Rural Affairs and Environment Committee, 05 Dec 2007

Meeting date: Wednesday, December 5, 2007

Official Report 335KB pdf

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Budget Process 2008-09

Good morning and welcome to this meeting of the Rural Affairs and Environment Committee. I am deputising for the convener, Roseanna Cunningham, whose train has been cancelled. She hopes to arrive in due course, but we are not sure when. We look forward to her arrival. I remind everyone to switch off their mobile phones.

I welcome the Cabinet Secretary for Rural Affairs and the Environment, Richard Lochhead, to the meeting. I also welcome his team: John Mason; David Wilson; Andy Robb; David Reid; and Ingrid Clayden. Richard Lochhead will perhaps introduce them.

If the minister would like to make an opening statement of up to five minutes, we would be pleased to hear it. Thereafter, as he would expect, we will ask questions.

Thank you, deputy convener. Given the circumstances of Roseanna Cunningham's delay, I guess that you would rather have Stewart Stevenson, the transport minister, before the committee today.

It is a pleasure to be at the committee to discuss our budget and our plans for the future. As you suggest, I will introduce the officials who will, I hope, help me out. David Wilson is from the marine directorate; John Mason is from the environmental quality directorate and the climate change and water industry directorate; Ingrid Clayden is from the rural directorate; David Reid is from the finance directorate; and Andy Robb is from the rural payments and inspections directorate.

The strategic spending review brings significant investment for Scotland's natural resources, for our rural communities and for delivery on the greener Scotland objective. In particular, we will invest £154 million to take Scotland closer to becoming a zero waste society. We have allocated £126 million to local authorities for flood defences—I take the opportunity to welcome the committee's decision to undertake a flooding and flood management inquiry. We will also extend forestry cover and our ability to absorb CO2 emissions by investing £45 million in new woodlands. We have created a new sustainable development and climate change fund, which is worth more than £30 million. Our priorities are clear. Our spending and actions will reduce our impact on our local and global environments and will protect and enhance Scotland's unique environments.

Our investment for a greener Scotland will be targeted to help us make much greater use of our substantial energy resources to reduce the climate change emissions from transport, housing and business and to improve Scotland's record on waste management and recycling.

Across the Scottish Government, we will ensure high standards of environmental performance and design as we refurbish the public sector estate. We will protect our environment through additional funding for the Scottish Environment Protection Agency's programmes to tackle pollution, and we will promote active care for and enjoyment of our natural heritage through continued support for Scottish Natural Heritage and Scotland's national parks. All that will benefit our rural and coastal communities.

Our land managers will benefit from the opportunities presented by the £1.6 billion rural development programme. Rural development contracts will provide a significant level of resources for farming, forestry, environmental management and rural communities.

I am delighted to take the committee's questions.

The reduction in the rural development budget line of 6 per cent means that rural development will be among the 10 biggest losers in the 2007 to 2011 spending review. The Government's spend on rural development is set to fall by more than 35 per cent in real terms between 2007 and 2011. Will you comment on that reduction in the rural development budget?

Members will all be aware that the budget is about balancing different priorities and demands in a very tight settlement.

We have made decisions on the budget headings in the context of the £1.6 billion rural development programme. You mention a 35 per cent decrease, but if you look across the board at all the budgets within the portfolios that address rural development, we are confident that we will make a substantial difference to rural communities.

Are you confirming that, excluding European Union funding, there is a 35 per cent cut in the rural development budget? Is that correct?

I would like some clarification of how you got that figure.

It is a Scottish Parliament information centre figure.

Is that the same figure as we have? I do not recognise the figure of 35 per cent. We have to balance the funds available between all the different budgets.

I will let Jan Polley speak.

The raw figures are taken from the SPICe material, which in turn comes from the spending review document. The calculation takes out the European Union proportion of the rural development spend and the modulation from that. What is left is the contribution from the Scottish Government, which is given in real terms once the gross domestic product deflator is taken into account.

Okay, I am happy to look into that. Table 24.03, which is in the "Scottish Budget Spending Review 2007" document, shows a modest increase.

But that is including EU funds. We are asking you to confirm that there is a 35 per cent cut.

Unless we have that figure to hand, I will have to come back to you. You are looking at a different figure from the one that I am looking at.

Planning for the spending is done on the basis of the gross amount, incorporating all the available resources.

All that we are asking you to do is confirm that, not including EU funding, Scottish Government funding will be cut by 35 per cent. Is that right: yes or no?

I cannot confirm the 35 per cent figure for the simple reason that I would have to compare the baselines that you are using with the ones that we are using. As you are aware, the baselines in many areas of the budget have changed. I would have to examine the baselines that you are using to reach the figure of 35 per cent. I am happy to come back to the committee on that.

Thank you, minister. I will bring in Jamie Hepburn at this point.

Thank you for coming before us today, cabinet secretary. I wonder whether there is a bit of confusion and whether the 35 per cent figure is a slight exaggeration, given that there has been historical overallocation in a lot of the budgets in question. I understand that there has been an historical overallocation of about £220 million across the entire Scottish budget, which will obviously affect your portfolio, and that the Government is reducing the amount of money that is overallocated so that there is no overallocation by the end of the spending review period. Is that perhaps a source of the confusion?

May I just clarify that question? Are you talking about overallocation in my portfolios or in the overall budget?

Both.

Yes, there has traditionally been an overallocation in the overall budgets for some good reasons. As members have heard from John Swinney, he has reduced that substantially, but overallocation still takes place to ensure the flexibility that we need in terms of potential underspends in some areas. Overallocation is not done by portfolio—it is done across the whole Scottish budget.

Perhaps overallocation is another word for contingency. Des McNulty is anxious to get in on this point.

Cabinet secretary, I think that Jamie Hepburn might be leading you into difficult territory. I do not think that Mr Swinney would like to hear talk of overallocation in the budget.

Just to concretise the issue, let us turn to page 129 of the spending review document. Table 24.03 gives the detailed spending plans for rural development. The figures at the bottom, on the total budgetary allocations, show a reducing allocation to rural development in cash terms in the next three years, although there is a small increase in relation to the current financial year. Does that not amount to a 6 per cent real-terms reduction?

Well, again—

Does it not? It must.

Potentially. I will ask David Reid to clarify the exact figure for that table, but are you talking about your calculations from your own baselines?

No, I am talking about your calculations. You have produced figures that show the amount that is allocated to rural development, and they show a real-terms reduction in the cash that is allocated to rural development. If you look at the line in the table above the totals, you see that the EU income line shows a significant change from the current situation—that is where the 35 per cent reduction comes from. The actual allocation from the Scottish Government to rural development in the next three years is showing a pretty substantial reduction. Is that not right?

I am not arguing with your interpretation of the figures in table 24.03, but you have to consider the overall budget.

I am sorry—

I am not arguing with or disputing what you are saying about table 24.03. However, if you are arguing that we are substantially reducing investment in rural Scotland and rural development, I disagree.

We can provide the minister with a written explanation of how we have arrived at those figures. He and his officials can then comment on them and clear up the point. Does that make sense? I trust that the committee is happy with that.

I welcome Roseanna Cunningham to the meeting. Obviously, her train has come in, so to speak. I will pass over convenership of the meeting to her, but first Bill Wilson wants to ask the minister about Scottish agricultural and biological research institutes and other issues.

