Finance and Constitution Committee

Meeting date: Wednesday, September 20, 2017

Official Report 643KB pdf

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Budget Process Review Group (Final Report)

Item 2 is to discuss the budget process review group’s final report. We are joined by two external members of the group: Caroline Gardner, the Auditor General for Scotland; and Dr Angela O’Hagan, from Glasgow Caledonian University. Another external member of the group, Professor James Mitchell, had hoped to join us but, unfortunately, he is unable to be here and has passed his apologies to the committee.

Before we begin, I put on record the committee’s gratitude to all members of the group for their incredible efforts in producing such a wide-ranging and high-quality report within the very challenging timescale that they were presented with. I know that some elements, such as the change in the autumn budget date, came into your thinking halfway through, and I am grateful for your dealing with all that turbulence. I know that the external members of the group in particular played a key role in formulating the recommendations that are aimed at improving our budget scrutiny process, particularly in light of those changing circumstances. I thank all the members for their contributions. The group has provided a positive example of the Parliament, the Government and civic society working together. That should be applauded, and I hope that it might serve as a model for similar initiatives in future for trying to find successful ways forward.

Just so that the committee is absolutely clear, although I am sure that everyone will know this from reading the report, I point out that the proposals will take some time to be implemented and some elements will stretch over a number of years, especially in relation to the fiscal framework issues and the block grant adjustment process. That will in no way be able to be implemented for the scrutiny of the budget process for 2018-19. I just want to set the context of where we are.

To begin the discussion today—[Interruption.] Sorry, but the clerk has rightly reminded me that, before I go to the first question from James Kelly, our witnesses will each make an opening statement. Forgive me for being premature. I do not know who wants to go first, but I think that you both want to make a short opening statement.

Thank you, convener. I will be brief, but we thought that, in the light of the shift between your first agenda item this morning and this agenda item, it would be helpful to set a bit of context.

On behalf of the members of the budget process review group, thank you for inviting us to provide evidence on our final report. As you know, we were established to review the budget process in the light of the new tax-raising and spending powers that are being devolved to the Parliament. In March, we published our interim report, which highlighted what we saw as the key issues for a revised process, and we included questions for consultation. The final report reflects the breadth of contributions from members of the group and from the external stakeholders who we engaged with during our work and those who responded to the consultation.

In agreeing our findings, we reflected both on the existing budget and the implications of financial devolution, which is fundamentally changing Scotland’s public finances. We would like to take this opportunity to thank everyone who contributed their views. The range and quality of the contributions that we got reflect the growing level of interest in Scotland’s budget as we move into this new phase.

Based on the detailed work that we have done over the past year, there are four key things that we think the revised process should do. It should enable Parliament to have greater influence on the formulation of the budget. It should increase transparency and raise public understanding of the budget and the way the new powers are being used to make important choices. It should respond effectively to the new fiscal arrangements and the wider policy challenges that the Parliament and Government face. Most importantly, it should lead to better outcomes for the Scottish people.

To achieve that, we consider that significant changes to the existing budget process are needed, and we have made a package of recommendations to that effect. We recommend a framework for a revised process that includes a continuous cycle of scrutiny throughout the year so that committees can explore the impact of budgetary decisions and look to influence the formulation of the budget before the Government sets out its firm spending proposals.

We think that parliamentary scrutiny should be evaluative, with an emphasis on what budgets have achieved and aim to achieve over the longer term, looking at where money has actually been spent and raised, and the outputs and outcomes that are being achieved. It needs a long-term outlook, building up evidence over time and focusing more explicitly on prioritisation within the fiscal constraints that we will always experience, and making sustainability a key consideration.

Scrutiny needs to recognise the interdependent nature of many of the policies that the budget seeks to deliver, and our recommendations look to enable that. They build on the principles that were identified when the Scottish Parliament was established and reflect an ambition for a world-class approach to managing the public finances to meet the challenges of today and the future. We recognise that that will mean cultural change as well as changes to processes and procedures, and that, as you say, convener, it will take time to work through.

Given the complexity of the issues, some of the recommendations will need to be phased in over time. We expect that there will be an opportunity to introduce most of the changes that are proposed as we look toward the 2019-20 budget cycle, with the publication of a medium-term financial strategy for the first time before the 2018 summer recess. We also expect some aspects of the budget process to continue to evolve during the current parliamentary session, as the new approaches bed in.

