Under item 2, we will take evidence on the draft budget 2008-09 from experts in the field of sustainable development, and from the Convention of Scottish Local Authorities. It gives me pleasure to welcome to the committee Professor Jan Bebbington, professor of accounting and sustainable development at the University of St Andrews and vice-chair in Scotland of the Sustainable Development Commission; Maf Smith, the director in Scotland of the Sustainable Development Commission; Ian Thomson, reader at the department of accounting and finance at the University of Strathclyde business school; and Dr Dan Barlow, acting director of WWF Scotland. Would any of our witnesses like to make a brief introductory comment?
I commend the Finance Committee for exploring the sustainability implications of the budget. This level of assessment is a first. From our perspective, it is a key component of how we manage to achieve a more sustainable Scotland—one in which we reduce our footprint and climate emissions impact by considering how we invest money and how we allocate resources. I very much appreciate the committee's consideration of this issue.
Thank you. It is very much part of this open Parliament and its work for the people.
One addition to my job title is that, from 2001 to the end of the previous session of Parliament, I sat on the Cabinet sub-committee on sustainable Scotland. During that time, I had the experience of reviewing two budgets against sustainable development criteria. I hope to bring some of that experience to the committee.
Thank you.
It is worth reminding ourselves what sustainable development seeks to achieve. There is an international framework on sustainable development, which is signed up to by each of the Governments in the United Kingdom through a joint document called, "One Future—Different Paths", and is delivered on through different Government strategies. As a result of that, we in Scotland have a sustainable development strategy. There are five principles of sustainable development: living within environmental limits; ensuring a strong, healthy and just society; achieving a sustainable economy; using sound science responsibly; and using good governance. Sustainable growth relates to the third principle of achieving a sustainable economy.
It is important to recognise that by defining the portfolio in terms of finance and sustainable growth, the Government is not talking about growth as usual. That signals the fact that, strategically, there needs to be a move away from the current development pattern. Using that terminology suggests that one is not seeking economic development as usual.
There is a potential contradiction between "sustainable" and "growth". In many ways, using the term "sustainable growth" is a symbolic gesture in that it places sustainability before a powerful committee and qualifies the notion of growth—it is not growth for growth's sake but a particular type of growth. The term has symbolic power and provides a qualifier that allows people to reflect on whether growth is simply about increasing gross domestic product in line with benchmarking. Whether there is much logic to it is debatable.
Do you think that the overall direction of the budget is focused in a way that is sufficient to meet sustainability objectives?
There is much to be welcomed. The identification of a national performance framework that sets out a clear set of outcomes that we are seeking to achieve in Scotland is welcome. From my perspective, there is a step missing in the budget to ascertain whether it will deliver sustainability, which is that there is no assessment of what the budget means for our climate emissions or footprint. Although spending has been allocated under a set of headings, it is unclear what the outcomes of those spending commitments will be. It is hard to ascertain whether the budget will take us further towards sustainable development.
Dr Barlow is correct in saying that one cannot tell from the draft budget whether the sustainable development objectives will be met. Several elements make that difficult, the first of which is timescale. Some things could be quick wins, but others are on a long timeframe while others will take longer still. For example, certain elements of fuel poverty could be dealt with quite quickly. Moving to a zero-waste society is one of the current Government's aspirations; that is commendable and in line with sustainable development, but the process will take much longer than two or three years. Achieving the 80 per cent reduction in greenhouse gases by 2050 will, by definition, be a journey towards 2050. Many of the spending commitments are on different timeframes, so it is difficult to analyse them and to indicate whether that target will be achieved, although some of the measures will certainly lead us on a pathway towards it.
The situation is complex and actions have knock-on effects, but you seem to seek some unifying factor or measurement to judge whether progress has been made. Is that fair?
Yes. The factor that we currently use to judge progress is GDP. That gives us a picture of throughput in the economy, but it does not give us a picture of all the activity in the economy—there are other ways of measuring that. Dr Barlow would be much better placed than me to talk about the ecological footprint, which is another way of measuring those things.
A queue is forming, but I think that Elaine Murray wants to continue the line of questioning.
Mr Thomson and Mr Smith may want to comment.
It is important to point out that there is no budget identified for greener, fairer or wealthier. It is very difficult to work out exactly where sustainable development fits in with those objectives and to track down spending on it. I had a go at doing that and the best estimate that I could come up with was that about 8 per cent of expenditure could be seen to go on sustainable development. If one was to be slightly nasty, one could take that to mean that 92 per cent of expenditure will not be sustainable. It is not possible to relate what is in the action plan to the outcomes, because the necessary information is missing. The figure of 8 per cent might be an overestimate or an underestimate. I got it by combining the information that is provided in the pack with my knowledge of sustainable development and working my way through the budget picking out every item that is to do with sustainable development. That process is difficult, because subjectivity comes into it; people could come up with different answers. The figure was dropping over the three years.
Is there a set of best-value indicators that could be taken off the shelf and applied? What you aim to do is a difficult task. Are there examples of best practice?
There are many indicator sets on sustainable development that could be used. They are relatively standard and are used for international benchmarking. For example, Eurostat and the United Nations have sets of sustainable development indicators. None of them is perfect, but basic principles underlie their construction. I would not argue that it is desirable to have a single indicator. We want a set of indicators that is coherent and which ties in with the basic principles. Such indicators are not provided in the spending review.
Related to the issue of the level of spending on sustainable development and whether it accounts for 8 per cent of the budget is the key issue of the overall budget and whether the weight of spend, the policy decisions that are made and the scrutiny of those decisions by the Parliament take account of sustainable development, such that when civil servants and ministers consider policy options, they are aware of the ramifications of their decisions as they relate to a wider indicator set.
I will comment briefly on the high-level purpose targets that are identified in the performance framework. The two targets on sustainability relate purely to carbon, but they relate to carbon emissions rather than carbon consumption. We would be deemed to be making progress if we were to carry on consuming carbon at the same rate but were to simply outsource where carbon-consuming products were generated, such that those emissions would add to another country's emissions account rather than ours. In theory, we could make progress towards achieving the target to cut our climate change emissions by 80 per cent by 2050 or the target to cut emissions by 2011 without reducing the use of carbon with which we are associated through all the products that we consume.
