Official Report 252KB pdf
We shall now discuss the Executive's annual expenditure report, "Investing in You". I understand that some officials will join us for this part of the meeting.
I welcome this opportunity to discuss our spending plans with the committee. With me are Bob Tait, from the transport division, David Reid, from the finance department, and John Graham, from the rural affairs department.
Thank you. That will be useful in our questioning. It was somewhat remiss of me not to introduce Kenny Gibson to the minister and the rest of the committee. He is here from the Finance Committee.
The Local Government Committee.
Sorry, he is here from the Local Government Committee. He is interested in the issues raised in our questions. I welcome him and apologise for not introducing him earlier. The floor is open for questions to the minister.
I thank the minister for her introduction. My question relates to equality of opportunity. When reading the committee papers, I came across Engender's response to the consultation document. Section 4.6 of their submission says
The research programme that is under way in the transport division includes research on the transport needs of women, to discover whether there are gender issues that need to be addressed in our mainstream policies.
You will not be surprised to learn that I want to ask you a question about the M74 northern extension. The discussions that you have had with local authorities concern whether the Scottish Executive will be able to assist with funding. Has that been taken into consideration in this budget proposal?
I shall ask Bob Tait to update us in a minute. This budget does not include an allocation for that. We are now at the stage of discussions with the relevant local authorities; discussions are on-going at an official level. We are entering into a comprehensive spending review for subsequent financial years in which we are considering many priority issues. However, there is nothing programmed in for this budget. Bob, can you say a few words about where we are with the M74 northern extension?
The decision in the strategic roads review was to ask Glasgow City Council and South Lanarkshire Council to progress the scheme. They have chosen to do that by establishing two working groups: one to examine technical issues, such as the size of the proposal, and the other to consider affordability and the financial issues. Good progress has been made by both groups and I expect the councils to have a report from the consultants, KPMG, by the end of this month. That report will take into account both the size and the affordability of the proposal.
Thanks for your answer. That is useful information. As the proposal stands, planning permission for the extension runs out this year. If no provision is made in this budget, will that create problems with planning permission?
The issue of planning permission is not directly related to the budget. We can provide a detailed answer to that question in writing, after today's meeting, if that would be helpful.
Okay. Thanks.
I have lots of detailed questions to ask. If I am not able to do so today, I shall lodge some parliamentary questions—I know that the minister always looks forward to those. First, does "Investing in You" include the budget consequentials in its figures?
No.
I presume that you will give us an update at some stage, when you have fully worked them into the accounts.
Secondly, towards the beginning of that document, resource accounting and budgeting are mentioned. The proposal is to incur the capital expenditure over the life cycle of the assets. I imagine that that would make little practical difference to roads construction or local authority expenditure, which is broadly similar from one year to another, although it surely should have made a significant difference to the way in which we treat investment in water and sewerage, which is clustered around the first few years of the new century because of the EC deadlines. However, the presentation of the information seems to focus on the expenditure in those years rather than on making capital provision over the 40 or 50 years for which the assets might exist. That has forced the water boards to rely on the consumer to generate income for them. At the moment, consumers' bills are increasing sharply, essentially because of conventional capital budgeting. Why has there not been an attempt to build in the resource accounting and budgeting process for water and sewerage at this stage, to spread the cost to consumers and not hit them with historically unique levels of investment and expenditure?
This is the first time that we have done this exercise; the feedback and questions we have this year will inform next year's budget process. The questions that Murray Tosh has asked are of two types; some relate to the presentation of what is contained in this document, whereas others relate to the detail of how we arrive at the figures.
Mr Tosh's questions arise from the move from cash budgeting to resource budgeting. This year's report has been produced in the old cash terms, because the transition from a cash budget to a resource budget is not yet complete. As part of the conclusion of this year's spending review, we will change the baseline numbers from their current presentation to a resource-budget presentation. This committee will have a particular interest in resource budgeting and accounting when it is finally adopted because, as Mr Tosh pointed out, it has an interest in two substantial capital programmes: the Executive's trunk roads programme, which involves not only capital spending but maintenance of our substantial roads network; and the investment programme for the water authorities.
The increase in water charges is not driven just by the Government accounting system that is currently in operation. English water companies use broadly the accounting system to which we are moving and charges had to rise substantially over a period to meet the same investment demands that we are now confronting in Scotland.