Angela O’Hagan wants to add to that from her perspective before we move on to your questions.

I thank the committee for its invitation and, on behalf of the group, I thank you, convener, for your gracious comments on the process and the report. The budget review process was a positive exercise, with a shared commitment on behalf of the group’s members and significantly, as you said, on the part of Parliament and Government to meet challenges and to come up with and advance a practical, responsive and progressive budget process.

Core to that is the commitment to embed equality analysis throughout the process. Through the recommendations to increase parliamentary scrutiny, there are greater opportunities to embed equality analysis. The expanded budget process gives a greater emphasis on evidence on outcomes and impacts. The proposals that we have put forward create more access and entry points for equalities scrutiny. On equality analysis, the Scottish budget process is already well ahead of the processes anywhere else in the UK and most of Europe; at least, there is a process to allow for greater equality analysis. There is an opportunity to build on that pioneering work with the equality budget statement and increased committee scrutiny and, as Caroline Gardner says, to create a world-class approach to equality analysis in the budget process.

I just wanted to emphasise that significant and distinguishing feature of the Scottish budget process and the budget review process and report.

Thank you for coming and for the detailed work that you have put into your report. I realise that it has been challenging, but you have carried out the review assiduously.

In recent times, the budget process has been curtailed to an extent because of external factors beyond the control of the Parliament. There has been frustration about the amount of time that we have had to consider the budget properly. You have recommended an approach that involves an all-year-round budget process and a longer-term view so that, rather than simply look at the budget in the coming year, politicians and interest groups will take a much longer-term look at the factors that affect the budget, and we will therefore have a much more robust and qualitative process. One of the key factors in that is data being available to people so that they can make proper assessments. On the issue of all-year-round budgeting and a longer-term approach, what data do you envisage being available to parliamentarians and stakeholders in the year running up to the budget and in the longer term?

That is a really good question. We absolutely recognise the challenge that Parliament has had over the past few years in trying to scrutinise the Scottish Government’s draft budget in a very short time that is also around the Christmas holiday, so time is squeezed in all sorts of ways. The focus on the budget tends to be over a fairly short time period. The group’s view was that that has tended to focus attention on the numbers that are changing at the margins rather than on the overall bulk of the £33 billion or so that is being spent and what it is achieving. We therefore spent a lot of time looking first at timing—I am sure that you will want to talk a bit more about that—and at suggestions that would help Parliament and its committees to pull back and look at the budget as a whole, rather than being squeezed into looking at the numbers that are catching the headlines in one year for particular reasons.

One benefit that we think there will be of a longer-term approach is that committees will be able, over a session of Parliament, to agree the areas that they are most interested in—because of demographic pressures and policy challenges, or because there are signs that the money is not keeping up with demand in various ways or that there are better ways of spending it—and build up their evidence from there. Some of that evidence will come from simply having more time to look at trends, looking back at what has been spent and how that has changed, and looking forward to such things as how demographic changes will affect demand in the future. Health and social care is an obvious example. It is also a chance to draw in evidence from a wider range of stakeholders, including audit reports from Audit Scotland, academic research and, importantly, the views of people who rely on and use the particular public service to drill down and build up that understanding in ways that can help to improve scrutiny of the budget and, as we say in our recommendations, influence how the Government formulates its budget and the proposals that it brings forward every year.

The sort of data available will be different in each of the policy areas that is looked at. This committee is taking a close look at economic statistics and indicators, which will obviously be key for some of the tax proposals coming through. However, in areas such as education and health and social care, the information that is needed will be quite different and drawn from different sources. We think that the longer-term cycle will give you the chance to identify what data you need, to start to pull it together and to see what it means for you.

In the report, we talk about the basket of evidence that needs to be brought into play to assist in year-round scrutiny. That would include everything that Caroline Gardner mentioned. We have given a graphic depiction of the range of background documentation. As Caroline said, that includes audit reports, but it also includes the reports and data that are generated by the agencies that are responsible for disbursing public finance. Included in that are the data and reporting mechanisms for the public sector equality duty—that is, the mainstreaming and outcome reports that are produced. Those give an indication of the impacts in changes in resource allocation and changes as a result of public service reform or service reconfiguration. So we can look at a wider range in that expanded timeframe.

