market strong and thriving in Scotland great could you expand that a little bit more when you say size of the envelope what envelope actually so the amount of tax that people pay in terms of employment taxes is what we were thinking primarily in that that sense your biggest source of funding is income tax so obviously if you want more income tax or more tax we'll stop income tax your primary source to look to and you probably get more tax by having more taxpayers and more highly paid taxpayers so that's really how you would increase the envelope with the powers that you have but are we too dependent on income taxes the package is what it is I mean and we can best say how it works I don't think I would comment on whether you're too dependent on one or the other I mean the big taxes are income tax national insurance and VAT they're the real ones that bring in the money okay and your paper also mentions council tax and clearly that has not been reviewed or has been reviewed but it's not been changed for a long time are you a little bit critical that we haven't changed or replaced council tax I don't think we're critical or not critical I think council tax is one of the levers that you have and it is one that is more within your powers than say income tax because it sits more separately and it's also completely within hollywood powers I mean the argument that are the the main reason that's put forward for it not having been replaced is that nobody can agree on what should replace it that's not an area you would go into as to what would be a good property tax or a good land tax or anything like that I don't think I'm going to commit myself to that here that's okay with the David Whom Institute of review on that and I think it's an area that seems to have been looked at quite a lot over the years and the fact that people still haven't agreed and nothing's changed it surely shows something's going on with it you know it seems that everyone agrees it needs to change but no one agreed what needs to change can we not just stop wasting time and get on and make a decision would be my that's my personal philosophy I don't think that David Whom Institute of review has written a paper saying that but geez come on you know get on with it okay well I could pursue that but I'll just leave that but at the moment I can also say you've got a cost of living grosses so that's that's front of mind and anything that is going to take time and energy away from dealing with what's going on at the moment is going to not get it either you know there's such a balancing act to be done with your time at the moment okay and you also say on your paper there's little evidence that cutting income tax will boost economic growth I think some people might be surprised at that might be surprised we wrote it down or well that that there is little evidence because we do hear arguments from some quarters that cutting income tax is a good idea and will boost the economy but you're saying there's not much evidence for that we haven't seen much evidence I think Paul Johnson was on BBC Radio Scotland this morning talking about tax cuts almost never pay for themselves I think it was a quote and there were several other interesting comments he made this morning I think you know the IFS are pretty up on all this stuff if if they're worried about tax cuts then I think you know it's it's an interesting sign I didn't hear that I'll go back and read it afterwards thanks very much thank you very much thank you very much Ross to be followed by Liz thanks can you stick in the tax and just go back a moment to John's line of question there in council tax and Charlotte as John said your submission mentions the process that's in the bute house agreement between my party and the government around reform of council tax the objective of that process is to replace council tax but what we're looking at at the moment as a committee is that the coming financial year obviously we're not going to replace council tax in time for 2324 there are interim changes that can be made to the system as it currently is the factor that's used for calculating the rates could be changed reliefs could be altered removed entirely new reliefs could be brought in does the institute have any views on what changes could be made to council tax as it currently exists I don't think there are a specific list of wishes as to what should be changed I think as Susan has just said there's been some really robust studies around council tax not so long ago and it's a tax that raises a lot of money and how do you replace that I mean one of the reasons that it's got its pain points is that it you know some people find it expensive and so it's actually a difficult one to replace because it does collect a lot of tax without a lot of problems in terms of collection I mean there might be problems in perception but there and so it's actually a really difficult one to reform but I think where the CIOT stands is that this is actually a tax that is within hollywood powers and therefore it's easier to work with and you know there's the proposition that one could pick it up and work with it did you take a view on the time or since then about the the minor changes that were made around 2018 to essentially increase council tax for I think it was banned F and above was did you come to a view at that point on whether that was effective whether it met reasonable objectives let me come back to you on that one yes because I think the low income tax reform group perhaps had comments and I'll pick that one up and come back to you on it thanks very much there was another point in your submission that I thought was interesting around the government's review of the additional dwelling supplement and you were essentially urging for progress to be made on that so again similar line of question do you have a view on what would be a desirable outcome do you want a lower rate of additional dwelling a higher rate something else entirely let me come back to you on two points in relation to that first off I think you'll tend to find that the professional body's charted institute tax and others don't tend to comment on the rates you know we can discuss rates in that you know if you put it up to 40% you'd say it's expensive you get anti avoidance you know avoidance kind of measures but broadly speaking whether it's three four or five percent we wouldn't comment on that's a political decision about how much money you take out of it I think where the issues sit with additional dwelling supplement are much more with how the tax works and I know that the previous committee had a session on this it doesn't affect lots and lots of people but those it does affect it affects really very invasively very strongly and I think it's been on the table for quite a while that there are some issues around additional dwelling supplement and there's been this kind of call for evidence about them and you know again what's the point in having that within your remit if you can't pick it up and do something with it which is why I think we would like to see it being taken up and dealt with thanks Susan your submission as well mentions housing as a key priority and it specifically does mention targeted action on second homes does the additional dwelling supplement factor into that does the David Hume Institute think there's more that can be done there and we didn't look at that so I don't have any information on that we did look at for a previous response we did for the Scottish Government on something we looked at short-term let provision and some of the work that's been done on that and the interplay between that and the small business bonus scheme and I think there's some really interesting data on that which is is worth looking at and so I mean I'm sure the committee knows this already but 86% of self-hatred properties get the relief and a number of them receive 100% relief and when you look at the Airbnb listings there's a number that have got over 100 properties and you just think some of those are are really pretty big businesses and some of so we were trying to work out how the different areas of policy play together and and you know where things are crossovering and might be encouraging something you might not want and housing just keeps coming up as a as an issue when we speak to people on on different elements of different issues across Scotland you know young people wanting to stay in communities not able to find houses workers trying to recruit and not able to find their employees it comes up again and again so I think how how that works out across Scotland is a really tricky issue your housing section your paper was particularly interesting you also mentioned I presume because it was written well ahead of this programme for government you mentioned potential greater use of rent pressure zones to affect positive policy change there the pfg two weeks ago now obviously announced a freeze on rents and evictions ban and there's a long-term commitment towards introduction of rent controls is that the direction of travel that you were trying to hint towards and saying that more could be done with rent pressure zones do you think what was announced in the pfg will achieve some of the objectives that you were looking for there or were you indicating something something else it's really difficult to tell without the detail of exactly how those all work you know there have been pros and cons of different schemes in different places around the world so I think the devil's in the detail on that I think what I do know is when we were trying to recruit someone that was actually a kickstarter to our team they just couldn't find anywhere to live in Edinburgh and I've heard that story over again and again and you know they've moved somewhere else now and we've managed to work with them remotely so we've kept that that role but you know I'm not the only employer that has you struggled to support a young person stay in Edinburgh I'm sure many MSPs would empathise with that trying to attract parliamentary staff to work from this building the just one final question for everyone if anybody's got a particular view on it there's been a lot of discussion at the moment around and the fact that it's playing out on twitter and in newspaper columns today around what more action the Scottish Government could be taking right now to help people through the cost of loving crisis and that there seems to be a attention there a misunderstanding perhaps around what can be done in future financial years particularly around tax for example that I think there's another column in a newspaper today saying the Scottish Government should be increasing in contacts immediately on higher earners to pay for free school meals something on those lines obviously the scotland access we can't do that we can only if that decision was made it can only be made from the first of april onwards is the discussion that is currently taking place around in-year revisions to the Scottish budget do you think it is sufficiently informed as our public sphere currently having a substantive debate or are we still in a place where people are coming at it from completely different levels of understanding of what the current fiscal arrangements actually allow for and what they don't one of our hobby horses is that people don't understand enough about the taxes and I think you see that right across the UK Deloitte's did a really interesting survey back in 2019 which looked at that they also looked at whether compliance would go up if you understood it yes it does and I think as I was saying earlier on if you put in an extra layer of devolved taxes automatically as the complications so automatically it makes more difficult things like can you make in-year changes no you can't that's probably not understood who goes into that kind of detail things the other thing that I think is poorly understood here is that tax is one part of it in the fiscal framework with the block grant adjustments is another really significant part of it and those kind of moving bits no I don't think they're properly understood but maybe a finance bill would help it or is that bad of me no not at all see a note that you were looking to come in there thanks mr group just very briefly and probably at risk of repeating points that I've made to the committee before about firstly positively welcome the summer budget revision arrangements that were brought into place during the earlier stages of the pandemic as an additional mechanism to support transparency without getting into the detail of the powers of the act that allows the Scottish Parliament to implement I would risk of repeating that thing it says that effectively the arrangements don't really lend themselves to significant whether it's crisis events or areas of public spending that require across departmental responses so just looking at the original budget through to in-year spending announcements through to financial reporting it probably comes from much more stable era whether it's pandemic cost of living or climate change that feels like now is that the appropriate time to have a really close look at that to support public parliamentary scrutiny and transparency thanks Susan do you have anything to add to this no i'm really where i'm sitting next to charlotte and although she's here with her charleston issue of taxation hat on i remember reading a paper that he wrote for icast and it was all about tax for the common good and what would happen if more people understood it and i think that was a really good paper that i think we should probably visit again i'll look that up thank you very much that's all from me here okay thank you lizz to be followed by douglas thank you miss barber just to continue that point you've raised about public understanding of tax