Finance Committee, 16 Dec 2003

Meeting date: Tuesday, December 16, 2003

Official Report 234KB pdf

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Budget Process

The third item on the agenda is consideration of a fairly crisp paper from the clerk and the committee's budget adviser on the budget process.

Given that the paper is crisp, I shall try to make my points crisp.

At point 4 in the paper there are five questions. The first is:

"Do members wish to investigate any aspect of the budget prior to the publication of the AER?"

In that three-month period I would like us to consider performance monitoring, which we keep coming back to. We have made great progress in persuading the Executive to try to split the budget into considering performance and new plans. It would be helpful if we could get a bit of understanding of how it intends to carry that out. I really liked the fact that we had witnesses who took a broad perspective and looked across the whole of the budget in the same way that the committee is charged with doing. We should at least maintain that approach and perhaps even augment it next year.

The important question is 4(d), which asks:

"Do members wish to commission research to inform the Spending Review?"

Everybody is aware that it is anticipated that the spending review will be quite tight. We have identified that it is impossible to know what the trends in current and capital spend are north of the border in the past five years in comparison to broad trends south of the border. That is the one issue that could really help us to inform the spending review. We should try to commission work to get a handle on capital spend versus current spend over the past five years, whether our approach is broadly comparable to that south of the border or whether we have drifted away towards too much current spend just because in the first year of devolution everybody wanted sweeties for all.

Question 4(e) is:

"Should the Committee be asking the Subject Committees to appraise key trends and issues within their functional responsibilities prior to the Spending Review?

That comes back to the other big issue that we identified: we should tell subject committees that they should be asking for long-term trend data in their portfolio areas. We know that that information is not available but, sod it, we have been asking for it for six months. It is not for us to do the Executive's job; it has to provide like-for-like data, subject by subject over 10 years. We should push things along by making it clear to committees that we have hitherto failed to come up with 10-year-trend data in the areas that they look after and we really feel that if they want to steward their own budget areas appropriately, they should be asking for the information.

I agree whole-heartedly with points 5 and 6, which suggest that we should have a conference on what we should cover.

I have two or three points to make. I presume that members are agreeable to having a conference. Work has been going on to set that in train, so it would be fine if we could get that agreed.

The issue of subject committees is one that we have to handle a wee bit carefully. There is a sense building up in the subject committees that the Finance Committee might be pulling them too hard in directions that they might not want to devote their time to. Although, in principle, it is a good idea that each subject committee should appraise the key trends and issues in its functional responsibilities prior to the spending review, I suspect, based on past evidence, that we will get a somewhat chequered response from various subject committees. Before we issue instructions to subject committees, we have to be a bit clearer about the direction that we are going in to ensure that the parameters of the spending review can be a bit more clearly established. That might be the point at which we engage the subject committees a bit more strategically. To be blunt, there might be areas in which, if the subject committee is willing, we will have to do the work rather than the subject committee. I am suggesting that we take more of a mix-and-match approach rather than a directive approach.

We should consider value-for-money studies on a cross-cutting basis. The Executive is likely to carry those out if it follows Westminster's pattern. If that work is on-going, it might provide a mechanism that we would want to engage in and, perhaps, influence. For example, some of the issues that have been raised about data, benchmarking and so on are relevant in that regard. We should link in with that process and seek to shape it as best we can.

Like Wendy Alexander, I have put a big tick beside paragraph 4(d). The spending review decisions are as important, if not more important, than the annual budget. It would be helpful to have a better handle on how those decisions are made. In past years, such decisions have been to do with how additional money will be allocated and which projects will win. However, as Wendy said, at some point we might find ourselves in a situation in which the sunsetting of certain projects is being considered. In such a situation, it would be useful if the committee had more information on how the decisions are made, what it is most desirable to promote and what each department feels that it can do without if times get tough.

Like the convener, I felt that the process of appraising key trends might be more part of our job rather than the subject committees' job. I do not know whether the subject committees are as committed to that process as we are. Given the short time scale involved, I would not want to be too critical of the committees, but the responses that we received were varied. Some people had answered the questions that we asked and some had not. Possibly, that reflects the priorities of the committees and the way in which they handle their portfolios. We might have to push the process further ourselves.

