The fourth item on our agenda is to take evidence on the expenditure side of the Scottish Government’s draft budget for 2016-17, further to last week’s session, which focused on the revenue side. We are joined by the Deputy First Minister and Cabinet Secretary for Finance, Constitution and Economy, John Swinney, who is accompanied by three Scottish Government officials: Mr Andrew Watson, Mr Graham Owenson and Mr Scott Mackay. I welcome our witnesses to the meeting, and I invite Mr Swinney to make an opening statement.
Thank you, convener. I welcome the opportunity to appear before the committee to discuss the expenditure aspects of the 2016-17 draft budget and to welcome the committee to Pitlochry in my constituency.
The draft budget that was announced in December was published following the later-than-expected United Kingdom spending review. As the committee will be aware, the timing of that spending review has required us to agree a truncated parliamentary scrutiny period and to reduce by a number of months the amount of time available to the Scottish Government to develop and deliver a draft budget.
Given those time pressures and the relevance to future budgets of continuing engagement with the UK Government over the fiscal framework, it has not been practical to develop a full multiyear spending review. That is consistent with the approach that has been adopted by the Welsh and Northern Ireland Governments, which have also published single-year budgets.
The 2016-17 draft budget is written against a backdrop of continued public spending constraints. The Scottish Government’s budget will continue to fall in real terms in each and every year until the end of this decade. By 2020, our discretionary budget will be 12.5 per cent lower in real terms than it was in 2010-11, and our capital budget will be more than £0.5 billion a year lower in real terms in 2021 than it was in 2010-11. However, I am absolutely committed to maximising the public value of all expenditure that is allocated by this Administration.
Therefore, the draft budget prioritises two main themes: supporting inclusive growth and protecting and reforming public services. It is essential not only that economic growth is maintained, but that the benefits of that growth are accessible to all our citizens. The need to tackle inequality is at the heart of the Government’s agenda and of this budget. We will deliver inclusive growth by focusing on investment in innovation, infrastructure, education and skills, and by maintaining a competitive business environment.
Innovation is a key driver of growth, competitiveness and productivity. Our universities have a key role to play, and in 2016-17 we will invest a further £1 billion to support the higher education sector. We are committing funding of around £345 million from our enterprise agencies and from the Scottish Further and Higher Education Funding Council to support research and innovation. We will work with all our partners to drive increased collaboration to create an innovation environment that supports the development of new products, processes and services.
Closing the attainment gap in educational outcomes is key to our ambition of creating a stronger, more sustainable economy and a more equal society. Our commitment to improving educational attainment is supported by additional investment of £33 million in 2016-17 in attainment programmes, our commitment to maintaining teacher numbers and expanding early learning and childcare, and we are again protecting college budgets.
We will also continue to do all that we can to protect family incomes. As we discussed last week, our decisions on the Scottish rate of income tax ensured that we will not put an additional burden on those with the lowest incomes. We also continue to mitigate the most damaging effects of the UK Government’s welfare cuts, including through the £38 million welfare fund, and the provision of up to £343 million for the council tax reduction scheme and £35 million to ensure that nobody pays the bedroom tax.
We have consistently emphasised the positive role that public sector investment in infrastructure can play in stimulating economic growth, and we have seen the evidential benefits of that approach. The draft budget supports that continued growth by investing around £4 billion in infrastructure and delivering new schools, hospitals, homes, roads and railways. We have established energy efficiency as a national infrastructure priority.
We will continue to protect and reform public services to ensure that they remain sustainable in the future by delivering on the Christie commission approach of prevention and service integration at a local level. Our vital front-line policing resource budget will be protected in real terms next year and—if the Government is re-elected in May—for every year of the next session of Parliament. In addition to maintaining 1,000 additional police officers, the draft budget provides £55 million in 2016-17 for a new phase of change and transformation funding for the police.
The budget delivers a balanced settlement for local government and one that will be strengthened by our joint work on health and social care integration and educational attainment. Scotland’s local authorities are key partners and we will continue to engage closely with them to deliver shared priorities in what remains a challenging financial climate for us all.
An additional £0.5 billion will be invested in the national health service, which means that we will provide a record total of almost £13 billion in health expenditure, and it will enable an additional investment of £250 million to support the integration of health and social care and to build the capacity of community-based services, which is the most significant reform in health and social care since the creation of the national health service in 1948. Those crucial changes will ensure that fewer people have to be treated in hospital and, when hospital care is necessary and appropriate, we can ensure that people spend less time in hospital and are able to go home more quickly.
The draft budget represents a positive and ambitious programme of investment to promote our economy, drive fairness in our society, deliver opportunities for all and protect and reform our vital public services for the future.
I will be delighted to answer any questions that the committee might have.
Thank you for that opening statement. As you know, at previous meetings, I have always started with some opening questions before opening the discussion out to members of the committee. However, today, following robust representations by my colleagues, I will come in at the end, instead. The first person to ask questions will be the deputy convener, John Mason.
I am sure that the cabinet secretary is as surprised at that change as we all are.
It is great to be here in Pitlochry. We had an interesting session this morning, which I will refer to later on.