and willingness i think economists call it a good tax what is nobody likes paying tax but it's a good tax when people do understand it and recognize what benefits it's going to produce and they know how it's being spent and that follows on from the last question that convener asked you about this if the devolved working party group was to be re-established would you advise that we kept the remit of that group the same as it was the last time or would you like to see the remit expanded to try to help with this business about understanding tax that's an interesting question i think the remit should stay as it is because actually the the remit of that devolved taxes working group is quite tricky as to how you get a legislative process that fits in with kind of the desire perhaps sometimes with taxes to make very quick changes having just said you can't make them immediately but you know what i mean if you were looking to anti-avoidance measures or something like that or you know the ads report comes through and you wanted to change it if you wanted to do it quickly so you've got that but you also want a time to kind of properly consider things through stage one two three and bring it through into legislation so there's those kind of conundrums you also have to have it fitting in if you're going to have a regular process with how the legislative process fits in with the cycles for budgeting and tying the two together and the reason i think that that devolved taxes legislative working group didn't come up with final propositions was that it's really needs a bit of careful thought and i think it should fulfill that remit and if it did that then one could always build on it by saying that's a great job could you now consider this interesting and you mentioned in your report that you had noted the cross-party suggestions that we might have a finance bill could you tell us how you think if it did happen a finance bill process how that would articulate with the devolved tax group i mean do you see them working together or do you see them as entirely separate that devolved taxes legislative group was well it wasn't a one-off because it lasted for quite a while and it had a great number of meetings and then it did an interim report but i my understanding of that group was that it was set up to put forward propositions as to how you could get a better legislative process and i mean a part of that is why would you want a better legislative process because again do some people say that the secondary legislation is okay so i think if it delivered a final report it would then need to come into yourselves and the government to agree on what process you did or didn't want in order to kind of take these things forward again interesting answer because audit squad is quite rightly has been suggesting that we have to improve the scrutiny in this parliament and greater transparency over well a lot of things but quickly tax and spend and i'm just wondering if if the devolved tax group did its job properly and its report came in let's say to this committee and then went to the Scottish government it doesn't necessarily compel it to be part of a chamber process as in stages one two and three whereas if there was a finance bill that would compel that and i'm just interested as to whether you think we need them both together or whether we could operate with a separate my understanding of the devolved taxes legislative group was that there were a kind of number of propositions put forward and part of it sits round whether you think that changing tax are technical changes you know something like the ads for instance if we were to change that plenty people would call that a technical change i personally would not because i think any change to taxes has an impact on a taxpayer and therefore it's a policy change about how much somebody is going to pay or the penalties are levied or that kind of thing so i don't actually agree that you get such a thing as a technical change and i think that should be parked and that's why i think i would favour a finance bill because then you can put all those changes through it why would i want something like a finance bill because i think it needs a regular slot and one of the issues that the devolved taxes legislative working group faces or yourselves face is that the moment what we're looking at is primarily around the fully devolved taxes outland building transaction tax and the landfill tax aggregates when it gets here that they're not to know we were talking earlier weren't we about income tax being your big money spinner they're not the biggest money spinners but they do set the tone for your taxes here and again depending on what happens in the foreseeable future now's as good a time as any to set up your processes for when you might or might not have other taxes say and that's why i think you might bring a finance bill in now all of you might say you've plenty on your plates and actually we don't want a finance bill every year because with other things to think about and the changes that are going through would either be small or this kind of technical which is often a euphemism for oh heck i don't understand it and i'm not accusing any of you being in that position but that you know the technical changes do take a wee bit of thinking through or do you know if we went back to something like the ads review and Mr Greer your questions were interesting i don't think they make a huge change to the second homes market what i do think some of the proposed recommendations might do is make a change to the fairness and the sense of perception of fairness around additional dwelling supplement because there's not many that are badly affected by it badly affected is maybe caught up in in in a way you wouldn't necessarily expect them to be caught up those people must think it's hugely unfair and that i think taints your tanks rather than being really important in terms of money so those are the kind of reasons i think you would maybe want to finance bill is to bring it in here have a full discussion if you do a stage one discussion of a a bill you tease these things out and then hopefully they get more mileage and air coverage that's extremely helpful thank you very much for these because i'm personally persuaded of the need for a finance bill because i think it does enhance scrutiny and i think it helps people to understand a bit more about where their money is actually going to be spent and i think that's crucial could i just ask the auditor general if he felt i mean you've said a lot through audit scotland about enhancing transparency and scrutiny is it your opinion that the finance bill is something that should be looked at i probably haven't nailed that down yet miss smith actually but if it supports the overriding objectives of improving transparency supporting parliamentary scrutiny particularly in the voluntary environment that we've been in and anticipate that we'll remain so then we would in general terms be in favour if that's one of the mechanisms it may not be the only one i think to say but if it if that acts as a additional lever for the parliament then we'd be keen to have support that and have fuller conversations about how it might best work thank you very much thanks okay thanks luis uh dungs before the michelle um steven you mentioned earlier and it says in your report you know structural reform in the public sector can take time to achieve and generate short term costs and we also have the government you know in terms of looking at the public sector pay bill their desire to keep that at a constant level so do you see any urgency from the the Scottish government to bring forward proposals because i would imagine the longer they leave it the more cutting they're going to have to to make do you see that urgency coming through or you know has that been any discussions with the government yet on when these proposals are going to come forward and so we're not aware of any detail yet i think that we obviously like the committee and others will have read that it's the government's intention to progress with public sector reform as set out in the resource spending review in light of the the scale of financial challenges public sector reform you know of course it can be structural it can be as the as is mentioned in the paper that it's a move to or you know digitalisation different ways of delivering public sector services so we've not been involved in any of those conversations i think nonetheless well you know if there's urgency or otherwise there is uncertainty that's being created and very clearly from our own thinking and submission is that regardless of whatever structure that's a policy decision you know not for us to to comment on that the intended outcomes are clear the costs are clear is transparent is set out as to what is intended to be delivered the risk of courses with the scale of change that takes place that tracking and monitoring the whether it's additional costs or savings becomes harder most particularly whether that's not just spread over different government portfolios but if it goes wider than that across different parts of the public sector that becomes harder for parliamentarians to scrutinise for the public to be clear on the intended benefits all those things would need to be set out in advance also on that the impact on on services and impact on people that may affect because there's been a change i think i mean looking at the the scale of the fiscal challenges are clear so there's inevitably that there'll have to be challenging decisions that will be made across the public sector to deliver financial balance but ultimately users of public services will want to be clear to have an anticipation of what that will mean for them so there's not just cuts we're talking about whether it's restructuring or reorganisation all of that has to be done in a transparent way both the spending that takes place to deliver those transformations and at the same time ultimately again what it means for for public users and i guess just now there is a you know i look at digitisation if we look at local government for example there must be a patchwork out there of i would imagine some local authorities have digitised and transformed quite a lot already so you know maybe some of that savings might not be there that the government may think there could be would that be right or so i'll be careful when you know mr lumson that i'm not i don't audit local government in scotland my colleagues in the accounts commission do so but i appreciate you have a further panel today i did read with interest the scale of innovation and change that has already taken place so i think before embarking upon any assumptions about what digitalisation will deliver it i think the government and others will want to be clear about what's already being achieved be some of that work hasn't been done yet but that with as you say we'd have to be done before the embark on any programme i guess any cost any plans for transformation and digital or otherwise to be costed timescales clear who's responsible all that to be reported public okay thank you the other question i had was around you mentioned divergence on benefits earlier but you know another huge divergence we have that we're seeing is on growth and tax income you know do you feel that the scotland government are doing enough to understand the reasons of that divergence between the rest of the UK under the other i've got plans in place that you can see to try and tackle that divergence and we want to have a go at that i'm happy to start by suspect charlotte knows more about it than i do i think the only point of just to repeat the reference i made earlier on actually that the national audit office and ourselves do look at the scotland's income tax arrangements and to understand where there are differences and divergence looking at taxpayer behaviour but although this will be undertaken on the government's behalf in scotland by HMRC through regular discussion and dialogue but again i'm more than happy to share that material with the committee but i suspect charlotte is better place to respond i'm not sure whether i am because you know in the main what we would look at is primarily the individual and the operational side of tax so that's probably where our expertise sits primarily and in terms of divergence and what sits underneath it i mean that's all about how the different moving parts between fiscal framework economic policy taxes sit but i guess you know of reconcellations of you know 870 million something is going wrong somewhere we would we would think i wouldn't like to comment on that for sure it doesn't look sensible does it you know just looking at it cold but then you've got different people making forecasts and you've to marry those up and you come back and you revisit them and it's you know it's not an exact science is it predicting exactly how many taxpayers you're going to have things can only be worse in recent times with people working or not working there's a lot of moving parts and that all comes back to things about why one needs a better understanding and more conversations about how taxes do work okay thank you computer thank you very much Douglas michelle good afternoon thank you for coming along today i wanted to ask you auditor general a question first of all you touched on it briefly but in your submission you note that the resource spending review notes 129 public bodies in scotland and you quite coily comment that structural reform can take time to achieve and generate short-term costs and i note the point you make as well about service delivery and outcomes however you know soon in terms of our typical time cost quality of any change what you haven't kind of given any indication are the potential for