DFM and Finance: FM letter to Deputy First Minister

Dear Shona,

Thank you for continuing your commitment to the people of Scotland by taking up your role as Deputy First Minister and Cabinet Secretary for Finance. I look forward to continuing to work together to deliver real, tangible improvements in the lives of the people of Scotland.

We, as a country, have faced incredible challenges over recent years. We are still recovering from the impact of the COVID pandemic. War continues in Europe, and the impact of Brexit and the cost of living crisis have combined to create some of the most challenging economic conditions in living memory. Alongside this we face the twin crises of climate change and nature loss, which are global threats of existential proportions.

As a government, we must be unapologetic about supporting those who need help the most. We will collectively deliver on the promises we have made in our Policy Prospectus and use the priorities it sets out to drive our decision-making, our accountability to parliament and our engagement with partners and the people of Scotland. This will mean that we will need to make tough decisions to ensure that every pound we spend and invest is targeted in such a way that it reaches those that need it most and delivers maximum value.   

Our aims as a Government

To ensure we maintain our focus on delivery for the people of Scotland we have set out three critical and interdependent missions in our policy prospectus Equality, opportunity, community: New Leadership – a fresh start  for the period between now and March 2026. These will be underpinned by our refreshed National Performance Framework and shared policy priorities set out in the Bute House Agreement. These three outcomes are:  

• Tackling poverty and protecting people from harm. Continuing to tackle poverty in all its forms to improve the life chances of people across Scotland.
• A fair, greenand growing economy. Delivering a wellbeing economy through harnessing the skills and ingenuity of our people and seizing the economic and social opportunities from meeting our net zero targets.
• Prioritising our public services. Creating, investing in, and maintaining sustainable public services, to ensure the people of Scotland can access modern, effective, and timely services when they need to.  

Strategic oversight and cross-cutting ambitions

As Deputy First Minister, you will play a unique role in delivering these missions by providing cross-cutting leadership and strategic oversight and promoting collaboration across government. I expect you to lead our Cabinet colleagues to ensure alignment of our government portfolios behind these missions. I know you will also take this collaborative approach in your work to achieve the ambitions of the First Minister’s National Advisory Council on Women and Girls, our work to support Redress and our support to ongoing public inquiries. As the Minister with cross-government responsibility for inter-governmental relations, you will work with Ministerial colleagues across portfolios to make the democratic case for the powers and responsibilities of the Scottish Parliament to be protected and enhanced from further encroachment by the UK Government and the consequent undermining of devolution seen since 2016. I know you will also continue to work closely with the Minister for Independence to provide the people of Scotland the information they need to make an informed choice about whether Scotland should become an independent country. 

You will work closely with our colleagues and partners in the Scottish Green Party, to ensure a continued positive and productive relationship through the Bute House Agreement. Our shared policy priorities represent a commitment to building a fairer, greener Scotland, and to doing so collectively. I know you are committed to steering our work on that agreement and furthering our relationship to achieve better outcomes for the people of Scotland.

You will work closely with the COSLA leadership team as we reset our relationship with Local Government and strive to work even more collaboratively in partnership with them to tackle our shared challenges. This will involve fulfilling our commitment to conclude the Local Governance Review within this parliament. Your aim should be to agree detailed proposals which will significantly strengthen local decision-making and implement new arrangements as swiftly as possible, including through legislation if required.

Your work on public service reform will be incredibly important in ensuring delivery and value for money are key components of our public services. I expect you to consider both short-term work, and longer-term opportunities to deliver more efficient, effective, sustainable and person-centred public services, leveraging the opportunities presented by digital technology. Current work to review the Community Empowerment (Scotland) Act 2015 will inform legislative reforms during this parliamentary term, to ensure we give local communities and organisations greater powers over their own future.

As part of our ongoing commitment to transparency and to enhancing how we serve the people of Scotland, I am determined that we respond fully and well to the requests made of us by both public inquiries into the COVID Pandemic. Supporting the work of the inquiries is a significant undertaking but it is vital to ensure that the lessons are identified and applied. You are also the Minister responsible for Freedom of Information and will work to ensure the Scottish Government meets its responsibilities under Freedom of Information Legislation. You will oversee delivery of a programme of electoral reform that will support people’s engagement with democratic processes and delivery of safe, secure and transparent elections.