With regard to the overall figures for the budget, you have made it clear that quite a lot more is being invested in health, but you have also said that issues such as growth are important. Some people would say that we should invest more in economic growth and they ask why health is getting so much money. Can you explain your thinking? Why is health being apparently favoured in that way?
We have recognised the importance of ensuring that we have a properly resourced and supported national health service that meets the needs and expectations of citizens. My assessment of the priorities that are widely shared in Parliament is that there is a keen interest in ensuring that the health service, in its broadest sense, is properly funded.
The budget statement has provided those resources to the policy area of health to ensure that we can meet the changing demographic nature of our population. We are in the fortunate position that people are living longer. However, as they live longer, they require a greater degree of support and care, and our challenge is to ensure that we can deliver that in the most effective way possible to meet the needs of citizens. Although the health budget is growing significantly—for the first time, it is in excess of £13 billion in value—it has to meet a rising demand for services within the population, and we have to recognise that in the budget.
The other part of the question relates to investment in growth. With regard to the quarterly gross domestic product figures that came out last week, the strongest sectoral element concerned the construction sector. I think that any analysis would show that one of the significant drivers of that growth in the construction sector, which I think that economic analysis would accept creates a wide economic impact and footprint, comes from the public investment that the Government and our partners are putting into the equation.
When we think about the budget, we must think about a broad range of factors that will have an effect on what will contribute towards the growth agenda. For example, if we were to take the view that the test of the budget was the size of the enterprise agency budgets, that would be to miss the point, because I think that there are factors such as the investment in the infrastructure programme that illustrate an investment in the long-term economic strength of the country that is driven by the priorities and choices that we have made as a Government.
There has been a lot of coverage of local government in the budget, and a few councils seem to be talking about council tax increases this year. Can you say why we are continuing with the council tax freeze? Will that continue until we abolish council tax, or is this the last year in which you are thinking of having the freeze?
Mr Mason is inviting me to reveal what might be the contents of my party’s election manifesto. However, important though the stage set in Pitlochry theatre is, I am not sure that it is exactly the location for me to do that—I might get into trouble back at the ranch.
The Government was elected on a commitment to freeze the council tax in every part of this parliamentary session. That was our commitment, and the Government is fulfilling that promise. We think that that is important for many of the reasons that we discussed last week in talking about the wider revenue-raising challenges and questions around the budget. We believe that it is important to provide protection for household incomes in what has been a very financially challenging period for many households. Over the years, the Government has continued to give a strong settlement to local government. If we look back, taking out the impact of removing police and fire costs from the local government settlement, which was done for wider public service reform reasons, we see that in 2014-15 the local government budget rose by in excess of £400 million while in 2015-16 it rose by a further £250 million.
The reduction in the local government budget of £350 million, in resource terms, that I have applied here must be seen in the context of three important caveats. First, that reduction is taking place against a very high baseline for local government expenditure in Scotland. Comparatively speaking, local government’s funding has been protected and supported by the Government over many years—I have just cited figures to show how it has risen steadily since 2011-12. Secondly, the scale of the reduction is not unprecedented. In 2011-12, when we faced significant budget reductions, the local government budget was reduced by £438 million. Thirdly, as we discuss the settlement with local government, an important factor to be considered is the allocation that we have made as part of the reform agenda under the integration of health and social care. We are investing £250 million in the integration of health and social care services to drive an important process of reform that is broadly, if not universally, supported within the Parliament as a major priority.
In summary, the reduction in the local government budget is taking place against the backdrop of a high baseline; in previous years, we have faced difficult decisions of this type and local government has managed to accommodate them without the benefit of having that higher baseline; and we are providing practical assistance through the investment of £250 million in health and social care integration, which is designed to ameliorate some of the challenges.
Thank you. I am sure that other members will come back to that subject in due course.
You mentioned preventative spend, which the committee has been interested in over a number of years. Our briefing paper sums up the responses to one of our inquiry questions as follows:
“Reactive services always come first. Long term prevention aims are highly supported in principle, but they do not compete well with more reactive policies dealing with current and more urgent problems.”
How do you see where we are going with that? Waiting times at accident and emergency wards are easy to measure—that is a reactive service—but it is much harder to measure the quality of service that someone gets from their GP. How do you feel that we are moving towards preventative spending? Do we have any real evidence of that?
The Scotland performs framework is designed to give us a set of measures of the performance of public investment and public services in general. One of the indicators reflects public attitudes to public services, and, in a tough financial climate, that indicator still demonstrates strong public confidence in the quality of the public services that people experience. On that performance management point, an important endorsement is made by evidence from surveys of members of the public.
Mr Mason asks a deeper question about the shift in emphasis within public expenditure. As I indicated in my introductory remarks—members will also have heard this in my presentation of the budget statement—the steady, incremental delivery of the Christie commission agenda, which substantially encouraged us to shift the emphasis on to preventative services rather than reactive services, remains an on-going priority of the Government.
14:45Are we going to achieve that in 12 months? No. There will be a sustained period of re-engineering public services. For example, through the work that is being done on the integration of health and social care, we are beginning to break down the barriers that have existed between the traditional silos of health services and local government services and move to a much more citizen-focused service where the focus is on what the individual requires rather than on what this service provides and what that service provides.