cost savings so my question to you is of the 129 public bodies from an audit perspective how does that compare with other countries and i realise this is a very difficult question but by head of population or some other appropriate measure in other words have we got far too many and we should actually have less and accepting what you said earlier yes it's a difficult question to give you a precise answer there are there are jurisdictions elsewhere in the world that will have far more public bodies than that and there are others that will have less from our perspective and you know that it's not my role to comment on the merits of individual structures or policy is about the are the outcomes clear from what individual public bodies are being asked to do matters more than the structural for the delivery of public services if i may a slightly related point actually just to note that with the challenges that are there are clearing in the fiscal environment that if there are structural changes proposed these can take time and you know they may not deliver the intended outcomes at the pace to address some of the the challenges that are clear clearly though if managed properly there may be longer term savings benefits and but it might not deliver what's intended in the short term let's go back to the original point if a committee would find it helpful something we can look at and come back to you with any information that we hold about the relative number of public bodies per head of population and i'm happy to do that that that'd be very helpful because i know you'll carefully qualify any data you put across just kind of following on from that in terms of outcomes and that focus and outcomes are you aware of any overlap of outcomes that might lend to consideration of streamlining from a from an audit perspective or perhaps i should ask when was the last time that you kind of audited the effectiveness across the board of the hundred and twenty nine bodies so all hundred and twenty nine public bodies are audited every year so they are subject to annual public reporting through the bodies themselves all of the audit judgments that are available on our website through the annual audit reports so i know the committee are familiar with but happy to state for the record that the public audit model in scotland goes beyond just a review of the financial statements auditors also look at the extent of which financial management is operating properly the financial sustainability and also the value for money that public bodies are delivering so that's all clear and available yes there is overlap of course between the delivery of public services if referencing the national performance framework and the national outcomes it takes many public bodies to deliver individual outcomes so some would say overlap others say that's that's necessary as partnership working to deliver effective public services and given the overarching nature of some of the priorities the delivery of child poverty being one can't just be tasked with one individual organisation many many public bodies will have a role on that and probably then we'll be stepped back slightly to say does that mean there should be structural change and have one body or is it about improving how these bodies are working together along with improvements in transparency of how public services are delivered that contribute towards the national outcomes i think that really that's the question that the government and the parliament will be grappling with okay my last question about that goes back to your point about potentially the the immediacy of the crises that we are lurching from because we've had several you know we've had brexit we've had covid we've got a cost of living crisis do they actually plus the upfront costs that you clearly point out before you get the benefits if they are benefits in financial terms do you think that works to inhibit the kind of structural change and you use that term you know does short termism always win the day or is it is the possibility increased that short termism always wins the day i don't think it's one or the other from frank actually but inevitably there's always you know challenges of the day but that shouldn't push out longer term planning both policy and financial and i think it's that i suppose given the experience that we've gone through over the over the course of the pandemic and what's been a really reactive you know requirement just by necessity and much of the thinking that government other public bodies are doing is that you know just recovery about reform actually to move to a more sustainable model the committee will be from now you know auditscotland has published reports for many years talked about the unsustainable nature of some aspects of public services we've said that about the nhs and we've made a paper earlier this year about social care about there are immediate pressures that need to be addressed but they have to be managed alongside longer term thinking and planning for the delivery of public services appreciate it it's difficult thank you i wanted to move on to another area it was a comment that you made susan i agreed with strongly about there's great potential for using procurement as a tool to drive change and i wondered i mean you do make some like a broad suggestion in your submission but can you give us a wee bit more flavour by what you're thinking is in here you simply mentioned standard environmental and social policy criteria but could you give us a few more examples because it does interest me well one of the examples we looked at i'm just looking for my notes on the numbers we looked at where there were not there were additional employment criteria put into some of the contracts and the number of jobs that have been created in certain categories hang on while i look at my notes um it's in there somewhere um but we thought um yeah so um 92 percent of suppliers pay the living wage and my question was i why only 92 percent um but given the total size of the budget creating 146 brand new jobs 27 27 apprenticeships and 31 work placements with 453 qualifications that seemed really low as a percentage of the whole of the number of procurement contracts you know you think you would think there would be new jobs is it just people transferring as a contract transfers and they're too paid over and they're not new jobs or you know and and we were just we were just looking at you know there's a lot said about community benefit clauses and additional criteria that could be put in but we just weren't sure from the reports that we looked at that those criteria were actually being used and there's I think there's more potential to use those criteria from the numbers that we looked at and it was the Scottish Government annual procurement report 2020 2021 that we looked at for those numbers and arguably then perhaps what you're suggesting is more transparency and making that linkage again to various outcomes I don't know if you want to come in on that point auditor general it just strikes me as an interesting area just to agree with the premise of the question absolutely but there is you know clearer connections between spending and outcomes okay my last question was that and it's something both yourself auditor general Susan you've mentioned around the kind of the net zero targets I mean that this is already very very difficult to do we know that but where will the tipping point occur as we anticipate a fiscal event from the UK government and if reports are correct it could roll back some of the commitments to net zero where's the tipping point and how that increases the challenge for the Scottish Government when they have such a clear target to try and achieve that and I mean obviously you mentioned Susan in your submission is the acorn carbon capture and storage that I think really everybody I've spoken to is utterly gobsmacked that it didn't come to Scotland but I suppose I'm trying to kind of flesh out what would happen to make you really concerned about this this is really just made Scotland's job so much harder so from both of your perspectives so we we will bow to the superior knowledge of the climate change committee because I think their reports are fantastic really well researched and they they just know their stuff for me I think when the cost of living crisis is the immediate thing in everyone's mind at the moment but we've spoken about the long-term objectives and we've got a not lose sight on them and I think there's been a lot said in the media about the the energy price cap and how that might disincentivise energy efficiency measures because people are sort of oh I don't need to do that and when you look at what's going on in the UK compared with Germany they're stopping lighting all their public buildings they've turned down their street lamps you know they're really going massively on on conserving energy we've not really talked about that but the knock-on effect of the the states doing that in Germany is that individuals are also conserving more and I think you know if if we can't get people to conserve more and use less you know we don't accelerate you know warhounds and insulation and all the things we can do to reduce energy use there's going to be really really big big problems I think clearly about prioritisation as the extent to which climate change remains a priority and it is as set out in the resource spending review to be managed alongside other pressures available public spending resource taxation choices at the same time and good and the conversation we just finished about doing all of that as a short term priority against medium term planning at the same time all of that is difficult absolutely but very necessary that that's done to influence individuals behaviour the public bodies themselves are clear about you know what's priority they can also think about what this means for their delivery of service and I suppose one thing we haven't touched on this afternoon is that the public sector estate is huge in Scotland but we need to be really considerable thinking planning about what public buildings and what they're for actually whether they're owned and used by public sector bodies or whether there's individual community benefit that can sue from them as well all of these are the choices that are facing government and public bodies over the months ahead okay thank you very much Michelle and that concludes our deliberations with regard to our first panel so I'd like to thank each of our witnesses for coming along and answering our questions I'm now going to call a break until 20 past four when we'll reconvene with our second panel we will now continue a pre-budget evidence taking on Scotland's public finances in 2023-24 and I welcome to the meeting Councillor Katie Hagman, resources spokesperson at COSLA, Kirsty Flanagan, chair of the seat for a local government director of finance Scotland section who's attending remotely and Paul Manning executive director of finance and corporate resources and deputy chief executive south Lanarkshire council. As with the previous panel we'll move straight to questions and I therefore like to begin by asking the first few questions so in terms of COSLA's submission I have to say it's excellent, it's very detailed and I find the appendix is particularly useful however the thrust appears to be additional funding for local government is required although all indications are that the settlement that the Scottish Government will receive will be static in cash terms or decrease in real terms so in your submission you highlight an anticipated £743 million reduction in core funding by 2627 if that's not to come from local government can ask where should it come from other areas of the Scottish budget I mean you've touched for example on health and social care or to envisage the additional powers over planning and building control fees and tourist tax which you suggest should be provided to local government filling that gap. Thank you convener. Macy's I want to start yeah. Yeah no I appreciate him thank you for for giving me the time to speak today to the committee so what I would say is there are going to be difficult decisions and certainly from a local government point of view we would look to looking at a whole system approach to finance it is undoubtedly as you say going to be challenging to everybody and difficult decisions will be made the impact on the flat cash settlement to local government is going to be challenging for local authorities to say the least in terms of where additional funding comes from I would I would dearly love to be able to to give you a response to that but certainly from the causal of resources point of view you know my role here is to highlight that you know there has been really challenging decisions and there has been a lot of of financial cuts that have been made already within the government we would look to having a whole systems approach and certainly you know and the aspect that has been discussed is around flexibilities and about making you know hard choices I would also perhaps go on to say that we need to work in partnership with local government and you know Scottish government and certainly looking at the priorities that government is making it would be local government that is potentially going to be delivering an awful lot of those so we do need to have those open and transparent discussions about working together in a much more collaborative way and almost on trust that local government can deliver those key priorities for for Scottish government okay well thank you for that I mean obviously the issue we face in the finance committee is everyone who gives evidence to suggest they should have more money for their particular area so we're always asking well you know how can it be