The report also puts an emphasis on greater hook-up between assessing and evaluating outcomes from publicly funded activities, as assessed through the national performance framework, and the data that goes behind that. That is about interrogating and drilling down into what is behind the national performance framework and making closer links between budgetary proposals and subsequent evaluation through the performance framework.

11:00  

You have both mentioned a lot of information sources that can be used to identify trends and help with policy choices. Private sector and public organisations outwith the Parliament take a longer-term view. They produce a business plan and five-year forecast showing what the overall numbers will look like year by year, at least at a very high level, but the Scottish Government currently does not have that. Do you think that producing such a medium-term financial strategy is achievable? Although all the information sources that you have identified are helpful, ultimately, the overall numbers and data will be critical to the political decisions that are taken.

The group felt that the medium-term financial strategy is a key element of the package of measures that we are proposing, and it is one of the things that helps to compensate for the continuing shorter period for focusing on the detailed budget proposals each year. The medium-term strategy will set the context for the budget each year, and it will look at the economic and demographic forecasts and the other things that are expected to change alongside current policies and the ways in which they will affect demands on the public finances. The strategy will also look at the level of taxes that are expected to be raised from each of the devolved taxes and at demand-led spending, particularly through the new social security powers. It will also set out clear policies and principles for the way that new powers such as the borrowing and reserve powers will be used within the overall framework.

There is no doubt that it will be challenging for Government to produce that for the first time; it will be a new element of our fiscal arrangements here in Scotland. However, we think that it is possible for it to be done next summer before the summer recess in 2018 to inform the 2019-20 budget cycle and, more importantly, that it is critical to do it if the longer-term and more strategic scrutiny of the public finances is to be effective. It is what lets you move away from a focus on the individual numbers that are changing to the bigger context and the things that the budget is trying to achieve.

The way that you describe it in paragraph 81 of your report, which sets out four elements, is useful. Just for the record, and so that those who are tuning in can clearly understand what the medium-term financial strategy will contain, I point out that the four elements are:

“• Forecast revenue and demand-led expenditure estimates from SFC and their effect on Scotland’s public finances;

• Broad financial plans for the next five years;

• Clear policies and principles for using, managing and controlling the new financial powers; and

• Scenario plans, based on economic forecasts and financial information in order to assess the potential impact of different scenarios on the budget.”

That is powerful, and it follows up on some of the things that the committee asked for as part of the discussion on last year’s budget. I am sorry for reading that out, but it sets the context for the wider audience who are listening.

That is helpful. Finally, this requires a change in culture, from that of recent years when the timescale for looking at the budget has been very short, to looking at it all year round and to taking a longer-term view. What is required to make that successful, so that politicians and stakeholders can understand the new process and engage with it effectively?

It is difficult and challenging to use the term “culture change” in a way that does not make it look as though you are being critical. However, our view in the group was that it has to be seen in the context of the recommendations for a more expansive and extended process in which the focus is on outcomes, which we focus very strongly on in the report. What difference is public funding making in the key areas of government? If, as we say from an equalities budgeting perspective, the budget is the principal expression of a Government’s priorities, how are those priorities being met through public spending? That is what we want to encourage: the scrutiny not of the immediacy of the politics of budgeting but of the longer-term impacts and outcomes that are achieved through the consensus that ultimately is the agreement of a budget and will be the agreement of the medium-term financial strategy and the multiannual budgets.

That, again, allows the setting of that consensus, that strategic direction for public spending and the outcomes that we collectively, through improved public engagement, want to see achieved as a consequence of the dedication and allocation of Scotland’s resources. It is about looking at the changes that are being made to advance the wellbeing and equality of people in Scotland, so shifting some of the budget scrutiny from the immediacy of political point scoring on indicators and targets to a more long-term and in-depth look at the changes that are happening and where adjustments might be made more effectively.

I will add a couple of brief points. First, all of us who are involved in this have to accept that the new fiscal framework and new devolved tax and spending powers will inevitably mean that there is more uncertainty in the budget than there has been in the past. Forecasts are never going to be right, in the narrow sense, and the fact that more or less tax has been raised in a year than was forecast is not necessarily an indication of failure. It is about how we manage the uncertainty and volatility as a whole.