Objectives for Finance portfolio for 2023/24

In your role as Cabinet Secretary for Finance, you have rightly noted that achieving and maintaining a balanced budget, while delivering against our central missions, will be your highest priority. These missions will help us to be clear about what we are committed to and why. Your work will be key in helping us to continually assess how we do this, to make sure we strategically consider our approach to delivery. We must prioritise, to ensure that we use our finite resources in the most effective way. That prioritisation work is significant, but it will also be demanding, and will require us to make hard decisions  about where to spend money and where to stop spending.

Our current fiscal situation is extremely challenging and so it is of the utmost importance that we meet our collective responsibility to work towards our policy priorities and to be clear on how we will achieve these in an accelerate, measurable and financially sustainable way. At all times, while remaining committed to fiscal discipline, I know you will be guided by our commitment to support those who need the most help and prioritise resources to the policies and programmes which make the biggest difference.

Along with your overall responsibility to ensure Scottish public finances are on a stable and sustainable footing, we have discussed a number of specific financial outcomes I would like you to achieve by the end of the parliamentary session, as set out in Annex A and in the policy prospectus.

For this financial year we have agreed that you will deliver on the following outcomes:  

Finance:

• Manage the Scottish public finances on a sustainable trajectory, and present Cabinet and the Scottish Parliament with a balanced budget for 2024-25 that maximises the value of public spending and builds on the Medium Term Financial Strategy that you published on 25 May 2023.
• Deliver the 2024-25 Scottish Budget, underpinned by a package of tax and spending measures which both improves our underlying fiscal sustainability and targets resources to have the greatest impact on realisation of our strategic missions.
• Use our tax powers in the setting of the 2024-25 Budget to further progress delivery of the most progressive tax system in the UK by making tax policy choices that are informed by public and stakeholder views.
• Prioritise capital investment to achieve net zero and maintain high quality public infrastructure and services by refreshing and extending the current Capital Spending Review and by exploring alternative sources of finance to help achieve our objectives in a fiscally sustainable way.
• Complete the first review of Scotland's Fiscal Framework – subject to negotiation with the UK Government.
• Lead work across Government to deliver the commitment to whole family wellbeing funding, to be given effect through the 2024-25 Budget and potentially the publication of a WFW investment strategy.
• Continue to raise awareness of the Community Wealth Building (CWB) economic development model within both the public and private sectors as a tool to create improved outcomes for communities, whilst exploring development of CWB legislation

Local Government and Public Service Reform:

• Deliver the foundations of a New Deal with Local Government to reset the relationship to better deliver our three missions, including the agreement of a new Partnership, a shared programme of work, and a Fiscal Framework between the Scottish Government and Local Government which will support alignment of shared priorities, enhance the fiscal empowerment of local government, and provide accountability frameworks.
• Review and reform the structures that support local governance and community empowerment, including developing Single Island Authority proposals and supporting community planning across Scotland.
• Co-ordinate a programme of public service reform to improve outcomes and equality of outcomes for people and communities across Scotland and help ensure that all public services can live within their budgets.
• Take forward a place-based approach to addressing poverty and inequality, working with local partners to change how services are delivered and aligning policy within government, including the prioritisation of regeneration investment to support our most fragile communities.
• Continue to participate fully in the Scottish Child Abuse Inquiry and learn lessons to improve practice, policy and regulation.
• Continue to deliver Scotland’s Redress Scheme which provides acknowledgement and tangible recognition of the harm that has been caused to survivors of abuse in care.
• Work with the First Minister’s National Advisory Council on Women and Girls (NACWG) to ensure that we collaborate to make the necessary gains for women’s equality in Scotland.
• Progress planning reform and delivery of National Planning Framework 4 improving efficiency and effectiveness in the transition to a net zero economy including through digital transformation of the service. Empower local authorities to unlock development opportunities by progressing work on land assembly and land value capture, including recommencing work to modernise Compulsory Purchase Orders and to introduce an infrastructure levy using enabling powers introduced by the Planning (Scotland) Act 2019.