That will help us to move much more readily to identifying interventions that will better support individuals and prevent them from requiring more expensive public services to be delivered in an emergency. The emergency services are the most expensive services to deliver. When somebody needs an ambulance to be sent to them, we incur a significant cost. If we have a care worker adequately and properly supporting the individual and we meet their needs in the home with proactive services, we are likely to deliver care more efficiently and at a lower cost.
There does not seem to be much evidence of disinvestment in acute services, as you describe them. Can we disinvest from the ambulances and things?
I do not think that that is a particularly good example of where we should be disinvesting from. The focus must be the shift of emphasis from hospital admissions in emergencies. The best measure, I think, is the degree to which we can reduce the number of people who are the subject of emergency admissions to hospital when we could support them better in the home. Some of the numbers will be complicated by the fact that we have a rising elderly population and, therefore, the potential for greater demand, but the shift to prevention might enable us to cope with the increased demand on some of the acute services in the years ahead.
That is just one example of the variety of agendas. Another is the getting it right for every child agenda in the early years, which is designed to identify measures in a range of combined public services that enable us to best meet the needs of our youngest citizens. It is about giving them the best start in life and trying to prevent the crystallisation of problems. If we can properly address things in the earliest years of a young person’s life, we can prevent those things from crystallising into deeper problems when they are slightly older.
A third example is the work to reduce offending. We are beginning to see some very good results with reductions in the number of individuals who are reoffending, and that has an effect on the scale of the prison population, which we are beginning to see declining. That is beneficial because we are preventing people from going into the cycle of repetitive offending that we all know has been a problem for many years.
I would not want to suggest to the committee that the job is done. This is work in progress, and it will be work in progress for a considerable time as we shift the emphasis of the public services in this direction. The work is part of a sustained programme to try to enable that to happen.
Thank you.
I said that I would raise one of the issues that came up this morning when we met members of local organisations, some of whom are still with us. I think that the number 1 issue that came up in the working group that I was in was broadband. I guess that, as a local member, you are reasonably familiar with that.
There seems to be a tension between local groups trying to raise funds and do some of the work themselves and BT coming in and choosing one area and then another and, apparently, being a bit inconsistent. What finances can we see in the budget for helping with broadband? What relationship do the Government and the likes of BT have to move the agenda forward?
On the financing that is available in the budget, the Government has made a commitment—if the number in my head is correct—of about £117 million in this financial year as part of the roll-out of the superfast broadband programme. That is the core contract that we have with BT. The target is to enable at least 95 per cent of properties with superfast broadband by the end of 2017. We have reached 85 per cent, and we are making good progress on achieving the 95 per cent target. That core, significant programme, which is valued at more than £400 million, is going well. We are ahead of its milestones, and about 7,000 properties a week are being enabled with superfast broadband.
We also have provision in the budget through Mr Lochhead’s portfolio priorities of about £9 million to invest in community broadband Scotland. Essentially, our contract with BT will enable at least 95 per cent of properties with superfast broadband. I am hoping to get the proportion higher the more we roll out the core fibre across the country. I am optimistic that a greater proportion of properties will be taken in by the contract. We have had a gain share out of the contract of about £18 million, which is £18 million of more capacity. We do not get back that £18 million; we just get £18 million-worth of additional fibre rolled out. That, obviously, will increase the enablement figure of 95 per cent.
I am quite confident that the programme is going well. My biggest priority is sorting out the other 5 per cent of households, so that they get superfast broadband not at the programme’s tail-end but as early as possible.
Community broadband Scotland has resources of about £9 million available to it in the forthcoming financial year to enable it to pump prime and be a partner in the development of local broadband projects. For example, a community organisation in an area that will not be accessed by BT may host a broadband project and put in place its own solution. Of course, technology developments are helping that process quite considerably. The key issue is getting notification from BT about where it is not going. If BT will not spill the beans about that, it is a bit of a waiting game. The minute that BT says, “We’re going there,” the community organisation cannot get the support.
That point came up in our discussions.
We have had a recent example in Kenmore, which is about 15 miles from Pitlochry. We were led to believe that BT was not going to go there, but we have now found out that it is. We may find that the broadband solution that is put in place by BT comes later than the community solution could have been put in had the community been allowed to go ahead with it.
Mr Mason asked about the relationship between the Government and BT on this question. I assure the committee that this is a vigorous area of discussion. I want BT to be clear about where it is and is not going. If I know where it is not going, I can put the resources and the focus in place to work with communities to find solutions. I do not want to be in the situation where communities that had broadband last in the previous programme are the last to get it in this programme. That would be fundamentally unfair.
I credit the previous Government for funding the enablement of about 110 exchanges around the country, including in this locality, that BT was not going to enable with broadband. It could do that only once BT said, “We’re not going there.” I am anxious to have clarity about where BT is not going, so that we can deploy the investment, the focus, and the energy to find out the solutions.