The second point is a strong theme in our report. It is about having greater transparency of information across the whole of public finances, looking at how these things join up, and doing things to make sure that that transparency is useful to people in Parliament and people across Scotland. In the budget documentation, we recommend separating the presentation of the numbers from their political presentation. I know that there was concern in some committees last year about how some elements of the budget were presented. If we can strip away the confusion between the numbers and their presentation politically, it will help people to focus on the numbers and what they are intended to achieve, as Angela O’Hagan has said, rather than on whether some number should be £50 million higher or lower, depending on which definition you use. That does not help anyone, and it tends to get caught up in the very narrow political street-fighting rather than the bigger decisions that are needed around the budget.

I think that Murdo Fraser probably wants to talk about revisions in the area that we have just been hearing about. Do you want to pick up on that?

Just as a precursor to my question, I echo what the convener said about the report. It is excellent, and the emphasis on evaluation of outcomes and outputs is exactly where we want to be going. It has been very valuable.

I have a specific question about budget revisions, which you touch on in paragraphs 184 to 186. A specific scenario came up during our budget scrutiny for the current year. It may be helpful to put that into context by way of illustration. The budget was presented to Parliament on 15 December last year, if I remember rightly. At that point, the finance secretary told us that every pound was accounted for in the budget. The Opposition parties were challenged to propose alternatives to the budget and they would have to say where the extra money was coming from. That draft budget was then put out to the various subject committees for scrutiny.

It was only six weeks later—a period that of course included the Christmas and new year break—when the finance secretary came back to Parliament for stage 1, at which point he had done a deal with Mr Harvie’s party and had found an extra £220 million in order to agree that deal. There were a lot of jokes at the time about the finance secretary’s sofa and how he had found that money wedged down the back. However, there are two more serious points. First, if the Opposition parties had been aware that the budget was understated on 15 December, that would have put a different complexion on any negotiations that took place. Secondly, the committees that were scrutinising the budget were scrutinising a budget that was £220 million smaller than it was in reality.

Did you consider that issue when looking at the question of budget revisions? Did you come to any view about how in future we might improve the scrutiny process and provide greater transparency?

You will not be surprised to hear that we spent some time considering that issue as well as the broader question of whether Parliament should have amendment powers over the budget as presented by the Government. There are arguments on both sides. We heard examples of legislatures elsewhere that have various sorts of amendment power, either general or within the overall cap of the resources available, or none at all, which is where Scotland is at the moment. We thought quite hard about the pros and cons of that. It did not take us long to rule out the idea of unrestricted amendment powers; they are generally not a good thing, as you risk ending up with pork-barrel politics and fiscal sustainability tends to go out of the window. However, we thought long and hard about whether it should be possible for Opposition parties to propose amendments within the overall cap that had come forward.

Actually, the more we thought about it, we more we thought that that throws up the same question that you are raising. What is important is that everyone is clear about what the overall envelope of resources is in ways that are complete and transparent. I had a patch earlier this year of making small bets with colleagues to test whether they could tell me where the extra £200 million-odd came from or not. Very few people understood, because, first of all, the budget as it is currently presented does not tell you the whole picture and, secondly, the current process does not require explanation of where the movements are happening. For example, the non-domestic rates pot is outside the budget as presented, and that presents opportunities because of the way it is managed on a rolling basis either to take money out or to put money in. From this year, we have the new borrowing and reserve powers, which bring in for different purposes different streams of money that are not shown directly in the revenue budget that is presented to Parliament.

As a group, we decided that the best thing to do was to stick with the current arrangements whereby only the Government amends the budget but instead to focus heavily on the transparency and the accessibility of the information and on the importance of that covering the whole of the budget, not just individual elements. We need to see how all the new moving parts—borrowing and reserves, the block grant adjustments and the interaction between forecasts and later reconciliations—operate in terms of the amount of money that is available and the choices that are made about tax raising in future. One of the recommendations in the report is for a fiscal framework outturn report, which puts all that into the public domain and gives everybody the same basis for understanding where there might be levers that could be used to raise more money for investment, spending or indeed for tax cuts in the future, if that is the decision that Parliament comes to. We considered it carefully, but that is the basis of the recommendations were made.

Thank you. That is very helpful. I suppose the lesson is that in future, when the budget is presented, the first question that will be asked of the finance secretary is, “Is this the complete picture? What else is there that has not been presented?”

