Rural Affairs and Environment Committee

Meeting date: Wednesday, December 1, 2010

Official Report 569KB pdf

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Draft Budget Scrutiny 2011-12

Agenda item 4 is evidence on the Scottish Government’s draft budget for 2011-12. We must report to the Finance Committee before the end of the year on the parts of the draft budget in our remit. We are joined at the committee table by our adviser Jan Polley.

Today we will hear from a panel that consists of: Richard Lochhead, Cabinet Secretary for Rural Affairs and the Environment; Paul Gray, director general, rural affairs, environment and services; Mike Neilson, director, Marine Scotland; David Barnes, deputy director, rural and environment directorate; and Ross Scott, finance team leader, rural affairs and environment. All are from the Scottish Government. We will also hear from Paul Smith, head of corporate services, Forestry Commission Scotland.

I thank all the witnesses for their attendance. Cabinet secretary, we are pleased that you were able to make it back from Brussels despite the weather. Do you wish to make an opening statement before we move to questions?

Yes. Thank you, convener.

It is fair to say that this budget is like no other budget that the committee has ever had to scrutinise. As we are all aware, the Scottish Government’s budget in 2011-12 has been cut by £1.3 billion compared with this year. Scotland’s revenue budget has been cut by more than £500 million, and our capital budget has been cut by around £800 million. Between 2010-11 and 2014-15, our total spending power, including both revenue and capital, will be cut by 11 per cent in real terms. The cuts will not only affect Scotland for the next few years but have lasting implications for at least the next decade.

The UK Government is cutting the budget too fast and too far in the opinion of the Scottish Government. Scotland’s economic recovery and long-term economic growth is being put at risk by the unprecedented reductions in public expenditure, especially the massive cuts to capital. Nevertheless, it is our job as the Scottish Government—and my job as Cabinet Secretary for Rural Affairs and the Environment—to do what we can to protect Scotland and to mitigate the worst possible effects of the budget cuts on the environment, rural and coastal communities, and our more fragile communities in Scotland.

In preparing our draft budget, we had three priorities: first, to support economic recovery and deliver the Government’s purpose of increasing sustainable economic growth in Scotland; secondly, to protect the public services on which people depend; and, thirdly, to establish a competitive advantage through the opportunities offered by taking action on climate change. Those principles having been followed, it is my view that the rural affairs and environment portfolio draft budget for 2011-12 represents a fair outcome in very difficult circumstances.

We have prioritised budgets that are critical to economic recovery and sustainable growth, and we have sought to make savings whenever possible through efficiency savings and reduction on spend on administration. We have also protected spend when it will help us to meet our ambitious climate change targets and to develop a low-carbon economy. For example, we have maintained spend on the sustainable action fund, increased the proportion of that fund spent on the climate challenge fund, and increased spend on our ambitious zero waste agenda.

We will continue to support our rural and coastal industries through the Scotland rural development programme and the European fisheries fund. We will also seek to continue the growth in the value of the Scottish food and drink sector to our national economy.

We have protected the funding for our strategic research through the funding for our main research providers. We will also protect our communities from flooding by working with our partners to implement the Flood Risk Management (Scotland) Act 2009 and by providing funding through the local government settlement for continued investment in flood prevention schemes.

We have had to make real cuts to things that we would have liked to retain in full. Even by striving for all the efficiency gains available, we just cannot do the same as before with the reduced resources that are available to us. Inevitably, we have had to make savings in our programmes, which have included some reductions in the SRDP, reductions of grant in aid to non-departmental public bodies, and reductions in non-strategic research and survey work. We have made every effort to protect the budgets that are co-funded by the European Union, but given the size of the programmes and the relatively small budget lines elsewhere in my portfolio it has not been possible to exclude them.

Overall, the rural affairs and environment portfolio draft budget is focused on the economic recovery and sustainable economic growth, on the protection of our valuable natural resources and rural and coastal communities, and on providing us with competitive advantage through our unique approach to climate change. I hope that that outlines our approach in difficult circumstances. I am, of course, happy to take questions from the committee.

John, would you like to start the questioning?

Cabinet secretary, I would take you up on your point that the UK Government is cutting budgets too far and too fast, but rather than debate it now we could perhaps let it lie—acknowledging that you and I could agree, I am sure, that the cuts are a result of the mismanagement of the economy by the previous Labour Administration.

Notwithstanding that, we are here to discuss specifics. At the risk of being rather mundane, I will ask you first about veterinary surveillance. The budget for that has already been cut before the Kinnaird committee has reported. Does that make sense? Do you expect the overall budget to fall in future following the results of the Kinnaird review? Do you expect that the surveillance network will be rationalised?

11:30

I take some comfort from your opening remarks—at least we all agree that one of the London parties is responsible for the cuts that Scotland is experiencing. With regard to the Scottish Agricultural College and the surveillance programme, we have unfortunately had to programme a cut into that budget line.

The timing is not perfect, because John Kinnaird’s review is taking place, as you rightly point out. I cannot pre-empt the review’s outcome, so I cannot answer your question on the extent to which a number of offices will be rationalised or whatever. That is not necessarily a given; it will depend on John Kinnaird’s findings and recommendations.

Very few budgets in the portfolio are completely unscathed. We are clear that we very much value the importance of the surveillance network in protecting our livestock sector in Scotland, and the need to maintain a vigilant approach to animal disease and an understanding of the profile of any disease outbreaks. It is important that the service has a geographical spread.

However, there was widespread agreement that it was time for a review. We must ensure that we are getting value for money and getting the service that we want, which takes into account the needs of the 21st century and the animal health agenda.

We will have to take the review into account when we make the final decisions on how the budget is allocated and spent, but there will be a cut—that is unavoidable.

When do you expect the Kinnaird review to publish its findings? I must declare an interest as a farmer. Will you ask farmers to share the costs in future? Is that a likely outcome of the review?

There are two aspects to that question. First, there is John Kinnaird’s review of the surveillance network. The review has been liaising with the working group on animal health and cost and responsibility sharing, which addresses the extent to which the industry should carry some of the burden for the costs of maintaining animal health in Scotland.

The working group has not yet reported on those issues, and likewise, we await the outcome of John Kinnaird’s review. I can, however, assure you that they have been speaking to each other, because those two agendas are very much interlinked and John Kinnaird is keen to take on board what is happening in the wider debate around cost and responsibility sharing.

That is the next question that I was going to ask you. What is the latest position on negotiations with Westminster in that regard?

I will answer that question. You also asked about the timescale for the Kinnaird review’s report. That is in the hands of John Kinnaird; I have not put pressure on him to report by a certain date. However, from the latest information that I have, I expect the report early in the new year, so it is literally only weeks away.