I found all three written submissions extremely interesting, but I was interested in particular in some of Mr Thomson's comments. Your submission states:
A lot of the deeper elements were present in the document "Choosing Our Future: Scotland's Sustainable Development Strategy", but many were not enacted in the action plan, although they were on the books as being real and part of the sustainable development commitment. When we consider what is happening, we see that a lot of them are missing. You might expect that in a spending review document, which obviously details budgeting, and some of the deeper aspects appear to back off in previous spending reviews. If anything, there is move towards education and economics.
So we could not claim that the 2007 spending review is making Scotland greener.
It would be difficult to make that commitment on the existing evidence. As I think the SDC submission points out, we are spending a bit more on some sustainable things, but we are spending a lot more on unsustainable things, such as roads and removing tolls.
I was interested to hear from Professor Bebbington about the idea of carbon balance being part of the budget. There is clearly some difficult work to do to make that happen, although that is not to say that we should not try. Are there any examples of other Governments that have managed to add carbon balancing into the budget process? Is there any best practice that we could follow?
That was highlighted as a possibility in the previous Government's national transport strategy, so there has already been an indication in this country that carbon balancing should be done. The idea was to calculate the total carbon in transport, allowing the Government to do anything as long as the pot of carbon kept squeezing down by the percentage that it needed to squeeze down by.
So, it is something that we could not do just yet, but which we could add in the future.
You might well do it quite quickly.
The other thing to note is that the Treasury green book already contains guidance on what is called the social cost of carbon. That relates to the Stern review—the UK Government review of earlier this year—which considered the economics of tackling climate change. Therefore, guidance to the Government, when it is considering policy options, should look at the relative cost or the social impact of different choices. That does not mean that the Government necessarily has to choose the policy option with the lowest carbon impact, but at least it allows it to scope out the options. It is meant to help policy to become more co-ordinated with the issues.
There is much to be welcomed in the budget, in terms of the outcomes that it seeks to deliver on climate. There is a clear recognition that the budget has a strong role to play in cutting Scotland's carbon emissions, but it is difficult to ascertain, from the transport proposals, what the impacts will be. I am not saying that they will necessarily take away from delivering progress, but there are significant commitments to invest in public transport, motorways and trunk roads, which amount to more than the public transport investment. Given the level of detail in the figures, those commitments will most likely be based on distinct projects that the Government will propose.
Carbon accounting is one of the best-developed sustainable accounting techniques. Technically, a lot of the issues have been resolved regarding the values and the mechanisms. It would be a case of assembling best practice from lots of different things, but that is feasible and it would provide a nice opportunity.
The budget states that we should look at the policy impacts and use the latest techniques to appraise the policy options in terms of their carbon impacts. Do you feel that that has been adequately taken into account in the preparation of the budget?
It is difficult to say because very little information is available. It is also a matter of timing—there is a new Government that has had to put a budget together. There was, no doubt, an opportunity to consult an expert set of stakeholders on whether the indicators are the most appropriate ones to use, but there was not the opportunity that we had in previous years to have a standing committee in place that was tasked with scrutinising the budget against the environmental targets.
I accept that there is no perfect way to measure growth, but if we take the list of countries that have the highest GDP per head and compare that with the list of countries that come out best in the UN human development index, which takes into account economic output, educational standards, life expectancy and the condition of the environment, we see the same countries in more or less the same ranking. Does that not suggest to you that, despite its imperfections, GDP by proxy is a fairly good indicator of human happiness?
There is extensive research on that. Unfortunately, it does not. In particular, it does not give an indication of sustainable development, because that kind of GDP correlates highly with CO2 emissions per capita.
What about the UN human development index, which is the best of the lot?
It is not the best for the comparison that we are trying to make. The human development index puts together the things that you mentioned. Countries whose GDP per capita is above the baseline score well on the index, so at the top end it does not distinguish tightly and determine whether GDP leads to happiness and well-being.
A problem with GDP is that it does not capture key things such as the inequality of wealth distribution within a country. Even if we accept that it gives a general picture, it works at only one level. It can mask massive inequalities. It is possible to make things worse on every indicator but still have an increase in GDP. In such a case, there would be a false positive reading.
I put it to you that the countries with the highest GDP per head have the fairest distribution of income and wealth, by and large.
No.
I disagree entirely. The countries with the highest GDP per head, such as Norway, Sweden and other Scandinavian countries, are also the fairest of the countries with developed economies.
One challenge is that many countries with high GDP have very high emissions that go way beyond what we know to be sustainable. We are not saying that GDP measures something that we might not want to measure—financial throughput—but the challenge is to accompany that with a set of indicators that monitor issues such as the economy's quality, which is just as important as, if not more important than, the quantity.
That raises the quest to measure whether people are happy.
The targets of cohesion, solidarity and sustainability that the Scottish Government has set provide some opportunities to test the presumption that we have. As Dr Barlow says, we are not saying that GDP cannot measure things—it can, and it is useful—but a challenge for the Government is how it uses those tests and integrates them into policy.
The question boils down to deciding between being among the poorest people in the world, in Malawi, with practically zero emissions, and being among the richer, better-off people in the world, in Sweden, which has its emissions under control.
We are looking for evidence rather than a debate, but somebody can respond.
We are looking at different developed countries. The suggestion is not that Scotland can be Scotland or Malawi; the aim is to have a Scotland that works economically, gives people welfare, allows them to have meaningful jobs and live good lives in that respect, and fits within its ecological constraints. The option of being Scotland or Malawi is a polarisation that is not particularly useful.
Most people would sign up to the generalisation that we need to be greener or sustainable, by which most people mean that we need to be concerned about future generations' inheritance, but the subject can be difficult to reach out and touch. I say with no disrespect that even the discussion that we have had so far might be difficult for people to relate to practicalities in their lives.