And the medium-term financial statement and the fiscal framework outturn report will give you, as parliamentarians, information on which to ask those questions in an informed way.

Thank you.

Following on from that, I suppose that there is a need to recognise that, as well as the objective that you set out at the beginning of allowing Parliament greater opportunity to influence the budget, presumably before its publication, there is also a political process that comes after publication. Whatever view we take—and I am sure that there are different views—about the merits of any particular outcome in any one year, the question about transparency and the finance secretary not holding back further information is very important.

We are all now being forced to accept that the budget process after publication is much shorter than it used to be, and that does not look likely to change. That increases the argument in favour of giving Opposition parties some ability to make amendments. Given that you have reached the view that that is not what you want to propose, how did you strike the balance between coherence of a budget and political accountability to Parliament? The current period of minority administration is particularly relevant to this, but the years of coalition were relevant as well, as are some of the same criticisms of a political deal between parties resulting in a lack of coherence in budgets. Some of those arguments were made at that time as well. We need a process that will be able to work in periods of potential majority, minority and coalition administration in the future. Just give me a sense of how you think your recommendations reflect the importance of parliamentary process and the reality that there will be a political process after publication, perhaps on a breakneck timescale that has not always worked well in the past.

11:15  

I will start with the point about post-publication and trying to create space that does not exist in the calendar at that point. That is why we emphasise pre-budget scrutiny, the opportunity—indeed, the necessity—for greater committee involvement and scrutiny over the year, and pre-budget influence and formulation and setting out proposals from the committee processes. That, we felt, increases the involvement of Parliament more in the round and engages Parliament much more in the propositions and proposals that should inform and structure the proposals in the budget. There is also the recommendation that the spring budget revision should be accompanied by a mid-year report on revenue and spending up to the end of December, and that the mid-year report should be scrutinised.

When you take the basket of measures across the report, there is public engagement and parliamentary engagement and scrutiny, proactive involvement from the committees—not just in a scrutiny role but in pre-budget proposals and the kind of data that James Kelly was asking us about—and increased monitoring of finances over the year. We have tried to present a series of proposals that have to be taken as a whole because of their interlinking nature, all of which are intended to give greater accountability and transparency.

Reflecting on Patrick Harvie’s point, I notice that paragraph 167 deals with some of the nitty-gritty of this. Could you expand on some of that? Again for the wider listener who is not as close to all this as we are, I think that that would be helpful in response to Patrick Harvie’s point.

Absolutely. The first thing to say is that we were very conscious that, although we are all working in a particular composition of Parliament at the moment, what we design must be able to cope with every possible permutation that can come out of our electoral system. It is not about a minority or majority Government or anything else; it is about what Parliament needs to work.

As I said, one of the key things that we were trying to balance was proper parliamentary influence with the ability to manage a budget and keep fiscal sustainability as a key consideration to avoid the risk of the sort of pork-barrel politics that we have all seen elsewhere. That can lead to decisions that are politically palatable this year but which lead to long-term problems after that. We felt that our package of recommendations, which would put more information in the public domain for the longer term, with the medium-term financial strategy and the fiscal framework outturn report, was a good starting point. The longer-term evaluative phase that Angela O’Hagan has talked about will influence committees’ pre-budget reports in ways that should drive some of the shift in the proposals that the Government publishes in the budget bill. The budget bill itself should give a much more complete a picture of the public finances, rather than just one angle on it with other moving parts elsewhere that are not included. That all limits the risk of misunderstood or not-understood changes coming through at a later stage.

Equally, we recognise that this will always be a political process. This is a Parliament and that is the way in which Parliament operates. Increasing transparency all the way through was a key part of what we were looking to do. We felt that the Government’s ability to bring in amendments at stage 2 was a key part of the ability to reflect on the negotiations that are happening and will always happen.

The influence that comes from committees is a part of their scrutiny and the scrutiny by this committee of the big picture of what is happening on borrowing reserves, with forecasts of revenue and spending for the future, is the best overall balance that we have. There is no right answer, but we feel that it respects the fact that this is a political process and will shine more light on the ways in which it is working and provide Parliament in general with more information about the impact of the changes that it is making than it is doing currently. That is the right place to land.