funded because it's either additional taxation or it's from other sections of the budget and it's all it's helpful when people can actually suggest that money spent on A is more effective in terms of public power than B now when you talked about for example whole systems approach you know and you did say in your rem submission I quote a more collaborative approach to budget setting how do you foresee this actually working practically I mean do you are you suggesting that the Scottish budget should somehow work with with the with COSLA or however to actually sit to when it creates its budgets or do you think it should come at a later stage in the budget process how do you see this working so in terms of discussions with COSLA I think it's really important that we do have that open dialogue and certainly it wouldn't be for for COSLA to you know mandate that funding needs to be cut from various places etc but we do need to have that open discussion and you know one of the points that has been brought up around flexibilities is we also need to be in a position where there's not necessarily blame a portion to perhaps local government or to Scottish government if perhaps some policies aren't able to be achieved because of the severe financial constraints that local government may be under in future budgets so it again is about having that collaborative talk and about being able to be open and honest without blame game because what we will find and it's certainly something that's come up already is what works for one local authority isn't necessarily going to work for all local authorities and this is one of the reasons why we need to have that flexibility and being able to trust local government and being able to deliver on that but I'll maybe ask if Christy wants to add into that from a more sort of detail point of view thank you thank you can can you hear me convener yes i can i'm sure we all can yep thanks very much no i just want to say thanks very much convener to allow me to to join you totally a seminar plus journey so on a collaborative approach i think there's numerous examples of announcements that were made prior to any engagement with cosla and local government that then transpired that the costs were significantly more than what were originally estimated and a good example of that would be free school meals and that's why we would we would welcome early engagement with local government and cosla when policies are being are being developed can i pick up on your previous question as well and councillor hadman mentioned that the whole system approach and you know there money there is extra money in the resource spending review that's going into health and social security but i think we need to recognise that that local government play a key role and particularly in prevention and by putting that money downstream you're probably not getting the saving you could get if you can have invest in the prevention and that's where local government could help i also think that i've just lost my train of thought there also think there's quite a lot of new policy commitments i welcome that in the programme for government there doesn't seem to be too many new ones but off late there's been quite a lot of new policy commitments and i think we need to focus on what is the priority and looking at the core budget rather than continually bringing in new policy commitments all the time okay thanks very much i'll just follow up what you just said a minute ago basically because in your submission you said in i quote the Scottish government is continuing to focus funding in areas where things have already gone wrong in people's lives rather than providing funding to stop them going wrong in the first place without evaluating the impact on other areas so is it what you're suggesting is that first of all there should be an evaluation before the Scottish government increases its expenditure on these areas and what would you say to people who say well you know folk who are actually struggling you need these the money now actually and some of the kind of solutions that suggested going through local government are perhaps a bit more longer term than the folk who would otherwise receive these benefits would wish for it's a difficult balance because people are needing the help now but if we don't try and move away from tackling what the urgent issue is and move to prevention it's a difficult issue yeah i mean you've said again and i want to quote your own um your own submission you said that uh and i quote there needs to be frank discussions about what should be de prioritised in the public sector so what should be de prioritised i don't know if i could answer that one fully because obviously it'll depend on local authorities what they might want to deliver locally locally but there is a lot of funding that is directed and and we don't have the local autonomy to make our own decisions so it's difficult for me as I say to comment and 32 authorities what needs to be done give us an example of one sorry give us an example of one then one thing that should be de prioritised across the vast area of local government expenditure across 32 local authorities because this is this is a fundamental importance then there should be examples if we're going to put together a report making recommendations to the scotish government on de prioritisation it would really help if we had at least one example of where do de prioritisation should take place well i've seen a significant increase in early learning and childcare and you know it's a significant amount of funding towards that and as costs escalate the core budget has been eroded from that policy decision so you know whilst it's commendable to have the 1140 hours you know there maybe needs to be consider whether the scale of that was right there's i hate to mention that there's a national care service i think you probably knew that would come up in some discussion and that's a huge area of reform that is going to cost a significant amount of money on the setup cost as well as the running costs of the national care service so again that's that's an area that that could be looked at thanks that's very helpful and mr manning just in case you feel a bit neglected i was going to ask you about well i've got a number of things i was going to ask you about but one thing i was asking going to ask you about is national care services submission from causer says it poses a risk to councils ability to deliver a wide range of services for communities is that something south lakson agrees with and what services and in what way again i suppose this is something that was picked up within our own submission i suppose part of what informed that is that it comes from a backdrop i believe that currently there's a level of service provision that's underfunded that there isn't enough money within the system in terms of care and i think that that's acknowledged the risk that we have is that we're embarking on a major structural change and i'm not convinced we fully understand how much this is going to cost so for example there have been figures quoted of around two-thirds of a billion pounds causally suggested a figure nigh on double that at 1.2 billion pounds so there's a significant amount of risk in this one of the points that i think the causally submission makes in our own local authority submission makes as well is if there is going to be additional funding directed towards social care and i think there's a consensus that there should be is there merit in doing that within the context of the existing structure right could a better outcome be achieved more quickly by doing it within those existing structures is opposed to creating an entirely new structure of a national care service and everything that's required to service that okay so your answer asking the question can you give us the answer to that then it's almost a rhetorical question you given but i'm keen for you to say how it would be beneficial if you retained it within the current structure a properly funded system right could deliver a better outcome and that's working on the premise that part of the reason that the care system fails is because of underfunding right so you know if an appropriate amount of money was directed towards care services through the current structure now it's not to say that no reform is appropriate i'm sure there is a degree of reform that's appropriate within this but does it really necessitate the creation of a completely new national structure right in order to deliver that one of the other concerns that i think the causally response in our own picks up on as well you know as well as not fully understanding those costs part of that aspect around the residual impact on councils you know in terms of what's left right particularly for smaller councils if we take you know what probably amounts to a third right of the average councils expenditure and remove it from the remit of local authority around things like support services that are left do they still have the critical mass right to support those councils it is a an absolutely fundamental change there are things as well that haven't even been dealt with right around the national care service particularly from a finance point of view so how is vat going to work we know there have been problems in the past with major major structural change within the local government family around vat the assets currently those assets are the property of councils so how is that going to change how is that going to change in the intervening period and also things like pensions which are acknowledged in the consultation papers that have been put out thus far you know we're talking about a workforce of 75 000 people and there's a real vagueness about how the pension arrangements are going to be dealt with so that there's a whole number of things there that could undermine local government's ability to deliver services so for example if this critical mass that you talk about was reduced significantly in some of the smaller councils and if you look at the issue at an MSP for North Ayrshire there's three Ayrshire councils which were actually created for political purposes rather than for any other reason does that mean that the three might effectively would be in a better position to merge into one local authority because they wouldn't be viable any more or would the same situation being forthfall with Falkirk, Stirling and Clackmannish I mean where would we be if this situation progresses as you suggest in terms of being able to deliver support services it's a really good point where would we be right and part of the apprehension around this is that by taking the step towards this change around a national care service it does start to trigger further reforms it'll necessitate further reforms so if you've got a smaller council if you think about things like you know finance and payroll legal services, HR, internal audit right and you take a third of what you do away from that council right the critical mass within those functions may not exist anymore and where that domino effect probably takes you next is a discussion about wider reform so I suppose what I'm saying is you could be looking at a period of five or six years right of significant public sector reform which is necessitated by this change right and across that period of time you do run the risk of people concentrating on reforming their bodies and reforming how services are provided right at the expense of actually delivering for communities okay thanks very much that's very helpful and now back to yourself Katie you said in your submission that and I quote from a human rights perspective there's a duty to increase resources to achieve the further realisation of rights so what are these specific rights and how much resource would be required to realise them I don't have a whereabouts in the in the submission is that quoted from I'd have to look through it all because what I did was I read the whole thing the whole tome and then took out the questions I was going to ask separately so I didn't have to wrestle with a 50 60 page document yes it's paragraph 40 yes exactly fourth line down third line down actually so what what I would say in terms of the in terms of having that local mandate and as local authorities we are the closest to the communities in terms of having a democratic mandate it is really important that authorities can actually fulfil their their rights within this I don't have I'm looking at it in terms of the human rights budgeting perspective I know that across local authorities there has been discussions with the communities and certainly I can speak on behalf of my own authority of Dumfries and Galloway where we actually went out to consult with the community because you know there's difficult decisions that have to be made and where there are specific policies that your local government are responsible for delivering we do need to make sure that they are properly funded which would mean in occasions that we have to look at where we're not able to deliver policies because of difficult budget decisions that are being made I mean from from what we see from the resource spending review you are only going to be faced by difficult decisions I'm not aware of any easy decisions that are going to be made and so I think it's very difficult frustrating when you get really I mean it's an excellent submission but it's an excellent submission when you get growing budgetary resource it's not really a great submission we've got a shrinking resource and even where we ask what specific efficiencies can be made you know the submission says well if you give us additional resources we can then make longer term efficiencies which was a bit I was talking about in terms of deprioritisation earlier on I mean