Fuel poverty is a good example, as it is closely linked to fairness, which you mentioned. Sustainable development means fair development, not unfair development. It is entirely appropriate and necessary for households in fuel poverty not to be fuel poor, to increase their consumption of fuel and thereby to increase their carbon dioxide emissions. It is entirely incorrect to say that that should be disallowed because of a green agenda, because we are talking about per capita environmental impact. The poor have low CO2 levels per capita; richer people have higher levels, because they have more opportunities to buy things, to buy food that has been flown further and to fly further.
Tom McCabe made some valid points. The situation that he described is part of the transition to an economy that can operate within sustainable limits. The previous Government is to be commended for the lead it showed with the development of the green jobs strategy, which identified exactly how we can create opportunities that can help to reduce our environmental impact. Through energy efficiency, we can increase our productivity as a country, because being more energy efficient would reduce costs, emissions and fuel poverty and it would create jobs. As we know, there are plenty of opportunities for us to improve our efficiency, but we have still to grasp them. We must manage the transition to sustainability, which the budget can support.
Tom McCabe spoke about making choices and looking for economic opportunities. If there were a decision to be made about inward investment that would directly benefit your constituents, you would make it, but if someone said that making that decision would create an economic disbenefit for another group in your constituency or in another part of Scotland, the decision would become more complex. That is what we are trying to help to quantify in respect of sustainable development, which has social, economic and environmental aspects. We speak about them as three separate things, but the way society and the economy works makes it hard to disaggregate them.
I am not trying to challenge your assertions unnecessarily. You are right to say that the poor are probably on the lower end of the energy consumption scale. Unless we are determined to subsidise people even more, surely we can enable people to afford energy consumption only by making them economically active, which in itself has an impact.
We should consider the local and global environmental impact of production and consumption and how we finance work. We outsource businesses to all over the world and we fly in goods from all over the place. We subsidise the technology that replaces labour—we penalise labour—but an awful lot of the technology and clever logistics that we have has a major negative environmental impact. If we became a bit more local and closed the loop a bit more, we could generate many jobs.
I agree with Mr McCabe. The best route out of poverty is not to subsidise lousily insulated housing and unemployment but to ensure that people have jobs. Of course that will have a knock-on effect, but the bigger picture is that if we can better design the economy that people join when they take up new jobs, we will have an opportunity to make the whole economy more sustainable. There is no gain in having ghettoes in which people are not economically active and cannot spend.
Derek Brownlee has been patient.
My question is fairly simple. So far, we have mostly talked about the incremental impact on sustainable development of individual budget decisions or directions of travel. Can the witnesses put the issue into a broader context? I am thinking about the extent to which the Scottish Government can influence economic policy, given that almost all decisions on tax and spending on social security, defence and other matters are not in its remit. Is it possible to assess the budget on a basis that is consistent with policy decisions that are taken at Westminster and in Europe, or are we trying to apply different standards to different levels of spending?
It would be possible to do that; I do not see it as an insurmountable task. I do not know anyone who has done such comparative work. Budget spending tends to be partitioned from the rest of the world—I am speaking as an accountant—and is a creature that not many people want to talk about. Building in accounting and doing the sort of comparative analysis to which you refer is problematic, but it is possible.
We are trying to judge the impacts of spending on sustainable development, but there might be things happening in other Parliaments that have a greater impact and which are not being assessed. Are we in Scotland further on or further behind in this regard? Is spending here just not comparable in practice? You said that it is comparable in theory. When spending plans at UK level are announced, this sort of discussion never seems to feature.
If we knew how to do it, we would be doing it. That is part of the difficulty with sustainable development and other really wicked problems with complex elements. I have not seen in policy documents or in the academic domain an analysis that tells us where the best lever is. There are certainly some things that we should do globally, such as in relation to the Kyoto protocol and some things that we should do locally—Tom McCabe gave examples from his constituency—and there will be all sorts of influences in between.
Although that sort of work has not been done for the totality of spend in this area, it has been done in certain parts of it, such as inequality and carbon. Carbon emissions is an issue that is partly being delivered on through the use of markets. At Europe level we have the emissions trading scheme, which aims to make carbon emissions part of the economic process by giving them a cost. That work will become more cohesive over time and more relevant—carbon emissions will be factored into everyday decisions.
We are under time constraints. I want to cover the full range of topics, so I ask for sharper questions and sharper answers.
There has been some talk about the netting effect and competing demands. That bites most intensively through the budget, but there are on-going pressures of that nature. You also referred to the Cabinet sub-committee on sustainable Scotland, which was set up by the previous Executive. What assurances would you seek on the mainstreaming of sustainable development? Professor Bebbington referred to economic strategy going through the filter of economic advisers. Is there also a mechanism through which some conflicts might be resolved at a political level? I am thinking specifically of the budget, but the question would also apply to broader topics over the longer term.
It would not be appropriate to repeat the Cabinet sub-committee example, which was a different structure altogether. One way of ensuring that sustainable development was considered would be for the Government to have public consultation with people known to be well-informed in particular areas. For example, the Council of Economic Advisers does not contain an expert on sustainable development, but perhaps it should. People were pleased when the council was created, but the choice was made not to have an expert on sustainable development.
The Parliament has a duty on sustainable development: when it scrutinises legislation, it is meant to consider aspects of sustainable development. However, that has not been done well so far, as was noted in the assessment of progress that we published earlier this year.
The key is to be systematic and comprehensive, so that any checks or appraisals of sustainable development are applied everywhere. Evidence of good practice exists, but it is applied selectively. Some issues, such as the transport strategy, are scrutinised. About two years ago, a good job was done on that. If you are systematic and comprehensive, you will have equity in your evaluations.
In your written submissions, you raised certain concerns—which you have raised again during the meeting—about the way in which data are presented. Mr Thomson said that data are presented in a disjointed fashion with no apparent links between the different levels of the logic model. Dr Barlow has also expressed concerns about the lack of a systematic framework.
Could we have a volunteer? Dr Barlow?
I will happily do some work on that. I am sure that, between us, my colleagues and I can compile something we agree on.
You, and Mr Thomson, and your other colleagues.
We are currently working on advice for the Scottish Government on decision making—for example how to integrate decision making on sustainable development into policies or programmes and how to quantify different aspects of that. It will be published early next year. We could share it with the committee.
That offer and the others are much appreciated.