The fact is that the political discussion that led to stage 2 amendments last time round was unusual. Are you suggesting that that should become the norm and that it should be an expectation that, if the Government reaches agreement with other political parties, that should be expressed through a formal process of stage 2 amendments going through on the record?

We felt that the mechanism was already there and that it is better than any political party being able to bring forward amendments, for the reasons that we have discussed already.

It is already there, but mostly it has not been used; it has been rare.

Precisely. I was going to move on to say that the thing that makes it both a more managed part of the process and one that is better understood is the greater transparency of the overall picture within which decisions and amendments are being made, the ways in which they will be funded, and their long-term impact in the context of the medium-term financial strategy. If I stick with the experience that we had last year, you are right to say that it has only rarely been used. The amounts involved were not huge in the context of the overall £34 billion or so that we are talking about but, equally, we know that some of that money came from different assumptions about the balance on the non-domestic rates account. Parliament should have been able to see that impact and what it meant in terms of trends when voting for or against the budget as it went through. We think that it makes their use more effective and more likely to lead to good fiscal decision making.

Just so that I can finish that off, you said specifically in recommendations 48 and 49 that there are some changes to the existing process. In particular, recommendation 49 states:

“The Group also recommends that any changes to the Scottish Government’s published spending proposals during the budget process must be dealt with through amendments to the Budget Bill at Stage 2 and Stage 3”.

That takes it a stage further than currently, where it is within the Government’s will. I think that you are suggesting that that process should become a norm.

That is absolutely right. As I say, for us this is about making the process more transparent and better understood in terms of the decisions that are being made and their longer-term consequences. I think that it gives Parliament greater control.

I am sorry, Patrick.

The other aspect of parliamentary scrutiny that I am interested in talking about is on the tax side. A large part of the purpose of the budget review process has been to understand how we evolve from scrutinising a spending budget—or what has been almost entirely a spending budget—to scrutinising one that is much more balanced between taxation and spending.

I understand entirely why, within the process of the review, you did not feel able to make a clear recommendation on the idea of a finance bill; you said that it should be examined further. In the interim, have you discussed how we might achieve a higher or more regularised standard of scrutiny of tax instruments before we get to the point of making a longer-term decision on a finance bill? We have a negative instrument on non-domestic rates, which is a major tax power. We have a much more high-profile and tightly time-constrained process on income tax rates—a rate resolution needs to be passed in a very tight timescale to get to the budget. For legislative reasons, we have had a much higher level of scrutiny of the land and buildings transaction tax. Council tax is still in theory a local tax, but the constraints around it are bound up with a national budget process.

Have you had any discussion about how we might achieve in the interim—before we get to the point of making decisions about a finance bill, which might be several years down the line—a common standard of scrutiny of relevant tax powers?

In some ways, that was one of the most difficult areas that we looked at because of how technical it is and because the legislative provisions have been built up piecemeal over time for reasons that we all understand.

We heard some quite strong views from different stakeholders about the need to review the process and streamline it a bit. You will recall that, when I was here with Don Peebles and Jim Mitchell earlier in the year to discuss our draft report, you asked us about the possibility of a finance bill. We considered that and ruled it out on the basis that we were very keen to make recommendations that were in the power of the Scottish Parliament and the Scottish Government to implement rather than ones that would require changes to UK legislation.

We have made some recommendations for streamlining and improving the quality of tax legislation and the way that it is reviewed for minor housekeeping changes as they come through to avoid some of the difficulties and teething problems that we saw when the devolved taxes first came in. To be frank, we feel that that is an area that needs more time and more consideration than we were able to give it as part of the report, and that it could appropriately sit alongside the implementation of the recommendations. Those would improve things in any case, but I am sure that more fine tuning could be done on the tax legislative provisions.

There is not much more that I would add other than, when it comes to the common standard of scrutiny of the principles of taxation—the so-called Scottish approach to taxation—we should ensure that, whatever the proposals are for tax instruments, which are political choices, the scrutiny that is applied is applied from the perspective of equality implementation, take-up and so on.

I, too, want to ask about equalities. I do not know whether you want to bring others in on that point, convener.

We have covered a fair bit of ground already. The key components of the process have already been discussed, so I think that it is appropriate for you to finish off your questioning, Patrick.

Thank you.

