Finance Committee

Meeting date: Wednesday, June 15, 2016

Official Report 354KB pdf

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Work Programme

The next item involves consideration of the legacy paper. Two points are particularly important. However, first, having read the legacy paper on several occasions now, I think that we should record our thanks to the members of the previous Finance Committee and to its convener and deputy convener for the work that they undertook. This is a robust and informative legacy paper and it should give us food for thought, particularly in shaping what is going to be a busy and complex series of actions over the next few months.

We need to do two things to start up the process: one is to invite the cabinet secretary to give evidence to us at our next meeting, because it is important that we know what he and the Government are thinking about the matters that are in front of us; and the other is, at that meeting, to look at our work programme.

I want to make a couple of points before I ask Alex Johnstone to contribute. We have a clear role to fulfil in budget scrutiny. Our hands are tied, to some extent, with respect to what we will be doing at certain times of the year. When the budget process starts in September, we have a clear run through until January or early February with the things that we have to do.

In addition, Parliament will, for the first time, be giving serious consideration to matters of taxation—the budget scrutiny model that we operate on is predicated on spending money, not raising it. That change creates a new situation, which we and the Government have to consider, from the point of view not just of timescale but of how that scrutiny goes forward. We have a budget scrutiny model that is much respected and has been effective. I would not want to lose that. Equally, though, we will have to adapt it.

The first task that we have to undertake is our budget scrutiny and, as ever, we must negotiate that with the Scottish Government. However, we must also, along with the Government, address the issue of how we put in place a new model. That will require parallel actions to take place over the winter and into the spring.

There are other issues that each of us will bring to the table that relate to our interests in the subject and, ultimately, our interests in the constitution, which we will want the committee to consider. In the period until January, the space for us to do that will be very limited. It is more likely that we will have time and space thereafter, probably from the beginning of February until the summer. That is likely to be our annual programme.

We hope to have an away day in August to start to take those issues forward and to help us to get to grips with some of the complex issues that we will be dealing with. I have asked the clerks to consider how else we can do that. Those of us who were in the previous Parliament and who nodded sagely when the fiscal framework was going through have not necessarily engaged in the greatest detail with it, and it is now incumbent on us to do so.

To sum up, we need to look at the budget process and the process of putting in place a new construct for scrutiny. We will also have our own issues to bring forward. Those are all things that we need to address.

I look forward to an early opportunity to have the cabinet secretary before us. A close relationship between the members of the committee and the cabinet secretary is vital. Although we may have disagreed to a large extent with John Swinney on many of the things that he did, the fact that we had a good working relationship with him was key to the success of the process.

I agree that, with the new powers of taxation coming our way, this committee will have to adapt the way that it processes the budget. It is not only taxation; my concern extends to borrowing—but that is just me.

No, absolutely.

The convener mentioned the fiscal framework. I was on the Devolution (Further Powers) Committee when the fiscal framework was being developed and it was disappointing to some extent that members of that committee and of Parliament were almost excluded from the process. If it is possible, I would like a stronger relationship to develop so that we can better monitor what is going on in that area. For that reason, the constitutional element will become very important to us and has an importance that will be reflected in the fiscal work of this committee, not just in some separate box marked “constitution”.

Those are good points.

I want to raise two issues in the legacy paper that I think are important. The first is the role of the newly established Scottish Fiscal Commission. Its remit was agreed in detail as part of the fiscal framework discussions. It is important for the committee to have an early opportunity to meet members of the commission to get a full understanding about how they see their role and how the committee might interact with the commission. I hope that we can do that.

The other issue concerns the land and buildings transaction tax. Having met the Law Society tax committee last week, I think that there are issues with LBTT and its operation. I noticed that paragraph 14 of the legacy paper contains a recommendation that the committee should review the first year of LBTT—how it has operated, what the impact has been on the market and what the tax take has been, as it is suggested that the tax take is below original expectations. Specifically, we should review how the additional dwelling supplement, which has been newly introduced, is operating in practice and how practitioners—lawyers included—are dealing with the practicalities of the measure. I hope that the committee will consider that.