With regard to on-going negotiations with the UK Government on the devolution of the animal health and welfare budgets, and the animal health aspect in particular, we have been keeping up the pressure on the UK Government to stick to the timetable for the end of this financial year. We must have a result.

I met Caroline Spelman, the Secretary of State for the Department of Environment, Food and Rural Affairs, and Jim Paice, the Minister of State for Agriculture and Food, in the past 10 days or so in London. I raised the issue with them and was once again given an assurance that they wish to stick to the timetable. They are adamant that we will have figures that we can work with and a signed agreement by the end of the financial year.

That would put Scotland in a position in which we could set off on our own agenda for animal health. We have a distinctive track record and agenda on animal health; there is widespread cross-party and cross-industry agreement on it. Having our own policy would bring a lot of benefits, but we need the budgets. Until we get them, we cannot reap all the advantages of having our own animal health policy. I am very hopeful that we will make progress in that regard.

Forgive me; perhaps I did not hear you correctly. If the responsibility is devolved to Scotland without any real budgetary support from Westminster, will the Scottish Government be able to finance the duties that will be imposed on it?

The difficult position that we have under devolution is that we have a lot of responsibilities in relation to animal health but we do not have responsibility for the budgets. We cannot accept just any budget; we have to accept a budget that we feel is our fair share of what is currently spent across the UK on animal health issues. The sticking point has been in trying to identify the element of the UK animal health budget that is allocated or spent in Scotland. Getting credible figures that we can understand out of the Department for Environment, Food and Rural Affairs has been like getting blood out of stone. That is why the process has taken so long. Until we have those figures, we cannot make a judgment about whether we should sign up to taking responsibility for the budget.

As I have said to this committee, Parliament and the industry, the more time that passes, the more the UK budget—and, therefore, the Scottish share—will decline. I do not want this to be fudged any longer. We must bring the matter to a head and, I hope, get a fair share of the UK budget.

And you believe that there is an acknowledgment, from the politicians, if not from DEFRA, that the matter should be resolved as soon as possible.

Yes. In the past 10 days, I have received an assurance from the UK Government on that issue.

We also face the issue of how action on exotic diseases is paid for, which we must negotiate with the UK Government. Those negotiations will concern factors such as the contingent liability surrounding outbreaks of diseases such as foot-and-mouth disease, which are potentially extremely expensive, and the way in which the responsibility for action on such outbreaks is allocated.

We understood that one of the sticking points was that DEFRA was insisting that Scotland would have no access to UK Treasury money in the case of a major outbreak. Is that the case or can you not comment on that because it is part of the negotiations?

It is a case of learning from bitter experience. During the previous foot-and-mouth disease outbreak—which I accept was under a different UK Administration—we faced significant costs because of the knock-on effects of the outbreaks down south, and were forced to use Scottish resources to pay compensation to agriculture interests in Scotland, particularly the sheep sector, because the UK Government refused to approach the UK Treasury for contingency funding, as had happened during the 2001 foot-and-mouth disease outbreak.

My gut feeling is that there is no reason to believe that the new Administration south of the border would be any more inclined to approach the UK Treasury, or that the UK Treasury would give the green light to using contingency funding to compensate farmers for outbreaks of exotic diseases such as foot-and-mouth disease.

If there is an exotic disease outbreak in England, does the Treasury provide extra contingency funds, or are no contingency funds available at all?

One of the debates that we are having with the UK Government over the devolution of animal health budgets concerns who has that liability. A debate is taking place between ourselves and the UK around the suggestion that, if there is any devolution of animal health budgets, that should carry with it the liability for the major disease outbreaks that, in previous times, were subject to a special arrangement with the UK Treasury. In other words, the funding should not come simply out of DEFRA’s budget—a UK budget that covers Scotland, as the budgets are reserved—and the Treasury should step in and help, effectively. That did not happen in relation to the outbreak a couple of years ago, so I think that it is fair to assume that the policy has been changed.

What would your aim be? If the UK Treasury provided DEFRA with extra money to deal with an outbreak, would you be looking for a Barnett share of that, if we are no longer getting contingency funding?

I do not want to go into too much detail on the matter, as we are at quite an important stage in the negotiations. However, the crux of the debate is whether, if animal health budgets were devolved to Scotland, we would still have access to Treasury contingency funds for major outbreaks. Clearly, if the UK Government’s part of devolving animal health budgets for everyday animal health issues amounted to a few tens of millions of pounds, but there were a disease outbreak that cost a lot more than that—last time, it was hundreds of millions of pounds—that would not be covered by our devolved budget. We have to understand how that arrangement would work and make a decision, in consultation with our industry, about the extent to which we want to accept that liability as part of the devolution deal.

Forgive me for not knowing, but—leaving aside your own views on Calman—is the issue dealt with under the Calman proposals?

Yes. The Calman recommendations include the devolution of animal health budgets.

Has anything been published in that regard?

As I say, it is UK Government policy to devolve that budget. We are just not quite agreed on what the budget should be and on the conditions that are attached.

On the issue of veterinary surveillance, what are the implications of the budget reductions for the monitoring of outbreaks of European and American foul brood among honey bees?

I do not envisage any direct impact. However, at this point, until we work out the detail of all our budget headings, I cannot rule out any impact. At the Royal Highland Show, we announced the steps that we are taking to work with the honey bee sector to address such diseases, and the difficulties that have been experienced in the past year or so. We are determined to follow that through.

So you will give it a degree of priority, to the extent that you can.

Yes.

Last year, when you gave evidence on the budget, we heard that the exchange rate fluctuations had given rise to a windfall of European funding and there was some discussion of the co-financing rates that would be applied if that were drawn down. Given that you felt it necessary this year to reduce the domestic share that matches some of that European funding, less EU money will be drawn down. Will the fluctuation of exchange rates give rise to another windfall this year? How would you be seeking to draw that down, given the broader financial constraints that you have?

You raise an important point in relation to the big role that match funding from Europe plays in my budgets. We are in a difficult position at the moment, given that the Scottish Government faces major capital cuts. I have to take my fair share of cuts and, of course, given that much of the capital expenditure within my portfolios is linked to EU funding, we will lose some match funding in the next financial year, which is covered by the Government’s one-year budget.

I face some cuts in the Scotland rural development programme budgets, and the capital element will be reduced substantially. The theory is that the match funding will not be called down for that, so we will take a double hit. However, the EU funding is spread over several years, and we also have the two years beyond 2013 in which to spend it—that is known as the N+2 rule.

