For our next item, I welcome John Swinney, the Cabinet Secretary for Finance and Sustainable Growth.
It is a pleasure once again to be with the committee today. As the convener said, we are here to look at the outturn financial performance for 2007-08 and at information that is provided on the Scottish performs website, in the context of the budget process for 2009-10.
Before I invite questions from members, I suggest that we might find it helpful if we ask first about the consolidated accounts and then about Scotland performs.
On page 23 of the accounts, the notes to "Post-Balance Sheet events" say:
The Scottish Futures Trust has been established as a company limited by shares with the clear objective of acting as a focus for a range of capital investment initiatives that the Government will undertake. Essentially, the structure ensures that it is an arm's-length body with sufficient flexibility to meet the Government's expectations as set out in our business case.
Why is the Futures Trust outwith the consolidation boundary? I am perhaps missing something fundamental about its structure. Is that a direct consequence of how it was established, or could it have been set up within the consolidation boundary?
I imagine that the Futures Trust could have been set up within the consolidation boundary, but it has been set up outside to provide it with arm's-length status.
Let me move on to some of the variances that are explained in the detail of the consolidated accounts. On page 45, on education and lifelong learning, it is stated that there has been an
It happened simply because of the timetabling of projects. Projects for which the Scottish Government has contracted a responsibility to pay claims will have come on to the budget. However, as Mr Brownlee will know, sometimes capital projects do not operate to the envisaged timescale, and they consequently take longer than expected to emerge, despite the fact that commitments to repayment patterns have been given.
So it is a slippage rather than an absolute reduction.
Yes.
I have one final question on page 45, which states:
I would not have thought so from the numbers in the accounts, but I will be happy to provide the specific figures to the committee in writing to confirm the point.
I have a couple of questions on the Scottish Government's payment policy. The Government's objective is to pay 100 per cent of invoices on time, which is obviously admirable, particularly when many businesses are under pressure as a result of the credit crunch. According to the consolidated accounts, 95.4 per cent of invoices were paid in time in 2006-07, but the figure reduced to 93.6 per cent in 2007-08, which is more than 6 per cent below the target. What is the explanation for that?
First, I share Mr Kelly's view that it is desirable to pay 100 per cent of invoices on time, and I regret that there has been a minor deterioration in the performance from 2006-07 to 2007-08. The issue is the volume of transactions dealt with; there has been some slippage in pursuing them in the appropriate time. That is why we have not performed as well as expected.
You said that the volume of transactions was the main reason for the deterioration in performance. What were the volumes in 2006-07 and 2007-08?
I do not have the information in front of me, but I will be happy to provide it to the committee, to give further context.
On motorways and trunk roads, I see that non-cash roads depreciation was £41 million less than was expected at the time of the spring budget revision. Why was that?
Non-cash roads depreciation is a fascinating area of analysis, I assure you. In essence, it is the assessment of the condition of the road network, which is undertaken after the close of each financial year. During the financial year, we are required to estimate the likely condition of the road network at the end of the year. Year on year, a comparison is made to identify the depreciation factor, for which we must budget in a non-cash environment—in essence, that is an accounting transaction. There is an assessment of the relative depreciation of the motorway and trunk road network from one year to the next.
It was helpful. If, by the year end, there is less depreciation than was anticipated at the time of the spring revision, does that mean that there has been less expenditure on motorways and trunk roads than was expected?
Less depreciation at the end of the financial year compared with what was anticipated in the spring budget revision suggests to me that we have done more work, because the roads have not deteriorated as much as we expected them to.
Is the figure based on your evaluation of the road network, as opposed to expenditure on the road network?
Yes. There is an evaluation of the road network at the end of each financial year. We can compare that evaluation from one financial year end to another. We make assumptions about that and the assumption in the spring budget revision was driven by about nine months-worth of financial information. By the time we completed the consolidated accounts, we were able to record that the road system had not deteriorated as much as we expected it to do, perhaps as a result of our interventions or because the weather had had less impact than we thought that it would have. A detailed model is developed year on year, which is informed by feedback from roads engineers around the country, who assess the motorway and trunk road network and provide us with the information base.
I thank the minister for guiding us so clearly and succinctly down those rather esoteric budgetary pathways.
I have a feeling that I am going to go back over those pathways. Cabinet secretary, you talked today and in June about the £42 million DEL underspend. Will you point to me where in the accounts that is highlighted? I may be looking at the wrong page, but I have difficulty correlating that figure with the details for the DEL underspends on pages 45 and 46 in the accounts.
