I welcome members, the press and the public to the 29th meeting in 2005 of the Finance Committee. I remind everyone to turn off their pagers and mobile phones. Wendy Alexander will be at committee this morning—she is just outside the room for the minute—which means that all our members are present for the meeting.
Thank you. I have obtained a copy of the Executive's document on management of public finances, which links to our concerns about economic growth. The Executive says that the devolved Scottish Government's expenditure supports the Scottish economy in several ways through the provision of public services, which support and raise growth; investment expenditure on infrastructure, which also supports growth; the multiplier effects, which generate demands for goods and services; and the direct provision of employment and income. The Executive sees the management of public finances as an important element of its work.
Will we let the Administration know of our proposed timetable? You said that it had not responded, but if it knew that we were timetabling our programme, that might help to concentrate minds.
If we agree to the proposal, the paper will be on our website, so the Executive will be made well aware of the timetable to which we are operating. Arthur Midwinter will talk about resources.
The Executive had not responded only to the request that we made last year for access to best-value reports; this exercise is different. We would of course have to operate selectively and to consider only a specific range of documents within each area, but I have no doubt that I could do the fieldwork to the required level. If that turned out not to be the case, the decision whether to go further on the basis of the early work would be for the committee. However, I know from experience of working with Executive officials that they are good at giving me access to the most relevant documents, so I am not worried about not being able to give the committee a worthwhile report.
One of the things that we are trying to do to deepen our already impressive credibility as a committee is to engage the wider financial community in Scotland. Every one of the five major accountancy firms in Scotland now has a dedicated public services partner who, in effect, works exclusively with the Scottish Executive. All those partners have experience of working on an individual programme. I have the names of the individuals at PricewaterhouseCoopers, Ernst & Young, KPMG and Tribal HCH, but I do not know the individual at Deloitte & Touche.
I am not sure whether, under the legal contract that those individuals have with the Executive, there would be any constraints on their talking to me in detail about what they have done. However, there would be no difficulty in their talking to me about the general process.
Exactly. They could talk about the potential of linking budgets to outcomes and where they have reached in much smaller areas. We want their insight. This is clearly not going to be a report that has all the answers, but it will point to a way forward. If we were to corroborate our findings with those of professional advisers in the Scottish firms, who could tell us what they thought was possible, that would add a different dimension to our performance management work.
A lot of the option appraisal work is contracted, so it would certainly be worth our while to do that.
This is not the first time Wendy Alexander and I have been on the same wavelength—I am delighted to hear what she has said. As well as taking evidence from Executive officials, I would like to broaden the oral evidence to include the individuals that Wendy suggested. One of the questions that were left by the announcement of the independent budget review group was about the degree of private sector involvement in that exercise. The people who were initially announced all had deep local authority or public service backgrounds, although it was subsequently announced that private sector input would be sought. We should not conduct our inquiry without private sector input to the background research by our adviser and in formal evidence on the record in relation to the conclusions of the research.
That would add to the value of the exercise.
Arthur Midwinter emphasised the importance of pre-expenditure assessments. The landscape for such assessments has been changing because of, for example, the Environmental Assessment (Scotland) Bill, which will transpose the European directive on environmental assessment into Scots law. The appraisals that I am familiar with, such as those under Scottish transport appraisal guidance, include value for money as one of a number of elements. Will you consider the whole pre-expenditure—
I will look at the whole framework. Equalities need to be taken into account, as do sustainability and many other issues. I will include all dimensions and report to the committee on the merits or otherwise of the framework that is in use.
I have a couple of questions. In carrying out the review it is legitimate to ask what would be needed for there to be a process of continuous improvement. I note the comment:
It is interesting. Without revealing who I have been working with in local government, I will say that a council has a baseline on spend and a baseline on service standards. It monitors the data over a five-year period and is required to demonstrate continuous improvement. The limitation is that of the 75 indicators suggested by the Accounts Commission, only about 12 are what you would call outcome measures. There are a lot of process measures, just as there used to be in the Scottish budget, which we complained about. However, as a basis for going forward that process is fine.