Clearly, the Government wants to maximise the European allocations that we have in the coming years. Although the budget for next year shows that we will be unable to call down as much as we would like next year, because there will be less capital domestic funding—and we know that it will be tight in the subsequent years as well—the outlook is unfortunate. However, it at least gives us a breathing space in which to find as many ways as possible to call down as much funding as possible.

11:45

On the benefits in this year’s budget, we were able to substantially increase the woodland grants because we are able to co-finance to a greater degree, with European funding. Our co-financing rate is now about 50 per cent for many of our SRDP schemes—I will ask David Barnes to comment shortly, because he is the expert on these issues. The co-financing rate was previously 30-odd per cent, so we have increased the European element, which has helped us to protect budgets. It has also helped our economic recovery programme, because we brought forward money from next year to this year within SRDP to help economic recovery.

As the cabinet secretary said, the N+2 rule is very important. It means that we do not have to draw down the entire European funding of the 2007 to 2013 programme by the end of 2013; we have until the end of 2015 to draw it down. That gives us some flexibility.

As the cabinet secretary said, the second variable that we can play with is the co-financing rate. We have already changed the proportions to bring the proportion of European funding up to 50 per cent. Of course, the impact of the exchange rate is not that more money flows to us; it is just that Europe holds a pot of euros and we spend in sterling and draw down against that pot, so the impact of the exchange rate means that we are drawing down fewer euros than previously anticipated to cover the sterling spend, so the amount left in the pot for us is bigger than anticipated.

We still have scope to increase the co-financing rate. If the committee wants to follow the matter in detail, we have a programme monitoring committee for the SRDP. It meets about once a quarter and we produce a finance paper, which is on the Scottish Government website, so you can see the kind of things that we have been saying to the members of the programme monitoring committee.

The expectation is that we would probably need to increase the co-financing rate again to ensure that we draw down all that European money. We cannot do that unilaterally; we have to apply to the European Commission to make a formal modification of the programme to change the co-financing rate, but Europe also wants us to draw down the money and spend it in rural Scotland, so it would be very surprising if it objected in any way to our changing the co-financing rate.

First, is the reason for not adjusting the co-financing rate for the year that we are just coming into in order to draw the money down, even though there is less domestic spend, simply that there is not time to clear that with the Commission before 1 April 2011? Secondly, will you formally apply to get the co-financing rate changed from 50:50 to whatever in order to draw the money down? Is there a definite commitment to seek to do that by the following financial year?

There is certainly a commitment to maximise the EU match funding as far as we can in next year’s budget, but clearly that can only go so far, because we are reducing our own domestic funding: the EU cannot match money that does not exist.

I ask David Barnes to clarify how the regulations work in terms of changing the co-financing rates.

The expectation is that we would make another change, so we would apply to Europe sometime during 2011 to have a higher co-financing rate for 2012. The European budgets are for calendar years, so the expectation is that we would need to apply in 2011 to have a higher co-financing rate from 2012. The current 50 per cent rate was, to some extent, pitched on the high side because we had to play a game of catch-up.

As I am sure the committee remembers, there was a delay in the opening of the SDRP, at least partly because of issues in Brussels with the necessary legislation coming through, which meant that the draw-down in the first year or two of the programme was well below the planned European draw-down. Therefore, if you like, we had to almost overcompensate to catch up on the first couple of years. We have done that and, by the end of June this year, we had drawn down more than the amount that we would have needed to draw down by the end of this year to comply with the N+2 rule. At this stage, I do not think that we have made a firm commitment on a figure that we would change to. However, to give the committee a ballpark figure for the area that we are likely to be looking at, it would not be surprising if we were looking at a move from 50 to 60 per cent European funding for 2012.

Is there precedent from past years or from other nation states of co-financing involving 10 per cent domestic funding and 90 per cent EU funding? Is that ever experienced or is the range much closer to 50 per cent?

The different axes of the SRDP allow different bands of co-financing. The maximum rate is 100 per cent. We can have high rates of co-financing, but it depends on the measures and the SRDP axis.

So, theoretically, even if you could not do much in the next year, which is 2012-13, in the final official year of the programme, you could draw down a much higher rate of European funding with a much lower rate of domestic funding.

Theoretically, yes. The calculation of our budgets involves trying to spread the budgets over certain years. We cannot always predict what the demand will be for certain schemes. A scheme could have co-financing that is valuable to the economy, but with a low co-financing rate, but it might be unpopular, with people not appling to it, or vice versa. We are always trying to juggle those issues as the programme goes on.

For information, how much of the approved fund of almost €700 million has been drawn down already in the programme?

I will find the figure for you; I am sure that we have it. The cumulative figure that has been drawn down so far since the programme began is €143.8 million up to end June 2010.

Is that what you would have expected to have drawn down by this point? That is less than a third of the total.

I do not know how to answer that question, because it is a moving feast and is changing all the time.

So the figure is not lagging behind expectations. If it was, that would mean that you would have to draw down more than normal in the coming period.

Some of the axes in the SRDP lag behind expectations and others do not. The demand for some measures has been less than expected and there has been high demand for others. The issue really depends on which measures we are speaking about. The demand for some forestry measures has been lower than we expected, but the demand for some other measures has been much higher than we expected.

Some of the SRDP funding comes from modulated funds. I should say that John Scott asked me to ask this question, to save him declaring an interest—no, I am being facetious. Seriously, if all that modulated funding is not used, is there any way in which it can go back to the Scottish farmers who lost it in the first place?

I do not think that that is built into the regulations. I would have to check the legality of that but, as far as I am aware, the answer is no. It is a fixed regulation.

On that subject, in the unlikely event that modulated funding was not drawn down, what would happen to it? Would it just revert back to the EC or would it go into other schemes to benefit rural Scotland in some way?

Our allocation of European funding comes from voluntary modulation, compulsory modulation and the European rural development regulation. I am not sure how easy it is to split that up to find out what goes to what schemes. It is not easy to say how the European funding that comes to Scotland from those three sources is then divvied up. It is not as simple as that. All the funding goes into a European funding pot and we then use it.

The point that Peter Peacock and I are trying to make is that, given the low level of funding that Scotland enjoys in a European context, it would be particularly upsetting to the Scottish farming industry and environmental concerns if money that was available to Scotland was not drawn down at the end of the period, even with the N+2 rule. That would be the worst of all scenarios. Therefore, if there was any way of securing that money for Scotland at least in some way, that would surely be a better outcome than just giving the money back to Brussels because we cannot draw it down.

