Draft Budget Scrutiny 2010-11
Now that our committee housekeeping is out of the way, we can move to the main item of business for this morning, which is consideration of the reports back from this morning's workshops as part of our draft budget scrutiny.
The purpose of our visit today is to continue our examination of the Scottish Government's expenditure proposals for next year, which form the draft budget. As part of that, we feel that it is beneficial to gauge the impact of spending plans on local areas and to see how engaged different parts of the country are with the national process.
During this section of the meeting, members of the committee will report back on the issues that were raised in the workshops that were held this morning on economic development. Who will report back on the workshop that took place in the octagonal room?
I will, convener.
Our group got off to a very friendly start by going straight into the issue of the Glasgow airport rail link—in fairness, I should say that it was my colleague Joe FitzPatrick who raised it. You will not be surprised to learn that the representatives from Glasgow City Council, Strathclyde partnership for transport and the Scottish Trades Union Congress all expressed their disappointment at the decision that was taken by the Cabinet Secretary for Finance and Sustainable Growth in his draft budget, and all expressed a desire that the decision be reconsidered.
We moved on to the difficulties of decision making in a tight financial climate. There was general recognition that budgets would be tighter this time and that that would have an impact on the decision-making process of all the organisations represented, including third-sector and housing bodies, the health service and private companies. There was a clear desire among the group for a more co-ordinated approach between the private and public sectors and within the public sector. People wanted a greater attempt at joined-up thinking to be made, so that budgets could be co-ordinated much more effectively.
I was especially taken by the input of Scottish Power, which made the point that it is engaged in energy-efficiency programmes to a great extent and that much more could be done to increase the insulation of poorly insulated properties. It suggested that it is not for the company to do that on its own, that the Government has a role to play in bringing things together and that there could be an economic benefit from combining our efforts, not just in the efficiency that is generated by insulating people's homes but in the jobs that that creates.
There was a clear desire for much more co-ordinated effort from the public sector, especially between housing and health. The need for health prevention, as opposed to just ensuring that people are treated well in hospital, was highlighted. There was a focus on the likely impact of issues such as swine flu on future budgets and on the importance of ensuring that the health budget is able to cope with such impacts.
If our group had one message to give to the cabinet secretary when we see him this afternoon, it was that we should remember the people whom we represent, especially those who are more disadvantaged, and the impact that budgets will have on them. That message came most strongly from representatives of the third sector. Mr Taylor put it best when he said that, 20 years or so ago, this city, in particular, was badly hit by many cutbacks and recession, and that he did not want us to return to those days. We should not forget that much good work has been done in this city since then, especially in disadvantaged areas and among people such as the disabled, who are now getting back into work. The budgets that are in place to help that work are now coming under threat. It is vital that they are not affected, so that people are not cast aside again.
I am happy to take observations from other members of the group. However, the message that came through most strongly was that, in all our arguments about budgets and where to focus spending—on capital, revenue or whatever—we should remember the impact that our decisions have on the people.
I will invite comments from committee members after we have heard the second report; that is the best way in which to proceed. I ask Malcolm Chisholm to report back from the mahogany room.
I will try to distinguish between individual opinions and those that were more generally supported by the group.
It was noticeable that there was much agreement on the need for capital expenditure to be accelerated. There was general concern about the effect that cuts coming too early would have on the economy. People thought that cuts were coming but that it was important to take a more strategic view, instead of making incremental cuts across the board. It was felt that we should focus on the economic consequences of decisions and that there was not enough in the budget that was focused specifically on the current economic difficulties. The acceleration of capital expenditure is part of that, but some of the decisions that have been made in the budget were questioned. More than one person felt that it was counterintuitive for there to be cuts in the Scottish Enterprise budget at such a time, and concern was expressed about the Glasgow airport rail link.
Other contributions focused on how money should be spent on the economy. The STUC said that money ought to be given to keep on and train workers in the private sector. It also said that money that is being spent on the small business bonus scheme could be more profitably spent on the Scottish investment bank. The view was also expressed that investment in renewables infrastructure is critical for the future of the Scottish economy.