There are great solutions out there. We have just come to a deal in some of the Argyll islands. The GighaPlus Argyll project, which is a community-based project that is supported by community broadband Scotland, will enable 1,100 properties in Gigha, Colonsay, Islay, Jura and parts of Mull and the Argyll mainland. That was made possible because BT said, “We’re not going there.” Some imaginative solutions have been put in place by community collaboration. I want to ensure that we can get on with that, but it is not Government that makes the final determination, so we need good collaboration with BT to enable that to happen.
During the Paris talks, our Minister for Environment, Climate Change and Land Reform declared that climate change prevention would be embedded in our budget. So far, it looks as though the fund has been cut by some 10 per cent or by approximately £50 million. Given that a lot of people believe that flooding and extreme weather and so on are a direct result of climate change, now does not seem to be the time not to have climate change as a priority. Given that it also fits in with the preventative spend agenda, how do we justify making those cuts in the climate change budget at this time?
It is important to look at the different components of the budgets that are relevant to this area and to understand what is going on in the different areas. For example, one of the areas where there is a reduction in spend is energy. One of the challenges that we have had over at least the past two years has been in deploying allocated expenditure to support the roll-out of renewable energy projects, simply because the industry has taken longer to develop some of those solutions. The development of a positive climate for such projects has not been helped by the changes in the financing arrangements that are determined at UK Government level. I have faced the challenge of how to put money into projects when there has not been a strong enough project pipeline. That explains one of the areas where we have made changes.
In housing, Jean Urquhart will be familiar with the fact that the Government is expanding its investment in affordable housing. Of course, the houses that emerge out of that housing supply programme will all be designed to deliver on our carbon reduction programme.
There are a variety of different areas where we are deploying expenditure that is relevant, such as transport and rural land use. As part of the common agricultural policy reform programme, Mr Lochhead has placed a greater emphasis on the greening elements of CAP support, which are designed to mitigate some of the effects of climate change, so the expenditure in those programmes is also relevant to the delivery of our climate change targets.
Government ministers have embedded this approach within our policy choices and our budget choices. Those are some of the examples that I can cite of where the Government has done exactly that.
One of the other interesting things that we learned today was about SEPA’s role in relation to flooding. Often, communities that are looking for advice and support are told by SEPA to go and prepare an expert’s report on whatever the particular problem might be, whereas one might expect that SEPA would be the organisation to deliver that support. To give an example of practical or local knowledge as it relates to a flooding strategy, we heard that there was a time when people would remove silt from the riverbed, but SEPA is against that. How does that square with the role of SEPA as an advisory body or at least, one would have thought, as a body with expertise that it might share with communities in such an important area?
15:00
I would need to know more about the specific examples that are being cited. The Scottish Environment Protection Agency has just published 14 flood risk management strategies for a range of localities around the country. It has done the research and has identified the communities and properties that might be at risk of flooding, and it has set out the measures and interventions that could be undertaken to address that. In that respect, I think that SEPA has done exactly what Jean Urquhart wants done.
Some of the solutions that emerged from those strategies make up the £235 million-worth of flood risk schemes, which involve engineering works of the type that were undertaken in Perth, which have been tested significantly in the past two months. Other interventions involve attenuation of significant rainfall further up the straths, before the water emerges into places such as the estuary at Perth.
Essentially, the flood risk management strategies determine the agenda of flood risk activity. That work has been done by SEPA. If people think that other work should be undertaken, there is a course of engagement with SEPA that can be followed.
On the issue of the silting up of rivers, the clearing out of ditches and so on, I have had a lot of involvement in this question as a constituency member in this locality, which has many challenges with flooding—I can assure the committee that the River Tay at Dalguise is a different beast today compared to its state seven days ago. There is a lot of knowledge and awareness here. It is important that that local knowledge on these questions is absorbed by organisations such as SEPA.
I have seen many examples in which SEPA has been approached to give licences to clear out burns and ensure that ditches are free flowing. I do not have the data before me, but SEPA has told me that well over 90 per cent of those applications are approved. The idea that there is a prohibition on ditch clearing and the cleaning up of burns is not borne out by the evidence that I have seen. The committee might want to discuss those specific points with SEPA, because there is a hydrology debate about the wisdom of speeding up the flow of rivers and burns versus slowing it down. SEPA has the expert opinion that can inform the debate about what is the right thing to do in certain circumstances. In some parts of this county, the benefits of water being retained higher up in flood plains rather than presenting itself in volume in and around the city of Perth, for example, is pretty easy to understand. Our flood risk management approach has to take that into account.
SEPA’s budget has been cut at a time when we might want it to do more of that work.
We are in a time of challenging financial settlements and I require all public bodies to contribute towards our ability to live within the resources that are available to us. The Government has specifically protected the flood forecasting and flood awareness work that SEPA undertakes. That is funded separately to the SEPA budget—there are separate budget lines that are clearly visible from the level 4 information in the rural affairs portfolio budget.
I require SEPA to operate in an efficient fashion. As with other public bodies, I require it to do so with fewer resources. SEPA has statutory obligations under the Flood Risk Management (Scotland) Act 2009, and it is from that work that the flood risk management strategies have emerged. Within the resources that are available to it, SEPA must fulfil the statutory obligations that the Parliament requires of it.