that's that's really not where we are in terms of the finances at the moment because of inflation so for example one of the things that you've said in your submission Mr Manning is that the you know the impact of the extraordinary effective inflation should be recognised in the local government settlement but how can that be done if the Scottish government's own budget is either is reducing in real terms okay I mean that it's a point that's well made and understanding that our submission went in from a local authority point of view and we're in a position where inflation is making things absolutely critical right across the next couple of years I referred elsewhere in the document to our budget that we've got yeah 37 millions 37 million pounds and that's probably doubled right sorry and getting to the 37 million pounds is probably doubled by sorry just to interrupt you there can you put that in perspective in terms of the overall budget of south Lanarkshire okay you are talking about a budget of 700 right plus million so it could be as much as 10 percent of the budget it's not quite getting on for probably closer to around 5 percent of the budget yeah but you said it could be 70 or it could be doubled right sorry right and getting to i've not been clear right seeing getting to the 37 million pounds normally i'd have been looking at a budget gap of around half of that right so it's on the 5 percent gap yeah sorry right so i wasn't clear there that's my fault where there are there are things that we're faced with every year in trying to put together the budget right so i would need to provide money for pay award we had assumed right a modest decrease in our grant right we had we would look to provide for things like contract inflation and putting together our budgets and normally i would have been looking at things items like that adding 20 million pounds to our bill right but there are exceptional pressures as we're going to 2023-24 so for example utilities right i believe we'll need to put an extra eight million pounds into the budget next year for things like fuel easily an extra another two million pounds i could add another million pounds on to that for people transport a real concern is ppp payments right so we've got as do most other councils ppp schools the contracts have got an inflationary uplift right so that crystallises at the beginning of next year right and when i wrote that paper there was an estimate of inflation being somewhere 10 11 percent round about February next year when those contract payments crystallised so that would be another four million pounds right on on to that budget gap the point i'm making is that the inflationary the inflationary climate makes this extra strained right in comparison to another year so normally i might have been looking at a budget gap of somewhere just under 20 million pounds right but it's up into the mid 30s because of these inflationary pressures and there's no way around them right and believe me i've tried around things like ppp but i can't see a way out of this so it's that that makes this particularly acute okay i mean one of the things that you've suggested and deemed as in the main causal submission is the multi-year settlements and i think it around this table i think we're all really sympathetic and supportive of that for local government of course yes of course is that scottish the scottish parliament doesn't really have multi-year settlements which makes it difficult for ourselves but given the proportion of resources that goes to local government so when the accounts commission gave evidence they always talked and i had a meeting with them privately just a week or so ago two weeks ago actually um they talk about long-term planning in the most local authorities but not all are involved in medium to long-term planning so what work is going on cate in terms of for causala in terms of the long-term planning financial planning so i think i mean you're absolutely correct you know we would all very much want to be working on multi-year settlements and that's the ambition that causala that's the position that causala wants to to get to i think you know touching on the point raised previously and i welcome the invitation you know as the new spokesperson for resources within causala about that deliberative engagement that's you know come forward once again i know it was touched upon with my predecessor in this role and certainly you know it is about where scottish government has priorities that local government are looking to take forward we need to have those engagements those discussions and be part of the the conversation so we can then take forward that aspiration of how do we get even if we don't have that multi-year settlement how do we get to that ambition of where we want to get to and how can we get there together so you know it's it is an aspiration that we want to get that but you know i absolutely accept scottish government are working within the confines and the constraints that they are with the budgets that you're given so you know it's how do we how do we plan on that and it's it's about being around the table and being part of those discussions so we can actually find a way forward in the positive direction okay i'm going to let colleagues in a couple of minutes i'm just going to ask two more questions one is to yourself curstri you've in the submission you've said there should be a greater emphasis on tracking outcomes rather than spend but should it not be both i think there's been with a with a number of new new policy commitments there is a increased reporting requirement to report how much has been spent whereas i think the focus should be on delivering the outcomes so you know rather than focusing purely on inputs and outputs we should be focusing on the outcomes more okay thanks and and paul um you talked about digitalisation in your submission and the potential savings in south lannockshire but you also said the scottish government would help we might need to help with implementation costs which of course again is another additional cost for the scottish government so what kind of additional assistance would south lannockshire need and what kind of savings would we be talking about through digitalisation either over one year or five years whatever time period you would be assessing coming back to your response i think part of the point that's being made there is around common platforms right and rather than than having or rather than trying to replicate the same system multiple times within different councils there would obviously be if it could be done once right or if we could at least rationalise how we we come up with digital solutions right from a procurement point of view and from a service delivery point of view that would help greatly but you know having been through this in a number of occasions right sometimes it's difficult to synchronise changes like that within councils so it's you know you might be ready to implement a new system but another local authority for example has just put in a system two years ago and they've not got the appetite to make that change so how can i put investment in to create common platforms and common solutions might be a way to break that cycle right of limping along and never really biting the bullet in terms of having common digital platforms so i haven't quantified and i can't quantify here what that would be across scotland right but i think there is an acknowledgement in our submission and there's an acknowledgement across local government that yeah there are real gains to be made from digitising what we do there will always be people who don't want to or who can't right engage with you and getting service or getting access to information digitally but there's a you know there is a growing percent right and it's a much growing percent within the past 10 years who are prepared to do that right so yeah how can i put it our submission in that context was meant to be positive given a suggestion as to if you know if we were to try and use that as a theme to make a change that would be a good one to start with okay thank you very much we're now going to open out the session to colleagues around the table and first task question will be rost before my john thanks convener looking back a couple of weeks causals position in the recent local government pay dispute was that the Scottish Government needed to contribute more money for that to be resolved and eventually that was the case so two weeks ago the deputy first minister published the budget revision explaining where that money had come from do you think that money was taken from the right places to fund the to settle the pay dispute i'm happy to come in thank you mr clear for your for your questions i think in terms of local government the and i'm looking at the pay dispute i think what local authorities and across the leaders had mandated that two percent was the maximum that local authorities could provide in that pay dispute and we did receive reoccurring funding from the Scottish Government of 140 million which was absolutely welcomed and the fact that it was reoccurring enabled us to increase that offer obviously there was intervention by the first minister and that is now you know put the strike action on hold and that has now gone out two unions and we will await the outcome there's going to be further discussion in terms of teachers pay and that's going to be on-going so you know it has been a really really challenging situation and you know yes ultimately there is not an infinite amount of money but you know with all respect it's local government is not there to determine what Scottish Government should put their money into so to speak so you know we want to nobody wants to be in a position where they're not paying their employees or their employees their employees a fair and reasonable wage you know local government is one of the largest employers across scotland if not the largest and you know we want we value our staff we value the input from the unions and we wanted to get to a position so it there was no easy solution with this and you know unfortunately we're not quite out of the woods yet we need to make sure that you know the pay settlement is is fully resolved but it's an on-going process so I guess my long long answer to a short answer is you know I don't know at this point it would be up to Scottish Government to determine what the priorities are and some of those decisions are political and you know that is the very nature of of where we're at and you know with limited budgets those are you know these situations these conversations are going to probably keep it occurring thanks and I agree absolutely given the context it was about picking least worst options and I just wanted to check they'll get the the list that the Deputy First Minister published a fortnight ago there was nothing on that list that it created concern for cause of knock-on effects to services that you deliver so in in regards to that it there was a range of options and I understand that you know causal officials are so working with government officials on flexibilities in order for us to be able to deliver that and that's for this year alone you know ultimately there are going to be difficult decisions that have to be made thanks and your written submission I agree very much with convener on the quality of the submission it mentions increased revenue raising powers for local government which has obviously been a long running and an obvious point of concern for causa a few years ago the workplace parking levy was introduced through legislation the programme for government a fortnight ago confirmed that the transient visitor levy will be introduced in this coming parliamentary year the visitor levy in particular has been a priority for cause of so what's next now now that you've succeeded on this visitor levy is is going to be passed into law that power will go to local government what's the next revenue raising leaver that causa would like to see given to local government I think what I'll probably do is pass over to cursey potentially on this one I mean obviously we need to have these discussions throughout the thematic boards of cause love and then going to leaders so that there is that that direction put in place but I'll maybe pass over to cursey as a share of SIPFA in terms of those specifics thank you thank you I'm not sure if I have all the answers on what the next revenue raising options are I've not been involved in the discussions but I know that has been discussions on council tax and I very much welcome the transient visitor levy and that that that for some councils might see a significant amount of money coming in but as Paul mentioned earlier with the cost of inflation you know it's probably going to get wiped out with the cost of inflation just now but it's certainly something that that that we would welcome involves they have to consult with their communities on that we mentioned earlier that the planning fees and building control and again that would be something that if we have control of that in local government and we could obtain full cost recovery that would be that would be welcome too thanks very much just moving on to a different area that this may sound more confrontational than I mean it to but councils across Scotland accept that this is very significantly from authority to authority but collectively the 32 councils have far more in their reserve than the Scottish Government's even legally allowed to have an extra reserve at any one time never mind what it's got at the moment some of the acute costs that councils are facing at the moment so Paul you mentioned energy costs over the coming months for council facilities are they the kind of areas where if a council is in the position