I have two fairly brief questions, minister. As you will recall, during the fisheries quota debate—and after the debate—I raised with you the issue of investment in scientific research. Can you give me some more details on the budget for scientific institutes and on how that budget aims to achieve the Government's objectives?

You will see in table 24.04 that there is a modest increase in the budget for the research institutes. Scotland is lucky with the amount of scientific expertise that we have, and the Scottish Government sponsors several research institutes that have world-leading reputations. We are keen to step up the efforts of our institutes to input to Scottish Government policy. In the proposals for a national food policy and marine legislation for Scotland, as well as in other areas, the Government recognises the importance of using good science to inform our policy development in the years ahead. We are also keen for the institutes to work closely together on issues such as climate change. We have much expertise in our research institutes in that context.

We are also lucky with the quality of the research institutes that we have in Scotland. We fund them through our budget because we recognise the importance of having a national capability in some areas, so that we are guaranteed access to the appropriate data that we require on, for example, animal health, for agriculture and livestock policy, and many other areas. We must maintain that national capability in scientific knowledge and expertise in new research areas to ensure that our policy is informed. That is why we use public funding to sponsor the research institutes.

I have one more question. I am jumping subject slightly, but I think that there is going to be a lot of that today. You have made a commitment specifically to increase forest cover. I want to be sure that the aim of that policy is not merely to expand commercial forestry, with its emphasis on non-native species. Ecologically, there would be much more benefit in expanding forest cover that included, or was heavily based on, native species. I would like to be reassured that we are committed to expanding forest cover in a way that gives the maximum benefit to our environment.

Clearly, we have to take into account the social, economic and environmental benefits that we get from forestry. Especially because of the climate change debate that is taking place at the moment, we want to maximise the role that forestry in Scotland plays in reducing carbon emissions. We will take those factors into account. Our policy is to expand forest cover in Scotland from 17 to 25 per cent. My colleague, Michael Russell, who is taking the lead on forestry issues, is currently considering the strategy for doing that.

As I said in my opening remarks, within our budget, we want to increase investment in new woodlands by £45 million over the three-year spending review period. We hope that that will make a substantial difference and help us to meet our target.

Have you finished your questions, Bill?

Yes, thanks.

I have a question, convener.

Is it on the same issue?

Yes. I am very aware of the reduction in funding for SABRIs in the budget for next year. I am not sure that Bill Wilson covered that in his first question. I know that the funding will increase in the following year, but why has the funding for SABRIs next year been reduced by so much?

The funding for the research institutes was virtually static throughout the previous Administration, and it will be virtually static throughout our spending review period because of the tight financial settlement that we have received. Nevertheless, given the good work that is being undertaken in the research institutes to achieve efficiency savings—they are making much progress in doing that—we believe that they will be able to fulfil their roles adequately within their current budgets.

My first question is on the waste strategy. This year, of the £132 million in the strategic waste fund, some £65 million was given to local authorities, with ministers retaining £67 million. I asked your officials about this at the committee's previous meeting. Next year, of that £67 million, £41 million is going to the zero waste fund. Where has the other £26 million gone?

By asking where the £26 million has gone, you have clearly chosen to phrase your question in a certain way. We have distributed all our resources in what we regard as an appropriate way to meet our objectives.

We had baselines when we went into Cabinet discussions. Many baselines changed, including the waste baseline. As you will know from the most recent spending review period, which is just ending, there was a significant underspend in the strategic waste fund. We clearly have to take demand for the waste fund into account and consider what can be spent within the next three years. If memory serves, only 69 per cent of the earmarked strategic waste fund was actually allocated during the period that is just ending. That is a significant underspend.

We have transferred £65 million for each of the next three years to local government as part of our concordat with local authorities, and we have also retained a central fund, in order to help Scotland move towards becoming a zero waste society.

You have just confirmed that the £26 million has been removed from the fund. Ministers retained £67 million, but that is now down to £41 million. You have just said that that is because you consider there to be less demand. However, as recently as 27 September, Audit Scotland said that, over the next few years, funding will have to grow by more than 50 per cent in order to meet EU targets. You are cutting the money from the strategic waste fund—you have just said that there is less demand—so how can you achieve the necessary targets? Audit Scotland is warning you that the present level of funding is insufficient. You say that you want recycling to go up from 25 to 40 per cent within the next three years, but you are cutting the budget. How do you square that circle?

I remind you that Scotland is achieving its 2008 recycling target early, with an underspend in the previous strategic waste fund. Scotland has a really good track record of achieving its targets, and the whole Parliament should take credit for that—especially when we consider the track record on recycling before 1999.

From your question, I take it that you would not have been happy unless we had given a 50 per cent increase, as outlined in the Audit Scotland report. It was a good report with a lot of good stuff that we can all learn from, but we have to take into account what will be spent. There have been negotiations between the Scottish Government and local authorities on recycling and other ways of moving towards a zero waste society. The history of the strategic waste fund is one of significant underspend. We are therefore confident that our substantial waste funds will help Scotland to move towards becoming a zero waste society.

I would like to move on to my next question.

Does Des McNulty want to ask about waste before we move on?

Yes. I refer Mr Lochhead to the Audit Scotland report, "Sustainable waste management". The bar chart in exhibit 24 on page 36 shows clearly that the cost of recycling increases with the recycling rate. It was estimated in early 2007 that support for council recycling would have to increase from £89 million a year to £289 million a year in 2020. The view from your officials, experts in the field and Audit Scotland is clear, although you are right to say that, historically, expenditure has lagged. We will have to force the expenditure up in order to achieve our own targets and the targets in the landfill directive.

Audit Scotland says, in paragraph 156:

"The cost of increasing recycling rates will rise as Strategic Waste Fund investment moves from funding quick wins to areas where separate collections of recyclables are more expensive."

You have made quite clear commitments on those issues. You are right to say that we have made the targets up to 2008, but on the basis of your proposed funding allocation for next year and the projections for the following years, there is no way that you will be able to achieve your existing targets and EU directive targets on recycling.

Further, you have transferred significant amounts of money that were previously under the Executive's control to local government control. The actual budget that you know will go into dealing with waste is therefore about £41 million—using your figures. As I understand it, you have no control over what local authorities do with the notional allocation that you are transferring to them. I am not clear about how you will distribute that money among local authorities and whether you will take account of where the local authorities are with their waste and recycling arrangements.

Are you not in a complete bind? You have policy targets but the resources that you are putting in place do not relate to reality.

You have raised a number of issues that I am delighted to address.

First, under the spending review that is coming to an end, we anticipate that the waste fund will have spent £284 million. The new Government has allocated £349 million for the next three years. Therefore, we are clear that there will be an increase. It might not be the 50 per cent increase that the Audit Scotland report outlined, but Government has to take into account lots of reports and we cannot meet all the demands made in all the reports that ask for additional investment.

Can you tell me where in the budget the £349 million is? I would just like to have a concrete idea about that.

I will come back to that.

On recycling costs, I make it clear to the committee that the overall waste strategy has been discussed by the Government and local authorities in recent weeks and months. You have rightly illustrated that it becomes increasingly expensive to rely solely on recycling to tackle the waste issue, and that the higher the target we aim for, the more difficult it becomes to achieve. Clearly, there will be massive challenges to face, which is why we have to consider other solutions for the waste strategy so that we can tackle Scotland's waste mountain. Of course, reducing waste in the first place is at the top of the hierarchy.