I agree that it would be disappointing if we could not use that money. That is why I am keen on the UK Government reversing some of its budget cuts so that we can do even more to draw down money over the next few years. We can use our very high co-financing rate for the money because of modulation. That enables us to have a higher co-financing rate. There are opportunities to draw down as much money as possible over the next few years through increasing co-financing rates. We discussed that previously.

We have discussed before at committee modulation and top-slicing single farm payments, but much of the SRDP goes to farming businesses in Scotland. I am always keen to move us away from the crude argument that money is taken off farmers and given to other sectors because the agriculture sector does extremely well out of the SRDP support mechanisms. It is not right to suggest that farmers are being top sliced and money is being lost to them and agriculture. A lot of it is recycled through the SRDP.

A number of sudden changes have been made to the SRDP over the past year. The uptake of grants has been less than expected but the number of applications for grants has exceeded Government targets. There was therefore a halt in the rural priorities scheme for a while. A £200,000 limit on the value of grants under the rural priorities scheme was recently introduced. Participants in the rural leadership programme subjected David Barnes and me to questioning on that this week; I have to admit that I had to leave, and I left him to tackle the questions. Can you assure farmers and landowners that there will be no repeat of the sudden changes to the rural priorities scheme that we saw earlier this year?

It is clear that the SRDP is an enormous programme that delivers all kinds of support to rural Scotland. Generally speaking, those who successfully make applications to it are very happy with it and recognise that it boosts the rural economy and their businesses. I have visited many businesses in Scotland that have benefited from SRDP grants, particularly under the rural communities heading and for business development projects. Significant grants have allowed people to expand their businesses. Generally speaking, those people think that the programme is good and fulfilling its role.

The programme was, of course, new and it had a new way of approaching delivery. It was to be outcome based; there was not to be a plethora of individual schemes. Some applications are therefore much more complicated than previous applications. I do not deny for a second that there have been teething problems with the scheme. We have discussed those problems before in the committee. However, we must balance listening to people’s concerns and changing the programme to address those concerns with trying to keep stability in the programme so that people know what to expect in the months and years ahead.

I cannot rule out future changes as I think that there will be more changes. We have clearly given a commitment under the draft budget to make future rounds of funding more focused. There will be fewer of them; that in itself will be a change. We will aim to give the industry as much notice as possible.

I fully accept that one of our biggest problems is managing expectations. People see the big headline numbers for the various grants and feel that they can go ahead and submit an application and have a high chance of success. If such expectations are not managed, there will be many disappointed applicants. We are doing our best to ensure that we give people adequate notice.

There seem to be variations in how the programme is administered throughout the country. Are there lessons that your officials can learn to make it appear that the programme is more evenly distributed and administered?

Many of the applications are a lot more complicated than they were before because the programme is outcome based. A person can put together an exciting project in their business, with many different elements, and there would be one application. It is clearly difficult to compare applications throughout the country and reach the conclusion that officials are taking different views. That may be a perception, but we cannot identify many cases in which it has been the reality.

We have investigated accusations that some offices deal with applications differently from others. There is a strict, criteria-based points system that is stuck to. We will always investigate a perception that there is inconsistent application handling; it is down to the fact that some applications are bespoke.

12:00

There are some concerns about the long-term fall in the capital budget. We heard in evidence last week that it will be manageable for one year, but there are worries about the long term. How does the Government expect public bodies to cope with a long-term fall in the capital budget?

Under the UK’s budget proposals, we in Scotland face the difficulty of a 36 per cent cut in capital expenditure over the next few years. As you can see from the draft budget, there will be a lot fewer capital projects in my portfolio than there have been in previous years. Only last week, I opened the new aquaculture and fish laboratory at Torry in Aberdeen. That is a £15 million, state-of-the-art laboratory and, luckily enough, it just got in under the wire before the capital cuts were proposed.

There will be fewer capital projects. As you know, the Scottish Government and John Swinney, the Cabinet Secretary for Finance and Sustainable Growth, are looking to alternative means of funding capital projects in Scotland. We will explore opportunities for public sector organisations that have been affected by the budget cuts in our portfolios.

The people who gave evidence expressed concern about the long term. Has thought been given to how to manage the need for one-off capital allocations in the future? The witnesses were not so concerned about the one-offs, as about the long term. Have you looked at one-off capital programmes or is it just about getting money from other sources?

There are still capital budgets, but they are substantially less than they were expected to be. There will still be capital projects. There is money in the draft budget for the Campbeltown creamery, which is a very important project. We have held that money over into the new budget because the project was slightly delayed. That is a significant contribution to an important project in a fragile part of the economy.

There will still be capital expenditure, but in some portfolios we have had to replace capital budgets with maintenance budgets. For example, the Royal Botanic Garden in Edinburgh would have liked some capital budget to build some new things, but unfortunately we have had to give it a maintenance budget because no capital funding is available.

That is one of the issues that was raised during an earlier evidence session.

Could the rules be changed to allow all public bodies to recycle capital receipts?

That would have to be a Scottish Government policy decision as opposed to one that I could make for my portfolio. I am sure that John Swinney will take that on board.

I have an example. I am sure that you are very aware of it. The Forestry Commission and Forest Enterprise are permitted to recycle their capital receipts. Their capital expenditure is shown in the draft budget as net capital expenditure. If that is permissible for the Forestry Commission, is it permissible elsewhere?

I have a wee add-on to that, but I will stop there and perhaps come back later with my other question.

I will ask Ross Scott to comment on public sector organisations’ ability to recycle their capital receipts.

All capital receipts that go to the Scottish Government increase our ability to spend on capital. It is therefore quite normal that we recycle capital receipts. For example, SNH has properties that it plans to dispose of. The capital receipts from them will boost the capital spend in the portfolio. The receipts might not necessarily be given back to SNH; they could be used elsewhere in the portfolio. Each capital receipt is considered case by case.

When we took evidence, concern was expressed about that. People have—rightly—made the point that the Forestry Commission and Forest Enterprise are permitted to keep their capital receipts. We have heard evidence that that might relate to a UK Treasury rule. I will press you on that. If it relates to a UK Treasury rule, will the Scottish Government ask for a change in the rules?

I am not sure to what Treasury rule you refer. Capital income is spent as capital—it increases our ability to invest in capital projects. The proceeds from disposing of assets can be spent on further capital investment.

The point that I made was that the Forestry Commission and Forest Enterprise are permitted to recycle their capital receipts. Would such a practice apply to others?

Yes—it would apply to others if capital receipts needed to be recycled. Some public bodies’ capital receipts are one-offs and no further capital investment might be required in such bodies. That is why we consider capital receipts case by case.

