Public finance experts call for ‘cultural change’ to Holyrood’s budget process

30.06.2017

Holyrood’s budget process needs to be substantially revised to take account of Scotland’s new financial powers and fiscal framework, says an expert review group.

An opportunity therefore exists for ‘cultural change’ and a new budget process that looks both forward and back in terms of parliamentary scrutiny.

In its report published today, the group also calls on the Scottish Government to adopt a more strategic approach to financial planning by publishing:

  • each spring, a Medium-Term Financial Strategy for Scotland’s public finances, and;
  • each autumn, a Fiscal Framework Outturn Report, setting out data for Scottish tax revenues.    

The report also found that the present budget process delivers insufficient opportunity for Parliament and its committees to influence the Government’s budget formulation.

Parliament should instead move to an “all year round approach” to scrutiny, where committees seek to influence government plans in advance of the budget being published each autumn.  

Overall, the group recommends that the Scottish Parliament’s revised budget process should have the following four core objectives:

  • To have an influence on the formulation of the budget;
  • To improve transparency and raise public understanding and awareness of the Budget;
  • To respond effectively to new fiscal and wider policy challenges;
  • To lead to better outputs and outcomes as measured against benchmarks and stated objectives.

Dame Sue Bruce, member of the Budget Process Review Group, said:

“By necessity, the new financial powers and fiscal framework require a substantial change to Scotland’s budget process, and that’s what our report maps out. 

“However, we also see this as an ideal opportunity for cultural change. Scrutiny at present tends to adopt a short-term approach, with an over-emphasis on ‘winners and losers’ year on year.  There is little consideration of longer-term trends.   

“It is also evident that the sequencing of the current budget process fails to deliver sufficient opportunity for Parliament to exert its influence over the Government during its budget preparation.

“We recommend, therefore, that budget scrutiny shifts to a full year approach. Committees should engage with their respective Ministers at least six weeks prior to the budget being published, setting out their respective policy priorities for the forthcoming budget.

“This, we believe, will facilitate more scope for Parliament and its committees to influence the Government’s formulation of tax-raising and spending plans.”

Caroline Gardner, Auditor General for Scotland, and fellow group member said: 

“Parliament’s extensive new financial powers reinforce the pressing need for scrutiny to become more focused on outputs and outcomes, with an emphasis on what budgets have achieved or aim to achieve.

“For Parliament’s oversight of tax-raising and spending plans to be really effective we recommend a shift towards multi-year budgets by the Scottish Government. This will also assist public bodies to develop medium-term priorities and better address future challenges.  In addition, we recommend that the Government adopts a Medium Term Financial Strategy to focus on the longer-term sustainability of Scotland’s public finances.

“The increased complexity of the Scottish Budget strengthens the need to improve the accessibility and transparency of budget information. This will help enhance public understanding of the budget and support wider public engagement with the budget process.” 

Bruce Crawford MSP, Convener of the Scottish Parliament’s Finance and Constitution Committee, said:

“The Finance and Constitution Committee welcomes this report as a major contribution towards shaping the Parliament’s future budget process.  I look forward to considering it in full with the committee in September.”  

Finance Secretary Derek Mackay said:

"The Scottish Government strongly supports the creation of the Budget Process Review Group to consider what changes are necessary to a Scottish budget process that has almost been in place for 20 years.  

"A lot has changed since the current process was designed, including the devolution of significant new financial powers through the Scotland Act 2012 and 2016.  This report proposes a new approach to our budget process that suits the wider powers and responsibilities that Scottish Parliament now has.

"We welcome the conclusions reached in the report and will consider the specific recommendations over the summer and discuss their implementation with the Finance and Constitution Committee."

Next steps

After the summer recess, it is expected that the Finance and Constitution Committee and Scottish Government will make joint recommendations to the Parliament for a new budget process designed to accommodate the new financial and social security powers.  

Background information

Established in September 2016, the 'tri-partite' working group - comprising Scottish Parliament officials, Scottish Government officials and external public finance experts - was tasked with developing proposals for a revised parliamentary budget process to take account of Scotland's new fiscal powers.

The final report of the Tri-Partite Scottish Parliament Budget Process Review Group can be found here:

http://www.parliament.scot/parliamentarybusiness/CurrentCommittees/100930.aspx

The membership of the external group of experts is as follows:

  • Dame Sue Bruce, Non-Executive Director
  • Professor Mike Danson, Professor of Enterprise Policy, Heriot-Watt University
  • Caroline Gardner, Auditor General for Scotland
  • Elaine Lorimer, Chief Executive, Revenue Scotland
  • Professor James Mitchell, Director of Academy of Government, University of Edinburgh
  • John Ireland, Chief Executive, Scottish Fiscal Commission
  • Dr Angela O’Hagan, Gender Budgeting Specialist, Glasgow Caledonian University
  • Don Peebles, Head of the Chartered Institute of Public Finance and Accountancy Scotland