It would be an error to direct all our resources and policies at tackling recycling—there are other ways of reducing waste. If we direct everything at tackling recycling, we will encounter the problems that you have outlined in relation to costs and the practical challenges of aiming at higher targets. Of course, there is a case for setting higher targets than those that we have just now. We are keen to discuss that with local authorities; indeed, we are doing so already.

You raised the passing of control over the waste budget by the Scottish Government to local authorities. The first thing to point out is the national outcome agreement between the Scottish Government and the Convention of Scottish Local Authorities. Secondly, single outcome agreements will be agreed with each local authority by the end of March 2008. Within those outcome agreements, the Government's national outcomes will have to be reflected in how local authorities use their resources; the original outcome agreement with COSLA also goes down that road. We will take that approach into account in reaching our single outcome agreements with each local authority in Scotland, which will cover how they will use the £65 million that is being given over to them.

If you are suggesting that local authorities are about to abandon their commitment to recycling and tackling Scotland's waste, I disagree with you. Many local authorities in Scotland see their waste strategies as a central way for them to fulfil their role in their local communities. I am confident that the resources that have been passed to local authorities will be used for that purpose.

Excuse me, but you have not told us how the money will be allocated to local authorities. There is a substantial spread among local authorities and how far they have gone with their waste management strategies. That reflects past allocations from the strategic waste fund. You have not told us whether the allocations for waste will be applied according to how far authorities have progressed with their recycling and related waste management arrangements, nor have we heard about a mechanism for doing that.

Let me elaborate. The £65 million that has been passed to local authorities is to reflect their existing commitments on recycling under their current waste strategies. The outcome agreements that we will sign with each local authority will reflect how that £65 million is used. The whole purpose of the £65 million is to fund the programmes under which local authorities are committed to fulfilling their obligations to meet the targets. I am not sure that I can be any clearer. There will be a local outcome agreement between the Scottish Government and each local authority in Scotland. The £65 million that has been transferred from the Scottish Government to local authorities is to allow them to meet the commitments that they have signed up to on household recycling and so on, so it will have to be reflected in the local outcome agreements. The situation is relatively clear to me; I am not sure how else I can explain it to you.

We have probably gone as far as we can with that question.

I welcome Sarah Boyack to the meeting. I appreciate that you have questions to ask about waste, but it is the committee's normal practice to wait until all the committee members have exhausted their questions before we bring in other members. I will try to get you in if there is time before the close of this question session. Jamie Hepburn and Karen Gillon have questions specifically on waste.

It is opportune that Mike Rumbles mentioned the figure of £26 million again, because it is a prime example of the overallocation—or the underspend, as the cabinet secretary referred to it—that I was talking about. Contrary to what Des McNulty said, I am quite confident that John Swinney would have no problem with my mentioning overallocation.

Cabinet secretary, you mentioned the concordat that has been signed with COSLA and the single outcome agreements that will have to be signed with local authorities. I imagine that there is no evidence to suggest that local authorities cannot deliver effectively on waste. Will the concordat and the single outcome agreements mean that we will be able to exceed the EU targets that have been laid out?

I like to think so, but I must be realistic and tell the committee that achieving the landfill targets represents a big challenge for Scotland. Many local authorities are struggling to achieve the landfill targets for 2010 onwards. We do not have a great deal of time to address that challenge. Early in the new year, I will make a statement about the next stage of the waste strategy so that, together with local authorities, we can do our best to achieve those targets.

We are talking about a challenge that the new Government inherited. We have been in power for only six months, whereas that challenge has existed for the past year or two; it did not appear only when we came into government. The achievement of the landfill targets for 2010 and 2013, which are laid down in tough European legislation, is a challenge for the whole of Scotland. We will have to find innovative and imaginative ways of achieving the 2013 target, in particular, which is attracting a lot of attention from local authorities. Part of the purpose of the statement that I hope to deliver to Parliament early in 2008 will be about setting out the way forward in that regard. Of course, the £154 million that we have retained for waste policy will play a role in meeting those goals, too.

Perhaps you could expand on that. According to Audit Scotland's report, "Sustainable waste management",

"Achieving the Landfill Directive targets will require increasing year-on-year spending on waste management at a time when the increase in public expenditure is likely to slow."

In your answers to Des McNulty, you said that there was no new money for local authorities. The money that they will receive is the money that has already been committed under existing waste projects. If there is no new money for them, how on earth do you expect them to fulfil their obligation to meet the landfill directive targets?

There is new money.

You just said that there was no new money.

Let me clarify matters, because you misrepresent what I said to Des McNulty. The £65 million that has been transferred to local authorities as part of the local government settlement is to meet existing commitments. There is new money—£154 million has been retained centrally by the Scottish Government for waste policy.

The Scottish Government must decide how to spend that money—we must decide where it is to go. In October, we had a waste summit with the local authorities at which we discussed the future of waste policy, and I will make a statement to Parliament early in 2008 on the future steps that we will take on our waste policy. We have £154 million at our disposal.

Audit Scotland asked you to increase the budget, but you have reduced it. Let us be clear. Based on the figures that we have, you have reduced the budget, although the Audit Scotland report said that resources should be increased.

You are referring to the budget that the previous Administration did not spend. It is clear that you could find a reduction if you compared the baseline now with the previous baseline, but the previous baseline was not spent. I am saying to you that, compared with what the previous Administration spent, a greater amount of resources for the coming three-year spending period is available.

If Audit Scotland says that a 25 to 50 per cent increase in resources is needed in comparison with the previous Government's budget and you reduce the baseline by taking out £26 million, you cannot by any stretch of the imagination run that as an increase in the budget. You cannot get away from the fact that the budget has been reduced. Whatever way you want to spin things, less money will be available to local authorities and the Government than there is currently to fund waste management projects, despite Audit Scotland's statement that the amount of money should be increased.

I am trying to be as forthright and honest with you as I can. I am not arguing with what you say about the baselines; I am making a very important point. Under our budget plans, more resources will be spent on the waste strategy in the forthcoming three-year period than were spent in the previous three-year period, because the previous Administration did not spend its baseline. It spent 69 per cent of its baseline. It is clear that our local authorities and the people of Scotland are concerned to see more resources spent on our waste strategy in the forthcoming three-year period than were spent in the previous three-year period. I am not arguing about what you are saying about the baselines.

So there has been a cut.

The baselines—

Okay. The minister has responded and presented things in one way, and Karen Gillon obviously takes a different view. Mike Rumbles wants to come back in on waste.

I was satisfied with the cabinet secretary's response to my question—he agrees with me. He accepted that the £41 million that is going to the zero waste fund means that there will be £26 million less than what the Scottish Executive has retained of the strategic waste fund.

In response to other questions, the cabinet secretary seemed to say that more money is available for spending. I want to ensure that we all understand the figures, and I would like things to be put simply. Some £132 million has been allocated to the strategic waste fund this year; £65 million has gone to local authorities and £65 million will go again to them. That is what you said, which is clear. The issue is the money that the Scottish Executive, or Government, is retaining, which has gone down from £67 million to £41 million. When you answered my question, you said that that was because there was less demand. Members are saying that the independent report by Audit Scotland states that spending needs to be increased by more than 50 per cent, but you will not do that. Is that right?

