Rural Affairs and Environment Committee, 07 Nov 2007

Meeting date: Wednesday, November 7, 2007

Official Report 279KB pdf

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Budget Process 2008-09

Good morning and welcome. I remind everyone to switch off their phones and pagers, or at least to take them away from their microphones, where they cause the most damage.

Item 1 is consideration of the committee's approach to the Scottish Government budget 2008-09. I welcome our budget adviser, Jan Polley, whose appointment was agreed by the committee some weeks ago. She can be brought into our discussion, because she has a formal role as our adviser.

The budget will be published on 14 November. Committee paper RAE/S3/07/7/1 sets out a possible approach, and paper RAE/S3/07/7/2 gives background information on the Howat report—the report of the budget review group. I need a steer from members on whether they want to invite witnesses from the review group, or other witnesses, to give oral evidence on the budget at our meeting on 21 November—there is not a great deal of time in which to invite people. At that meeting, we will take evidence on fisheries, so we might have two evidence sessions that day.

I invite members to discuss how we should approach the budget and whether it would be helpful to hear from witnesses on 21 November. I assume that we can take it for granted that we will invite the Cabinet Secretary for Rural Affairs and the Environment to give evidence—the clerk is advising me that that will happen at a later stage. We are talking about oral evidence from witnesses other than the cabinet secretary.

I was keen that we should examine the Scottish rural development programme, because it was not all in the public domain. However, the programme is now in the public domain, so I am satisfied in that regard.

I have suggested that we take one aspect of the programme and examine it thoroughly, so I am pleased that the options for consideration in our paper include the budget line that I wanted to consider—the £10 million for the new entrants scheme, which is a small element of the budget. Given that the Scottish Government has asked the tenant farming forum to work on the scheme, it would be beneficial to invite representatives of the forum to our meeting on 21 November, so that we can interrogate them on how they are taking matters forward.

My impression is that members are all new to the area, so I would like us initially to take a broad approach. We should ascertain the main areas of spending and gain a full understanding of why those are the main areas of spending and what objectives the Government is trying to achieve.

Over years of looking at public expenditure, I have noted that a key aspect of all budget processes is that a lot of expenditure is fixed and not really up for grabs. To exercise choice in any budget process, one has to look at the areas of real discretion. It is important that we try to identify what those areas are in the overall set of figures that we will receive. We should focus on that.

That would seem to be the £70 million that Howat identified.

It might be, but it could also be other things. I do not want to get into the issue that emerged over the weekend about the exercise of discretion by a minister in the previous Administration, but it indicates the extent of the available moneys over which discretion is exercised. That is the sort of territory that we should get into.

I have another couple of points, convener. We also need to look closely at the pattern of underspend over recent years by considering end-of-year outturns. Again, those figures will give us a clue about how much discretion is in ministers' hands.

I agree with Mike Rumbles about the Scottish rural development programme, although I slightly disagree with him about whether we should be looking at the £10 million, because, in doing so, we could lose sight of the whole thing. That said, it would not be illegitimate to look at that area, but how much time should we spend on it?

I am not keen on the Howat stuff. If we want to consider the report, we should do so at a later stage. I am unsure whether it covers the areas that I want the committee to look at.

I advise committee members that the Finance Committee has urged committees to use Howat as a basis for consideration of the budget so that a common thread runs through all committee budget deliberations. It wants to push us in the direction of Howat. The matter is one entirely for committees, but members need to be aware that the Finance Committee is looking at that.

I accept the point, convener, but I remain unconvinced.

We have two big inquiries on flooding and rural housing. Should we pick up the finance involved in those areas as part of those inquiries, or should we consider that as part of our scrutiny of the budget process? I am not sure how we should handle finance in those areas, although I am entirely relaxed about it. We should not lose sight of the fact that we will have a number of things to say about that, but where will we pick it up most effectively?

We should pick up that issue during the inquiries. That would ensure that we are mainstreaming some of our budget scrutiny in the context of specific subjects. The timescale for the mandatory exercise of budget scrutiny is very short, which makes it difficult to scrutinise specific areas in sufficient detail.