Murray, do you want to pick up on any points?
No, I am quite happy that we will receive further explanation. I do not really see the benefits of moving on to the new style of accounting if it will not spread the costs over a longer period of time. However, that is more a general financial issue than a matter relevant to the committee this morning. The question of the challenge fund money has not yet been addressed.
The challenge fund money, the public transport fund money and the remainder of the previous challenge funds that are going through the system are covered in the local authority capital spending programme, which is dealt with on pages 110 and 111 of the report. At the bottom of page 111, there is a reference to the fact that the two funds are included in what is called the single allocation to local authorities. The single allocation is top-sliced to make provision for those funds and the rest is distributed on a formula basis.
I knew that, but my point—which is not unduly critical, as I acknowledge that this is the first go at the budget process—is that anyone reading the document will find neither that reference nor the figures. Although we discussed the SPT payments at one of our previous meetings, members of the public who read the budget document might not have access to that material; there is a need to provide more customer-friendly information. A glossary of some of the terms and acronyms might also be helpful. For example, I did not know what appropriation-in-aid or EYF were. Those aspects of the document might defeat the interested reader.
Features such as glossaries are precisely what we will have to address for future years. Furthermore, people should have an idea of the documents in which financial issues are addressed.
My first question refers to table 7.9 on page 100 of the document, which shows that between 1997-98 and 1999-2000 passenger numbers are down; air movements are down; the cost for arriving passengers is up; the revenue for arriving passengers is neutral; and the capital grant and the revenue grant are substantially up. Where is the £1 million payment to the Ministry of Defence for Stornoway airport? What is going wrong?
I will ask Bob to comment on Highlands and Islands Airport Ltd. More generally, the decision on Stornoway was taken recently. Do you wish to answer the HIAL questions first, Bob?
Yes, minister. Table 7.10 shows the capital and current expenditure. The payment in respect of Stornoway airport would be from the line for the year 1999-2000. It was paid in the last financial year, and so would be out of the sum of £2.9 million.
The M6 payments were inherited, and we are continuing to pay them. On the M77, the scheme is costed at £60 million. On several occasions in the chamber I have said that we are looking at a public-private partnership scheme; until we have explored that fully, it is not possible to answer Mr MacAskill's question. On the fuel duty rebate scheme, we have an agency agreement with DETR. Bob, can you talk briefly about that?
This will be very brief. My understanding is that there is no charge for DETR making the payments on the Executive's behalf. That is part of the transitional arrangements. We will be taking that over in due course. I was not clear whether the question on VAT related to bus fuel duty rebate or to VAT generally.
Fuel duty rebate.
I do not have that information. I would need to provide it to Mr MacAskill later.
We make a commitment to provide that information in writing to Mr MacAskill.
Do you have a supplementary, Kenny?
Yes. I wish to clarify two points. First, on HIAL, am I right to say that, if the £1 million is coming out of the 1999-2000 budget, one third of the capital grant is being used to acquire Stornoway airport from the Ministry of Defence? Secondly, on the PPP for the M77, is it the case that the £60 million expenditure could in fact be substantially more, as is the case with the cost of the M6?
On HIAL, it was considered vital to secure the long-term future of Stornoway airport. The airport needed to be brought under HIAL's control. That is why it was seen as such an important purchase, which was indeed welcomed in the communities that are served by the airport. It gives a long-term future to the airport and it means that there is now no question of the integrity of the airport over the long run. On the second question, do you wish to answer, Bob?
Yes, minister. Perhaps I could add a little to the answer to the question on HIAL and draw the committee's attention to the fact that the capital expenditure for 1999-2000 is £2.9 million. It was only £0.7 million in the previous year and £1.8 million the year before that. There is a substantial increase in provision, but it is arithmetically correct to say that a third of the capital expenditure is being devoted to Stornoway.
I want clarification on the answer to Kenny MacAskill's question about the M6. Page 95 of "Investing in You" mentions the contractual obligation to pay the service charge for the next 27 years. Can you clarify what that amount is for the next 27 years and whether it is related to the figures—£24.7 million, £26.1 million and £24.2 million—that are given in table 7.2?
Yes, it is related to those figures.
Is that likely to be the ballpark figure for the next 27 years?
Use of the road and the fact that the figures for 1999-2000, 2000-01 and 2001-02 are in the same ballpark suggest that future payments would be no lower than that. They would probably be slightly higher.