My final question is again on climate change and energy efficiency. As you know, we took evidence earlier from officers from the Scottish Futures Trust. One of the issues that I raised with them was their commitment to work with local authorities on LED lighting and the savings that that would make. That is the only energy efficiency issue that is listed in the SFT paper. In answer to my first question about climate change, you referred to the actions that the Scottish Government is taking in house building, ensuring that better houses are built that will not need to be altered. Will that feed through to the SFT equally? Will you have the influence over capital development to ensure that that is the case for all building?
Yes. As Jean Urquhart fairly says, the SFT has done an excellent job on the public lighting projects, which are designed to save money and deliver energy efficiency. Those values also underpin the design approach that is taken in the construction of public buildings to improve the energy efficiency of those buildings. The mandate that the SFT has from ministers is to act in a fashion that delivers greater value for the public purse, and a key way in which that can be achieved is through greater energy efficiency. That is, therefore, a key part of the work of the SFT.
I am trying to establish what is happening to the housing budget. On page 86 of your budget document, the housing supply budget line appears to decrease by about £1 million between 2015-16 and 2016-17. However, when you delivered your budget statement, you said that you were going to spend £90 million more next year on affordable housing. If the overall budget goes down by £1 million but you spend £90 million more on affordable housing, what are you spending the best part of £90 million less on in order to achieve that balance?
The key factor is to incorporate a budget line that is not in table 9.03, which is the transfer of management of development funding that is part of the local government settlement—it is on page 95 of the budget document and totals £91 million. That gets added on to that housing supply figure to demonstrate the increase for housing supply.
To your knowledge, no housing budget lines will go down next year.
On a like-for-like comparison, there will be a reduction in the resources available for help to buy. We have prioritised improving the supply of affordable housing.
Help to buy funding will be reduced. Are you able to give us an idea of the magnitude of the reduction?
We can give you a detailed breakdown of what lies beneath those figures.
Your press release on help to buy said that you were going to devote £195 million to it over a three-year period. Have you determined what the budget will be for 2016-17?
That has been determined—if I can find the right page, I will be able to tell Mr Brown what the figure is. I do not think that I can break it down beyond what I have in front of me, but it will be part of a budget total that reaches £224 million. I will have to write to the committee with the exact composition of that element.
That would be helpful. Thank you.
Let us leave housing and turn to one of my favourite topics, which is the Scottish business development bank. When you gave evidence to the committee at the end of 2014 in Arran, you told us that things were progressing well. When I asked in May, I was told that I would get an answer before the summer recess. When I asked a parliamentary question in September, I was told that there would be an announcement by the end of 2015. Where are we with the Scottish business development bank?
We have set out the market assessment of what we think is the requirement to be fulfilled by a Scottish business development bank: what we consider to be the gaps in the finance that is available in the marketplace. We published that report some months ago—probably in October or November, I would have thought.
We followed that up with an announcement of resources to create a small and medium-sized enterprise investment fund, which is in essence expenditure to be made available through the existing channels that we have for the Scottish Investment Bank to support business investment and to assist in filling some of the gaps in the marketplace so that we improve the supply of funding. This is all about trying to improve the supply of funding to the marketplace.
The challenge is about how we can establish, within the current accounting arrangements within which we are required to work, a regenerative business development bank that has greater flexibility than there is under the arrangements that we have with the Scottish Investment Bank, which operates within Scottish Enterprise. It is challenging because we operate within an annualised set of financial and accountancy arrangements. As Mr Brown knows from the issues that we are wrestling with around the fiscal framework and the interaction with the UK Government’s finances, our ability to hold resources and pass them over from year to year is the accountancy challenge that I am trying to overcome.
That work is not complete and it is not without its difficulties.
Is there a timescale? I understand that there are challenges, but is there a current Government timescale for when the bank will be open for business?
In answering Mr Brown’s questions, I have tried to illustrate that I want to get on with providing support in the marketplace. That is my objective, and we have done some of that already by undertaking research to identify the challenges in obtaining business finance and putting the SME investment fund in place to enable that to be done. I have done that rather than thinking that I must set up the Scottish business development bank first.
We are trying to get to the Scottish business development bank by resolving the accountancy issues but, while doing that, we have also worked to ensure that we improve the supply of finance in the marketplace.
I take all that on board, but the actual question was whether there is a projected timescale.
I am trying to do it as quickly as possible, but I do not want to suggest to the committee a timescale that does not bear any relationship to the challenges and the complexity of the issues with which we are wrestling.
You have already answered a couple of questions about local government. A brief glance at the budget document suggests that the cut was in the region of £600 million, but you used a figure of £350 million. Is that the difference between capital and revenue?
There is a £350 million reduction in resource departmental expenditure limits. In capital DEL, there is a reduction of £150 million, but that is to do with profiling of the expenditure.
I have given a commitment to local government that it will receive 26 per cent of the CDEL that is available to the Scottish Government until 2019-20. That is an extension of one year to the commitment that I previously gave to local government. I have simply reshaped the way in which local government will get its capital expenditure. It will get £150 million less in 2016-17, but it will get £150 million more in later years.