where it has reserves it can use the reserves to pay the increased energy costs accepting that that is a short term not a long term solution I'm interested to know how how councils are planning on using reserves where they have them listen I'm happy to come in at that one I can't speak for all councils I can give you an answer in terms of my own part of the money that we have in reserves will be paying in the current year those increased energy costs the vast majority if not all councils will be in this position their reserves will be earmarked for specific things and more often than not their reserves will be earmarked to make the financial position the budget position deliverable over the short to medium term right that there is not money salted away within councils that's going to see us even into the you know the the sort of five year term in terms of a balanced budget position so in the case of my own authority the the reserves that we've got are supporting our revenue budget in the short to medium term it'll do that for maybe two years and in the third year we will face a much higher savings target than a well over the next two we can keep things moderate and deliverable for a period of two years right but in the third year we'll start to look at a cliff face in terms of an efficiency savings target and most authorities are going to be in the same position so that there is a picture painted of local authority reserves right most of it will be bolstering the financial position in the short to medium term other things within local authority reserves will be for things like housing revenue accounts insurance funds they've got specific purposes for most councils and I include my own there is a very small amount of money comparatively in comparison to the council's budget is one and a half percent right which is our uncommitted reserve now that's our in case of emergency smashed glass money right but but that is small and if I was to use that to deal with budget pressures in the immediate term I would be having a conversation with the auditor general pretty quickly after that about what my approach is going to be in order to replenish those reserves so looking to reserves is really short term and it's not something that councils are in a position to do thank you thank you thank you thanks very much and probably had asked to speak just when Paul started speaking and I'll probably just reiterate some of the points that Paul made I think quite a lot of authorities are probably going to have to use reserves in the current financial year 22 23 and some of that is probably the years they've had left over from Covid to support their inflation rises but for a lot of councils they're seeing the reserves being depleted for next year and therefore the cost of inflation is very much an additional cost next year also there's probably quite a lot of people's reserves that have been set aside to support capital investment and that'll be crucial to support economic regeneration and recovery from Covid and that's you know our capital grant has remained static for a number of years now and or it has reduced actually but it's going to remain static over the next few years and therefore some of the reserves that are set aside are really crucial to support that capital investment in council areas thanks much that's all from me convener yeah I should point out the Scottish government's capital allocations cut by 9.8% in the current financial year so I understand the position you're in it's position the whole parliament's in okay John to be far by Douglas thanks very much convener one of the issues you raise is about preventative spend and that's something this committee's done quite a lot work on and I think we're all sympathetic but struggle with the idea of how we put it into practice because if we don't have any extra money at the moment and I take the point that it's paragraph I think seven in your report you know education housing employment are key things which can prevent then reduced demand on say the NHS or or other more reactive services but I mean do you have any suggestions as to how we balance that because you know that we get continually shown what what are the waiting times for A&E at hospitals and that's a big figure and we all get excited about it but in a sense if we put more money into that there's less money for housing or whatever have you got any suggestions how we get that balance right so so again I would say that it's maybe not for cosla to say what's government should be doing I'm putting that funding in however one of the points that I did want to raise is and it was in the public health Scotland submission to this committee and it's a quote if I can read out that the NHS was never designed to work alone in protecting our health and wellbeing and all public services have a role to play in creating the building blocks of health so the fact that that's come from public health Scotland and not from cosla actually just reinforces this holistic whole system approach of actually you know of course we want to increase the the more positive outcomes of health but it's not just as simple as looking at that end point we need to look at the whole system and it is you know it's I feel like I'll be repeating this often but it is challenging and it is going to be difficult and that's where we need to have these open discussions of how we work in partnership together to get to that good point of where we can deliver and increase those health outcomes for everybody for all our communities no I don't think you'll find Emdy here I'm not myself who's going to argue with that yeah the point's been made and I think it's made in this paper that you know we've tended to give the NHS more than inflation or at least a bigger increase than we've given to local government and the two of them are the main two parts of our budget and I've asked your predecessor this summer as well ask you as well you know have we been too generous to the NHS should we be trying to kind of give the same increase to both the NHS and local government I think that the standard answer to that is I would never look to take away or I'd never say that you or NHS shouldn't have funding absolutely not we want to have those outcomes you know we we need to invest across but what we need to ensure that is local government that when we're delivering on some of these key priorities and will be you know in effect mopping up some of the maybe the unseen consequences that we need to be properly and financially resourced so that we can actually do that job properly but it's not to say that you know local government should get money over the NHS you know but again it's difficult choices for government to make I mean another choice we have to make is this question of ring fencing and do we should we just give more money to local government or any other sector for that matter and then we get accused immediately of oh there's a postcode lottery because Aberdeen spending more on education whereas South Lanarkshire spending more on social care or refuse or something have you any suggestions how we get round that balance so what I would say is it's about and I'll go back to the term used previously that deliberative engagement let's have that discussion let's work in partnership together and I appreciate that there is that level of direct spending that has significantly increased it's sitting approximately at 65% of the council budgets at present which is a huge portion which leaves less money for us to deliver the core the other core aspects that we are delivering as local authorities but again I'll maybe bring Kirstie in as as chair of SIPFA who's maybe got more technical detail on that but you know 65% of direct spending is a is a large proportion and you know what I would say and you know speaking from my my own local authority where we do work in a very collaborative way is we all agree on you know 95% of the priorities nobody's sitting here saying that we shouldn't be delivering you know for the very best outcomes and it it does come down to that level of trust and you know giving that that power back into the local communities and delivering through local government I mean I'll come to Ms Faddie again just in a minute but if I can press it I mean there's a kind of political angle as well as the technical angle isn't there because if you're sitting in South Lanarkshire and across the road is North Lanarkshire and they're doing something differently you and your colleagues come under pressure sorry you're not like your Dumfries and Galloway's but whichever one it is your council comes under pressure oh well the next council is doing so much more they're collecting the bins more often and all that kind of thing so do you feel under pressure to be consistent with other councils I think each local authority is so unique and different that each local authority is delivering for the best way for their communities I mean you mentioned yourself from a political point of view if the local authority isn't delivering for the community as the best see fit then we will have a new election and you know a new a new council will be elected so you know we have got that dem that democratic mandate and it's up to individual councillors to take that forward and you know ultimately the power lies within our communities within our people who are electing the councils but as I say it is it is very challenging you know as you pointed out as I've said Dumfries and Galloway local authority is very different from say one of the you know say let's say Sterling your council or Edinburgh and what works for one local authority may not necessarily work for a second so you know it has to be done on almost that individual basis and with the expertise that local authorities have that as I say it it does come down to that trust and knowledge that your local government is best placed to deliver for the local priorities okay thanks miss Flanagan does you want to come in yeah I guess I would add that you know some local authorities they're already delivering different services so sometimes when we get the ring fencing of some monies you know some authorities might be all already delivering on that outcome that the ring fence monies are for so we're all at different stages of what we actually delivering dependent on what the needs are for our own communities so you know I think there's an element of trust trusting local authorities that the money that is passed over will be delivered on the key outcomes and remove that and remove that ring fencing you know communities are very different needs and I you know if looking at your example you know between South Lanarkshire and North Lanarkshire if they're delivered differently there is probably services that are delivered differently but they're probably delivering on the same outcomes for that community okay thanks well while you're speaking maybe I could come back to an issue you mentioned already which was like planning and building control full cost recovery can you explain to us in a bit more detail you know are councils not recovering their full costs or are some recovering and some aren't or quite how does that whole system work I'm not sure across Scotland what the position is but the fees are set nationally and if we had the ability to set our own fees locally we could structure them so that we ensure that we do get full cost recovery right so not entirely sure I mean if it was possible to give us to get some of that information because I would be concerned if none of the councils say we're recovering their costs I mean I certainly get developers who say they'd be happy to pay more if it meant speedier planning decisions I think we should get that information for you and provide that to the committee if that would be helpful well I think it would be to me so thanks very much I mean another point that's one of these balances that we've been discussing so much is towards the end of the COSLA submission there's the mention of transparency and the submission brings in the question of flexibility as well and I just wonder again how we get the balance right between these two Mr Manning sorry I haven't asked you any questions so maybe I should try asking you this one because if we just give money in one sense ring fencing is easy I'm not saying I totally agree with ring fencing but then we can follow where it's gone because we get questions asked in here about how much is spent in education and so on whereas if we give south larcha an extra amount of money and then it gets split up in different ways does that actually although that's flexible does that reduce the transparency in some ways again I'm making reference to COSLA submission right but you know that there were certain aspects that were picked up in our own I would go back to the point that COSLA had been made and Kirsty made as well there is a degree of this which is about respecting local governments position in the democratic process and trusting the decisions that are made locally I think that's an important thing picking up on your point Mr Mason around flexibility and transparency so flexibility and you know and how local government uses the money given to it would help right and it would help particularly in dealing with the type of problems that we've discussed this afternoon and that I've discussed this afternoon so if local authorities were trusted to come up with a solution that suits their local needs right in a way that's democratically approved by their local members that might lead to a different spend in some areas than in others right so it's about getting those bonds loosened right at a local level to get trust made that are trust in the process that the right decision is going to be taken for a particular area right which would hopefully be