We are not increasing our budget in line with what is in Audit Scotland's report: we are not increasing it by 50 per cent. I am sure that the committee accepts that we cannot meet the demands of all the many reports that are published, given that the United Kingdom Government has given us such a tight spending settlement.

I want to make an important point.

We are very clear—

Let the minister answer, Mike.

There has been a substantial increase in local government's overall budget. It also has a role to play, which it has accepted, in moving towards a zero waste society. Therefore, not only have we the central budget of £154 million retained to deal with waste over the next three years and the £65 million a year that has been transferred to local government for its existing commitments, but there is also the overall increase in the local government budget to help with implementation of more ambitious waste strategies, should each local council wish to do that. A great deal more resources are available to tackle waste, if local government desires to go down that road. With its increased overall budget, local government has the flexibility to implement as ambitious a waste strategy as it wishes. That is local democracy in action—giving local authorities the choice to use the resources that are available to them in that way. Some budgets have also been retained centrally.

We could shift our whole budget under the heading of waste and not spend it. The previous Administration tended to have big waste budgets that it did not spend, but instead transferred the moneys to other budgets. That allowed it to talk about having massive baselines without spending the money. Within a much tighter financial settlement, we must be more realistic and set waste budgets that are in line with what we think we will spend. I hope that I have clarified our approach.

We should move away from waste and tackle other subjects. If there is time, we can return to the issue at the end of the meeting.

I would like the minister to give us additional published information.

If there is additional information on a variety of issues—not just this issue—that can be forwarded to the committee, I expect such information to be forthcoming. If we have time before the end of the allocated period, we can return to some of the points that have been raised. I am aware that Sarah Boyack, as well as Des McNulty, may want to do that.

I would like to ask my second question, convener.

I am sorry for losing track of that. We went so far down the road on waste that I forgot that Mike Rumbles wanted to ask about the new entrants scheme.

I am interested in the new entrants scheme for farmers. I will sum up quickly what has happened. In your manifesto, you promised £10 million annually over the six years of the rural development programme, which works out at £60 million. In your budget, that has been reduced to a total sum of £10 million over six years. In the evidence that we received from your officials, it turns out that the £10 million is not new money but will come out of the money that you have already allocated to schemes such as the agri-environment schemes. The officials made it clear that the money is not ring fenced and that the new entrants scheme must take its chances with every other scheme in the rural development contracts budget line. What guarantee is there that even one penny will be spent on a new scheme to encourage new entrants to farming? It seems to me that there is no such guarantee.

I can give the member the guarantee that he seeks: £10 million is ring fenced for the new entrants scheme in the rural development budget. I will give the committee the background to that. Members will be aware of the history of the rural development programme and of the fact that, when we came into government, we had to submit our programme to Brussels by mid-June. The decision was taken to allocate £10 million to a new entrants scheme, so that it could be included in the programme before it went to Brussels; we could not have included it at a later date without taking the state aid route. The £10 million is ring fenced within the rural development programme. Initially it will be for interest subsidies for loans that young farmers or new entrants take out. We have an opportunity to amend the rural development programme, so we will be able to amend the scheme once we have the outcome of our consultation on the barriers that new entrants to agriculture face. However, it was of key importance to include the scheme in the rural development programme as soon as possible.

The scheme has been widely welcomed by Scotland's agricultural community. It is the first of its kind in this country and is desperately needed, if we want to protect the lifeblood of one of our most important industries for the future.

I welcome the fact that the minister has confirmed that the funding is ring fenced. However, at last week's meeting his officials submitted a paper from the rural directorate that made the position quite clear. We also asked them about it. I refer to table 24.03 in paper RAE/S3/07/9/1, which is dated 21 November 2007. Can the cabinet secretary explain why his officials emphasised to us that the funding for the scheme is not ring fenced?

I would have to examine the note that officials sent to the committee and your interpretation of it. I cannot give more of a guarantee than I have given. We are committed to the new entrants scheme. A substantial amount of money has been allocated to it in the Scottish rural development programme. We will be able to amend the scheme, but we await the outcome of the consultation on the barriers that face new entrants to agriculture that the tenant farming forum has undertaken at our behest. I understand that more than 800 submissions from across Scotland have been made to the consultation and that public meetings have been held around Scotland.

The lack of support for new entrants into agriculture is an important and popular issue in our agriculture sector, which people in the sector think has been neglected for far too long. There has been a big warm welcome for the fact that the new Scottish Government is doing something about that.

I seek final clarification. Are you saying that the £10 million is additional money and will not be taken from the money in the agri-environment schemes that are already available to farmers?

As far as I am aware, there is no opportunity to take the money away from the agri-environment scheme.

You said only, "As far as I am aware". Is there an opportunity or is there not? You should know.

It is a stand-alone fund of £10 million for new entrants, which I guarantee will be available for new entrants schemes if there is a demand for it. What else can I say to you?

You can tell me whether the money is new or whether it has come from available money that is already going to farmers under the agri-environment schemes. That is a simple question.

It is new money because we increased the overall rural development budget by £70 million, of which £10 million is for this particular scheme, when we submitted the scheme to Brussels. You might remember that we also contributed £60 million to reduce the level of voluntary modulation. The extra £10 million is for the new entrants scheme. The overall rural development budget increased by £70 million.

I advise members that we have outstanding a letter to the tenant farming forum. The minute the TFF has finished its consultation, it will have to respond to us giving detail of how things will work in practice. There will be a second opportunity for the committee to examine this issue with perhaps more useful detail from the forum.

Two weeks ago, we discussed at length with the minister's officials funding under the rural development contracts programme. At that point, we were assured that the £10 million was in that budget line. We now have a funding table that shows that on-going payments for 2008-09 are £69.68 million, leaving £29.74 million available next year for new agri-environment schemes or organic aid schemes—everything else that comes under that heading. Are you suggesting that £10 million of that money is ring fenced for the new entrants scheme and that there is £19.74 million available for everything else?

Alternatively, is there another budget line that has not been shown in the papers from your officials? The paper that I have for agenda item 1 has a list of different budget lines. At no point is there shown a £10 million budget line for the new entrants scheme separate from the rural development contracts budget line. We specifically asked these questions last week. We were told that the money was in the rural development contracts budget. Therefore, only £29.74 million is left after money has been committed. Are you suggesting that, in actual fact, only £19.74 million is left?

I am giving you a guarantee that there is £10 million—

That is not the question.

I will ask Ingrid Clayden to explain the figures to which you are referring.

I am not sure that I can explain the figures. I will go back a step and explain the issue around the ring fencing. The budget as set out in the rural development programme document identifies €14.7 million for setting up for young farmers. My finance colleague will perhaps be able to convert that figure quickly to pounds—it is roughly £10 million. The expectation is that that will be spent. The delivery mechanism for that spending is through rural development contracts.

So, of the £29.74 million that is available for everything under rural development contracts, including agri-environment schemes and organic aid schemes, there will be only £19.74 million left for everything else. That is based on the figures that we have in front of us.

I will have to look at your figures and get back to you.