I call Karen Gillon, who I think wanted to come in. I will then call John Scott.

Following on from the issue that Peter Peacock raised on ministerial discretion, I want to pick up on Sunday's press comment. The issue is not whether we decide to look in detail at the decision, but we should ask where the £40 million that was swishing about in a budget last year is. If the money is still available, it makes a wee bit of a mockery of the cabinet secretary pleading poverty over the sum of £25 million.

We need to look at flexibility: where it is, what is set and what is not set. For the past eight years, we have had the proverbial problem—I am sure that we will continue to have it—of where the budget lines are, what they are attached to, where the flexibility is and how the Rural Affairs and Environment Committee and the Finance Committee ensure that there are no large pots of money swishing about. In the grand scheme of things, £40 million may not appear to be a large pot of money, but people out there think that it is. Is the money in the budget this year? If not, where was it spent? Where did the underspend go? What is the projected underspend for this year?

That would involve calling ex-ministers to come before the committee to discuss the previous year's decision, which is still slightly opaque.

I call Des McNulty and then Mike Rumbles.

I thought that John Scott was to be called next.

I am sorry. I call John Scott, to be followed by Des McNulty and Mike Rumbles. I will then ask Jan Polley whether she wants to comment on what she has heard so far.

I take a different view from that taken by Peter Peacock. I think that we should consider Howat, particularly because it seems to open many cans of worms that are news to me. One point that springs out is the insistence that the crowded landscape be looked at. A sum of £1.3 billion is distributed among 15 sponsored bodies or agencies. I think we are all agreed that, by and large, we want to reduce the number of quangos. We can get a lot of information from Howat about the crowded landscape of which quangos are a part.

I am happy with Mike Rumbles's suggestion of considering the incomers scheme, but I am not sure that we need to take evidence from the tenant farming group, given that it is part of the consultation. It would almost be better to take evidence from NFU Scotland, which represents many more tenants than the tenant farming group does, but that is a matter for debate. However, if there are to be bids for time, I think it is more important to take evidence from Howat.

I am particularly interested in the question of efficiency savings, but I am not sure that simply mapping Howat is the best way to go. However, like John Scott, I am interested in the proposals to fold together different agencies, and I am interested in testing ministers' proposals for delivering savings.

The big issue for us is measuring performance. It is not enough for ministers to say that they have targets—on the green trajectory or otherwise. They must be able to show us what practical steps they will take to ensure that the targets are progressed. We need to focus on the intermediate elements that ministers say they are doing, which are geared towards the longer-term targets that they have identified. The focus should be heavily on how the targets are being turned into practical steps.

For information, I was taking Howat as a starting point, not as an end point.

I agree with Des McNulty. I talked about looking at a small budget line and following it through—I hope that we will do that—but the big picture in the Scottish budget is about efficiency savings. Within Richard Lochhead's budget, I would like to know where we and he can see that efficiency savings can be made—that is the key to the whole thing.

I want to save members' time by pointing out a little misunderstanding. The convener used the word "opaque" with reference to the £40 million in the less favoured area support scheme. However, the situation is simple and straightforward; I do not know what all the fuss was about at the weekend. The scheme was put back about eight months, so—

I do not want to get into the LFASS this morning. I just need to discover whether we will include it as part of our budget scrutiny or deal with it separately.

Exactly. That is the point that I am trying to make. Karen Gillon commented that the minister will have £40 million swishing around, but that is not the case, because that sum is part of the European Union programme.

There is obviously a debate to be had on that.

There is no debate about it.

The LFASS is an issue, and what came out in the press indicated the different ways in which money can be found for various purposes, which may or may not create difficulties within the broader Cabinet set-up. I do not know that that changes from Government to Government—there will always be that tension.

I think that there is a misunderstanding of what we are talking about. It is not about money being found, because the money is part of the EU programme.

There is a significant issue here. The previous committee asked a former minister specific questions and received specific answers, which now appear not to be the case.

That is just not true.