positive in terms of the outcomes in that area so we've talked at length about the proportion which is directed and which isn't directed and councillor Hadman's made the point that it actually boils down to to maybe you know two-thirds close on being directed so that's the extent of the change that could be made through this the point around transparency is really one that that's probably a level of you know local government as a whole and even the Scottish Parliament looking at what is actually the local government spend right because it comes from different departmental budgets within the overall Scottish budget it's not necessarily easy to follow what follows through the local government so that impedes transparency and what it makes it particularly difficult to get to is what's our core funding and that's the point that that gets made by local government at every year right and it's is the core of what we do if we put to the side the specific government initiatives that we're getting funded for and money that comes in from other departmental budgets it is you know to what extent is that core funding suffering also if you know that doesn't guide us towards a strategic approach to looking at the local government budget right you know to have in that clear picture of what it is and how we see it moving across the across the short to medium term so that's the issue that I think we were picking out in the point around transparency okay well we could probably spend longer on that but I think I'll be running out of time soon so if I could just ask one more question I'll try yourself on that as well it in the cause law submission under capital projects and expenditure it talks about 30 percent increase on anticipated costs which I have to say jumped out at me is that the kind of inflation we're talking about for what capital projects and so on it wouldn't surprise me right so I could pick an example of a bridge right which we've been trying to construct right within our own authorities area the purpose of the bridge is really to connect a community who at the moment have to go on a terrible dog leg journey right because the existing bridge isn't safe anymore so this was you know costed properly right and thoroughly a couple of years ago right around four million pounds we could be looking at a cost increase not too different to the one that we're talking about there in terms of a percentage increase and there's a whole number of reasons for that right the inflation that we've talked about particularly in the case of capital projects and it's a statement of the obvious right construction industry inflation is running at a higher level inflation on commodities that are commonly used on capital projects if for example steel and this is an issue that hasn't been helped right by the war in ukraine which was a steel supplier right to to the uk that has forced the cost of these things up and we are seeing a longer leading times to capital projects that makes it makes it harder to deliver and we're also seeing fewer companies being prepared to bid for public sector contracts at the moment because they know you know by the nature of what we do we are going to try and price these keenly right and they're not as attractive a proposition to the market as they might once have been so that that's that's not fantasy that's the reality of what councils are having to live with at the moment okay well leave it at that just now thanks thank you very much douglas so far by daniel thank you convener um ben i was a counselor and went along to the um you know the cosla leaders meetings you know when the tourist tax was discussed it was always spoken about as optional for each local authorities and also additionality was another key thing but have we now moved to a place where councils are looking at things like the tourist tax or the parking tax is not as additional income but to plug the gaps that they have i can come in on that one i mean i as i said before each local authority is different and you know local authorities are positioned that they have to look in and make these hard decisions as well so while you know some local authorities may not be wishing to put those taxes in place that there are options available for them and it comes back down to those choices those flexibilities and for what works for one may not but there should never be that a portion of blame that oh look this local authority is doing is making this tax and it's not as good as this you know and and that's where we need to get to to be able to actually have that understanding that we have to have that individual level for each local authority but have you got members that are looking at the tourist tax as a way to you know increase spend on tourism for example or or marketing or are they looking at now to plug the gaps that they've got what i would say is in terms of of local government finance i think all local authorities are looking at ways of increasing revenue in order to provide some of that those core provisions that local government provides so is that to provide additionality or is it to just basically to keep the lights on it to provide the statutory services that the councils have to provide so where we are is you know we are looking at a seven percent real terms cut to local authority budgets so yes you know local authorities are having to find ways to to fill those gaps. I was just going to say that you know with the with the cuts that the local government is faced with just now we're obviously going to have to make some difficult decisions on services that that you know are important to tourism you know waste services roads and infrastructure so you know it will probably fill a gap for services that we would no longer be able to afford and we would afford them in the past and that tourism tax it will help to plug that gap. Thank you. Next thing I was going to go on to because I know we're short of time in your submission you talk about the you know the gap going forward over the next five years and the equivalent of 20,000 fewer local government jobs so do you think that's a reality that we're looking at in five years time that there will be 20,000 fewer local government jobs? Good so ultimately local government is probably going to have to adapt and evolve and certainly one of the discussions that we have when we were looking at the pay increase is in order to put a larger pay settlement forward if local government if we hadn't had that reoccurring funding from Scottish government in order to meet that pay gap then we were faced with the reality that yes local government would be looking at cuts to jobs that is the reality that is faced by local government right now. So is local government still looking at 20,000 fewer jobs in the next five years? So that would be dependent on the budgets coming forward but yes with the predicted decreasing in budget allocation then local government will have to make those difficult decisions. Paul, did you want to come in or? It's fair to say you've got within the cause of submission a picture of budget gaps moving forward so I've quoted today in the case of my own council £37 million. I suppose we just need to remember the majority of what councils spend is employee costs so if budget gaps have to be closed that is absolutely something that councils are going to be having to consider right are the levels of staffing moving forward and the things that for example we quoted in our submission around you know the capacity within things like digital transformation right you know that will take a cost right out of processes and sometimes that means taking jobs out of processes and that section of our response was meant to be constructive in terms of what are the areas that you're going to look to in trying to bridge that budget gap moving forward but you know I don't think we should be under any illusion right these are very real gaps that are faced by local government and unless there are solutions put in place right and you know we've talked about the ideal solution being more funding or funding that addresses the inflationary pressures that we're facing then there are going to be losses and jobs in local government and I guess from that unless there's digitisation quick to replace people then there's going to be an impact on services that local government provide and I was in earlier on when the auditor general was here and I think it was a point that's been made a number of times change takes time right and you know an ability to innovate to digitise processes to change structures right to implement any changes structure you know it's not going to be done for year 2023-24 right and you know councils will will be taking that into account in their approach moving forward but in order to make change I do think you need two things one's time right and one's investment right some degree of money put in there to facilitate change and I gave the example earlier on of digitisation of processes and you know the examples that I think a government gave about you know how you could reform as digitisation maximise and revenue through public sector innovation reform a public sector estate reform a public you know public body landscape improving public human is this not things you've already been doing for the last five years again right you know councils have a if we were coming at this from a position where councils hadn't spent the past decade making efficiencies and you were looking at a clean slate and looking at what they do and thinking okay there's things that can be done here in order to make this a better position you know I'd feel better about that but it's not right so we're going back to councils and we're you know we're saying we're going back to councils through the position that we're in in terms of a funding settlement that's there is flat cash right and the inflationary climate that we're in doing things through becoming more efficient it's going to be that bit more difficult because you know the low hanging fruit has been taken long ago so the the ideas that are referenced in there are absolutely ones that are worth looking at and you mentioned there at the end that the in terms of the public sector estate and there are considerations there that's a prime example of one where investments needed right and trying to meet net zero commitments right so there will be a massive cost in that moving forward right so the these are areas that have been looked at there is merit in looking at them further and I think we reflected that in our own response but somewhere along the line right as well as structural change right and as well as becoming more efficient councils are going to be in a position where they have to look at the services that are provided right with a view to trying to cut back in them in order to bridge budget gaps cursed I was going to ask you next you spoke earlier about early intervention and prevention I completely agree that you know more money spent at a local level probably means less money eventually spent on health health spent on justice and yeah and but how do you make the case better then to Scottish Government how do you quantify what you can save later on to to the health budget the justice budget that's a really difficult question and I'm not sure if I could quantify that but I guess if we look at the the outcomes just now we're not delivering in all the outcomes that Scottish Government want to deliver on so there needs to be a change in what we're currently doing I just wanted to also I'd ask in a speaker I wanted just to pick up that your question on your question on jobs cuts I think that's a real a real likely scenario because 60 to 70 percent of our budget is on the workforce and councillor Hadman noted the additional money that we'd got for the pay the pay settlement and that's that that's very much welcome but I have to point out that councils also are short for the pay settlement most councils are the budgeted 2 percent for pay and the additional money that the deputy first minister has awarded is is takes that up to 15.5 percent and the pay the pay award offer is currently 5 percent so councils have a one and a half percent gap that they need to bridge and pay and to do that will probably see significant job losses so it's so even just to meet the pace element that was agreed this year there's got to be savings made elsewhere is that what you're you're saying in the current year most councils have budgeted for a 2 percent pay award in the current year you know the 5 percent pay award that's on the table leads councils in the current year with a budget gap that they're going to have to look at and the deputy first minister has confirmed that he's willing to look at some flexibilities on the sum of the funding the ring fence funding that has been looked at but we're just in the early stages of discussion on that just now so yes moving on to next year there's going to be significant budget gaps but most councils are going to have a budget gap in the current year because of the pay award offer because it wasn't fully funded by the Scottish Government I guess most councils are 2 percent in their budget for that and deputy first minister's funding equates to around about one and a half percent so there's a one and a half percent gap okay thank you and sorry back to the point about early intervention you know how do we get the message across better to the government that more and money spent the local government will give that savings later is there a way of quantifying it at all you think not quite sure actually how to how to get that message across better it's it's a message that we have been that we've been reiterating for a number of years but yeah i'd need to think about that further okay thank you thank you community okay thank you very