They are your figures, minister. This is an important issue, which we have been pursuing in Parliament over the past six months; it is about the number of farmers who are about to finish their agri-environment contracts and the level of need to enhance and support developments in organic farming. If the figures that you have given us are correct, we are facing a substantial reduction in the amount of money that will be available for new agri-environment schemes. It is a fundamental question to which the minister would, I imagine, have the answer.

There are additional resources for agri-environment schemes, and I will come back to you once I can—

What additional resources?

I want to consider what you are saying here—you are highlighting an important issue. I am undertaking to come back to the committee.

I do not know whether you have in front of you the budget briefing note that was provided by your officials.

Yes.

The table at the bottom of page 2 shows the rural development contracts budget line, which is broken down into subsidiary lines. However, it is not broken down to the level of the new entrants scheme, for instance, which is part and parcel of this discussion.

Over the page is a heading, "New Entrants Scheme". It says:

"Provision for the New Entrants Scheme is included within the RDCs (RP) budget line."

That is what is giving rise to concern and a desire for clarification of what that all means. That note was provided directly to us by your officials.

The point here might be that the figure that you are looking at is a three-year figure and the £10 million figure is for the whole of the rural development programme, which is over seven years. Even though it is under the same budget heading—

So it is not £10 million a year.

It is not £10 million a year, no; it is—

It is not £10 million a year? But—

I never said that it was £10 million a year.

Has there been a misunderstanding here from the start?

I never said that it was £10 million a year. There is £10 million in the rural development programme for new entrants. The rural development programme is a seven-year programme. The figure that you are quoting to me is a three-year figure; the £10 million is for the whole rural development programme. Clearly, we can adjust the £10 million and the extent to which it spreads over the seven years. As it stands, however, it is for a seven-year programme.

So it is roughly £1.5 million a year for the new entrants scheme.

If it is spread evenly.

Yes—if we assume an even distribution.

I understand what you are saying now. I am looking at the figures that you are quoting. You are quoting one year's figure from a three-year programme. The table is for three years, and you are quoting one figure of £29.74 million. The £10 million for new entrants over seven years—

That is only £1.5 million each year, roughly.

Right—you can work that out.

That is fine.

So instead of taking £10 million off the £29 million figure, it is one point something million pounds.

The principle is the same, however. That one point something million pounds over the next three years is coming out of money that has already been allocated to agri-environment schemes. That is what we are trying to get out of the minister.

I think that the minister said that that was not the case; he said that it was extra money.

It is new money, is it? That is not what he just said. It is additional to the money that has already been allocated to agri-environment schemes and other schemes, is it?

The £10 million was added into the rural development programme.

Not "added into"—

It is therefore extra money.

Right.

I am not sure how I can answer that in any other way. It is new money.

And other schemes are not being reduced.

No. The £10 million is new money. Therefore, the overall budget has increased.

Fine. That is helpful.

There has been some clarification, then, after a misunderstanding.

If we are done with the new entrants scheme, we can go to Jamie Hepburn for some other questions. After that, we will have Peter Peacock—although I notice that he is down to ask questions on subjects that might already have been dealt with. Peter is indicating that they have not yet been dealt with as he wants.

I had a question about the rural development programme, but the cabinet secretary has already provided a useful answer to Bill Wilson, who raised the subject of forestry. My question was largely the same, although a further question arises from it. Bill Wilson's question sought to underline the importance of the environmental perspective of the Government's plans to increase forest cover. We obviously welcome your saying that that is of huge concern and forms a huge part of the plans. I presume that there will also be a commercial imperative. How important will that be as part of your plans to increase forest cover?

The commercial imperative will be central. I am getting feedback from the industry suggesting that there be greater emphasis on the commercial sector in the future forestry strategy. That is something that we are taking seriously. Forestry, of course, has multiple benefits, including health benefits—next week, the Minister for Environment will lead a debate on forestry and health, which will emphasise the fantastic links between those two areas—environmental benefits and the wider social benefits. However, we would like the economic benefits to be at the centre of our future forestry strategy. We are actively considering that and will bring our plans to Parliament in due course. The commercial aspect is extremely important.

I presume that the quite large increase that you project will be able to cater for all the environmental, social and commercial benefits.

Certainly, it will. As Jamie Hepburn may know, the Forestry Commission sells land each year and purchases new land on which to grow commercial trees, largely. That is at the heart of their strategy. We have to ensure that the overall forestry strategy takes into account the commercial aspect, given the importance of forestry to the economy.

I also have a question on investment in the energy sector, particularly in relation to the climate change challenge. How has the energy sector—particularly the parts of it that are involved in renewables—responded to the budget? I am aware of the suggestion about a saltire prize and of the increase in funding for community renewables and microgeneration. What has been the sector's response to those initiatives?

From what I have seen, the sector has been encouraged. Of course, John Swinney, the Cabinet Secretary for Finance and Sustainable Growth was giving evidence to the Finance Committee yesterday and, no doubt, addressed the subjects that you ask about. The fact that the microgeneration budget has been trebled has been warmly welcomed. As we have seen from developments over the past few years, when budgets have run out and have had to be topped up, there is an increasing demand for microrenewable generation in Scotland. I know that there is cross-party support for it, and that it has a major role to play.

On forestry, which we were just talking about, Michael Russell and the industry have been working on the wood fuel strategy, which has huge potential. Our rural communities can benefit a great deal from renewable energy, particularly from biomass. I hope that we can develop more energy partnerships in our communities. Again, we are considering ways of encouraging that in the future because such partnerships enable communities to take control of their own energy needs and to accrue economic and fuel benefits. Biomass generation is linked to the forestry strategy. As members know, our approach to government involves an attempt to ensure greater joined-up thinking. Ministers are not in silos—they must work together to achieve their strategic objectives. In terms of forestry, we have to consider not only health policy but also energy policy. We are trying to join up all of our objectives.

You mentioned that communities will be able to hook in to some of the funding and to develop energy partnerships. Do you have specific information about how communities, energy companies and companies that might establish themselves in the renewables sector will be able to hook in to that funding?

In the rural development programme, there will be various headings under which communities and rural businesses can apply for energy-related projects. Climate change and renewable energy will be themes throughout the rural development programme. Again, there will be regional priorities and regional assessment committees, which will consider the extent to which they want to promote such things in their areas.

The subject is complex, so a lot of work is being done to establish how we can ensure that the regional priorities also take account of central Government's national outcomes. The rural development programme can be used for renewable energy and climate change initiatives, and we have to encourage that.

As you know, the committee is holding a flooding inquiry. Last week, we split into two groups and visited various locations. One thing that I learned was how long it can take for flood defence improvements to be put in place. Des McNulty, Mike Rumbles and I were told that Glasgow City Council has been trying for years to put in place SUDS ponds—sustainable urban drainage systems—in East Renfrewshire. The ponds could still be a few years off. Flooding is a huge problem that offers huge challenges. How will the Government rise to those challenges in its budgeting and in its more general plans? What measures will be put in place to hurry along improvements?

The motivation behind our proposed flooding bill is slowness in getting flood alleviation schemes off the ground—the process is notoriously difficult and bureaucratic. I represent a constituency that is severely affected by flooding, so I know how frustrating it can be for local communities and the local authority. The convener and other committee members also represent areas that are affected by flooding.