I will ask about roads. You seem to suggest that increased expenditure on road building is damaging to the environment. I live in Ayr; the upgrade of the A77 to the M77 has been a great benefit to people who live in Ayrshire. I will leave aside the fact that that has already saved a significant number of lives because it has made the road substantially safer. Could it not be argued that, because cars travel at a more economic mileage on such roads, investment in upgrading such as happened with the M77 under the previous Administration has contributed to reducing carbon emissions? Remember that roads account for less than 0.3 per cent of the land mass in Scotland.
We must recognise that transport constitutes a quarter of Scotland's emissions. It is a matter not so much of the land mass that roads cover but of what the emissions are from transport. Road transport is the principal component of that. One of the big challenges with road building is that it often has a traffic inducement impact—that is, in time, roads fill up with traffic—and there are plenty of reports that highlight the impact that building a road has by encouraging traffic growth.
Surely the problem is not the roads themselves but how the cars and other vehicles on them are powered. If they were all powered by electric means, for example, the roads would be perfectly sustainable. It is not the roads per se.
It is not. To answer your original question, yes, road building can be sustainable. Dr Barlow is saying that we need to know what we want the roads to do. In the example that you gave, there have been substantial cuts in accidents and deaths, so—to go back to the original discussion about how we account for such things using alternative measures of progress—the lack of deaths has led to a GDP cut because fewer accidents are happening. That is a good thing.
The lack of deaths would increase GDP because the folk are still at their work.
But there is a clear social benefit. Alternative means of travel and alternative vehicle fuels would certainly help, but there are issues to do with congestion, which can have social and economic disbenefits. It is not that we cannot build roads, but we must know what we are trying to do with them and must be able to measure it.
Exactly. Therefore, if the road budget is going up faster than other budgets, it does not automatically mean that the budget is any more or less sustainable.
No, it does not.
You must be intellectually rigorous about this.
We can use carbon balancing. There is a commitment to do that in the transport strategy. Delivering on that commitment would allow the Scottish Government to make the decisions that we have been talking about. It would help to prioritise decisions and clarify what different choices would mean. It does not necessarily mean that the Government would decide against a certain road and in favour of a certain railway; it could also mean a different choice being made between two road options. If carbon balancing were done, we would know where we had got to and the Government would be better able to deliver the associated commitments that it will have on carbon emissions under the climate change bill through its economic decisions.
At a moment when time is short, Alex Neil has bestirred academia.
I would reiterate that, if the pattern of CO2 to road building were to hold for all roads in the future, carbon emissions would increase if you built more roads. However, we are appealing more for a mechanism by which you can have a carbon balance and judge whether, when you are making proposals about a variety of options, they will increase or decrease carbon emissions. A proposal may increase carbon, but you might agree that that is an appropriate outcome because of other benefits. However, in this budget and current decision-making processes, we cannot make those judgments. If we knew the evidence base, it would make the debate much freer and easier. This is a plea for evidence.
I was going to make basically the same point. Considering the current figures, you cannot assume that road building will be sustainable. You need the evidence base.
Similarly, my argument is that you cannot assume that road building is not sustainable, which is what I think you guys are trying to do.
No.
That is the point.
The point that I actually made was that we could not include motorways in the judgment on what was sustainable considering the evidence that is provided. All the prior evidence on road building indicates that it will not be sustainable.
If Joe FitzPatrick is very quick, he can ask the last question.
I will be very quick. In talking about transport, we have talked a lot about roads, but there is an increasing problem with CO2 emissions from air traffic. One Government proposal is to end the air route development fund. Will you give us your thoughts on that?
I would commend the Government's decision to end the route development fund subsidy. There has been no assessment of its impact, but the chances are that it was contributing to more people flying and thus increasing our CO2 emissions at a time when we know that we have to cut emissions and aviation is a huge concern.
Sorry, but there is evidence. Previously, if someone wanted to go to the United States, they had to go to London, but now there are numerous direct flights from Scotland to the US, so there is evidence.
Sorry, I meant that there was no evidence that demonstrated to me the carbon impact of the route development fund investment in Scotland. I never saw any evidence of that.
Academia, in turn, has bestirred the committee members.
It is a matter of record that the reason for doing away with the air route development fund had nothing to do with sustainability and everything to do with European Union requirements. Ministers have indicated that they are considering ways of dealing with the fund tapering off and replacing it with something else. Would you advise that there should be no replacement, in any shape or form, of a route development fund?
That would certainly be our advice. Let me be clear that we are not trying to impact on flights to islands in Scotland that are a much-needed part of the economy. I am talking about investments through the route development fund that facilitate people to make far more short trips, particularly within Europe or the UK, that could be made by alternative means. With the imperative to cut our emissions dramatically because of climate change, we do not think that the route development fund is an appropriate mechanism.
This will be the last, very short point.
We would say that if you have to take any such decisions, including on the route development fund, you need to factor in the carbon and social impacts so that, if there is going to be a net gain in carbon, you know what it is. I am saying not that you cannot take decisions that will increase carbon but that you need to know what the impact is, so that it can be balanced by decisions made elsewhere to reduce other carbon emissions. That can be done cost effectively across different objectives.
Time has defeated us. I deeply regret that because this has been an interesting and wide-ranging evidence session. I have to bring it to a close, but if we can submit the remaining questions to the witnesses for written answers, that would be very important for the committee. I hope that that will be acceptable.
Meeting suspended.
On resuming—
I welcome representatives of the Convention of Scottish Local Authorities. Councillor Pat Watters is the president of COSLA, Rory Mair is the chief executive, and Martin Booth is head of finance.
Thank you, convener. I will take the opportunity to give some background information and explain how we arrived at the situation that we are in.
I will start with a factual question. How many local authorities have agreed to the terms of the concordat? How many have noted its terms? How many have neither noted nor agreed to the concordat? What is the state of play?
We took the concordat to our leaders meeting last Friday, where all 32 authorities accepted the agreement as the best position that we could manage to achieve from negotiation. They agreed to take it back for consideration. As you will know, COSLA as an organisation is not in a position to enter into an agreement on behalf of the 32 authorities. In light of the settlement that they receive, the 32 authorities will either accept or reject the deal. The leaders have agreed to take the concordat back to their authorities for consideration in light of our saying that it was the best that could possibly be negotiated under the circumstances.