I will come to Dr O’Hagan first. In your opening remarks, I think that you said that the Scottish approach to equalities analysis is better than elsewhere in the UK. Do you agree that that is setting a bit of a low bar, and that what we have should not be seen as a model but as a starting point to build on much more substantively? I would suggest—and I would like to know whether you agree—that the equalities statement that accompanies the budget places a lot of emphasis on the value of positive things that the Government thinks that it is doing, but it does very little to analyse the impacts of cuts, for example.

Let us look at the number of jobs that have been lost in local government in the past few years as a result of the constraints on local government spending. The Scottish Government has made no real attempt to produce an equalities impact assessment or an analysis of the equalities impact of such decisions. The Government claims that it is unable and lacks a suitable evidence base to conduct an intersectional analysis—the kind of distributional analysis that your recommendations call for—yet you will be well aware that the Scottish women’s budget group has done a fair amount of that kind of work with existing data that is already available. Is it the case that the Scottish Government has been unwilling to go further and do what is already possible? If so, why would we assume that, if it had more data available, it would do what is needed when it has not been doing what is needed with the data that it already has?

Okay. There was quite a lot in there.

I will start by saying that, although the Scottish approach and the equality budget statement should perhaps not be used as “a model”, to use your phrase, the work in Scotland is the very best of what is going on in the UK, where there is very limited equality analysis. There is no equality impact assessment and no similar documentation on the UK budget, for example. I have consistently said in the equality budget advisory group, in successive consultations, in evidence to Parliament and elsewhere that although, as it stands, the equality budget statement is a very important development in our budget process, it is a narrative accompaniment to the budget decisions and not an equality impact assessment.

What we have recommended in the budget process review group report is that we should move more towards the typology and approach that are advocated by the Organisation for Economic Co-operation and Development, which involve ensuring that we have an ex-ante, a concurrent and an ex-post equalities analysis of the budget. By encouraging the creation of that year-round scrutiny of parliamentary involvement, we would create many more access and entry points for equality analysis. We need to prompt that from and require it of Government and within parliamentary scrutiny. The committees themselves could be much more robust in some of the equalities analysis, which should be concentrated not just in the Equalities and Human Rights Committee but across all the subject committees. That would begin to address some of the issues that you have raised, such as the impact on local government employment. Let us not forget, either, the impact on local government of public service reform, which usually falls on low-paid, precariously employed women.

11:30  

The kind of approach that we are advocating is to make more of the public sector equality duty requirement to ensure that proposals that are put forward in the budget—whether from committees or spending departments—are subject to an equality impact assessment and that a wider range of equality analysis tools are used, including beneficiary analysis, to work out what the impact will be. There has been significant improvement in the equalities data that is available in Scotland, which can be brought into much more effective use in the analysis. Indeed, the Scottish Government has recently said with regard to the relationship between the budget and the national performance framework that there is better data there and that more should be used.

The kind of analysis that we are talking about is not what is currently in the equality budget statement, which is why the report has made its recommendations to strengthen and improve the equality budget statement and to reconsider its timing, its purpose and the use to which it can be applied in Parliament. The recommendations on distributional analysis are there for a reason—we know that the data has improved and that improving distributional analysis will improve parliamentary and public understanding of the impact of and outcomes from public spending. There is an increased availability of data—although we undoubtedly still have data gaps—but there needs to be the political will in Government and in Parliament to bring that data into better use and to commit to the kind of intersectional analysis, whereby we look at the lived experiences of women and men in all their diversity in Scotland and at how public services and public finances in Scotland are advancing equality.

That is the basic question that must come before every committee: to what extent any proposal that comes before it advances equality and seeks to eliminate inequalities. If a proposal is not going to do that, it is necessary to go away and think again. That is where we can look to other jurisdictions at sub-national level with similar budget levels and considerably more advanced equality analysis, such as the Andalusian region in the south of Spain, or at national level, where Austria was one of the examples in the international report for the group.

So, without suggesting that perfection is achievable immediately, your view would be that the Scottish Government already has available to it the data and tools that are necessary to produce a much higher level of information for Parliament, when it publishes its budget, on the impact of its budgetary decisions in terms of gender, disability, ethnicity, age and income decile. Are you saying that it should be our expectation that Government publishes such information alongside its budget?