As members know, Michael Russell has been working on a flooding bill. It is therefore encouraging and helpful that the committee is holding its inquiry.

Our flooding strategy comprises two or three elements. First, work on the flooding bill will consider the process for getting schemes off the ground. The current process is antiquated: it dates from the early 1960s and we are now in the 21st century. Because of climate change and other situations, we will have to get on top of the timescales and be able to respond quickly to threats of flooding.

Secondly, we will be building in a more sustainable approach to flood management. That will be part of the bill. We need concrete solutions, but they will have to be sustainable, as well.

Thirdly, we have to consider investment. The Scottish Water budget should not be forgotten. It will be important because many problems of urban flooding relate to the drainage systems in our cities and towns. The work comes under our portfolio, with the flooding bill, and it comes into the remit of this committee, with all the good work that you are doing with your inquiry, but Scottish Water issues also come under other portfolios. That is how we are approaching the issue. It is important in the 21st century.

I want to ask about flooding and coastal protection, picking up on points that Jamie Hepburn raised. We have received helpful information from your officials, but inevitably that has raised more questions than it has answered.

Jamie Hepburn said, and you and I would agree with him, that flooding is a growing issue; indeed, you had a flooding summit earlier in the year. However, when your officials were here we established that there is no increase in spending on flooding. Perhaps more important, we established that nowhere in the published national indicators or targets is flooding or coastal protection mentioned. Why is that? Is that not a pretty significant omission if flooding is such a growing issue? Will you reconsider, and will you ensure that a national target is set for flooding and coastal protection?

The spending review sets out 45 indicators, some of which have to cover quite a number of issues. I hope that all members agree that preventing flooding is part of keeping communities safe and of tackling climate change. We will continue to review all the targets, and our outcome agreements with local authorities will be important. Our outcome agreement with COSLA is already in the public domain. Outcome agreements with individual local authorities will also address flooding issues. Members can rest assured that flooding is high on the agenda.

I take the point that there is something in the national outcomes about living in safe places, but I am talking about the national indicators and targets that are part of the concordat with local government. There is no mention anywhere in them of flooding. If flooding is such a national priority, why is it not a target or indicator that we can use to measure how local authorities are doing?

Well, you made your point, and I answered it. No one who is looking at the fact that the new Scottish Government is introducing a flooding bill in its first tranche of legislation would say that it is not taking the issue extremely seriously. One of our first acts was to hold a flooding summit, and I assure the committee that the feedback from Scotland's local authorities and communities affected by flooding is that the Government is taking the issue extremely seriously. It is high up the agenda—the proof of the pudding is in the eating.

I accept the point about legislation, which I agree needs to change. However, I am talking about how we will measure progress as we move forward.

I will move on to a second point. Given what I have said, what are your national priorities for flooding apart from the legislation? Or, given that in the next three years you are divesting your cash to local authorities through the local government settlement, are we seeing a move from national priorities to local views about flooding schemes? What is the relationship? Given that in three years' time you will not have any of the cash in the budget in your own hands, what levers will you have to influence from a national level what is happening at a local level, where needs may be particularly high?

Many of those issues will be addressed in the flooding bill and, indeed, in the committee's inquiry on flooding. They include the role of and legislative tools available to central Government and flooding policy in general. Funding is one element, but many others are still with central Government. That may change or they may be bolstered in the flooding bill. That will all happen in the next weeks and months, and the views that the committee takes on central Government's role in flooding policy will have a big input.

Are you hinting that the policy that you have adopted as part of the concordat with local government and the shift away from ring-fenced funding may be reversed by the flooding bill?

I am not suggesting anything, because the consultation and the committee's deliberations in the flooding inquiry—to which we will pay extremely close attention—are all still to happen. It would be silly of me to sit here and pre-empt what the flooding bill will say. I do not want to do that, and I am sure that you understand why.

Let me comment on the relationship with local government. Local authorities have warmly welcomed the concordat. The transfer of flooding funding from central to local Government was agreed with them, and we hope that we will have a much more productive relationship. We are giving a lot more respect to local government and we want local democracy to be enhanced. That is why the concordat and the new responsibilities and funding passed to local government have been so warmly welcomed. We are trying to have a better and more productive relationship with local government and we want to give local authorities more of a role in shaping the destinies of their communities.

I understand the principles behind that, but if you do not have enough cash to do what you want locally, that will cause a problem. Will your policy not remove from central Government the ability to support local areas to achieve major objectives that are also, arguably, in the national interest? I will come on to how cash will be distributed under the new system, but, considering the principle of the policy, are you not just removing from yourself your ability to have an impact at a local level when it is necessary to help local communities overcome problems?

As things stand, prior to the flooding bill and the committee inquiry, the answer is no. The legislation ensures that a lot still lies at central Government level, including applications for flooding schemes, the planning process and so on. Our influence is still substantial. You are understandably concentrating on the funding, which has been transferred to local government, but nothing else has been transferred as we speak. It is up to the committee's inquiry and the flooding bill consultation to come up with ideas if they think that the system should be changed. As cabinet secretary, I am certainly not going to sit here and pre-empt the consultation and the committee's work on the flooding bill.

Let us move on a bit further and discuss the distribution issues. When we had your officials before us a couple of weeks ago, they offered a list of schemes that will no longer be ring fenced, but earmarked. I am not entirely sure what the difference is; however, there will be earmarked funds for the first part of the spending review and your officials listed the local authorities that will be involved. The clerks asked for the same information in a letter last week, but that has not been provided. Can you provide us with information on the funds that are going to the local authorities that were mentioned at our previous meeting—Glasgow City Council, Falkirk Council, City of Edinburgh Council, North Ayrshire Council, Fife Council, Moray Council and South Lanarkshire Council? Can you give us those figures today?

I will address that in a second. Discussions are taking place and will continue over the next few weeks between the Scottish Government, COSLA and local government. Commitments to the schemes that have already been agreed will be honoured, and there is no reason to suggest that COSLA or local authorities will disagree with that. Why would they do that? I have no doubt whatever that, once the outcome agreements between central and local Government are signed, everyone will agree that the schemes that have already been given the green light will continue and will be funded.

At the moment, the discussions centre around the need to ensure that the flooding resources that are passed to local government are used for flood prevention schemes to meet the demand that exists. As you may be aware, there will be a 29 per cent increase in the flooding funding that is passed to local government over the spending review period. That is a reasonable increase. Indeed, the funds that will be passed to local authorities will be roughly two to two and a half times what was spent in the previous spending review period, as there was an underspend in the previous funding baselines for flooding.

We expect that, under the agreement with local authorities and COSLA, the flooding funding that is passed to local authorities will address those areas that are most at risk from flooding.

Can you give me the cash figures for each of the local authorities that is involved? I will then pick up those points, if I can.

I understand that around £40 million has so far been committed for around seven schemes.

Can you give us a breakdown of those? That is what I am asking for.

I will come back to you with a detailed breakdown; I do not have it in front of me at the moment.

Can you do that today? Can we get that information today, if it is available? Your officials offered it two weeks ago and we asked for it again a week ago. Can we get it today?

We will get it to you as soon as we can. You will understand that we are still discussing the issues with local authorities and COSLA.

I am not talking about future plans; I am talking about the decisions that you and your officials said have already been taken.