So public bodies apply to the Scottish Government to do what the Forestry Commission does and the decision follows that. Is that what you are saying?

Yes.

The way in which the national health service sells buildings and reinvests in new buildings shows that such a practice is perfectly possible.

So it does not involve a UK Treasury rule?

It does not. We will look out the reference from whoever gave evidence to the committee—

The issue was raised.

We will see whether we can answer the question.

What is SNH’s incentive to sell a building if it receives no benefit from doing so?

First, SNH can discuss with us its plans, to which we can sign up. Secondly, disposing of buildings that are older, more expensive to heat or whatever might cut revenue costs. Such a decision would be in SNH’s interests and would help its budget.

Is there an argument that it would be more beneficial—if SNH had several buildings that it could dispose of, for example—if it disposed of those buildings and retained the capital receipts in its budget line, which would allow it to make greater savings in its budget line and therefore regenerate that into its development plan?

I return to what I said about taking a case-by-case approach. If SNH disposes of a property—

I am just using SNH as an example—we can talk about whatever organisation we like.

If a public body disposed of a property and had a capital project that it wanted to fund, we would consider whether to invest in that project rather than other projects.

The NHS is sitting on hundreds of thousands of pounds of potential capital receipts that it is not realising, because the money will go back to central Government.

According to the “Scottish Public Finance Manual”, capital assets should be disposed of when they are no longer required, which is generally what happens.

But that is not happening.

SNH has odd offices around Scotland that are not really disposable. It cannot say, “We can put this property on the market and sell it within three months.” Some properties might not sell for two years.

As the cabinet secretary says, it is obviously in a body’s interests to dispose of surplus assets and get away from their running costs. If further investment is made in capital developments, that increases running costs, so a cost benefit analysis is involved.

The arrangements today are no different from those that have been in place for several years.

I am not suggesting that they are.

You make a fair point. As you know, we are all constrained by the rules on capital expenditure in the bigger picture.

Absolutely.

What you suggest is a perfectly sensible approach in some circumstances.

Let us move on. Bill Wilson has some questions about flood prevention funding.

What change will there be in expenditure on flooding and coast protection between 2010-11 and 2011-12?

There are essentially two areas of Government expenditure in that regard. The first comes under my portfolio—which is what I think you are referring to.

Yes.

That budget line, “Natural Assets and Flooding”, covers flooding issues and other areas of expenditure such as that on noise and air policy. We anticipate the reduction being taken by the air and noise part of that budget rather than by flooding. Tackling flooding is a priority for the Government, and a lot of work is under way to implement the Flood Risk Management (Scotland) Act 2009. There is a small budget line under our portfolio for that purpose.

So it will effectively not take any cuts?

Yes, that is right.

Elaine Murray has some questions on waste management.

There has been an increase of £2 million in the zero waste budget. Can you advise us how much of the £24.4 million under the 2010-11 budget was allocated to local authorities to help them to meet their municipal waste targets?

I do not have a figure for that here, although the figure will have been negotiated under the agreement between John Swinney and the Convention of Scottish Local Authorities. We would have to write to you on that, having asked John Swinney’s officials to provide the figure.

COSLA will be pleased that there is an additional £2 million, but it is uncertain how much of that £2 million it will get and how local government will access the funding.

The figures in my budgets, as they are set out before you, are clearly outwith that agreement. The funding to which you are referring is for spending on zero waste projects. Much of it will be spent by local authorities.

So they will get a share of that additional money?

Yes, they will get a share.

We are launching our new recycling campaign today—in fact, I am launching it after my appearance at this committee. Local government has asked the Scottish Government to work with it on the campaign. It will be largely funded by the Government through the zero waste budgets—under this year’s budget, not the draft budget that is before you. Virtually our whole approach towards zero waste is one of partnership between ourselves, zero waste Scotland and local government.

Concerns have been expressed in a recent report that local authorities will find it very difficult to meet their 2025 targets. You have described how their capital allocation has fallen. Given that limitation on capital expenditure, have you had any thoughts as to how local authorities could be helped to achieve those targets?

There are two points to make on that. First, as you will be aware, the Scottish Futures Trust is working with local government on a number of infrastructure projects. The feedback that I have been getting from local government has been very positive. There are a number of infrastructure projects in the pipeline across Scotland. I do not know how many of them will go ahead but I am confident that many of them will, and that will help to meet the infrastructure needs for reaching our targets. Over the next year or two, you will see a number of major infrastructure projects coming on stream across Scotland.

How will they be funded? Will the Futures Trust fund them?

The Futures Trust is giving advice and working with local authorities. I understand that a number of projects will get the go-ahead, hopefully—or they will at least get support from the local authorities concerned. The funding arrangements are a matter for local authorities. That work is encouraging. I am concerned about this. Given that they face a wide range of financial pressures, we do not wish local authorities to take their eye off the ball with regard to our zero waste targets. Some local authorities have said clearly that they have no intention of taking their eye off the ball and that they are very ambitious about their zero waste targets. Others might not be quite so enthusiastic. A lot will come down to local leadership and the extent to which local councils prioritise our zero waste goals.

They will be permitted, I assume, to enter into public-private partnership arrangements, even if it is according to the non-profit-distributing model.

There are many different methods of financing projects and I am happy to send the committee a note on some of the projects that are in the pipeline.

12:15

What kind of infrastructure projects are we talking about? Incinerators?

We are talking about a range of different types of treatment plant, which certainly includes energy-from-waste plant. As I have said, there are a number of projects in the pipeline and I am happy to send that list to the committee.

My question is more or less the same. COSLA has said in its evidence that there is essentially no money to meet climate change targets. How are local authorities going to do that?

That was certainly not the feedback that I had when I discussed the issue with a COSLA spokesperson in Edinburgh just a couple of weeks ago. I was told that a number of local authorities are taking their zero waste targets very seriously and are preparing major investments in that respect.

Well, I will just read what COSLA has told the committee into the Official Report. It says:

“Additionally it needs to be recognised that there will be a need to meet infrastructure requirements of the Climate Change Act. There are no resources available which Councils can call on to meet these infrastructure requirements, should the burden primarily fall to Local Government to provide these. This is an area which the Committee may feel merits further answers from Government.”

Your view is that money is available and there is ingenuity out there to meet these climate change targets, while COSLA is telling us that there is no money to fund infrastructure projects to do so.

I am not denying that there are challenges. All I am saying is that there are a number of projects in the pipeline across Scotland and that they will be taken forward under different funding models. Moreover, when I met COSLA a couple of weeks ago to discuss our zero waste plan, it was enthusiastic about it and confident that a number of local authorities are going in the right direction.