In addition, what steps can be taken to strengthen and increase the openness of any after-the-event assessment? An interesting contribution was made to the debate recently by Bob McDowell, a Scottish Enterprise international advisory board member, who has just written a highly persuasive book on the subject.
We might want to consider that when we take evidence. The issue that I am most concerned about is the fact that the most systematic sources of after-the-event appraisals have not yet been published in the best-value reviews, whereas for all other public organisations they are required to be published and are published readily. We can usefully include that in the exercise and, I hope, in our recommendations.
I have two points. First, we should focus on procurement issues as a subset of the efficient government initiative, given that it is intended that a high proportion of savings will come from procurement. John McLelland has worked on procurement for the Executive. He is likely to complete his report during our review, so perhaps we should target him for evidence. His report might fit in with what we are doing.
The Chancellor of the Exchequer's statement yesterday on progress on the efficient government programme in England focused heavily on the scale of gains through procurement. We will certainly have to consider that issue. I am not sure whether a decision has been taken yet, but there will be a performance report on the partnership agreement at some stage. From memory, the review in the previous session of Parliament was not particularly helpful; it simply said that the Executive was either on course, had missed a target or had got there—the report just ticked boxes, which is not adequate if we are trying to evaluate what is going on. I will certainly make an effort to clarify the Executive's intention on that, but for me that is less important than the other element that you spoke about, which was the need to link policy, resources and outcomes in the budget with the policy documents. Many of the partnership agreement commitments are straightforward and do not even have outcome consequences; they simply say that the Executive will take certain actions. However, if the issue is a source of confusion, we should certainly consider it.
My recollection of the assessment report on the previous partnership agreement is that it simply said, "A lot done, a lot more to do," to quote a slogan. I agree with the convener that we should focus on performance monitoring. If we are to introduce rigour to the expenditure of public money so that we generate the greatest value and achieve other objectives, such as economic growth and the improvement of public services, the objectives must be the drivers of policy and not—dare I say it—a rather arbitrary combination of policy commitments that were put together in the aftermath of an election, although I do not imagine that the process is as casual as that.
That will fall to you one day.
I am sure that the same casual attitude will be taken.
That is a good point. If John Swinney's turn comes, I hope that he gets the number of targets below 400.
Perhaps it will be 399.
A wider concern is to ensure that new efficiencies in procurement do not have a negative effect on economic growth in Scotland. We should not bulk up orders so that they are cross-border when they should not be. I am concerned about the impact on economic growth nationally and locally, especially given that procurement savings are often not all that they are cracked up to be once we analyse the costs of stockholding, storage, personnel, losses, capital expenditure, write-offs that may accrue and the insurance cover that is required to look after major assets. I seek an assurance that strict accounting will be applied so that we know exactly where we are. We should not lose the opportunity to create genuine partnerships with local suppliers, in which, working with the public sector, they are out to optimise outcomes.
That is a serious and fundamental point. However, I must say that I am not now, and nor have I ever been, a procurement expert, although I propose to put effort into getting on top of the law on the matter. However, I know someone who is a professor of procurement and I will seek his help on the matter, if necessary.
I am sure that there is an endless amount of private sector evidence on procurement performance that the committee could benefit from listening to. In the chancellor's statement yesterday, the extent of dependence on procurement as a source of efficiency gains was interesting.
Another fundamental point loops back to the business in the Parliament conference, at which Iain Graham and the girl from M Computer Technologies made a case for high levels of procurement from Scottish suppliers, on the basis that that could be economically strategic for Scotland. In other words, we could do a deal with a local supplier that did not breach competition rules because we place a heavy emphasis on local supply. That could bring the company up to a higher level of advancement in its technology and give it the boosted credibility of being able to say to international markets that it sells to its own Government and public sector.
Another dimension is that savings targets that are geared towards procurement can sometimes be achieved at the expense of quality. A balance is always to be struck in streamlining procurement—we should not always go for the cheapest supplier, particularly with public buildings such as schools and hospitals.