We know that there has been a big improvement in data, but in some areas there are still deficiencies; they are historical and are to do with the kind of data sets that we have available, the population size for data sampling in Scotland within UK samples and so on. There are a whole lot of technical reasons. However, the point is about not just producing the data alongside the budget, but using it in the pre-formulation of budget options, in the ex-post and concurrent evaluations, and in the ex-ante formulation of budget proposals.

Sure, but if the Government is using the data in that way to shape its budget, the way for it to show that it has done so is to show its working when it publishes the budget.

“Showing its workings in the margins” is a phrase that I have used very often in relation to equality analysis, but the emphasis here is also on the public authorities and public bodies that are implementing the services that are funded through public finance. That is why, in the budget documentation that we talk about in the report, we want committees to take a much wider view and to look at the public sector equality duty and the associated publications that are required for compliance with that duty. Consideration needs to be given to what bodies such as the NHS, Skills Development Scotland and the successor to Scottish Enterprise are saying in their mainstreaming reports and in their audits about equalities and how they are advancing them, and about how those proposals will meet the overarching objectives of Government and of the policies that are proposed by parliamentary committees.

That is helpful. Thank you very much.

We have already had a good discussion about year-round budget processes, longer-term planning, timing, revisions and mid-term financial strategy, which I think is hugely important. Ivan McKee has a very quick question.

I want to focus on outcomes, and I am glad to see that you have given that some attention in the national performance framework, which we do not talk about often enough in this committee or in subject committees. It is clear that there are difficulties—I know that the subject committee that I am on struggles to establish the relationship between the input funding, the outcomes that are delivered and how those line up, and you talk about that. You talk about potentially moving from portfolio-based budgeting to programme-based budgeting, which would be interesting.

Could you talk about the discussions that you had about that and the difficulties that you foresee in enabling this committee and subject committees to move more firmly in that direction, so that we can look back on what has happened and not just have a political bun fight about how to line up input funding and outcomes in the future?

I think that it was common ground in the group and among all the external stakeholders that we heard from that the outcomes approach is a good thing. We absolutely should be looking at the outcomes that we are trying to achieve rather than at how many nurses, doctors or teachers we have; we should be taking that longer-term view. More can be done to link those outcomes to the money that we spend, which is the key way that any Government or organisation aims to achieve its aims. Alongside that, as the outcomes are agreed and set, Government and public bodies can do more to set out their plans for how they want to shift those outcomes.

At the moment, there is a gap in many areas between the outcomes in the national performance framework and the way in which they cascade down, and the plans that the Government and all the people who are involved in trying to shift those outcomes have for how they will actually go about it. That is a complex thing; for most of the outcomes that are in the framework and that we care about, it is not just a case of cranking a handle to see what is changing. Equally, there is much more room—for example, if one of the outcomes is about keeping people safer by reducing reoffending—to be clear about what the interventions are that the evidence says reduce reoffending; which ones we intend to try here in Scotland or in different parts of Scotland; what money we will put behind that; and how we will know over time whether things are moving in the right direction and we can therefore do more of those interventions, or in the wrong direction, with the result that we must think again.

We have a section in the report about planning for outcomes and the way in which that would be done in the Scottish budget overall, but also within the budgets of the public bodies that Angela O’Hagan referred to. That information itself would give the subject committees much more to work with in testing and challenging whether that thinking stood up to scrutiny and whether the evidence available was changing over time and whether policy and the direction of money should also change. We felt that that was all a positive direction of travel that would build on the good things that are already in place with the national performance framework and the outcomes approach that we have embedded in legislation now in Scotland.

Thank you.

Thank you very much.

As I said at the beginning, the budget process review group’s report is an excellent report and this morning’s session has been extremely valuable. Obviously, lots of processes and procedures are in there, but I heard the phrase “culture change” a couple of times. It will take a significant culture shift in the Parliament if we are to make sure that some of the proposed processes and procedures are embedded in what we do in a meaningful way.

Obviously, the financial issues advisory group set the foundation stones for the parliamentary budget process and did a rigorous and robust job on it. We now have an opportunity to take it forward to a completely different level and produce a world-class budgeting process within the constraints that we all work under. If we can achieve that on an all-party basis, we will have done the Parliament and Scotland proud. I hope that we can get to that end, and I thank you for helping to push us along that road.

The clerks will produce a paper for a future meeting, which will set out our suggested approach to the implementation of the review group’s final report.

Meeting closed at 11:39.