As I said, it all comes down to local leadership. The local government budget has largely been protected and I hope that, when the draft budget goes through Parliament and the settlements are agreed, a number of local authorities will feel confident about pressing ahead. Otherwise, they will have to pay the landfill tax and make all the other expenditure that will come from not achieving their targets. Indeed, the COSLA spokesperson I met a couple of weeks ago accepted that the cost of taking action and building infrastructure would be dwarfed by the cost of doing nothing.

In fairness, the submission might well have been written before the budget was announced.

With regard to the landfill tax, which the minister has just mentioned, I have, like everyone else, read the submissions and COSLA not only welcomes the extra money for zero waste management but points out that the Scottish Government has commissioned a research project on landfill tax options in the context of the Calman recommendation that

“may identify alternative funding mechanisms”

for waste management. With the publication of the Scotland Bill, which will implement some of the Calman recommendations, how far along the line do you think we are with regard to getting money from landfill tax?

Looking at the proposals, I do not think that we are very far along the line at all.

I have not read them yet.

We are talking about post-2015. We need to turn Calman into something that is meaningful for Scotland and we are a long way from that at the moment. It would clearly be welcome if the Parliament had responsibility for landfill tax, as it would be another lever to help us to achieve our zero waste targets. As I say, though, that is all potentially some way away.

In my experience, the private sector is quite prepared to build these facilities but there is genuine concern about them in local areas. How should those concerns be balanced?

If we agree that we want a zero waste society and do not want to dump our waste, which, after all, is essentially a valuable resource, into a big hole in the ground, we will have to find alternatives. If we want to do that over the next decade or two, we will have to build infrastructure plant.

It is not for me or the Government to say what technology should be used in any particular circumstance. A range of technologies exist—from anaerobic digestion to energy from waste. As members will know, energy-from-waste plant has been looked at by the regulatory bodies and by SEPA, and the Sustainable Development Commission reported on its role a year or two ago; they all find that it has benefits and a role to play in dealing with our waste. Energy-from-waste plant today is a very different creature from what it was several decades ago. It is licensed and must meet certain standards to get a licence. Clearly, being able to recover some value in terms of heat or power from waste that would otherwise be wasted and go into a hole in the ground is good, and it is good for renewable energy targets. I think that energy-from-waste plant can have a role, but the extent of that role is for consideration, on a case-by-case basis, by local authorities and others around the country.

How do you manage that conflict of interests, though, if the—

This is not exactly budget stuff and we have a lot of questions. Can we move on?

But it is a budget issue, convener, because local authorities are being told that they must manage their budgets and that if they do not they will have to pay landfill tax money and be fined—they are being pushed down that road. If they also have to make the planning decision around waste-from-energy plant—

Exactly—it is a planning decision and not—

But they have a budget decision to make, so it is a conflict of interest. At what point does the Scottish Government provide guidance and leadership on that?

Can I finish off that point, before we move on?

I think that it is a genuine question.

The planning system and licensing system conducted by SEPA are the ways in which we regulate energy-from-waste plant or other infrastructure plant to ensure their efficiency and that they meet the criteria for being safe and environmentally friendly. There is a regulatory regime that deals with the quality of plant that will be built in Scotland and there are a variety of technologies. Each local authority or group of local authorities has the option of choosing what they feel is best for local needs.

The Forestry Commission for Scotland budget is decreasing by £7.4 million. A written answer provided by your colleague the Minister for Environment last week indicated that £2 million of that comes from the strategic timber transport fund and £2.4 million comes from capital. Am I correct in assuming that the remaining £3 million relates to the difference in the co-financing arrangements for the woodlands grant?

Let me just get that in front of me. [Interruption.] The figures that you are looking at are the—

The figures were in an answer given by your colleague the Minister for Environment at the end of the week, which suggested that £2 million comes from the timber transport fund and £2.4 million comes from capital, and that the £3 million relates to the difference in the co-financing arrangements for the woodlands grant. Am I correct?

The timber transport fund is going to be reduced from £5 million to £3 million, so that is a £2 million reduction. Many of the major projects in Scotland that had come under that particular fund are now completed, so a judgment had to be made as to what the demand might be in the future. If the demand exceeds the grant, clearly that is unfortunate, because we have had to take a cut. However, that is why that cut has been proposed in the draft budget.

The Forestry Commission said in its evidence that it was content with the cut because it felt that those projects were coming to an end. However, different woodlands will produce timber at different times. My constituency has been a beneficiary of that fund in the past. It is likely that there will continue to be demand as forests become mature and timber starts being harvested in different communities.

Clearly, in future budgets we will have to take that into account, but we are facing a very difficult budget, in which we have to have such expenditure cuts.

The good news is that you are almost trebling the amount of the woodlands grant. Do you think that that is sustainable in the long term?

We want to meet our planting target, which is 10,000 hectares a year—100 million trees by 2015. Given some of the applications that we have already received, we reckon that we could be a quarter of the way towards the 2015 target within only a matter of months of that target being verified. That is good progress. We hope that the fact that we are able to increase the woodlands grant is good news for our ability to achieve our targets in the future.

ConFor does not think that it is enough. In its evidence to us, it states that the

“planting 8,000 hectares of new forests ... will require £46m”

per annum. Do you accept that figure?

I will have to check. Clearly, ConFor has a job to do. I expect that, no matter how big my budget had been, ConFor might not have been entirely happy or thought that it was enough. However, despite the difficult backdrop to the budget, we have recognised the priority of tree planting. Meeting our climate change targets is part of that. Tree planting also supports a vital industry in Scotland on which your constituency, as well as mine, relies. That is good news, given some of the other budget cuts that we face.

Of what will the £2.5 million reduction in capital spending consist?

The Forestry Commission will have less available to spend on new equipment, vehicles and so on. The commission accepts that, is prepared to cope with it and does not think that the impact will be too detrimental.

Last year the commission made £10.6 million in efficiencies from the sale of forestry land. Is that process likely to continue?

I hope so. All the organisations have efficiency targets for the next year. In the past few years, they have largely exceeded all their targets, so I hope that they will be able to keep up that good track record while maintaining a good quality of service.

Given that the Forestry Commission must make more efficiencies in the future, do you see sales accelerating? Are there dangers connected with that?

All our portfolios face efficiency savings in the year ahead. Efficiency savings ain’t going away, but it is much more productive to have them than it is to have more cuts. I hope that we can keep up that work. There are voluntary severance schemes in some organisations. The Forestry Commission has had one and various other NDPBs have had them.