much and I would say the issue of the the transient visitor lever tourist tax is it's called is it might be good news for our gyle and but I can't see north Lanarkshire making much of it so I think there's a real issue about the fact that it's going to be very uneven in terms of which local authorities benefit from and which don't and that would also have to I think be taken into consideration with funding deliberations. Daniel to be followed by Michelle. I'll keep this to one question but I'll just I'll put two strands to it and because of submission it states that in real time since 2013 that the local government budget has been cut by seven percent indeed Mr Manning was pointing at that within that that the two thirds has gone to ring fenced areas but further on in the submission it says that that that that those ring thing in stairs have to be cross subsidised from your discretionary budget that that is that implying that that 15 percent real terms cut to it there's an additional sum to come out of it in that if you've got if you've got ring fenced that that's impacting on on core and then you're having to cross subsidise and if so is there is a a quantum that you can attach to that cross subsidisation? Can I start off with this one right sir? A part I think of the point that's being made in causeless submission is there are areas of directed spend right so there are additional monies coming in for specific purposes right and a causeless submission goes into a fair amount of detail in terms of monies that have come for health and social care children and young people and I think another example was it was around the 10 pound 50 per hour right those are all quoted right in in causeless submission in terms of monies for specific uplift one of the points that I think is made in causeless submission is those initial amounts go in right but in an inflationary climate right councils are going to be faced with pressure on that spend right so what you what you had to spend on a unit of those services last year I understand the point right I'm just wondering if if you've actually quantified that so I understand the point that your budgets are under pressure because of ring fencing that that's where you get from 7 percent to 15 percent what you're implying in the submission is that on top of that you're having to subsidise those ring fencing shares from your discretionary budget I'm just asking do you actually have a quantification of either what proportion of your budget or how does that what what what is the addition to the 15 percent effective reduction I think individual councils could do that for individual priorities and for initiatives that have been put in place and between myself and councillor I remember happy to have a conversation with the causala team to see if that figure is out within the background papers of the causala submission and that would be helpful and likewise you mean you've specifically quoted the the early years funding I mean has that specific policy been funded in terms of how much that is having to be subsidised from core discretionary funding I think if I can come in I think in order to get clarity around that I can get my local government finance team to submit some further written evidence direct to you in that specific issue but what what I would say is in terms of the the key areas of of policy so child poverty climate change looking at you know a fair greener economy local government are key partners within that delivery and this is you know this very question of is it properly funded how do we ensure that we're not having to take so by having that early intervention that early discussion during the the creation of those policies is is the point that causala has been has been making that we need to be around the table and having those early discussions so that therefore when the funding is delivered and it is given to local authorities that it is a true reflection on the actual cost that it takes to deliver I mean I understand that this is I think a slightly different point in that you are saying that the ring-fenced areas of policy delivery are not being sufficiently funded I was just really asking you to clarify by how much so if you can provide that in writing that would be really helpful we'll do thank you I finished there thank you very much daniel and michelle to perform my list again I'll try and be brief I've just got a couple of questions in your submission you mentioned a wider adoption of shared services and you correctly know that it needs increased resources and time to take effect but the other area that it needs is appetite so can you help me understand what of the standard functions that are normally part of shared services i.e finance, HR and IT is there any genuine shared services across all 32 local councils I think on the specifics of this one I'll maybe pass over to Kirsty to answer that as as chair of SIPFA thank you thank you and Paul might be able to help me out as well I think the question of shared services is quite challenging across all the authorities certainly in our Gail and Bute council where I work there's not a great desire not from our council perspective but for people to share services with our Gail and Bute council it is really quite difficult to share services across what would be such a wide a wide geography our own council is a huge geography as it is never mind feeding sharing across so it makes it really hard to while suppose we would like to do share services it's not always practical to do that and there may and you know I think coming from our Gail and Bute council you know I'm not I'm not kind of aware on all the services that our councils are sharing so whether whether Paul can give any examples from a central belt area that could help okay everybody's looking at you Paul I can't readily give an example right again through cosla right we'll hopefully try and properly document the instances that are there as one of the points that I was making earlier is just the changes that are likely to come right if and when we go to a national care service are going to bring this to the fore again and I've seen the recent document that was published in May so going back to your point Kirsty I'm not talking I mean sometimes you could see facilities management for example being part of a shared services function I accept what you're saying about the disparate geography of our Gail and Bute but you're also pointing out to me that there is a lack of appetite across councils where you have replicated functions ffds for example it for example hr the specialisms in any other commercial walk of life where I spent some time in a previous life there's no way that you would have duplicated functions across the board so that hence my comment about appetite you know because in the one hand councils are complaining about not having any money on the other hand this to me is an area that clearly should be looked at because there are duplicated functions across 32 councils so I suppose that's the point I'm trying to make whilst accepting there's a time thing and there's a cost just one other question yourself Kirsty I wanted to ask it's a wee bit of a technical one so hopefully we can deal with it quite quickly you make the point about capital accounting in the submission and I know this has been rumbling about for for some time but the review that is planned to be under way I mean there's obviously some concerns about that but I wondered what what was the driver for a concern because this has been raised a number of times now something's been done about it and it's been looked and surely actually a potential outcome is that it could be positive so it's just to understand where your concerns are coming from and the assumption that actually could end up less favourable for councils. Yeah we have a great deal of concern about the capital accounting review so local authorities are not comparable to profit generating businesses where assets are purchased to support profit making activities and then they get depreciated to reduce the taxation payable by that business over the life of that of the asset we hold assets to deliver services to communities for the public good so you know we put a notional charge through our accounting and if we had to and we've got statutory mitigation in place that allows us to do that if we didn't have that statutory mitigation in place the chances are that the charge that would be put to our to our council tax payers or our rent payers in case of the HRA would be significantly higher. I understand that but I'm trying to sorry to interrupt but I'm just trying to understand what is the basis for your concern that this might change surely there could be a potential for a positive outcome as well because this has been triggered by by the lack of flexibilities fiscal flexibilities you have the overarching review I just wasn't clear from your submission why you're concerned and what evidence you're offering to back up that concern I mean has there been anything in the like indicated by the government that that is an intended way to go I'm just not clear about that we're actually not sure what the positives are and you know we have heard we have heard comments that there would be positives on that but from a director of finance point of view we're not sure what the positives are we only see that there'd be direct charges and increasing charges to council revenue which would limit the amount of capital investment we could make in the future yeah okay I'm not going to labour the point because I know time I'm just not clear why you think that is automatically going to happen and that's all I was querying because because because my understanding is that the review is to look at the removal of the statutory mitigation that's in place and if that statutory mitigations are removed then there'll be a bigger charge to to the council revenue in the eight body why is the case so has there been a terms of reference for the review that there has been a terms of reference that we've seen and I think the review is about to kick off in October so we'll get more information and obviously we'll be we'll be involved in the review which is welcome that we'll have a we'll have a seat on with the group okay thank you thank you lice thank you just have one question miss lannigan it's just on the back of Michelle Thompson's first question to you I know what you're saying about the fact that some councils are not terribly keen about sharing services because they feel that dilutes their own you know best interests in terms of delivering local services but off the areas and the councils which have delivered shared services has an audit been done of how much money has actually been saved by joint services because I think it'd be quite helpful to know where there is good practice and just as a saving Michelle Thompson asking for some information about that and I think that would be very helpful to this committee yeah and I wouldn't have I wouldn't have any of that figures to hand just now but that's something we could we could look to get to get for you I think there might be as a an opportunity now that councils may be able to look at sharing of some services on the back of on the back of Covid because certainly prior to Covid when when everybody was working in offices you know there's certainly you know if I take my council for example if we had if we had shared services with somebody with another authority and it took a number of jobs out area you know that would have been a concern for our local economy but now that more and more people are working remotely and online there possibly will be an opportunity to look at some of the back office functions for sharing and that's something we'll certainly be exploring as a council and others may well be doing that as well. Thank you we're very helpful if we did have that information. Much and just to follow on to that I mean one way to kind of look at the potential costs is to look at this in reverse so I was a council in 1995 when the Bollie Strathclyde region so you went from one social work department in Strathclyde to 12 because each local authority suddenly had 12 directors a social work and 12 direct deputy directors and all the rest to it so I mean if you look at the kind of costs of setting that up it would be interesting to to see what potential savings it would be in terms of sharing some of those services. For me come in I mean one of the points and we are talking obviously in terms of finance but certainly looking at collaborative working we do have education collaborative going on and certainly within again my own local authority it's not just about having that saving it's about the sustainability of services that we do sometimes need to look at and certainly I know for some young people the only opportunity for them to take specific subjects in terms of education to make because of the sustainability because of reality and you know we do need to be very mindful of you know rural areas that we need to look at doing things in sometimes a different way it might you know not always be possible to do things in the same way and again it's about having that discussion but you know I do know that there are some local authorities that are sharing services for example in planning even now so you know local authorities are open to that because we are looking at ways to best deliver services for our communities. Okay well thank you very much that's exhausted questions from the committee so I shall wind up the session and just remind colleagues that we'll be back in our usual Tuesday morning slot next week we will continue to take further evidence on Scotland's public finances in 23 to 24 so thank you all for your participation this afternoon thank you to all three of our witnesses