The cabinet secretary will make another announcement on 13 December about the distribution of resources. Clearly, councils will not make individual decisions until they know how the resources will be distributed. The position just now is that COSLA has noted the concordat as the best that can be achieved, but individual councils will wait to see how the money is distributed before they make a final decision.
I understand that COSLA has decided that the concordat represents the best deal available in a tight settlement. Will you confirm that the 32 leaders also agreed—at the meeting last week that Pat Watters mentioned—that the concordat is the best deal that could be achieved?
Yes.
Following on from that, will you clarify the length of time for which the concordat will apply?
The concordat will apply for the period of the settlement, but not all parts of it will apply for the whole period. For instance, we are clear that the £70 million for the council tax freeze applies for next year and that authorities will take council tax decisions with that in mind. For future years, Government will need to enter into further discussions with us. Most of the concordat is for the three-year period, but that part will need to be discussed with Government on an on-going basis. We will not freeze council tax—if that is the decision that an authority makes—for three years; we will do that on a one-year basis once we know the settlement after the announcement is made on 13 December.
Going into the negotiations, COSLA had a set of costings on specific commitments. What was the value of those costings?
This year, we said that we needed our base budget along with inflation, funding for some elements that we feel require more money and, beyond that, funding for other pressures on council budgets. We expressed those as pressures rather than as straightforward bids because, when we included all the pressures, the total came to more than the money that we realised would be available in the settlement. There was no point in asking for more money than we could possibly get, so we decided not to do that. We had a range of figures between about £10.8 billion and £11.5 billion. As you can see, £11.14 billion sits somewhere in the middle of that range.
What is the cumulative cost of the commitments that local government has signed up to in the concordat?
That depends on what year you look at. Different costs will arise in different years because the commitments will be phased in over a period of three years. There are different values in each of the years. If you want to know about a particular commitment, I can get to that.
Can you give specific values for each of the three years?
Including the council tax freeze, the cost of the commitments in each of the years is £109 million, £212 million and £351 million. Those are cumulative figures. It is difficult to break those figures down because the commitments form an overall package, which includes all the flexibilities as well as finance. The issue is not just as simple as, "This is the amount of money and this is what it will cost."
My question relates to our strategic role in assessing the local government settlement and its adequacy. I understand your point about going with the pressures and being more realistic about what you ask for. Presumably, councils can always find additional worthy things to do with whatever additional money Government allocates. Is it fair to say that, from a COSLA perspective, the overall settlement for local government is reasonable in the context of the spending review, but that it will not be possible to take a view on whether it is adequate at individual council level until council allocations have come through and councils have taken a view, based on local circumstances, on their adequacy?
I will deal with the first part of the question before asking the chief executive to comment. The job of COSLA, as a member organisation, is to get the best deal possible and to keep it on the table for as long as possible, so that when setting their budgets local authorities have the opportunity to choose what to do. If you are asking me whether the cash settlement is enough, I will always tell you that, no matter how much money Government gives us, we can find services to develop and improve with it. There are many things that local government would like to do, but we must look at what finance is available before considering how to deliver. This is not the best cash settlement that local government has ever had, but we always knew that it would be tight. We believe that we have got the best deal possible under those circumstances. You are right to say that, when local authorities come to set their budgets, they will have to consider in detail the financial settlement that they get and whether it can accommodate their services and the manifesto commitments that the Government requires councils to address.
In answer to a previous question, I said that we would have preferred to get £11.5 billion, as that was the top end of what we aspired to get. We realised that there was a negotiation and wanted to pursue a range of issues, but we did not think that we would get everything. As we did with the previous Government, we tried to break away from having COSLA and the Government blame each other if sufficient resources are not available. We did not say, "We need this and if you do not give it to us, we cannot do our job." We did not want the Government to say to us, "We have given you everything that you need, so get on with your job." In the negotiation, we took joint responsibility for getting the best possible deal in the circumstances of Scotland's settlement.
That is a key point. In the past, there have always been tensions between the tiers of government, which is not surprising when so much funding comes from one to the other. When we get to 13 December, or whenever the individual council allocations are published, will it be possible for anyone to form a view from an external perspective on whether individual councils have been given adequate finance? We can see that overall spending has increased by a certain percentage and can decide whether that is reasonable in the context of the overall settlement. However, it is difficult to form a view on whether the settlement is reasonable for 32 local authorities that have different pressures, demographics and council tax levels and which are trying to accommodate different services. Other than leaving it to individual councils to say yes or no, is there a way of assessing whether the settlement is reasonable?
I do not know of an empirical way of doing that. The one thing that would drive a wedge between COSLA and its members would be for us to conduct a negotiation that put councils in the position of saying that something was not okay when we had said that it might be. Going into the negotiation, and when the president presented the package to our members, we had to be acutely aware that it was not our job, as a membership organisation, to dump any member in the position of being unable to function.
Mr Mair, one of the particular pressures that you will already be aware of is the impact of demographics on councils. The cabinet secretary has said that he would wrap up various sources of finance and effectively distribute it, mainly by population. That accentuates some problems that some councils face. For example, in Dundee, economically active people tend to move out to neighbouring council areas, which means that, in Dundee, there is a disproportionate call on certain council services, such as social work. In what way did you factor that issue into the negotiations? Will that be part of the review process if individual councils—some of which, as you know, were complaining bitterly already—come back and say that they have been hit even harder than they were before?
In our discussions with Government, in which we were trying to include as much flexibility as possible and take out as much ring fencing as possible, we were acutely aware that it would be wrong to take a big-bang approach, as that would disproportionately affect some authorities. We realised that there needed to be some phasing. We expect the money to come to local authorities, under this settlement, much as it came to local authorities under the previous settlement. In the first year, therefore, we will look to ensure that, in that single package, authorities get what they expected to get. That will ensure that authorities do not experience a swing that would cause problems for individual authorities.