My question is on the Scottish renewables obligation. I have asked—and had answered—my first question in Parliament previously, although I did not agree with the answer. My view—and that of Friends of the Earth who recently lobbied you on this—is that a renewable is an energy source that does not contribute CO2 to the atmosphere. Is the Executive's position still that waste-to-energy projects will qualify for support under the Scottish renewables obligation? I expect you to confirm that.
On the future of the SRO and how it operates, to examine the whole picture we are currently in discussion with the Department of the Environment, Transport and the Regions and the Department of Trade and Industry. The issue does not affect only Scotland, but the whole UK. I am aware that a number of views have been submitted to the Executive—those views are being considered.
On the freight facilities grant, I am pleased that an amount has been set for the next three years. However, on the basis of the interest that has already been shown in the grant, do you anticipate that it will be difficult to meet the requirements of all the projects that people would like grants for? A number of people know about the grant and I doubt whether the amount of money that has been allocated would be enough to see all their projects through to fruition. How will priorities be decided?
You are right to say that the increased level of awareness about the freight facilities grant has generated interest in the industry.
I will follow Murray Tosh's practice of asking three or four questions at the same time so that I do not have to come in again.
I will address the four key points that you raised. We will want to examine your first point in future. I have said that we are trying to be more explicit about how the programme for government is addressed through the budget. A key target of the programme for government is that we meet European requirements and obligations. We have tried to be more explicit about water expenditure in the quality and standards paper, but you make a fair point that we should try to be more rigorous in all areas.
On the water question, the broad picture is that just less than half of the investment programme is being funded by the Executive from grants and borrowing consents. The balance will come from charging.
I want to pick up on a couple of points from the question and answer paper, which I found helpful.
We address that issue in the climate change consultation paper, which considers the possible costs of climate change and the extent to which we can mitigate its potential impact. We are almost coming at the issue from both angles: we are considering the impact of climate change and trying to shape the level of change that might take place in future. We are aware of the issues.
So, that work is coming down the track.
The answer is that local authority grants are almost entirely taken up by Strathclyde Passenger Transport Executive. The figures are in table 7.11 on page 101 of the report. The principal reduction concerns the SPTE and there is a small reduction in capital grants to local authorities, which is because that is made up of specific projects. To the extent that one can identify what is coming, one can anticipate the need. Other than for SPTE, the change is negligible. The figure of £5.2 million for 1999-2000 is high, but that amount relates to particular projects. The line then carries forward at £4.7 million for this year and next year.
So, does that money relate to projects, rather than a general grant for roads and road maintenance?
Yes. It will be for particular projects that local authorities are undertaking on roads or piers and harbours.
Does it cover the Executive's general allocation to roads and road maintenance?
No.
The last wee bit of Nora's question covered what I was going to ask.
A number of members want a second attempt at asking questions; I am happy to allow that as long as members are fairly brief and to the point.
I want to go back to the issue of freight facilities grant in table 7.4. The minister and her colleagues deserve to be congratulated on the work that they have done. However, I am concerned about the amount of future moneys and would have hoped that the forecast figures would increase. The minister might not be able to respond to that point now, but it is an area of work that is warmly welcomed by the community.
There are two answers to that question. First, there will be discussion, through the comprehensive spending review this summer, of the Executive's future priorities. Secondly, we want to ensure that the rail industry also invests in infrastructure. There are discussions with the strategic rail authority and Railtrack to discuss priorities throughout the network. There are constraints and there are issues about how to achieve the improvements in the infrastructure that will enable the projected increases in freight and passenger transport.
I have a few questions about the environment section of the statement. Is there a case for picking out what might be called new policy initiatives in future reports? For example, on page 104, reference is made to the pending access legislation and the related increase in allocation to Scottish Natural Heritage. However, no amount is quoted that might be available to local authorities or SNH to carry out detailed work. Councils, in particular, might welcome such money—they are about to be charged with additional responsibilities in that area.
No such luck.
With the help of the clerks, I worked out what EYF is—it is obviously all in the rounding of the figures. Nevertheless, a health warning to say that the figures do not add up absolutely would have been of assistance to the ordinary reader.
I was not going to comment on that, but I did note it.