I am afraid that we are about to go into esoteric territory again. The £42 million underspend is a comparative figure that relates to the Scottish Government's control over the departmental expenditure limit. That has been the basis on which the underspend has been reported to Parliament on every occasion that an underspend has been reported to Parliament since devolution. When the underspend is shown in the accounts, various other adjustments are made to take into account factors that are within the departmental expenditure limit but outwith the Government's control and which must be factored into the calculation. The consolidated accounts report an underspend of £103 million, which is split between £96 million in resource and £7 million in capital. However, the end-year flexibility announcement is made on a comparative basis. In essence, it is the amount of money that we hold on account at the Treasury, free for us to spend in a future year, subject to Treasury agreement. That is the comparative figure that I announced in June.
I understand that. However, the statement that the Scottish Government made in June was that the figure of £42 million was good news for Scotland and a positive development, as it is less than 0.2 per cent of the DEL budget and the lowest-ever figure recorded by the Scottish Government. However, that £42 million cannot be reconciled with the accounts—it is simply not there. The broad equivalent—the total variance within departmental expenditure limit—is £96 million. The Government is stating that elements within that total are outwith its control, so it will not publicise that figure. However, it is a Government underspend, and I do not think that that is a fair representation of accounts, regardless of what the practice has been. I am sure that the Scottish Parliament information centre will inform us of what the practice has been in previous years when the Government has announced underspends in press releases in June several months before the accounts are published.
I have two points on that. One is that, as I said, the basis on which the announcement was made in June was directly comparable to the way in which it was done on every previous occasion on which the Scottish Government or Scottish Executive recorded such an underspend. Secondly, on the point about a true and fair account, I simply point Mr Purvis to the fact that the Auditor General, in his assessment of the accounts, has provided an unqualified opinion of them.
The press release in June stated:
I certainly will. First, on the £42 million, I simply return to the point that I have made previously, which is that the directly comparable figure and the one that I would have thought members would think was the appropriate one to use in looking at one underspend versus another is the figure that I reported to Parliament in June. That is directly comparable to how the information has been recorded in the past. The consolidated accounts record a variety of other factors that must be taken into account.
My final point follows on from the cabinet secretary's statement to Parliament in June and the highlighting of the anticipated overall underspend of £216 million. The press release that accompanied the statement said:
But the significant variability in those numbers is because of an issue that is entirely outwith the control of the Scottish Government.
But, equally, there could have been relevant elements in the figure that you highlighted of £256 million in the previous year. In fact, the Government boasted that there was less underspend by this Administration than by previous Administrations. However, the £256 million and the £275 million are directly comparable, as you highlighted in your press release in June.
Which is why Government comparisons are made on the departmental expenditure limit basis, which is the basis of the headline underspend figure that I reported and which all my predecessors have reported to Parliament since devolution.
Mr FitzPatrick wishes to comment.
Sorry, convener, but I just want to finish my point.
At the start of his contribution, Mr Purvis said that he wondered whether he was looking at the wrong paragraph. I direct the committee to paragraph 67 of the consolidated accounts, which states:
Therefore, it is not strictly comparable, although the cabinet secretary stated that it was. I thank Mr FitzPatrick for highlighting that.
I think we are entering a dialogue here. I will let Jackie Baillie in now as she has been very patient.
Which is most unlike me, convener, but there you go—I am perhaps learning new habits.
I have a sense of déjà vu, as I sat in this very committee room this morning, explaining to the Equal Opportunities Committee the difficulties of presenting a budget that is sliced up in a way that people believe is relevant, readable and comprehensible. I illustrated the point this morning by saying that although the Equal Opportunities Committee might want the budget to be cut up in a way that showed the equalities spend, one could have that argument about the spend on deprivation, economic growth or whatever. The area that Jackie Baillie asks about is similarly fraught—it is difficult to understand exactly how expenditure can be classified to fit appropriately and neatly into all five categories.
I was beginning to get quite excited that we are more than doubling our spending on green issues and climate change, and then I discover that the spending is actually on pensions—there you go.
I am not sure whether that was a question, although it was certainly an invitation.
I hate to drag the cabinet secretary back to his £42 million underspend, but he and I were both around in the first session of Parliament—although in different roles—when the Opposition created a hoo-hah about an underspend of somewhat less than £42 million by the then Administration. For the record, where is the underspend? Which departments are not spending the money that has been allocated to them?
I stand to be corrected, but I would be staggered if the first Administration in a devolved Scotland delivered an underspend of less than £42 million. I am sure that Mr Whitton will correct me if I am wrong about that.
My vague recollection is that it was a departmental underspend that caused the uproar in the first session.
Mr Whitton has now set me a challenge of looking through the endless number of old papers that I have in my house, which I shall spend the evening doing.
I will save you the bother: the underspend was in the Health Department. I think that Miss Wilson probably knew that, but she was not letting on.
Does the fossil fuel levy appear anywhere in the consolidated accounts? We have not taken it up from Westminster, but, technically speaking, it is money that is available to the Scottish Government.