I can confirm what the president said. One of our difficulties, which we would have had regardless of who formed the Government, is that we are right up against the negotiations for the spending review and its implementation in April. Anything that put volatility into the system—distribution always means taking money from somebody to give to someone else—would not be welcomed by members, who wanted to keep the settlement much as it was.
James Kelly has the last question on the subject, but Liam McArthur will ask a quick question first.
I will follow up Tom McCabe's questions. A separate issue is the disparity in funding per head of population for the islands authorities. Are you saying that that disparity will be locked in for the spending review period? What timeframe do you envisage for further work to unwind some of that?
Examining the distribution mechanism is such a huge issue that we have said to the Government that we need to give councils certainty of funding for the next three years. We must work during that period to prepare plans.
Tom McCabe does Dundee and Dundee City Council in particular a disservice. The problem that he talked about has been a reality that Dundee has experienced for several years, but people there from across the political spectrum have worked hard to bring economically active people into the city and they have had some success. The city of Dundee has turned the corner, so his comments were a bit unfair.
That was a comment, rather than a question.
The capital budget will decline in real terms over the settlement period. What is your view on that? What impact will that have on authorities that have continuing school building programmes?
In the first year, the capital budget will have a 13.37 per cent increase, which is baselined in the following years, although the increase above that in years 2 and 3 is small. The capital budget will increase substantially—by an additional £115 million—between the current year and next year.
So you are saying that in 2008-09, the amount will rise to £949 million.
The figure will be £975 million.
Okay—I accept what you say.
The £70 million fund has been mentioned. It has been reported that local authorities will receive that additional £70 million, but is that offer on the table? Is it conditional on all councils freezing council tax? What will happen if one council refuses? Before the negotiations, the Conservative leader of Dumfries and Galloway Council said that unless the council received £14 million over the next two years, it would have to make hundreds of people redundant.
The £70 million is a pot of money. If it were not set aside, would it be in local government's budget? It probably would be, but the Government has decided to keep it as a fund that is lying there, which local authorities will access only if they freeze their council tax.
Will the fund operate collectively or will each council receive its share of the money if it freezes council tax?
The decision will be for individual local authorities. That is one reason why I have said that neither the cabinet secretary, the First Minister nor COSLA can freeze council tax. The only people who can freeze council tax are councillors, and they will decide on that when they set their budget. They will compare their share of the £70 million with what they need.
If one council does not freeze council tax but all the others do, will none of the others receive their share of the £70 million?
No. It is a matter for individual authorities. One authority would not bring down the whole pack.
What is the basis on which councils will access the £70 million fund? If a council decided to freeze council tax, would it receive the equivalent of what it would have raised if it had increased council tax by the rate of inflation?
The allocation proposal that will go to COSLA next week for agreement is based on councils receiving a percentage of the money that they raise through council tax in the current year. A percentage of the total council tax budget for this year will be taken and the £70 million will be allocated on the basis of that percentage.
But what will that percentage be? Will it be the rate of inflation? Will it be based on the retail prices index?
If council X had 5 per cent of the total council tax budget, it would receive 5 per cent of the £70 million.
That does not really answer my question. Let us say that Glasgow City Council would generate £5 million by increasing council tax by the rate of inflation. Would it get £5 million from the £70 million, or would a different basis be used for the amount that it would get?
A different basis would be used.
What would that be?
The calculation is based on a percentage of the band D assessment, taking into account COSLA's view of inflation at the time. The figure would work out at somewhere above 3 per cent—it would be around 3.2 per cent—but the figures would vary slightly council by council.
That touches on the question that I want to ask. I take the point that Pat Watters made—we are talking about the financial year that starts in April 2008. If everything else was equal and the £70 million fund was not available to fund the council tax freeze, what percentage council tax increase on average would there be across Scotland?
There is no way that we can know that.
In the light of the answer that was given to Tom McCabe, the increase would have to be just over 3 per cent. That is the logic of what was said.
No. That is based on what has happened this year.
That is what I am saying.
Councils will not set their council tax rates until they set their budgets, which will be some time in early February. They will know what they will need only after the cabinet secretary makes an announcement on 13 December.
I understand that, but Tom McCabe made a fair point. I think that he and I agree on the matter. The assumption is that it will take £70 million next year to freeze the council tax. That is the quid pro quo. If the council tax across Scotland increased by £70 million in cash terms, what percentage increase on average would that represent for the nation?
On average—that is different.
That would represent an average increase of 3.2 to 3.4 per cent.
So without the £70 million, council tax rates would rise on average across Scotland by around 3.3 or 3.4 per cent.
Yes.
Great.
I want to consider efficiency savings, but I am slightly unclear about Martin Booth's answer. He slightly implied that Glasgow City Council would get 0 per cent of the £70 million as a result of freezing its council tax last year.
The witnesses are not saying that.
Are you saying that calculations would be based on last year's council tax rises?
Councils' budgeted income from council tax as a whole, not their percentage increases, would be considered. The actual take—the amount of money taken in by the council—would be considered.
Indeed. The other approach would be eminently unfair on councils that had kept council tax down last year.
The Government would not be unfair, Elaine.
Let us move on to efficiency savings. As you know, the target for efficiency savings—which, of course, councils will be able to retain—has increased to 2 per cent. How realistic is that target? What balance will there be between cash-releasing and time-releasing savings? Will all authorities manage to achieve 2 per cent efficiency savings? I am thinking about evidence that we took when the previous Administration introduced the efficient government initiative. Some councils were concerned. They thought that they had been efficient in the past and that they had already slimmed down and cut out the fat, and therefore that they would find it even more difficult to make efficiency savings. Is the target realistic? What will the cash-releasing and time-releasing savings split be? Can all authorities meet the target?
I think that you are asking me for an opinion on how councils will behave. We have been speaking to councils about the efficiency savings target. One of the difficulties in the last round of the efficient government initiative was simply gearing up to measuring efficiencies accurately. We did not have all the input data on the baselines. It was difficult to separate efficiencies from savings. I think that we have cracked that problem now—councils have a clear idea of their baseline costs.
Do you think that the Government's decision that local government will be allowed to keep any other efficiency savings will drive some councils to go further than 2 per cent, on the basis that they will be able to keep it and spend it on other front-line services?