Yes, I can get information to you on the schemes that have been given the green light, if that is what you are after. I do not have that information in front of me, but I am happy to send it to you.

That is absolutely fine.

I would like to pick up on two things that you just said that are contradictory. You said that you will come to an arrangement with COSLA that will ensure that the funding that comes from the flooding budget, which is now passing to local authorities, will be ring fenced for flood prevention measures. You then said that, in the future, you want a distribution mechanism that ensures that the flooding funding goes to those authorities that have the greatest need. Those are not the same thing. Which is it?

I did not say that they were the same thing. Also, I never used the term "ring fenced".

In fairness, I think that you said that the funding will be used only for flooding.

We expect a formula to be agreed between local government, COSLA and central Government for the distribution of the flooding funding that is passed to the local authority budget from central Government.

That is ring fenced, then.

No. That is the formula for the allocation. The Cabinet Secretary for Finance and Sustainable Development will allocate a budget to each local authority in Scotland. The element of the flooding budget that is passed to local authorities will reflect the level of flood risk that each local authority faces. We expect the formula for that allocation to be agreed between local authorities, central Government and COSLA. Once the money is allocated to local authorities, because it is local authority money they can choose to spend it on something else if they so wish. That is why I am not using the phrase "ring fenced". However, I am sure that Moray Council, for instance, will use its allocation of flooding funding on flood prevention schemes, and I expect that most other local authorities in similar situations will do likewise.

I completely agree that that will be the case with Moray Council, but my difficulty is that Moray Council might not have enough to spend on what is a huge need. That is an issue to which I will return.

From what you have said, the distribution formula has not been agreed, yet the Cabinet Secretary for Finance and Sustainable Growth is due to make a statement to Parliament next week on the distribution of cash to local authorities so that they can decide their budgets. Will the distribution be agreed with local authorities within the next week?

Clearly, the Cabinet Secretary for Finance and Sustainable Growth is directly involved in those discussions. I am happy to ask him to contact the committee with more details. I do not want to start straying into his negotiations with local authorities on the local government settlement.

Your written submission for today's committee meeting suggests that your desired criteria for the distribution to come will include—there are two parts to this—earmarked funds including

"schemes submitted by the SR date".

Does that refer to the date on which John Swinney made his statement on the outcome of the spending review?

I did not suggest any particular date—

I refer to the written submission that we received from your officials following last week's meeting. I refer to the foot of page 9 of paper RAE/S3/07/9/1.

Come back to me if this does not quite answer your question. I am saying that, because a number of schemes have already been given the go-ahead, we recognise that that funding must be honoured. We need to agree that with local authorities and with COSLA.

I completely understand that and I agree that that is the sensible thing to do. I am just trying to establish what the spending review date is that is referred to. It is important. Does "the SR date" refer to the date on which John Swinney made the announcement? In other words, will a scheme that was not submitted by that date not qualify for earmarked funding?

I will ask John Mason to clarify, as the letter was drafted by officials.

I want us to move on quickly. Another member wants to ask about efficiencies and I am trying to ensure that Sarah Boyack is not crowded out.

These are important issues.

I remind everyone that we have a flooding inquiry, during which some of this detail can be gone into again.

The matter is also important for the budget.

I invite John Mason to clarify the timescale for the schemes that will be taken into account.

We will provide details for the schemes that have already been committed, where they are and what amounts have been allocated to them. We will also provide a list of those schemes that are confirmed and ready for construction—that list is mentioned in the first bullet point in the paper—and a list of those schemes that we expect will be submitted for application by the end of this financial year. Those are the schemes that we expect to fall within the criteria.

Will schemes that may still be submitted but were not submitted by the spending review date still be considered for decision by ministers? That would add to the earmarking that has been indicated.

As I said at the previous committee meeting, we asked local authorities to give us a list of all flooding schemes that they expect to undertake and we have received that list. As the cabinet secretary mentioned, we are working on how to take all those known schemes forward in terms of the allocations.

The point that I am trying to establish is that that means that some decisions might still be made. Therefore, more of that £42 million could be earmarked into the spending review period. It might not be, but it may be.

It could be. The £42 million was our best estimate of what we expect to receive.

So the door is not yet shut, contrary to the indication in paper RAE/S3/07/9/1.

Okay, I think that that is clear.

Can I make just one final point?

Is it on the same subject? We will run out of time and you will crowd out your colleague Sarah Boyack if we do not move on.

The point that I want to put to the cabinet secretary is that it seems to me that our current system in Scotland is pragmatic and tends to work in the sense that local authorities—in particular, those that have a small tax base and low population levels but high levels of need—can undertake major works such as those that were previously undertaken by Perth and Kinross Council, those that Moray Council needs to undertake now and those that Western Isles Council will need to undertake in the Uists in future. The current system is pragmatic and it works. The cabinet secretary is in the process of changing that policy to divest funds from the centre to the local authorities. Whatever distribution mechanism is arrived at will result in some anomalies, so some local authorities will be very challenged to undertake the schemes that are required. Is this not just a silly policy? Is it not time to reflect on all this and to say to local authorities, "Look, we know that we want to"—

Peter, can we get to the point? I am trying to move us on to allow other colleagues—your colleagues—to participate.

My point is that it is time to say that this is a silly policy and that we should reverse our thinking. We should retain the funds at the centre so that we can continue nationally to support local areas to undertake major objectives that they will otherwise struggle to achieve under the new arrangements.

I whole-heartedly disagree with that. First, the policy has not been foisted on local government; it was agreed by local government with central Government and has been welcomed by local government. It is important to get that on the record, because you suggest that central Government somehow wanted to get rid of the responsibility and foist it on to local councils.

On the issue of small councils, I know that Moray Council is heartened by the way forward. I do not agree with your point that small councils will lose out—that is a fundamental point. I would like to know what your evidence is to support that claim. I saw the press release that you put out after my officials appeared before the committee. It states:

"the inadequate level of grant funding will be distributed to all councils irrespective of whether they have severe flooding problems".

There is no evidence for that. That has never been the case and, to my knowledge, there has never been any evidence that that has been the case. Moray Council responded to Peter Peacock's press release, which I must say was issued on the day when people were putting sandbags outside their houses because of the threat of flooding.

They are the people whom I am concerned about.

That was irresponsible and may have left those people with more anxiety. Moray Council's response to Peter Peacock's press release states:

"The Council received an assurance from COSLA that we would have their support in ensuring that the money for flood defences would be allocated in the same manner as at present, i.e. where councils have been awarded a Flood Protection Order. Effectively, this would leave the council in the same position as before the recent changes."

It misrepresents the situation to say that small councils will lose out under the new arrangements. Small councils welcome the new arrangements.

I think that we have had enough on that issue. We still have a few minutes to go. Des McNulty has some specific questions on efficiency savings. If he confines it to about five minutes—that is for the question and answer, Des—Sarah Boyack will be able to get in for a few minutes at the end.

I simply want to ask where the efficiency savings will be sought in the rural affairs and environment portfolio and what their impact is likely to be. Is the Government seeking lower costs, improved outcomes or some combination of the two? Can you be specific about that?

