Humza Yousaf has signed a deal with councils that aims to “reset the relationship” which has become fraught between the Scottish Government and local authorities.

The Verity House Agreement, named after the Edinburgh headquarters of Cosla, will set out a "default position” of no ringfencing of funds – which has in the past seen the Scottish Government determine how councils spend some of their cash, much to the annoyance of local authorities.

The deal agrees a long-delayed new fiscal framework governing how local authorities' funding is allocated and giving councils greater control over their budgets.

Councils' powers will also be regularly reviewed.

Read more: Auditors find records of SNP cash and cheques 'not kept by the party'

Mr Yousaf said he was committed to building a “stronger relationship with local government, with mutual trust and respect at its core”.

Under the agreement, councils and the Scottish Government will work together to make progress on three key priorities: tackling poverty, achieving a just transition to net zero and the provision of sustainable public services.

And it promises a “positive working relationship” to be based on “mutual trust and respect”.

As part of this, the First Minister will meet the Cosla president at least twice a year, with more regular, informal meetings to take place between “key cabinet members” and Cosla’s leadership sounding board.

In recent years, Cosla chiefs have repeatedly accused the Scottish Government of underfunding councils, allocating core funding to SNP priorities such as the expansion of free childcare.

Read more: Councils are in trouble – can local government survive?

The new agreement aims to set out a “vision for a more collaborative approach to delivering our shared priorities for the people of Scotland”.

It promises that by the end of September there will be “improved engagement” between councils and the Scottish Government on budgetary matters will be “well underway”, ahead of the draft budget being announced in December.

The deal goes on to promise that the powers and funding local government has will be “reviewed regularly to ensure adequacy and alignment with effective delivery of outcomes”.

It states: “From this point onwards, the default position will be no ring-fencing or direction of funding, unless there is a clear joint understanding for a rationale for such arrangements.”

But it also stresses that councils will “respect and value the roles and responsibilities of the Scottish Government and Scottish Parliament”.

Mr Yousaf said: “The Verity House Agreement is based on the idea that councils know best how to serve the people in their communities.

“By giving them greater flexibility over how they use their budgets, and regularly reviewing their powers and funding, we can empower them to put that knowledge into practice – whether that’s to tackle poverty, transform our economy to deliver net zero, or to provide the high-quality public services on which we all rely.”

Read more: 1 in 4 Scots homes face targeted council tax hikes in 'brutal' plan

The First Minister added: “This is just the start of the process, and we look forward to working further with Cosla and councils in the interests of the people of Scotland.”

Cosla president Shona Morrison said the deal was a “clear signal that both parties want to reset the relationship between central and local government in Scotland”.

She added: ”This agreement is about creating a new way of working as a partnership of equals – discussing key issues as early as possible and using our collective expertise to deliver for communities across Scotland.”

Speaking about the work done by councils, Ms Morrison added: “Scottish local government is the sphere of government closest to the people of Scotland and delivers a range of essential services that impact on people’s everyday lives and livelihoods – from education to improving health; from social care to the fabric of our communities.”

She added: “When national and local government work together to tackle shared priorities, the result will be better outcomes for the people of Scotland.

“This is ultimately what councils seek to achieve every day of every year – better local outcomes for the people we serve, enabling everyone to live well locally.”