Mr Tosh is quite right that contaminated land is one of several pressures on SEPA, which accounts for the rising gross provision for SEPA in the plans. Like SNH, SEPA produces a corporate plan each year, which will come out within the next month or two. It sets out the full background to its funding. As Mr Tosh points out, the contaminated land will also have implications for local authorities. That will need to be taken into account by the Scottish Executive in the spending review discussions with COSLA about the single capital allocation.
That might raise questions about whether the document should contain links to other reports or the websites of various agencies. It might also include information on the time scale of the availability of further information. That would mean that people would recognise the limitations of the document, but would know where to go to get more detailed information. I take it that the same point applies to the access issue—one would go to the SNH report for that information.
I acknowledged that earlier when I accepted your points about a glossary. We need to consider where people should go to find information about different elements of our expenditure. It will not necessarily all be covered in the document, although that will provide a clear structure.
I want to pick up where Nora Radcliffe and Murray Tosh left off. On page 106, in table 7.17 on flood prevention, the estimate for 1999-2000 is £6.1 million reducing to £6 million for the following two years. In view of the fact that that predates the serious flooding in Aberdeenshire, Moray and the city of Edinburgh, do you anticipate any increased funds being made available, or are local authorities in danger of losing out?
No. The figures represent projects that the local authorities have already identified as important and have therefore included in the budget process. Clearly, in response to recent experiences, local authorities will make further submissions to the Scottish Executive that we will have to consider and programme into future budgeting.
Will funds be available?
I refer you to the points that I made earlier about the comprehensive spending review. In the light of pressure on all our budgets, we will have to prioritise. We will get some fairly strong feedback from local authorities about which schemes they want to implement. That is something that the Executive will have to consider.
Landfill tax was mentioned and the minister will be aware that there is considerable disquiet about the rules and regulations applying to the disbursement of landfill tax, particularly in relation to the development of small local recycling businesses. Is there any intention, at any level of government, to review those rules and regulations? For the record, could I also add biomass and hydro to the renewables that I listed earlier? I am always getting told off for forgetting them.
There is an on-going review of landfill tax that is examining its current effectiveness and future direction.
I would like to thank the convener for welcoming me to the Transport and the Environment Committee. As I am the reporter from the Local Government Committee, I thought that I should wait until the other members had asked their questions before I asked mine. I am pleased to say that members have already raised many of the issues that I would have raised, such as the landfill directive, water and the M74. The minister's answers have been very helpful, as were the papers from the Executive. I hope to come back in a couple of weeks with a list of questions from my colleagues on the Local Government Committee; however, I have a few points that I would like to raise today.
I will answer as best I can. I am not involved in the detailed calculation of the distribution of the local government finance settlement. We should possibly provide further information to the committee in consultation with local government finance colleagues. It would probably be most helpful, in fact, if we simply got back to the committee in writing with an answer to that question.
The other matter is in regard to water. I noticed that, on page 103 of "Investing in You", the allocations appear to vary considerably between 1999-2000 and 2000-01, for example. The figures for East of Scotland Water and West of Scotland Water appear to show significant decreases over those two financial years, although the figure for North of Scotland Water shows an increase. I have an idea why that is the case, but I wonder if the minister could respond on that.
John could deal with that.
Essentially, that flows from differing investment needs. In general, those needs are higher in the north, which is why it has been given greater priority in distribution.
Is that to ensure that the increase in water and sewerage charges is not as high as it would otherwise be in the north of Scotland? Is it a matter of trying to level it out?
Given that the investment needs are higher in the north, if the Executive had not made extra funds available to the north, the charges there would have had to rise.
We were very conscious of that when the decision was taken.
I hate to be too persistent, convener—
You do not hate to be persistent at all.
I asked a question about table 7.17 and wanted to be advised on where its figures fed backwards into a level II line. That point was not picked up—because I asked too many questions.
Table 7.17 relates to the local authority single allocation, shown in chapter 8.
Is it covered by specific grants or by the capital expenditure allowance?
It is a combination of both. Flood prevention expenditure is assisted by a 50 per cent capital grant.
I thank the minister and her team: that was a comprehensive and useful session for us, and our preparatory work paid dividends on the level and depth of questions that we were able to follow up. I appreciate the time and effort put into that. As members are aware, the Minister for Transport and the Environment is staying with us for our discussion on the statutory instrument on nitrate vulnerable zones.
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