That should certainly be passed to the clerks for consideration for the work programme.

I believe that the intention is to have the Fiscal Commission present at the away day for an informal presentation. I will meet the chair of the Fiscal Commission and have a first conversation before the summer recess. I will report on that, and we will have a chance to meet all the members and have a conversation. We will require to establish a close relationship with them.

I am happy to support the proposal to have Derek Mackay and the Fiscal Commission engage with the committee in the near future.

I will pick out one or two issues in the legacy paper. One is the recommendation that the committee should lead a wider debate in Scotland about tax policy. I struggle to see when we will have a chance to do that. We are about to break for the summer recess and, not long after the recess, a draft budget will be published. It seems that there is no space for that wider debate about tax policy to take place. It would be regrettable if we simply had to dinghy that aspect of the legacy paper. It is worth noting that that will be a lack.

On the timescale of the budget process and the impact on other committees, during the previous parliamentary session, other committees justifiably complained on a number of occasions that they were unable to make the judgments that they needed to make. The issue that irritated me most frequently was that the carbon assessment of the budget was not produced in time for the Rural Affairs, Climate Change and Environment Committee to do its budget scrutiny. There are a number of other examples that relate to the remits of other committees that will report to us on the budget with regard to their portfolios. We need to put pressure on the Government to ensure that those committees have the information to enable them to do their job.

I will also say something about minority government. Experience tells us that, in a period of minority government, there can be much more substantial changes to legislation as it goes through the Parliament and, when substantial changes are made to a bill, the financial memorandum as introduced might bear little relation to the final bill that is passed. I notice that there is a recommendation in the legacy paper that the Government should be asked to give some sort of post-stage 1 update on the financial memorandum. Perhaps that proposal needs to be beefed up in the context of minority government so that the Government is asked to give an assessment of the changes that are under consideration by Parliament. We might want to make other changes to the budget process in the context of minority government, but that is one aspect that might be relevant.

Everything that is said in this discussion will be considered and refined by the clerks in the work programme. In essence, we are laying out the ground. The issues that you mentioned are all important.

I hope that we will have the Cabinet Secretary for Finance and the Constitution at the committee in two weeks’ time. Members—particularly you, Patrick—will want to raise with him one or two key issues from the legacy paper. It is not my intention to suggest questions for members in the briefings that the committee will have. Members will want to ask their own questions but, as questions occur to them, they might want to ask SPICe or the clerks for further information to allow those questions to be filled out.

There will be a chance to influence the timescale strongly because we are talking about a new budgetary model.

I want to pick up a point that has already been made about timescales, new powers and moving from scrutinising spending to including discussions on tax. We need to get that right. Tax has a big impact on behaviour so we need to make sure that we have enough time for discussion and scrutiny so that, in a year in which there is a lot of flux and we have to deal with new powers, we get it right. We should not hurry this side of Christmas.

There is an established protocol and it will require to be considered as we go on. Obviously, the committee will have to be happy that we can make a recommendation to Parliament.

Members have commented on the changing landscape and additional tax powers, and I know that they will be a great focus for the committee.

Two practical points come out of the legacy paper. The first is the use of the Scottish Fiscal Commission’s forecasts, which will greatly help the committee, working with the budget adviser, to forecast the impact of changes and different scenarios. They will inform our discussions and give some robustness to our decisions.

The second point of interest is the outcome-based budget scrutiny. I first sat on the Finance Committee in 2007, and there was a lot of discussion about outcome-based budgeting at that time. It is probably fair to say that we have not addressed the issue correctly; I think that even the Government would acknowledge that we have not got it right. The approach is about not just pushing the spending into different areas but what that spending is achieving. It is right to focus on outcomes, and we need to put a framework around that so that we can assess them properly and see whether the spending that has been allocated to various areas is effective.