I also concur with the convener's suggestion on value-for-money studies. That is the mechanism by which it might be possible to release money from some budget areas to ensure that areas that the Executive has identified as priorities are funded.

Ensuring that money is spent better is one of our objectives.

On the performance assessments, if we have only a half-day conference we will be giving ourselves quite a heavy schedule. It is a detailed piece of work and I am sure that even simply examining the performance assessments in the area of health could take a substantial amount of our time. We got a snapshot of that this morning, when we were talking to our witnesses. We should give that some more thought, especially as regards the relationship between the Executive and local authorities.

On paragraph 4(b), I think that, by and large, the range of witnesses that we have had has been good. However, I would prefer that we were able to take more evidence from those who are at the coalface rather than take evidence from their representatives. That is a lot harder to organise, of course, and might mean that we have to go to speak to people at a local level. For example, we could go to a social work department or a general practitioner's practice. In effect, those people are the budget holders and make decisions at a level that directly affects people. In relation to the filter-down effect of the budget, I think that that approach would be helpful.

All the points in paragraph 4 of this tight and succinct paper are good questions to ask and all relate to the points that are made in paragraph 5. It reinforces the great Peter Drucker quote:

"If you can't measure it, you can't manage it".

The greater grasp we have of data, the better. In relation to the 10-year time line, the clarity and completeness of data are utterly crucial. That will allow us to link the data to outcome trends and trajectory.

Regarding the range of witnesses, it is possible for this committee to bring in witnesses who might put more pressure on the Executive to produce the 10-year data. If we had John Curtice, Alf Young and Bill Jamieson before us, we would get the attention from the media and the Scottish Executive that this committee deserves.

I am conscious of the point that has been made about the dangers of turf wars between the Finance Committee and the subject committees, but I would like to take some time to respond to the points that have been made.

Wendy Alexander's suggestion relating to capital trends is a good one and would be manageable within the timetable. It would be helpful to get a steer as to whether the committee wants to go ahead with that.

I see that members are nodding.

That is fine.

I suspect that we could deal in our conference with the issue of how decisions are made by the Executive. Are members looking for research on how those decisions are made?

I would like the Executive to explain the process.

I get access to the papers that the Executive sends out to the departments on the information that it is seeking. I do not think that we should commission a research paper on that.

No, but I think that we should ask the Executive directly how such decisions have been taken and how decisions would be taken in relation to any cuts that might have to be made.

On the targets and performance assessment and monitoring, there are about 20 strategic targets that I would regard as the province of this committee and there are about 100 other targets, some of which are relevant only to individual subject committees. I would like this committee to examine those 20 targets. We do not need to do any further work on that and an in-house paper could be produced for the committee to consider before the spending review process starts.

From the discussions that we have had with the Executive, we can be sure that the Executive will produce information about performance against those targets for March. In advance of that, it would be useful to have a conceptual discussion about whether those are the right targets for what we are trying to measure. Is the committee happy with that?

I sense general agreement.

For the past two years, SPICe papers have been produced for each committee on the background trends of the most recent two to three years in the relevant budget areas. I do not think that committees can play their proper role in the budget process if they do not have some sort of steer as to what has happened in recent years.

I realise that this committee would have to take a view on whether the committees should be formally asked to do that work. However, there is no point asking them in April; if we are going to ask the committees to do something, we should ask them soon. Perhaps Ross Burnside will say something about the SPICe view on the matter. Some thought that we had given the committees a heavy task, but most of them produced papers at the start of the past two budget processes that showed trends from recent years. However, they did not go back as far as the committee would have liked.

It is definitely possible from our point of view. Some of the clerks have budget advisers to assist with the task. The issue is whether we want to ask for 10 or five years' worth of data because, as the committee is aware, we do not have that.

The message is that, technically, it would be possible without any great effort for us to produce some data about changing shares of the budget.

I seek the committee's advice on what seems to be a fundamental principle. It is not our job to come up with how much the Executive spends. The committee's view, which is reflected in the budget report, is that it is a dereliction of duty for the Executive not to tell the Scottish people how much it has spent in each of its major subject areas over a reasonable time horizon, since the arrival of the Parliament.