Thanks for the question, but it is a general one, so I will have to give a general answer. We are seeking 2 per cent efficiency savings throughout Government. The money will be reinvested in services and in meeting the Government's obligations. South of the border, the figure is higher than 2 per cent, but we have gone for 2 per cent because of the tight financial settlement here. If memory serves me correctly, agencies within our portfolios have already exceeded the efficiency savings targets that were set for them last year. It is clear that the public sector is up for making efficiency savings.

I will avoid generalities and cut across the matter. The Finance Committee in the previous session of Parliament asked the previous Administration for identified efficiency savings, almost project by project. Will you produce for us in writing information on the mechanisms through which you will achieve your efficiency target, project by project, so that we can examine how that will be done?

That is a more detailed question, therefore I am happy to give a more detailed answer. We propose to publish our efficiency delivery plans early next year. The committee will have an opportunity to review the plans then.

On a related subject, the budget is expected to contribute to 26 of the 45 national indicators and targets that you hope to meet. How will you measure the success of the budget over one-year and three-year periods?

That is a fair question. The issue is a huge challenge that faces all Governments. The performance framework in the budget document lays down our approach to measuring the success of our policies and how we spend our budget. You mentioned the 45 indicators. To reiterate what I said earlier, it is important to emphasise the Scottish Government's new approach to policies and expenditure. For instance, the aim is for environmental expenditure to meet not only environmental indicators, but a range of indicators. All our policies and expenditure should meet the Government's five key strategic objectives. For instance, our food policy should address our health, environmental and economic indicators. As many of our policies as possible should address as many of the indicators as possible. Of the 45 indicators, perhaps 26 relate directly to our portfolios, but all our policies and expenditure should address as many of the 45 as possible.

I appreciate what you say, but much of the analysis looks as if it will be fairly subjective. Will there be an objective analysis of the outcomes?

Much work is being done with programme boards, which comprise senior civil servants. All boards have delivery boards or committees, whose job is primarily to put meat on the bones of the indicators and how we measure success. We are six months into government and we have an ambitious performance framework. Much work is being done to address the questions that you have asked.

One question that has not been asked and which I thought might be asked is about the rural development programme. There is an analysis of the criteria by which regional decisions will be made. Will each region have a pot of money about which it can make decisions?

No—there will not be a pot of money as such. The regime was formulated under the previous Administration, but we agree with the principles that lie behind it and we are doing our best to put it into practice. One tricky exercise is balancing regional priorities with overall budgets. Much work is being done on that.

That is fine—I wanted to know whether regional budgets would exist; you have said that they will not. The budget will be national and decisions will be taken regionally and moderated nationally.

Yes—as much as possible.

You will have guessed from Peter Peacock's questions that some disappointment is felt about your approach to flooding. I will ask about the process of river basin management planning. If a local authority has the potential to undertake a flood prevention scheme, what is the incentive for it to do that when the downstream flooding problem is in a different local authority area?

That is a good question.

From the river basin management work that is taking place, do you have a take on which authorities will be affected by such issues?

No—I do not have that to hand. We are interested in the subject and we are taking it into account in the work on the flooding bill. We must ensure that all that work is co-ordinated. I do not have a list in front of me, but I am happy to write to the committee with information on the local authorities that are most affected by river basin management plans, if that would help.

That would be useful. Such planning was seen as a regional issue rather than an issue for separate local authorities, because flooding issues do not respect political boundaries.

I can make a general statement. One tenet of the new flooding bill will be sustainable flood management, which involves considering the holistic management of the whole river basin. The flooding bill will deal with that and with arrangements that might be sensible for local authorities that are affected by a single river system.

It may help Sarah Boyack to know that the approach will be a key issue in our flooding inquiry, because it has been flagged up several times.

Sure—I was trying to tease out the question, because we could be going in the wrong direction with the allocation of money to continuing policy development in the Executive.

Richard Lochhead talked about money that would be reserved to the Scottish Executive for the national waste strategy. How will that money be spent? I presume that plans are quite firm for 2007-08. I am trying to tease out the issue of waste reduction and recycling. Some local authorities have worked together to develop schemes, but you now expect them to work individually. Has the regional approach been abandoned? Given that the Scottish Executive and not local authorities would be fined, how will local authorities be accountable to you for meeting the European landfill directive targets?

The debate is interesting and challenging, given the targets that we must achieve. We addressed some of the issues earlier. As I explained, I will make a statement to Parliament early in the new year that will set out our thoughts on how central Government will use the waste budget. We recognise that we will fund community sector initiatives from the centre. One of the most challenging decisions facing the Government is how Scotland should deal with its residual waste—I am sure that the committee is aware that it is a controversial issue—and the role that generating energy from waste can play is central to that debate.

There will be no shortage of demands on our waste budget at central Government level, but local authorities will have the flexibility to decide how to influence local waste strategies.

Are you saying that you might still fund projects in the regional strategic waste areas that grouped local authorities together, rather than letting that responsibility go to local authorities? I seek clarity about the division of responsibility.

If the Scottish Government chooses to fund regional projects, it will lay down its criteria for doing that. Central Government will have that influence. I will announce the way forward to Parliament early in 2008, so I am not in a position to do that now.

Are local authorities already working up indicative projects that, as with projects on flooding, were not agreed by the date of the spending review? It might be useful for us to learn about the range of projects that are being worked up by the regional waste management areas and to see whether there will be increased demand for expenditure or whether it is expected to be stable for the next three years.

The most pertinent issue now is the two residual waste projects. Outline cases have been put forward by the consortia of local authorities both in the Lothians and in Lanarkshire. One outline case has just come in and we expect the other to come in shortly.

It would be useful to see those projects' funding expectations and to see, in relation to my first question, the national expenditure on waste reduction. If that is to be a key part of the new Government's priorities, it would be interesting to see how you expect to spend that money over the next three years, given that in the past few years much of the emphasis has been placed on funding organisations such as the Waste and Resources Action Programme or looking at recycleit markets. I presume that all the resources have been allocated for the next financial year, but it would be useful to see that budget line.

I am happy to write back to the committee on that. I would welcome the committee's input to our future waste strategy, if the opportunity arises—I know that it has a lot on its plate. We have to make some big decisions in the months ahead as a society, and any input from the committee would be welcome.

Before we wind up the discussion, I ask you to resolve a slight contradiction that has emerged. In your response to Mike Rumbles's questions, you talked about a lessening of demand on the waste budget, but you have just talked about a huge increase in demand on the waste budget. You may have been talking about slightly different things, but it might be worth clarifying the issue. I do not want to extend the question-and-answer session, but it would be helpful if you could clarify the slight contradiction.

There is a difference between demand for resources to deal with waste and the timescale for when the funds should be allocated and spent. For example, whatever way we look at it, there is a demand for significant expenditure to deal with residual waste in Scotland, but I think that we would all agree that it is unlikely, although we do not quite know yet, that the expenditure for residual waste treatment facilities in Scotland would come out of the three-year spending review. The resources might come out of future spending reviews or whatever. It is a matter of timescale versus demand. I hope that that clarifies the issue.

I thank the cabinet secretary and his officials. I am aware that the cabinet secretary has a further evidence session to go.

I ask the committee to agree that consideration at our next meeting of a draft report to the Finance Committee should be taken in private. Is that agreed?

Members indicated agreement.

There will be a brief suspension, to give members a break and allow a changeover of witnesses. I ask everyone to be back by 11:39.

Meeting suspended.

On resuming—