I do not want us to get bogged down in the issue just now. The committee must decide whether to incorporate discussion on the LFASS in the more general discussion about flexibilities, efficiencies and so on, or whether to look at the issue separately. If we were to consider the LFASS in detail, we would need both the relevant former ministers to come and speak to us—there is no way round that. We need to have a feel for members' views.

I do not want us to have a separate look at the issue but, whether or not one takes Mike Rumbles's view, the key point is whether the issue signifies that significant discretion exists. All ministers who have budgets of thousands of millions of pounds have an element of discretion.

Either the money came from somewhere else or it is new money, so which is it?

The situation may be illustrative of the fact that there is cash in the system that can be moved—it seems to be illustrative of that, even if it is a cash-flow issue, rather than a real cash issue. The matter is complex, but if there is cash in the system that can be moved, we need to know about it, because that is where ministers can exercise choice and change the budget. That is significant for people who are arguing for more for the rural development programme or environmental stewardship schemes or for greater headage payments for sheep in the present crisis. To me, that is the important point—it is not the issue itself, but whether it signals that discretion is available. I suspect that there is quite a lot of discretion of that order. The historical underspends indicate areas of discretion and choice for ministers. We could have an impact on that in the long term.

Is that a surprise? Should there not be elements of discretion?

Of course there should.

The issue is the extent of the discretion, particularly in a budget such as the one that we are considering, in which the vast majority of expenditure is not discretionary. The question is what level of flexibility or discretion is available and how it is being exercised. There is also the bigger issue, which Des McNulty raised, of whether savings can be achieved even with mandatory expenditure. How much of that mandated expenditure is sacred? Can some of it be examined in an attempt to achieve efficiencies? The matter has those two aspects.

You have summed up the situation effectively, convener. There are two focuses for us. One is the management of the department, for example in identifying efficiencies and managing performance. The second focus should be on policy choices that ministers make. Ministers will make policy choices in allocating funds. We must be able to identify clearly where ministers have made policy choices, either simply for next year or for the spending review period. The choices that the ministers make now will have longer-term financial implications. We must then hold ministers to account on the policy choices that they make. The issues of management and policy choices are the important ones.

We should bear in mind one other dimension, which is the need for a wee bit of flexibility round the edges in the way in which we consider the matter. The committees' remits match those of the ministers to a degree, although not always precisely. However, the ministers do not match with the departments precisely. There is a danger that some elements of the budget, which are often important, will be missed out because of the different roles, responsibilities and remits. All the committee budget reports will go to the Finance Committee, but we should ensure that key elements of the budget—for example, those on climate change—are focused on, either by us or by the Transport, Infrastructure and Climate Change Committee. That matter must be covered. The departmental budget as a whole must be scrutinised properly. The chief official for the Scottish Executive environment and rural affairs department is responsible for the Government's greener objective, all aspects of which must be examined.

I ask Jan Polley to comment on what she has heard so far and give her overview of where she thinks we might be at—all over the place, I think.

I will start with the Howat report, which has a particular strength, in that the people who wrote it know very little about this area of work and therefore their approach was to ask, "What about this?" and, "Have you thought about that?" That was particularly helpful.

The downside is that they might not have a lot more to contribute to your analysis, but they will have flagged up some interesting issues. For example, John Scott mentioned that such a big proportion of the budget goes towards agencies and bodies, and the report's authors could see that that might link in with the efficiency agenda. It is important to note how pressure is being kept on those budgets to achieve efficiencies.

A point was made about how much discretion there is in the budget. The budget that we are discussing does not contain the direct payments—the individual subsidies—that come from Brussels. It is therefore not that different from any other budget, in that it has a lot of discretion. Where it differs is in the timescale within which those decisions need to be taken. It is difficult with this budget, particularly where it relates to rural development funding, to take quick, ad hoc decisions to shift money round because plans have to be put to the European Commission, agreement must be sought in advance, ministers have to say what they will be spending X number of years in advance and so on. To contribute to that debate, it might be helpful for the committee to seek factual information on the timescales within which those discretionary and policy decisions will be taken so that you know what you are dealing with.