There was a big focus on the need for investment in various parts of the economy. It was felt that not enough prominence has been given to that in the budget.
The voluntary sector representatives in our group were vocal. They welcomed the Scottish investment fund but had concerns about what is happening to the voluntary sector at a local level. Part of their concern was the increased freedom that local authorities now have. They felt that there should be more scrutiny of how the end of ring fencing is affecting the voluntary sector.
There was discussion about other ways of saving money. The issue of local authority services was raised and the number of local authorities was questioned. It was said that we need to have an increased drive towards shared services, although some doubts were expressed about that by a couple of people in the group.
The main theme coming through the discussion was very much the issues that are faced by the economy. Some of those, such as accelerated capital expenditure, are beyond the control of the Scottish Government, but some of the Scottish Government's priorities in the current economic circumstances were questioned.
Thank you. I invite comments from committee members.
David Whitton summed up well our group's discussion, which was very constructive. I expected GARL to be an issue, but many other issues were raised and some constructive thoughts were expressed on how we can move forward as budgets continue to be squeezed in future years. We discussed how we can deliver front-line services more efficiently by working better together, which is something that the Finance Committee might want to consider in the future.
Malcolm Chisholm mentioned the concern that was expressed over GARL, but there was a wider concern about infrastructure in general. The view was expressed that investments in infrastructure will prepare our economy for the recovery when it comes and that, if there is a gap in the provision of infrastructure, we will pay an exaggerated price. The Scottish Government is doing its best to get further accelerated capital, for which there is more and more cross-party support, but there is a concern that eventually there will be a gap—possibly at a time when capital budgets are being reduced anyway. Perhaps more thought needs to be given to how we will deal with that gap, which could cause substantial disruption to the Scottish economy if and when it comes.
There are several points that I could have added to my report. On the issue that Tom McCabe identifies, one individual in our group made the point—and other people took it on board to some extent—that it is possible to transfer revenue into capital and that one way of dealing with the capital gap that would result from the further acceleration of capital expenditure would be to use revenue for capital, in future if not at present. That is an option that we often forget about in budget discussions, although self-evidently it would have repercussions for revenue budgets. Nonetheless, given the general emphasis that our group placed on the importance of capital expenditure, it was understandable why that was considered as an option.
The point about whether revenue could be moved to capital came up in our group, too. However, on the issue of the acceleration of capital budgets from next year into this year, it was pointed out—in fact, I think that I pointed it out—that a lot of the money that was accelerated into last year's budget was spent on land acquisition. I specifically asked the representative from the Glasgow Housing Association how that had impacted on the association. He made the valid point that it is good to buy land when it is cheap in order to build affordable housing in the future. I then asked what he would do with the money if he brought forward accelerated capital from next year into this year. Would he spend it on house building rather than on land acquisition? You get a bigger bang for your buck in economic benefit from the former because you can employ construction workers and so on. He said that a number of schemes are waiting to go, but there is a lack of capital to help them to do so. That point was clearly taken on board by our group as something that we should feed back to the cabinet secretary.
It is striking that the themes that we discussed are similar to those that the other group discussed. Although, strictly speaking, we are considering a one-year budget, most of our time was spent talking about issues that are broader than just next year's budget and concern the medium to long term. Most of the points that we discussed were about a longer-term impact. Perhaps we need to focus on this year's budget in the context of the medium to long term. We will probably have a better feel for how effective this year's budget is if we can view it in the context of a medium-term approach to budgeting by the Government. That point might be useful in guiding questions this afternoon.
Thank you for those early observations. Having attended both workshops, I found the range and depth of contributions to be impressive. They have given us valuable raw material and food for thought, on which the committee will ruminate.
Now that each workshop has reported back, I again express my thanks to everyone who contributed today. Your wide-ranging expertise and experience will be helpful to the committee in our deliberations. I am sure that committee members will want to raise the issues that have been highlighted in the evidence session this afternoon with the cabinet secretary. The workshop outcomes will also feature in the committee's report on the draft budget, which will be published in December.
Meeting suspended.
On resuming—