They would do that above 2 per cent anyway. The Government is only talking about 2 per cent. Anything above 2 per cent—even if the Government was taking 2 per cent—we would be able to retain.
The key to continuing the drive on efficiencies, which Mr McCabe will be aware of, is to make those efficiencies across the public sector. However, the ability to continue to drive out 2 per cent savings just within the confines of a council will be limited. The question is how we do business between councils and agencies in ways that allow us all to be more efficient. That is going to be the key for the period that we are entering. Simply working towards internal council efficiencies will not continue to drive out 2 per cent savings; we require to get better at interagency co-operation and efficiency to make it work.
Will COSLA lead by example and make 2 per cent efficiency savings in its own budget?
We are at the pinnacle of achieving efficiency within local government.
Is that a yes?
In a sense—
Do not bother answering that, Rory. [Laughter.] As I say, we are at the pinnacle of achieving efficiency savings in local government.
I invite Elaine Murray to finish this section of questioning.
You say that you now have systems in place to monitor efficiency savings, whereas you did not in the previous period of the efficient government initiative. Do you believe that you made the efficiency savings the last time round?
The difficulty was that, from a standing start, authorities did not know what their baseline costs were. If a reduction in cost was made, it was difficult to know whether it was a saving or an efficiency. I am talking about getting the same output for less money. It was difficult for us to be sure about that. We think that we underestimated our efficiencies, because the tendency was not to claim an efficiency unless we were absolutely sure that we had achieved it. We examined six councils in depth, and we found that they were underclaiming efficiencies, not overclaiming them. I am sure that we did make the level of efficiencies that was asked of us.
We will now consider single outcome agreements.
Do you expect single outcome agreements to be in place throughout the course of the spending review period? You spoke earlier about moving away from a blame culture in which national Government blames local government and vice versa. Will local government be judged on its success in delivering national outcomes or targets?
I will take the first part of the question and hand over to the chief executive to deal specifically with the single outcome agreements.
Moving away from the blame culture, it seems from what you said that some recasting of the commitment is needed to ensure that there is an agreed outcome for the single outcome agreements, otherwise you will be debating the point of first principle or the point of departure.
There are areas in Scotland where we would like to see a reduction in class sizes, which would improve children's education. In other areas, there is already high achievement, and the local authorities might not see reducing class sizes as the best way to spend their money. However, we are agreed that, if there is a demographic shift in an area, we will reduce class sizes there. The outcome that we are seeking is an improvement in children's education—we in local government have seen long-term, on-going improvements in education. I will hand over to the chief executive to deal specifically with the point about outcome agreements.
Two things are being confused here. One is the commitment on class sizes that we made in the concordat. The wording is absolutely explicit and it has been agreed between the president and the cabinet secretaries. We will move
COSLA is negotiating with the Government on the national issues, and individual councils will negotiate on local issues council by council. I presume that, once the national outcomes are agreed, every council will have the same core of national objectives.
We have got the national outline. We believe that each council is being asked to say what it is prepared to do to help to deliver improvement in the national outcomes. We think that not all councils will try to address all the outcomes equally. For example, East Renfrewshire Council should probably not be looking at increasing children's attainment in exams, but it might want to examine what happens to students who have had a good education. Do they get jobs or not? Each council must come to Government with the package of effort that it thinks it can pursue to push up attainment of the national objectives.
So, to some extent, there will be a local element to the national application.
Absolutely.
What happens if, despite the best efforts, the objectives are not met? What sanctions will be applied, or is the new approach a move away from sanctions?
It is a move away from sanctions. I do not think that we have ever seen a legislative approach in Scotland such as has existed in the rest of the UK. Delivery is very much a matter of trust. Local authorities are accountable not to Parliament but to their communities, and their communities judge whether they are meeting their targets. Councils will set the targets jointly with the Government, and we will make best endeavours to ensure that they are met.
We now turn to the reduction of the ring fencing of funds.
As a representative of somewhere that suffers from flooding, I was relieved to hear that some of the rolled-up moneys for the cities growth fund and the flood prevention moneys are still being discussed. It would be manifestly unfair to distribute such funds on the basis of population. Concerns have also been raised about some of the other rolled-up specific grants, such as the one for victims of domestic violence and the supporting people fund. Will there be outcome agreements to ensure that support for vulnerable people is not lost in the general pot?
I will ask Mr Mair to answer that question. You are absolutely right: we are conscious that not everything is divided by 32, and local authorities are conscious of the fact that some areas are a higher priority than others for some funds. That is why we are still discussing with the Government how we can sensitively deliver to local authorities what they expect. We are trying to do that within tight constraints—there is never enough money to deal with everything, and we must be sensitive to that. The Government needs to be sensitive to that, too. We must ensure that areas with acute problems, such as flooding, and areas where there was bid funding are dealt with properly and do not feel that they are being picked on or that other people are getting a share of money that they do not need.
There will be only one outcome agreement—it is a national outcome agreement—therefore there will be no separate agreement on vulnerable people or anything else. We will have to say how we will deal with vulnerable people in the context of that outcome agreement.
I take your point about the inefficiencies of having to report on 50 targets. That is an issue throughout the public sector, and it is one issue that will be considered under efficient government. However, because councils have different pressures and coalitions of different political compositions, some of them might consider the support of vulnerable people to be more important than others do, and there is concern that there is now no safety net if a council decides that the activities that have been undertaken under the supporting people fund are not terribly important to it.
That is called democracy, Elaine. Local authorities are elected to distribute funds and to deliver services, and they are accountable to the local people. If the local people are unhappy about the way that their local authority does that, they will let it know. The Government and Parliament have a role, but Parliament's role is to scrutinise ministers, not to scrutinise local government. That is what we are elected to do as councillors.
The First Minister said at question time last week that he was fairly certain that all councils would sustain their spend on, for example, domestic violence, but that is not necessarily the case.
What council is he a member of?
Mr Salmond?
Yes.
He gave an assurance at First Minister's question time that the commitment to addressing domestic abuse would continue.
I am sorry, but the Government cannot give an assurance on behalf of 32 councils. We are independently elected to look after our communities. That is what we do—and we do it very well, I might add.