I return briefly to the timber transport fund and the need to meet climate change targets. You said that the fund will be reduced from £5 million to £3 million—a 40 per cent cut—which is pretty savage. Given the good work that it does, is there any flexibility in that area? I am particularly concerned about the timberLINK project between Ayrshire and Kintyre, which must save a huge number of road miles. What are the prospects for the scheme, which is demonstrably good value for money?

Like every budget, this one must be balanced. Unfortunately, given the difficult backdrop, there will be cuts to many budgets. However, next year and beyond we will keep under review all budget headings, including the one to which you refer. We will continue to make adjustments to our budgets throughout the year in light of demand, underspends, future plans and changing priorities. I can give no commitment on the timber transport fund, but we monitor demand for all the schemes and support that we provide.

I move on to the new entrants schemes. What will the Government do to encourage new entrants into farming? There seems to be different, almost conflicting, information about the number of new entrants and the uptake of money; perhaps it relates to more than one scheme. Can you clarify the situation for us?

Various schemes in the SRDP give enhanced awards to new entrants—up to 10 per cent extra, depending on the scheme. We intend to continue that approach.

I have mentioned some of the challenging budgets—especially capital budgets—that we face in the SRDP. As a result, we have said that we will focus future SRDP rounds and our priorities under the programme. As part of that work, I am keen to ensure that we deliver benefits to new entrants. In other words, we may want to look at how we can protect the extra support for new entrants to prevent any cuts that must be made from having an impact on new entrants. That is one way in which I intend to help them through the SRDP.

With the overall review of agriculture support in Scotland and the new common agricultural policy coming in 2013, the best way to help new entrants is to ensure that they are on an equal footing with existing recipients of single farm payments and agricultural support. Most of, if not all, the new entrants whom I speak to point to that as the one thing that could help them in the future.

12:30

I understand that the new entrants scheme is age limited to those under 40, or under 41, and that that is an EU rule.

I am not sure whether it is an EU rule. There are some EU regulations that impact on the area, but we have a bit of leeway with others.

It occurs to me that, if we want more new entrants to take up the scheme, it seems discriminatory on the ground of age to deny people of, let us say, 42 the right to access it. Why do we have the age limit if we are looking for new entrants to come into farming and take up the grants?

I will ask David Barnes to comment on that. We have had this debate in the past. It is partly about EU regulations, although there might be some leeway for us to make changes in other areas, so I am not totally passing the buck to Europe. I ask David Barnes to explain the age limits.

There are European definitions of a new entrant and a young farmer, and because those are set by Europe we have no choice but to comply with them. Along with the rest of the CAP, they will be up for renegotiation for the next programme post 2013, so it is open to us to try to negotiate different rules for the 2014 to 2020 programme. In the meantime, we have no choice but to stick with the definitions that we have.

John Scott talked about the difficulty of getting a grip on the precise numbers. That is also because there are two different sets of European rules. There are rules that are specifically aimed at giving enhanced payment rates to young farmers, whether or not they are new entrants; then there are separate definitions and rules about giving enhanced payment rates to new entrants. However, in both cases, those enhanced rates are given under other schemes—they are not self-contained schemes—which means that the numbers are aggregated among the total spend under the schemes in question. I agree that it is not easy to get a proper grip on the numbers.

We are clear that there are many other factors that influence how difficult it is to get into the farming sector. We do what we can through the SRDP and through spend, but the Government is looking to take other steps as well.

The other point that it is perhaps worth noting is that we have now introduced a second element of new entrant support. When the SRDP was launched, it used one of the new entrant options in the European legislation—the subsidising of interest payments on loans. One of the changes that the cabinet secretary announced on the back of the first stage review of the SRDP was that we would start using the other part of the European menu for new entrants, which is lump-sum grants, so that has been introduced as well, albeit relatively recently. That means that the SRDP now fully utilises every bit of new entrant support that the European rules permit us to apply.

You have certainly convinced me that the situation is fairly complex, anyway. I have an observation. If some of the money is not being used, perhaps you might care to suggest to Europe that determining that someone who is aged over 40 is ineligible for new entrant schemes might qualify as age discrimination under Europe’s own rules.

We will take that on board.

Remind me—are there other restrictions in relation to whether people qualify as new entrants? Do they have to have land or something? When I read the rules, I thought that it would be difficult for someone to become a new entrant to farming if they did not already have some connection to the sector. If someone genuinely just thought, “I would like to get into farming,” it would be difficult for them to become a new entrant.

Yes, there are criteria. I am happy to get back to the committee on that, because I do not have the full criteria in front of me.

It is a point that has struck me. I understand that people do not often just think that they would like to get into farming, but if they did I think that it would be difficult for them. We might want to look at that. Could we devise a scheme to enable a young person who genuinely wanted to get into farming to get some support? I do not think that our current scheme would do that.

There are huge obstacles to getting into agriculture, as you rightly point out. Although many of the schemes are valuable and are appreciated by those who have successfully applied to them, the capital expenditure that someone would require to get going with their own farm, or even a tenancy, is a big obstacle. It is a barrier not just in agriculture but in lots of the capital-intensive industries that we have these days. It is the same in fishing, for example.

We must move on. Sandra White has questions on efficiencies.

They are mostly on the Christie commission. Earlier I asked about long-term capital and long-term plans, and the Christie commission has been set up to look at the next three years. What do you think that the rural part of the public sector should look like in the future? Do you have any ideas on that? What should be merged, what should be protected and what should disappear? You do not have to give me specifics, although it would be nice if you did.

That is obviously a general question, but it is a good one because we all accept that there will be changes in the delivery of public services in the next few years. The Christie commission is now up and running, and it has the responsibility of trying to give us a blueprint for the future.

As members will all be aware, the theme in recent years has been that we have a plethora of rural public sector organisations. There is quite often duplication and inefficiency. Looking to the future, it is interesting that many of our NDPBs and other rural organisations now accept that they should work much more closely together, including on shared services. That agenda has certainly taken off in the past few years. We have the SEARS initiative—Scotland’s environmental and rural services—which is about the family of rural organisations working together to follow the shared services agenda. It involves the Forestry Commission, the national park authorities, SEPA, SNH and so on, which are taking a number of steps, including on shared buildings or shared services. It is clear that that approach has to be accelerated.

In future, rural organisations will be working much more closely together, often sharing services. I cannot look too far into the future, but we have to have an open mind on issues such as whether there will be mergers.

My question also covered efficiencies, and the cabinet secretary’s answer is exactly the same as the answers that SNH, SEPA and others have given about looking at efficiencies. Ross Scott referred to small outlying buildings that are not used, and they could be shared. The answers that the cabinet secretary has given are exactly the same as those that the organisations have given—that they would not so much merge as share information and staff.