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At budget time, you always talk very openly about local government expenditure as a percentage of the Scottish Government budget. Is it fair to say that that share goes down this year, given that there are reductions in the budget?
Yes, it goes down to 35.7 per cent in 2016-17.
For reference, what was it for 2015-16?
I do not have the number for 2015-16 in front of me, but when the Government came to office it was 35.9 per cent.
You have given reasons for the cut to local government, but I wonder whether you are doing a fair like-for-like comparison. You said that the integration of health and social care could reduce some of the burden on local government. However, some of the bills that the committee has considered over the past couple of years—such as the Carers (Scotland) Bill, which has not yet been passed by Parliament—add significant sums on to what local government will have to spend. The childcare elements, which will be fully implemented in the next financial year, and the named person legislation also put some financial resource burdens on local government. When I tot those three up, it seems that you are reducing the resource budget by £350 million but asking local government to do quite a lot more with its budget. Do you think that your comparison is fair?
Yes, because we have allocated more resources to local government over the years. The numbers have gone from £11.274 million to £11.682 million to £11.933 million, so there is a trend of increasing resources available to local government. When Parliament requires local government to provide a particular service, additional resources are put in place.
As I went through with Jean Urquhart in relation to the SEPA budget, we are currently at a point where we have to live with reduced resources. Therefore, I must place a requirement on public organisations to act in a more efficient fashion to stretch the resources that are available to us.
We should look at the true effect of the local government settlement. The figure I gave to the committee of a £350 million reduction does not take into account the fact that we are investing £250 million in health and social care, which is an area of significant priority for local government and one in which it is a key partner. That £250 million goes into an area in which local government has a significant policy and operational responsibility. We have to look at all of the factors together.
I accept that entirely, and you are open and up front about it. You mentioned areas where some of the burden on local authorities might be lessened as a consequence of the £250 million. However, flicking through some of the bills that we have looked at, it is pretty obvious that we are increasing their responsibility, as well as the amount that they will need to spend. I just feel that you did not mention that.
We have put in place the different increases in budgets. For example, the local government budget went up by 3.62 per cent in 2014-15 when the Scottish Government’s budget was going up significantly less than that in cash terms. The difference was that we were putting resources in place to support new services such as the provision of greater capacity in early years support and early learning. The Government provides local government with additional resources to support the new burdens, and we are now in a position where we have to address the financial challenges that we face across the board. Local government has to play its part in that.
Are the figures for the additional burdens, the additional resource for childcare and so on included in the budget figures that are published for local government, or will they be additional to the figures that you publish for local government?
The local government numbers—the headline grant in aid—will be supplemented by sums of money that will be available in other portfolios, which will be added in to some of those totals. There will be a combination that will be clear from the budget documents.
Just for clarity, are you planning to add stuff for other responsibilities on to the headline numbers for local government?
No. The Government sets out the global level of financial support that we make available to local government. Specific decisions will be taken within other portfolios that will result in local government acquiring more resources beyond what it has now. That is what we discuss at the spring and autumn budget revisions.
Any consideration of the wider local government budget position has to take into account the fact that, over the years, we have put in place specific support that has met the requirements of new policy priorities that Parliament has required local government to bring forward.
Thank you. I have a couple of smaller issues to ask about now. Scottish Water’s budget for this year appears to show that new or additional borrowing will be nil over the course of the financial year 2016-17. Does your longer-term commitment over the five or six-year period remain the same, or is that reduced accordingly?
It remains the same.
That remains the same, so it is purely for next year that it is not the same.
We have a commitment to investment in the Scottish Water programme over a five-year period. The requirement for that investment is a reflection of the financial strength of Scottish Water at given times and the resources that it has at its disposal. It does not make practical sense to draw down resources in advance of requirement, but our commitment remains the same.
Lastly, I have question about the Forth crossing. I had a look at the level 4 data for that. Since 2012-13, the budget for the capital grant has been about £5 million a year—it has been £4.9 million, £3.9 million and £5 million, and it is £5 million in the current financial year. Next year—2016-17—the budget goes up by 80 per cent, from £5 million to £9 million, which is roughly where it was back in 2011. Did that increase come as a consequence of, or response to, December’s problems, or was it always going to happen?
That is for planned maintenance—the programme that had already been planned to be undertaken.
So even if December’s problems had not happened, the budget would still have been £9 million for 2016-17.
Yes.
Okay, thank you.
I take this opportunity to say to Mr Brown that the help to buy element of financial transactions in 2016-17 will be £55 million.
Thank you.
I go back to local government, cabinet secretary. You have said in the chamber that local government needs to look at reforming the way in which services are delivered—in particular, at the possibility of shared services. In your discussions with local government, what appetite or otherwise have you detected for the shared services agenda? I know from my time in local government that there was often reluctance to examine the benefits of shared services properly.
Frankly, the picture is varied around the country. There are examples of enthusiasm and appetite for shared services; in other areas, that is less so.
We have to maintain as a priority in the budget the focus on the Christie commission’s agenda, which was all about breaking down barriers and boundaries in public service provision. The measures that the Government has put in place to strengthen community planning partnerships and to encourage a greater focus on the delivery of outcomes have all been designed to ensure that there is much greater sharing of services not only within the local government family but between the local government organisations and other public service providers.