It is money that, in essence, has our name on it—if I can put it that simply—but it will not form part of the consolidated accounts, because it has not been transferred into the Scottish consolidated fund. It cannot be transferred into the fund at this stage, because the Treasury has made it clear to us that if we make a claim on that resource, which is held by the Office of Gas and Electricity Markets and which totals about £120 million, we would have it netted off our expenditure. If we were able to use the £120 million of Ofgem money, which has to be deployed for expenditure on renewables projects and initiatives, it would be deducted from the controlled totals provided by the Treasury. At this stage, we cannot gain access to it as a fresh resource, although the Government continues to make representations in that respect.
How much higher do you estimate that the income of the Scottish Government would have been last year had we had all the Barnett consequentials to which the Scottish Government thinks we should have been entitled? What order of magnitude are we talking about?
It is slightly difficult to explain that figure for one financial year. For example, we considered that we were entitled to receive Barnett consequentials in respect of the regeneration element of the London Olympics—that view is shared by the Administrations in Wales and Northern Ireland.
And, I think, by the candidates in the Labour leadership contest.
I did not follow that contest with enough interest.
So, in fact, if we add the fossil fuel levy and assume that we were allowed to spend it outwith the departmental limit, plus the Barnett consequentials, we would have been better off to the tune of just over £400 million.
Yes, it would be of that order.
Before we stray off the strait and narrow, I would like to move on. We have given that matter a fair run, so we will move on to questions on the Scotland performs framework.
I note the cabinet secretary's interest in the Labour Party leadership contest. I also note that the Secretary of State for Scotland has made some rather positive comments that might merit a phone conversation between them.
That subject is closed.
The Government has five strategic objectives, which are welcome. Does it have any cross-cutting governance arrangements? I recall there being Cabinet sub-committees that took a strategic objective and drove it through, so I am interested to find out whether such committees have been established as part of the process of government.
Perhaps, off the pitch, Jackie Baillie might like to point out to me the helpful remarks that were made by the Secretary of State for Scotland. Such remarks are always welcome; I always try to be as charitable as I can to the secretary of state.
I will pursue the process point a little further. I understand the distinction that you make between the Cabinet and the programme boards. Will you outline the process by which the indicators that underpin the five strategic objectives are chosen? Do they emerge from the programme boards and are they open to revision, or do they flow from the Cabinet? The strategic objectives are clearly about political direction.
The strategic objectives are indeed about political and policy direction. The national indicators and targets were agreed by the Cabinet as the right indicators to be following—that was the level of political agreement about the indicators. They were based on advice from the different elements of Government—professional advice from across the organisation—as to what the appropriate indicators should be. Ultimately, they were signed off as the appropriate indicators by ministers. A judgment was made about the most appropriate indicators for judging performance in achieving the national outcomes and the Government's purpose. The indicators represent a judgment that has been informed by professional advice from Government officials.
During a previous appearance before the committee, the cabinet secretary told us at length that he considers the Scotland performs website to be crucial to the national performance framework and to achieving the objectives that we have just been discussing. I would like to get more of an idea of how Scotland performs provides information in that context.
I point out to Mr Kelly that in its report, Audit Scotland took a retrospective look at the previous Administration's performance. If Audit Scotland decided to undertake an assessment of the current Administration's performance, that would be its decision, and it would develop an approach accordingly.
You produce a capital infrastructure report, and you report to Parliament on the budget. Are those areas the main areas of scrutiny and accountability? Does Scotland performs come beneath them, effectively?
I do not think that the Scotland performs approach is beneath or above other approaches; it is just a different medium through which we try to provide an easily accessible and transparent structure that shows how the Government exercises its responsibilities. As I explained to Jackie Baillie, our approach is quite different from the previous Administration's approach. We also have a performance framework, which assesses our approach, and there is parliamentary and wider scrutiny of the Government's performance, for example through Audit Scotland reports or parliamentary inquiries. Whatever the process, the Government will happily contribute to it.
Has Audit Scotland been involved in discussing independent assessment, particularly of the information on the page on the Scotland performs website that is entitled "Performance at a Glance"?
Audit Scotland was consulted about the formulation of the Scotland performs process. Plans for the creation and development of Scotland performs were fully discussed with Audit Scotland.
I know that, but that is not what I asked. I asked whether there have been discussions about whether Audit Scotland will independently audit the information that is published on the "Performance at a Glance" page and other pages on the Scotland performs website.
There have been no discussions about that.
Why not?
For the simple reason that we must be careful not to confuse Audit Scotland's responsibilities in relation to independent audit and accounting services for Government organisations—and the responsibilities of the Accounts Commission in relation to other organisations—and some of the implications for policy of assessment of our work.
It is clear from answers to parliamentary questions that were asked in June and July that internal analysts in the Scottish Government are involved. I am certain that the core information should be published, but the question is how it is presented, in particular on the Scotland performs website, which most of our constituents use to gauge whether performance is improving, being maintained or worsening, as the Government intends people to do.