Although it is nice for SPICe to help out, the centrepiece of our budget document is the fact that we are coming up to a tight spending review, five years into the Parliament. We know that we have tough choices to make and we want the Executive to produce data, as every other country does, on how much it spends in real terms in different areas. That is the responsibility of the Executive; it is not the responsibility of SPICe. In that sense, we are saying to the committees that we hope that they will have the data available.

We have failed so far to convince the Executive that this is an important part of an open and transparent budget process. The Executive must be made aware of that. The reason why the Executive is floundering around, as did all the people who came to speak to us at Lanark, is that it does not have the data in an accessible form. I foresee us writing to the subject committees on the matter as a way of ensuring that we will not be the only committee that says, "This information would be helpful." Whatever information SPICe provides is extra, but as part of our trying to restructure the process, tomorrow's debate will allow us to say that we think the information would be helpful, particularly in the run-up to the fourth and tightest spending review that we have faced during the past eight years.

We need to explain what the Finance Committee is doing—the framework that we are trying to put in place and the way in which we are going about that. We must then try to empower the committees, not just in the framework, but with the information that they are likely to have. We must not set the committees impossible tasks, because that will turn people off. We need to get guidance to the committees that they see as meaningful, so that they can make a difference and influence the decision-making process in their area and, potentially through this committee, across other areas. That is what we are trying to achieve. I do not have a problem with what Wendy Alexander suggests as part of the background, but we must also get SPICe to give the committees what it can.

That is fine. So you will send a message and I will carry on with SPICe to give the committees an independent steer on recent trends.

I back up what Wendy Alexander said. Her point is the same as the point about wanting to know how the Executive arrives at decisions on the projects that it will prioritise or those that it will sunset. To scrutinise the work of the Executive, the Finance Committee needs to know what money is being spent over a certain period and how decisions are taken against that background, in terms of either promoting certain areas or sacrificing certain areas if times get hard. It is not just a matter of research; we have the right to ask the Executive for that information so that we can scrutinise its decisions. We require a direct dialogue with the Executive. However, if the subject committees can help us, we should elicit their help.

That is right. We have to take up the leadership role, but we also have to involve the committees and empower them to contribute to the process.

Ross Burnside and I are close to completing a paper that links spending with outputs since 1999 only—that is the period for which Executive data is in the public domain. We have consistent spending data that we will get to the committee in the new year.

We should not overlook the time series data in "Government Expenditure and Revenue in Scotland 2001-2002", which are fascinating this year, because they go back to 1997. The report provides outturn data on spending instead of estimates. I would like to write a supplementary note on that for the committee, because although the report includes UK as well as Scottish Executive spending, it shows big changes in priorities. There has been significant change over the five-year period.

That would be helpful.

I seek clarification from the convener, the clerks or Professor Midwinter. Usually, when a committee produces a report, the Executive is obliged to respond in eight weeks. How will the Executive respond to our budget report and in what time scale? There is no point in our standing up in the debate tomorrow and accusing the Executive of not responding, if we are still to find out the mechanism by which it will respond to our recommendations. How pessimistic or optimistic are you? The answer to that question might influence what a number of members say in the debate tomorrow.

As far as we are aware, the Executive will respond to our report in its entirety within the eight weeks as set down. It is anticipated that we will get a co-ordinated response, but if there are any issues in subject committee reports that are specifically for the subject minister, the Executive will respond separately on those matters.

When other committees have a debate in the chamber, the debate usually takes place after the committee has taken receipt of the Executive response. We are in an awkward position tomorrow, in that we are obliged to debate a report in Parliament before we have the Executive response. I understand why the situation has arisen, but have I understood the procedure?

That can be the case, depending on when the committee asks to have committee time in the chamber for a debate. Sometimes a response has been received from the Executive, but it depends on when the committee has asked for time in the chamber.

Tomorrow's debate is on our report and I anticipate that when members of this committee speak, they will act as advocates of the particular elements of the report that excite them the most. However, I am sure that there will be a party dimension to the speeches.

There will be a further debate on the budget at stage 3 in February, as has been the case in the past. I presume that the final debate on the budget will be after we have received the formal response from the Executive, so tomorrow is not our only day in court; we will have a further day.

The fact that the Executive will provide a single, co-ordinated response this year is progress on last year, when we did not get the response in time. We had to ask for the response and it was not produced in a corporate way. Some decisions that were left for the spending review had been taken, but we had no record of the outcomes. I regard as good progress the message that we have had this week from Executive officials that they will produce a single, definitive response to the recommendations in our report and that ministers will deal directly with subject committee issues only.