There is a way to go on all of that. There is much that could be achieved by local government; equally, there is a way to go in the sharing of public services among public bodies. Some of the points that are included in the budget—some of the challenges to different public bodies in their financial settlements—are designed to be an encouragement and motivation from me to ensure that more public services share services than is currently the case.
One way in which the reform of services can be driven is through the drawing down of unallocated reserves to spend on transformation projects. My local authority, Aberdeen City Council, currently has something in the region of £116 million of unallocated reserves, which is equivalent to 27 per cent of its revenue budget. Audit Scotland recommends a buffer of around 3 per cent. Are you aware of the overall picture in local government? Does the Scottish Government hold those figures or are they available through COSLA?
The figure that I have in my head for local authority reserves is about £1.8 billion. [Interruption.] I am being encouraged not to use that number, so I had better not use it. I am pretty sure that I have seen an Audit Scotland number of £1.8 billion, but I do not think that that will be a figure for unallocated reserves. The Government will have that number, and I could certainly make it available to the committee.
People are often not aware of what are statutory services—the services that local authorities are required by statute to provide—and what are the services that are delivered because the local authority has made a policy decision that it wishes to provide them. Are figures available for the breakdown of the cost of the delivery of statutory services versus the non-statutory ones?
I do not have those numbers, and there is a danger in focusing on that discussion. I am more interested in encouraging a focus in the public sector on meeting individuals’ needs.
A service that may be required by statute can be more effective if it is delivered alongside some services that are not required by statute. As a combined proposition, they may make more impact on individuals’ lives and a greater contribution towards the preventative agenda that Mr Mason questioned me about earlier.
It is a false choice is to have a discussion about statutory and non-statutory services. The more important consideration is the combined effect of services on individuals and how we can best maximise the effectiveness of those services.
There are clearly roles for others, such as the third sector, in the shared service agenda or other ways of working. I recently visited a project in Aberdeen that is run by a third sector organisation, which supports individuals from extremely troubled backgrounds not only to gain but to sustain housing tenancies. That obviously has a knock-on benefit to local authorities. Is enough of that sort of collaboration with the third sector happening?
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There are good examples, but such collaboration could go a great deal further. For example, a lot of the work on reducing reoffending is undertaken by third sector organisations, working with public sector partners—particularly the Scottish Prison Service—and they have proved to be very effective in redirecting individuals from their previous activities and, as a consequence, saving the public purse significant sums.
There are good examples but, as for the rest of the agenda, the approach requires sustained leadership. The Government provides that sustained leadership, but it needs to be supported and endorsed at local level.
One of the other things that have been raised with this committee and others is how change fund money was used. In a lot of locations, projects seem to have been funded that were seen to be delivering benefit for individuals and communities. However, instead of mainstreaming those projects many local authorities pulled the plug the minute that the change fund money was no longer on the table.
Do you think that, for some local authorities, the change fund was a missed opportunity to get into the kind of service redesign and reform that we are now looking at for the coming budget year?
I do not think that we will ever get to a period when we will say, “That’s it—services do not have to change any more.” We will constantly reform and revise services and the way in which we deliver them to individuals.
A lot of good learning emerged from the change funds, which have led to significant changes. The learning from the early years collaborative, which involves participants from all 32 community planning partnership areas, has led to huge change and development in the provision of services and approaches to meet the needs of our youngest citizens.
I have also cited the example of reducing reoffending, and in elderly care we have seen that the thinking from change fund projects has influenced the design of the integrated joint boards.
The learning has been good and beneficial, and the Government wants to encourage and foster that in the years to come.
One of the discussions that we had this morning was about dilapidation and repairs to private sector property, whether housing or retail, and the difficulties that arise in encouraging and stimulating the work that is required in those areas.
Lack of repairs can create difficulties for energy efficiency, how a community looks and feels and public safety. Are those difficulties on the Scottish Government’s radar?
Some of those issues are encapsulated in the regeneration agenda that is being supported through the budget. Around the country we are all familiar with very good examples of success being delivered through that regeneration programme, which stimulates wider private interest and involvement. One of the challenges is that buildings are hard to repair because they have fallen into disrepair, and property owners may not be taking a particular interest in resolving those issues.
The statutory powers that are available to Government and local authorities apply largely when there is an issue of public safety. The fact that a building is run down and ugly does not necessarily mean that the Government or local authorities can intervene—there has to be a risk to the public. That leads to a lot of frustration, but some of the collaborative work that we are encouraging to change the nature of some building uses, improve housing supply and find alternative uses through the affordable housing agenda is designed to address those points.
On the retail side, for example, might local authorities that have not already done so consider rolling out business improvement districts, since they could support that sort of work?
These are all beneficial steps and interventions that can make a real difference. We are all familiar with examples. A particular challenge arises where there is a difficulty with property owners not wishing to follow an agenda of repair and renewal, and that can cause significant frustration in communities.
I thank the cabinet secretary for ensuring that the Finance Committee came to his constituency—it is indeed beautiful. Having said those nice things to him, I will press him just a little, which he would expect.