From what I can see of the LFASS debate—having read the paper and having been responsible for the LFASS several years ago, although I had nothing to do with the issue under discussion—I do not think that there is any extra money. I can explain to members afterwards what I think has been happening to LFASS finances.

The LFASS debate has come about because an ad hoc payment has had to be made. The old payment regime finished at the end of 2006 and the new regime has not yet been authorised, so, in relation to the vires for paying the money, the Government has had to find a slightly different way of making payments for the eight months from April 2006 to January 2007. It is a £60 million scheme that runs for 12 months of the year and pays £5 million a month—eight times £5 million is £40 million, which equates to the eight-month gap. From the outside, it looks as if the plan was to spend the £40 million anyway, but because the rural development regulation and Scotland's plan were not passed, the money could not continue to be paid in the normal way. I am deliberately not going into the details. Although you might want to look at the matter, it might be a bit of a red herring in light of the bigger issue about policy choices and decisions on spending in the future.

I want to bring this discussion to a close as quickly as possible.

To add to what Jan Polley said, I would like there to be more discussion of the bigger issues in the Howat report, such as whether Scottish agricultural and biological research institutes should be integrated into further and higher education and whether job dispersal should be pursued as a policy—I have an open mind about whether that is a good idea. The Howat report has only one or two paragraphs maximum about such matters, but we could benefit from hearing about them from the Howat people—even if they have only limited knowledge—to inform the committee better. That would be a valuable way to proceed.

As a matter of interest, I advise members that we have only two more committee meetings at which to deal with the matter—21 November and 5 December, and the cabinet secretary is already booked to speak to us on 5 December. If we try to make our budget scrutiny too wide, we will have to think about scheduling another meeting. We do not get the budget until next week and we need to report to the Finance Committee before Christmas, so we do not have a huge amount of time.

As I said, we will take evidence from the cabinet secretary on 5 December. At the moment, the only scheduled committee meeting with free space available is our meeting on 21 November.

Would it perhaps be appropriate for the budget adviser to meet the Howat people in the light of today's discussion? I have no problem with the specific issues that John Scott raised, but I am not clear that our taking evidence from the Howat people will take us much further forward. If, on the back of our discussion today and the issues in which we have all highlighted an interest, the budget adviser could speak to the Howat people, any further issues that might arise could be brought to us in an organised way. That might be a more effective way of dealing with the matter.

I suggest that we approach the issue on the basis that we provisionally alert the Howat people that they might need to attend our meeting on 21 November but that we ask Jan Polley in the meantime to have a conversation with them to establish whether they would be able to add much to their report. If it transpires that they cannot add much, we will stand them down.

That leaves us with our 21 November meeting for substantive discussion and, possibly, for taking evidence from anybody else to whom we might wish to speak. Remember that we will take evidence from the cabinet secretary on 5 December. In addition, the clerk has helpfully reminded me that our visits in connection with our flooding inquiry are scheduled for the Tuesday of the intervening week, so it is unlikely that we could schedule another committee meeting for that week.

Are members content with that? That means that, at the moment, we have invited nobody to the 21 November meeting.

It would be appropriate to take evidence, purely for clarification, from the department's officials on 21 November. We could ask them factual questions to seek to uncover information on the basis of which we will quiz the minister.

That would be useful.

Do you mean that we should ask them to respond to the points in the Howat report?

No, we can ask them general questions.

I want to know what is different in this year's budget, what changes the Government proposes to make and what choices are being made. The process would be purely for the purpose of eliciting information. We can then have a much more focused discussion with the minister, who will need to respond to more political questions on 5 December.

I back up Des McNulty's suggestion. I would like to take evidence from the tenant farmers, but we are short of time so we should not proceed with that. Asking factual questions of the officials in preparation for the minister's visit is an ideal way to proceed.

We can ask the tenant farming forum how it would approach the budget and consider any written evidence that it provides. We are not precluded from raising any of those issues separately, outwith the committee's budget scrutiny exercise. Indeed, we might uncover a whole set of things that we might be quite interested in pursuing at a separate time.

Okay, I think that the matter is now a bit clearer.