Your question assumes that it is somehow impossible for the independent statisticians who work for the Government, who have a duty to pursue—every day—the production of statistical sets of information on a massive number of factors, to present the information on Scotland performs objectively. That is what they do every day for every statistical set.
Finally, I want to ask about the read-across into other areas. The Government has published part of the performance framework for its relationship with local government, and it has cited the concordat and the single outcome agreements with local authorities. However, a SPICe briefing for the Local Government and Communities Committee points out that the single outcome agreements include 3,599 targets, outcomes and indicators. Do those have a relationship with Scotland performs? Will the Scotland performs website show whether those 3,599 targets are being met?
I am absolutely certain that there will be a relationship between some of those and the contents of Scotland performs. Without a shadow of doubt, that will apply to a substantial number of them.
Where will that be outlined? Where will the read-across to Scotland performs appear?
The technical notes that underpin the national outcomes, targets and indicators contain all of the information about the statistical basis that underpins Scotland performs.
What about the single outcome agreements?
The technical notes that were published last November contain all of the detail on where the data sets come from. Establishing a read-across between any single outcome agreement and those technical notes would be quite a simple exercise. All of that information is in the public domain.
Further to Jeremy Purvis's questions, I point out that we are not criticising the statisticians. However, we need to recognise that—quite legitimately—there will be time gaps and time lags in the data sets, because things are not measured at the same time, so Scotland performs might present an incomplete picture, which I am sure is not what the Government wants. Is work in hand to deal with some of those statistical gaps to ensure that the website presents a much better picture?
Let me make two remarks in response. For 13 national indicators, the data sets that the Government thinks would be appropriate are not yet available, so we cannot show comparative performance. Those data sets will emerge as quickly as possible. My recollection is that we expect almost all of them to be in place by 2009.
The technical notes for the spending review set out the details for information development where there are gaps. Obviously, the timings for those relate to the particular data sets. Some gaps are due to improved performance measures, such as the improvements in Her Majesty's Inspectorate of Education assessments. Other gaps are due to the move to an outcomes focus. Obviously, it takes a while to develop those data, because data on outcomes are not as readily available as one might like. However, all of the timing details are set out in the technical notes for the spending review.
The second point that I want to make is that the Government obviously desires to ensure that we have the best and most readily available statistical information. The statisticians work to ensure that it is published as timeously as possible. Some data we get quarterly, but for some we have to wait until 18 months after the year end. Narrowing those gaps would give us the most accurate picture possible.
When will all the data sets match up, so that they give a true picture at any given point?
We will never reach a point at which all the data for 31 July, for example, of whatever year one happens to choose fall into place on that date. For example, we get gross domestic product data on a quarterly basis about three months after the event—I stand to be corrected on that—but we wait 15 months for some other data. We will never get to the ideal point of having all the data for 31 July in a given year on that date. However, we will do our best, as far as possible, to narrow the gap.
It is important that the data are as up to date as possible. It is important to understand what Scotland performs can and cannot do. In other words, we cannot—and it is important that we do not—ask it for something that it was not designed to do.
The convener's points about the existing function of Scotland performs, and Audit Scotland's suggestions about the need for better project scrutiny and planning, are essential requirements. There is no way that Audit Scotland's point about capital infrastructure projects can be adequately or appropriately handled within Scotland performs, and I would not suggest that it should be, but the work that Audit Scotland says has to happen needs to happen.
In this and previous parliamentary sessions, the Finance Committee has focused on the linking of budget inputs to outputs, which is a difficult and complex area. How will Scotland performs serve the objective of linking budget input expenditure to outputs?
Essentially, it is configured to help us to do that difficult job. We have a range of national outcomes, which were set out during the spending review in 2007; we are, in structuring our approach to public expenditure as we have done, focusing Government on delivering our purpose and those outcomes; and we are taking decisions that ensure that our spending is designed to support the achievement of the outcomes.
We have had a long session with the cabinet secretary, which is appreciated. The last question is from David Whitton.
It is brief. The cabinet secretary mentioned the spending review. Does he believe that, in the current situation, major realignments in relation to the spending review will be necessary next year to improve Scotland's performance?
The Government must consider that carefully. The committee will have observed what we announced on, for example, reshaping capital expenditure in light of the current economic circumstances. In a sense, that is an acceptance that our original capital spending programme was not structured to deal with the circumstances that we face. The Government has done the right thing in that we have tried to put more money into affordable housing where there has been a collapse in the private housing development market for all the circumstances with which members are familiar.
Would the cabinet secretary like a final comment?
No thank you, convener.
I thank the cabinet secretary, Alyson Stafford and Julie Wilson for their attendance and valuable evidence. We will take a quick break before the next item.
Meeting suspended.
On resuming—