Corporate Transformation:

• Progress corporate transformation within the Scottish Government to make our own operations more efficient and effective, including in relation to workforce planning, use of our estate, process improvement, application of corporate digital technology, and maturing our existing corporate services including those offered to the wider public sector.
• Provide digital public services, to a higher quality, at less expense and more rapidly by reforming our delivery model to ensure that we are doing the most impactful digital work using a shared model of how we approach the data, architecture, commercial, design and capability aspects of implementation and using common platforms and components
• Provide appropriate corporate support to public inquiries, including the Scottish Covid-19 Inquiry.

A number of commitments that support the achievement of these outcomes have been identified as part of the priorities set out in our policy prospectus. These will not be the only areas of work to contribute, but are some of the key levers we have to deliver the outcomes set out above. I expect impact and improvement to be key considerations as you deliver these priorities and I expect you to bring forward suggestions for where we may achieve better outcomes if you think there are additional or alternative options.

Responsibility for financial sustainability

 As we take action together to carefully manage the Scottish Budget to deliver these priorities, you must work within your portfolio to drive efficiency and reform, and identify measures that can be taken to create additional flexibility within the wider Budget.

We must prioritise, to ensure that we use our finite resources in the most effective way. That prioritisation work is significant, but it will also be demanding, and will require us to make hard decisions. I know you will be guided by our commitment to support those who need the most help and prioritise resources to the policies and programmes which make the biggest difference to our three missions.  

Responsibility for delivery and performance monitoring

As well as delivery of the outcomes set out above, as part of your role in co-ordinating cross-government delivery I ask that you take a lead role in reviewing delivery of government priorities and ensuring they represent the best value for money with the resources available, and that they will allow our colleagues to guarantee a balanced portfolio budget. Please satisfy yourself that the reporting arrangements in place are sufficient to ensure progress is closely monitored, and all risks to delivery are considered and mitigated as far as possible. I would like you to work with your Cabinet colleagues on this and join me in six monthly discussions with each of them on their progress.

I look forward to working with you to deliver on our shared ambitions for Scotland.

 Yours sincerely,

First Minister

Priorities to the end of the parliamentary term

• Manage the Scottish public finances on a sustainable trajectory, balancing our budgets through maximising the value of public spending and putting robust policies in place to support and sustain effective public service delivery.
• Use our tax powers to deliver the most progressive tax system in the UK, making tax policy choices that are informed by public and stakeholder views and ensuring that the revenue we generate helps us to achieve the Government’s three critical and inter-dependent missions.
• Prioritise our capital investment to achieve net zero and to maintain high quality public infrastructure and services across Scotland.
• Complete the first review of Scotland’s Fiscal Framework – subject to negotiation with the UK Government – which underpins the principles of fiscal devolution to Scotland.
• Progress a ten-year programme of public bodies and public service reform that seeks to achieve effective and person-centred, fiscally sustainable public services.
• Respond fully and well to requests made of the Scottish Government by the public inquiries into the Covid Pandemic and, in due course, ensure that the relevant recommendations of both Inquiries are properly applied.
• Strengthen the resilience of our public services and our communities by increasing the number of people who have good, increasingly productive jobs which meet the principles of Fair Work, and who make a positive contribution to our society and our economy.
• Target both short term efficiencies and wider, deeper, and longer term reform, including through rolling out modern digital services that are easy to access, reliable and effective. This will remove the need for manual processing, reduce failure demand and meet people’s expectations of how they want to interact with government, securely and in a manner which protects their privacy.
• Publish a Rural Delivery Plan, showing how all parts of the Scottish Government are delivering for rural Scotland. As well as policies on agriculture, land reform, marine, and our Islands Plan, this will cover areas such as transport, housing, social justice, repopulation, digital connectivity, and economic development.
• Agree and implement a New Deal for Local Government, including a fiscal framework, enabling better collaboration to jointly deliver our shared priorities, tackle the collective challenges we face, and improve outcomes for people – building on the constructive work already ongoing with our partners in COSLA.
• Deliver, subject to the agreement of parliament, legislation giving councils the discretionary power to apply a Local Visitor Levy on overnight stays in commercially let accommodation, increasing the opportunities for councils to raise revenues.
• Through the Joint Working Group on sources of Local Government funding, including council tax, we will have considered further reforms for council tax building on the joint publication on 17 April of a consultation on the treatment of council tax for second homes and long termempty properties.