Thank you.

Before we finish, I have a question about the conference. Are members thinking of a conference or a round-table meeting? A conference is a major event with 100 or 200 people, whereas at a round-table meeting, one could get more input from a range of experts rather than have a grand audience. I am not sure from previous discussions at whom the conference is aimed.

I was going to suggest that we left it until April, because March is a bit tight. There would be merit in having the conference in the three months following the annual expenditure review. I think that the terms of the debate depend on whether the Executive accepts our report. As soon as we take receipt of the Executive's response to our budget paper, I would like the committee to have a discussion. If the Executive accepts our recommendations, that will be great progress and we can cheerlead the conference. If the Executive does not accept any of the report, however, we might need more work to put the pressure on. I propose that we think about lagging the conference a wee bit and that we revisit the matter when we take receipt of the response and see whether the Executive has bought the argument that Peter Wood and Donald MacRae put forward.

Are members happy to adjust the format and timing of the conference according to the Executive's response, as Wendy Alexander suggested? Would that be a problem from the clerks' point of view?

If the committee wanted to have a major conference, we would have to consider the logistics in terms of timetabling and the time that it would take to organise such a conference.

If there were costs associated with holding such a conference, I presume that we would have to submit a bid to the Conveners Group. We could do that at the group's January meeting in a way that would allow us to adjust the conference format according to the circumstances, as Wendy suggested. Another possibility would be having a morning conference and an afternoon round table; a combined mechanism might be appropriate. We should leave ourselves enough scope to allow for the various possibilities.

A final point for clarification is Jim Mather's point about the range of witnesses. We need a steer on that. John Curtice is an election specialist rather than a budget specialist, so he is not an appropriate witness for our purposes. We have tried to get Alf Young involved, but he said that he might have to comment on the budget, so there would be a conflict of interest for him if he were to contribute to our discussions. I ask members to give some thought to whom the witnesses might be. It would be helpful to get a steer so that we do not come up with a list with which members will not be happy. It would be helpful to have a list of names and time to contact them.

There is also an issue about themes. Alf Young talked in his column in The Herald—last Thursday, I think—about how we spend money, which is an important set of issues for the Finance Committee. It might be useful to have him as a witness to talk specifically about the issues that he raised.

Can the clerks circulate copies of that article, as I did not read The Herald last week?

Yes.

I still have a concern that we will see a larger proportion of witnesses who are what we would term experts in their field. I am not decrying our using such experts, because they contribute hugely to the committee's work and they prepare us very well. However, I believe that there should also be an opportunity—which would be quite novel—for some members of the Finance Committee to get involved at the local level with which our constituents deal and which is the end result of the budget process. Many of our constituents' experiences will be of not having the services delivered that we all want delivered. Rather than focus too much at the top end, perhaps committee reporters or others should get out and about in local authority areas. I believe that that would be valuable.

We need guidance from the convener on that issue. When Jeremy Purvis made his point, I wrote down, "The private world of academia—topocrats and technocrats". We tend to get at committee meetings what I call topocrats—the chief executives and the directors of finance. The technocrats, such as the social work director who was referred to, tend to go to the appropriate subject committee. I have a reservation about Jeremy's point, because I feel that we might be crossing into turf-war territory. We must be careful not to be seen to be giving an "in" to particular lobby groups or interest associations. If members wanted to invite witnesses from social work, they would have to invite witnesses from housing, education and other areas to ensure that the committee was perceived as equitable. However, chief executives and directors of finance are regarded as having a grander overview, which is in line with the Finance Committee's role.

Could we reflect on that as we go forward?

Yes.

Perhaps the process for our detailed scrutiny does not need to be hard and fast at this point. However, we need to establish the broad parameters.

Are members reasonably clear about that? The different strands that members have raised will be recorded in the Official Report. The clerks will try to gather the strands and turn them into a series of decisions or steps that we would want to take forward. We can circulate the result round the committee with the message that this is what seems to have come out of our discussion. I believe that there is consensus in the committee on how we want to go forward. If members and Arthur Midwinter are happy with the direction in which we are going, that is fine.

We now go into private session for the final agenda item.

Meeting continued in private until 12.30.