That point requires to be built into our work programme both in relation to how we scrutinise the budget and as a special item.

I echo James Kelly’s point. I am also on the Health and Sport Committee, which deals with the portfolio with the biggest spend. It is important to consider the relationship between where the money is going and the outcomes that it is delivering, and how those outcomes align with priorities and are measured.

I found the legacy paper to be extremely helpful and echo the remarks that have been made about it.

One of the committee’s short-term priorities should be a careful look at the Scottish Fiscal Commission’s role. It would also be valuable to do some post-legislative scrutiny—or post-agreement scrutiny, as it is not legislation—of the fiscal framework agreement.

I am concerned about building enough time into the committee’s crowded autumn agenda for whatever the constitutional consequences are of next week’s referendum. I am conscious of the purdah rules so I will not say anything about the referendum but, whatever the result on Thursday, it will have constitutional consequences for the United Kingdom and Scotland. With respect, convener, we should not imagine that it would be appropriate only to start consideration of those consequences in the new year. Whether we like it or not, we will have to find time in the autumn to take some of that on board.

You are absolutely right about that. Although we cannot go into any detail, that will be imperative. There is no question but that that will require to be done.

I am entirely in the committee’s hands over the way in which we operate but, during the discussion about committee reform in the previous session, there were suggestions about ways in which committees might operate through rapporteurs. This committee has used rapporteurs before, has it not?

Not particularly, but it depends what you mean by rapporteur. The committee has tended to work as a whole, to be honest.

We might work through rapporteurs or small groups, with the committee’s consent, because we will be pressed. The committee will meet once a week; I really do not think that it is sensible for committees to meet twice a week but other things will have to be done. I hope that the committee will agree to work in slightly different ways from time to time. We should develop the confidence in each other that will allow that to happen.

11:00  

I have a couple of points to make. I echo Murdo Fraser’s point about looking at LBTT. The Scottish Property Federation and others have expressed concern about the impact of the tax; we should be monitoring that. I also agree with what was said about outcome-based budget scrutiny. It would be beneficial to look at not only the outcomes but the impacts of budget decisions.

Our predecessor committee said in its legacy paper that it was often put under “unrealistic timescales” by other committees. I think that it considered more than 60 financial memorandums in the previous session of Parliament—I am not sure whether there will be a similar amount of legislation in this session. I have not been on the Finance Committee before, so I do not know whether there is anything that we can do about that, but it might be something for discussion.

That is an important point. There is secondary legislation, too, which I suspect will be considerable in the context of the implementation of tax powers. We will have to look at that.

You talked about a new construct for scrutiny. I completely agree with the comments about outcome-based budget scrutiny, but there is also a case to be made for putting in place some kind of scrutiny process at an early stage in financial planning.

Murdo Fraser might recall some of our experiences in the Public Audit Committee over the years. There were common threads running through public sector finances, but our scrutiny or intervention always seemed to come at the end of the process. I hope that members agree that any element of early scrutiny of financial planning would be good practice.

We might not get the opportunity to do much of that, and I am not suggesting that we attempt to micromanage capital projects or whatever. However, there is a job to be done to consider, at as early a stage as possible, whether financial planning is reliable enough. If we do not do that kind of activity, who should do it? I hope that all members support such an approach. The committee might have the opportunity to do something in the area.

If there are no further comments, I think that the clerks have a clear indication of the initial priorities. I think that we have agreed to invite the cabinet secretary to come in two weeks’ time. I suggest that, at that meeting, we consider a paper on our work programme in private—that is the normal approach. The paper will take account of the points that have been raised in this meeting and in the legacy paper. We will then be able to discuss in more detail what we might do. We will also know what things look like post the Brexit vote, so we will have an idea of what will fit in. Do members agree to take the paper in private?

Members indicated agreement.

We have come to the end of the public part of the meeting. We move into private for item 7.

11:03 Meeting continued in private until 11:10.