It is important to make the point that the SEARS initiative is about not just cost cutting but facing outward to the customer and being customer focused. A farmer, land manager or rural business does not want to have to deal with lots of different public sector organisations. They do not want lots of different inspectors coming to the premises or lots of different places to go to. It is a question of delivering a much better service for the customer—for rural businesses and organisations.

Will you be a little more specific on that suggestion? Do you have a wish list of organisations that might amalgamate to deliver the efficiencies that we all seek? Do you see any likelihood of severance payments being required for that?

We must have a debate in Scotland about where we take the many organisations that exist. We are a small country of only 5 million people and we have major budget issues for the years ahead. The more closely some of those organisations work together, the better, because that can increase efficiency and make it easier for people to know whom they are dealing with. It can mean less duplication and bureaucracy. We must have that debate and, to an extent, we must keep an open mind. I cannot really add a lot, because the irony is that, even if the Government and Parliament decided to have mergers or have bodies working more closely together with more shared services can cost money to achieve which ironically, we would have to spend to save to get those efficiencies.

Do you envisage the process being driven by Government, or by organisations saying that they could work together? There is a suggestion of such working happening in local authorities. They have budgets to work within and they are considering ways of joint working. Might that happen with NDPBs? Might such measures come from the grass roots up?

That might happen to an extent. For instance, SNH and SEPA are enthusiastic and have been prepared to work together to identify synergies and get the advantages from them. That has been encouraging and it is down to leadership in those organisations and not just the Scottish Government’s leadership. To an extent, we can rely on the enthusiasm within organisations, but the Government must show leadership, too.

My final question is on fishing. As you would expect, the committee is particularly concerned that the fishing science is not as good as it might be. We have heard the suggestion that that is simply because of inadequate funding, so I do not cast any aspersion on the scientists. Marine Scotland faces a 10 per cent cut in funding, yet there are still significant problems with quantifying the state of the fish stocks, particularly in the white-fish sector. Do you accept that that cut in Marine Scotland’s budget will make it even harder to deliver the better science that is obviously required?

The issue of fisheries science is pertinent at present. We must ensure that many of our decisions are science based, but we must also ensure that we have the right science, not flawed science. Given the nature of marine biology, that will not always be possible. However, we are proud of the scientific expertise that we have in Scotland. Marine Scotland Science has several hundred scientists working for our sea fisheries, aquaculture and freshwater fisheries sectors.

We are lucky to have that major scientific expertise, but we rely on working with countries that share our waters to gather the science, and that is not always possible. It is more possible in the North Sea, where many countries fish, than it is on the west coast, where not so many countries fish. We must work out how to plug the gaps, and we must work more closely with our fishermen to use their knowledge and experience and help them to gather data for the Government. That will help us take the right decisions jointly with the industry.

There is a big debate on the issue. Europe is currently considering the relationship between fisheries science and the industry. I hope that we get some good news from that work and that useful conclusions on how to proceed are made.

You are correct that we are taking a 10 per cent hit on the Marine Scotland budget, which will have an impact on how the science is gathered. We do not want to gather less science, but we might have to gather it differently. We will need to use our own research vessels more smartly and work better with the industry. We will perhaps have less resource available for external commissioning of scientific trips.

12:45

We want to use our European Union scientific quotas better, so that the work can be self-financing to a degree. That will allow the fishermen who participate in the scientific work and gather the data for us to sell the fish that they catch. We would not have to pay as such for people to undertake some of the surveys, as they would be able to sell their catch and get the income from that. We must be a lot smarter in the way that we do things, but we recognise the importance of ensuring that, as far as possible, we plug some of the gaps in our scientific knowledge of Scottish stocks.

You do not need me to tell you that that is a particular problem on the west coast. The lack of science in that regard is most evident to us as a committee, and I would be grateful if you could address it. This week’s Fishing News comments that the industry may be prepared to help you by providing boats for your scientists. I would have thought that that would be well worth considering.

Yes. The industry recognises that it has a role to play—it is a commercial sector, and there are commercial benefits from higher quotas for the sector. It would be enormously helpful if we could work together better to help to finance some of the scientific exercises in a time of budget constraints.

I think Bill Wilson has a question on research.

The cabinet secretary has top-sliced 15 per cent of the budgets of the research institutes.

That is not quite the case. We have gone out of our way to prioritise our main research providers and their budgets. Although the budgets will be flat—there is no increase as such—we have protected them.

The reduction in our science budgets will come in the external and ad hoc commissioning of the type of scientific work that we have undertaken in the past. If there is an initiative in my portfolios on which we need some scientific work carried out, there is normally a relatively significant budget to pay for it. That budget will be reduced, so there will be less resource available for that ad hoc commissioning of research.

With regard to maintaining the research capacity of our institutes, we have prioritised that and protected it.

Have you considered assisting the research institutes to find funding from other sources, such as Research Councils UK? They are not all eligible to apply at the moment, are they?

There are different arrangements and different rules and regulations with regard to how each of the national research councils’ budgets distribute their funds.

The very fact that we are giving significant support to our research institutes enables them to pull in additional financial support or research moneys from external sources. When I speak to any research institute that the Scottish Government helps to fund, it tells me that our funding helps it to pull in funding from elsewhere—funding that it would not get if we had not given it the core funding.

The institutes are very grateful, as you can imagine, that we are maintaining their current budgets. The principal of the Macaulay Land Use Research Institute, who spoke to you last week, felt that it had got quite a good deal out of the budget and did not have much to complain about.

Finally, will fees and charges for the agricultural sector—for farmers and rural businesspeople—rise?

The short answer is yes, where that is justified. We are not adopting a specific revenue-raising policy, but we have said—we are up front about it—that, given the budget situation that we face, we feel that we are justified in recovering more of our costs in certain areas, and that that is what we will do.

Some of the fees and charges in certain sectors—in agriculture and elsewhere—have not increased for many years. That does not take into account rising energy costs over the past few years. In those commercial sectors to which we have effectively given subsidised assistance in the past, there may be a case for some modest rises in fees and charges. I am keen to ensure, however, that that occurs only where it is justified, and that any increases are modest. SEPA has said that it has no intention of raising its charges for the next year. We want to help where we can, but where we feel that raising charges is justified, we will do it.

I thank you all very much for your attendance, and ask you to forward as soon as possible any written evidence that has come up during the questioning today. That concludes the public part of today’s meeting. I thank everyone in the audience for their attendance.

12:50 Meeting continued in private until 12:58.