Elaine Murray mentioned flooding. As somebody who represents a number of low-lying islands that are wedged between the Atlantic and the North Sea, I am more aware than most of the risks of flooding.
I will ask Rory Mair to answer that because he chairs the shared services board.
Under the previous Government, there was a fund for transforming the way in which we did business and a number of pathfinder projects were resourced in order to prove that people could work across organisational boundaries. To get the money, people had to sign up to opening up the project to scrutiny by everybody else, so that we could all learn the lessons from the projects. As Liam McArthur said, Orkney got resources from that fund to do that.
How confident are you that that is where the money will be directed? Will the lack of available funding prevent other councils from getting to the point that Orkney reached?
I chaired the board that dealt with the projects before the matter went to the minister for approval. The projects' business case is that, by doing the work that they are doing, they will generate such significant savings that they can afford to fund the work that is necessary. At some stage, efficiency works only if we do not have to carry on pump priming it. The business case says that, after a certain number of years, the projects will start to see returns for the investment that Mr McCabe made. All we are saying is that that is the deal that we made with the Government and that is the money that was put on the table; now, every council has to be given an incentive to start the process and get to where Orkney was. That was seen as a bigger priority. However, we understand from the new Government that there will not be a fund. What will happen is that, in order to get the finance for the work that has to be done to get a project started, each business case will have to demonstrate that, by doing things more efficiently, it will be possible to get a payback in a sufficiently short period of time. That is just a harder-edged business case. However, we are further on in the process. Local government is better at this now than it was three years ago.
I entered politics in 1999 as a councillor, when the Scottish Parliament was brand new. A large number of MSPs had been councillors and there was an expectation that that would result in parity of esteem between councillors and parliamentarians. However, during my eight years as a councillor, that parity of esteem never materialised. To what extent do you think the removal of ring fencing and the granting to councils of the ability to make their own decisions—which goes along with an assumption that our councillors are the best people to make decisions about, say, vulnerable people in their area—will make that parity of esteem more likely? Do you agree that it is damaging to say that the Government does not have confidence in local government's ability to make such decisions?
We have had parity of esteem on our agenda for quite some time, although I do not think that that is what we would call it. Latterly, we have examined ways of developing partnerships with Government. I believe that we were on the road to developing those partnerships prior to the election and that we are still on that road. We have an understanding with the Government that we must discuss how we can take forward the governance of Scotland. I firmly believe—and have dedicated myself to saying—that we are part of the governance of this country. We are not part of the problem; we are part of the solution. We should, therefore, be able to work with the Government to deliver for Scotland.
On the point that Mr Mair made about vulnerable people, it is quite correct to say that councillors are locally accountable. As you know, I was a councillor before I became an MSP. People have to be accountable at all levels and I frequently tell my constituents that I cannot tell the council what to do and that I do not intend to do so. However, in relation to the point about services for vulnerable people, I must say that the vast majority of the electorate are not vulnerable people. Most people are not drug addicts who require support or victims of domestic violence, which means that there is not a great deal of electoral comeback if the council does not provide an adequate level of support for people with those problems. There is an issue about the way in which funding is directed to sections of society that are not popular and which include people who possibly do not even take part in the democratic process.
Are we saying that, to provide those services, ring fencing—directing funds so that local authorities can spend the money only on those services—is necessary? Alternatively, should it be left to the local authority to take the decision on how it delivers services in its community, bearing in mind that it represents the whole community and not just bits of it?
This market day is wearing late, and we have a fair bit of material to go through, so I would like quicker questions and quicker answers. Alex Neil will ask about the council tax freeze.
I think that we have covered most of the ground, but I have a specific question for Pat Watters.
That was a veiled political question. The level of salary that we are talking about is the level of a councillor's salary, but I will not go into that in great detail—we are only part time after all, and I am conscious of the time.
But at what social cost to some people?
I do not think that you will find that the authority has ever taken any individual to task. We are very supportive and deal with people using different methods—involving social work and money advice, for example.
You should come to North Lanarkshire.
The council tax increase—the £70 million that you are talking about—would work out at about 71p a week for an average band D property. That is hardly a king's ransom—it would not even buy you a Sunday newspaper.
If we had the council tax freeze over three years, you are talking about £1.50 or £1.60. That is not a lot to you and me—probably a lot more to me than to you—but it is certainly a lot to the people who are earning the kind of money that we are talking about.
You mention a three-year council freeze, but a three-year freeze has not been agreed, so we are talking about next year—one year—and we are talking about £70-odd per year. If I could get away with paying an increase of £70-odd per year, I would be delighted. I am not taking away the impact of the increase, but there is a long way to go before we link that to the change in the tax system and so on.
Presumably you agree that the local income tax, when it comes in, will be a lot fairer?
Sorry, but I do not.
You have mentioned the £70 million that is allocated for the council tax freeze—you said that that is 71p of savings for band D properties.
Ish.
Ish—okay. Which bands are the main beneficiaries, in cash terms, of that £70 million?
The higher the band, the more money people would save.
As a percentage of their income?
That does not matter.
It does.
I have no idea of knowing what percentage of income that would be for someone who lives in a big house.
We seem to be having fewer questions and more debate. Can we stick to questions please, so that we can hear the expertise of the witnesses? We will move now to consideration of single status agreements.
We all know that single status agreements are one of the biggest pressures on local government—perhaps the biggest. I appreciate that the patterns will be different in councils across the country, but can you give us an update on the projected timescale for resolving the issue? To what extent, if any, does the budget settlement for local government allow you to make progress?
I cannot give you an update. We thought that we were coming here to talk about the three-year settlement, which was not part of the discussions that we had with Government on single status. If we had known that your question would come up, we could have looked into it in detail.
Would you be able to come back in due course with some information?
Certainly.
Thank you.
We sent a letter in September but we still await a reply. Could an investigation be made so that we can receive a reply?
It might be a short reply.
If it is informative, that would help.
I jest, convener. We will get the information to you and will be happy to come back here to discuss it.
Thank you. That brings us to the end of this evidence session. I thank the president of COSLA and his officials for sharing their expertise and experience in local government.
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