The big loser in the budget by anyone’s estimation is local government. We can quote various figures at each other, but the SPICe briefing suggests that the largest real-terms reduction is local government with a figure of £774 million. If we split the difference and allow a like-for-like comparison, the figure is £500 million, which represents a 5 per cent cut when capital has been taken out. That is a sizeable portion of money to take out of an already diminishing budget.
I do not think that you can compare the figures with what happened previously—I think that you mentioned 2011-12—because the budget is on a diminishing line. You quoted figures of £11,000 million but, in reality, the budget has gone from £10,756 million for 2015-16 to £10,152 million in 2016-17. Is it not the case that the trajectory is downwards?
Let me just explore a few of those issues. I do not agree that this is an already diminishing budget. It cannot be, because the budget went up from £11,274 million to £11,682 million and then to £11,933 million. In anyone’s book, that is an increasing budget.
I have not seen SPICe’s figures, but I suspect that the number is of a character that must not be taking into account—or SPICe must be including in the reduction—the reprofiling of capital expenditure, which essentially would have inflated the local government budget line in 2015-16. I accept that; that is the case. Local government had a much more significant capital budget in 2015-16, because it was getting paid back—as I committed to do—from resources that I took out of the local government capital budget in 2012-13 and 2013-14.
I am happy to confirm to the committee for clarity that the resource budget for local government has been reduced by £350 million. The capital budget is down by £150 million, but that is a temporary factor and local government will be repaid in later years.
We can debate the numbers, but I reduced the £774 million that SPICe estimated as the largest real-terms decrease and removed the capital that it had shown to take down the figure to £500 million.
Let us not argue about the figures, because in my local authority area and indeed others cuts are now being made year on year. Local authorities are finding little left to cut. Take just the number of job losses—40,000 jobs have been lost in the public sector and COSLA estimates that 15,000 jobs will be lost as a result of the latest cuts. If this was a private company, members would be standing up in Parliament screaming for a Government task force to come in and help.
We cannot, in all honesty, say that the cuts are not having an impact and that, somehow, local government is operating from a higher base. What are we going to do about those job losses? Forgive me for saying this, but I think that you have made a choice that local government will be the big losers and therefore the majority of cuts are channelled towards local government.
First, I take issue with Jackie Baillie’s assertion that local government is not operating from a higher base. I return to the point that I have made before: the local government budget has risen in cash terms in each year since 2011-12, with the exception of when we removed the police and fire resources; I think that we all accept that as a structural change to the public sector budgets. Therefore, by its nature, local government is operating from a higher base.
Secondly, any analysis of the discussion has to take into account the change in the way in which we will deliver health and social care services that becomes effective from 1 April. We are moving to a situation whereby integration joint boards in every local authority area will combine into one integrated service the resources and activities of what was formerly done within the health service and what was formerly done within local authorities. When we integrate services of that nature, we find duplication, overlap and people who were being assessed by this service and also by that service, so we remove that duplication to simplify the service available to individuals. The Government will add to that by investing £250 million of new money to support the process.
I would be the first to accept that this is a challenging settlement for local government, but it comes with an agenda of reform and with financial support to address the challenges that exist.
Finally, the member mentioned choice, and I have made numerous choices. Hundreds of choices have been made. Every budget line is a choice by the Government. Jean Urquhart challenged me about the reduction of 6.8 per cent to the SEPA budget. For local government, there is a reduction of 3.5 per cent of the resource grant in aid from the Government and a reduction of 2 per cent of total local authority expenditure, so the choice that I have made is to make a bigger reduction in some public bodies than there is for local government. Of course, there are choices for all members of Parliament—it is perfectly possible for MSPs to bring forward alternative options, and I look forward very much to seeing those.
Indeed. I point out for the record that, according to the SPICe briefing, there is a 7 per cent real-terms reduction in the local government line between last year’s budget and this one.
I have not seen the SPICe briefing, but what matters is the Government’s approach in looking at those things not purely and simply as numbers. I am answering the committee’s questions about numbers, but I encourage the committee to consider some of the wider questions that arise out of our budget decisions and not to overlook the investment of £250 million in integrated health and social care, which I think is to be welcomed as a significant contribution to the creation of integrated person-centred services.
You will find no disagreement from me on that. In fact, we argued for something similar except that the quantity was greater.
That said, I understand that the money will be channelled through health and I have already heard that finance directors in health who are struggling with their budget seem to think that a goodly proportion of the money will be theirs. I have heard that there is a split of £110 million going to health and £140 million going to local government. What flexibility is afforded to local government in its £140 million?
Some of those issues are still under discussion with local government. When I made the budget statement in December, I said that I would update Parliament on these matters before stage 3 of the budget process, and I will do that.
On the substantive question that Jackie Baillie poses, I want to make it crystal clear that £250 million is going into integration joint boards. The Government will ensure that the money is properly disclosed and audited and that there is transparency, so there can be no suggestion that it will go anywhere other than into the activities of integration joint boards.
15:45
I am very pleased to hear that, because that is not the kind of chat that is going round. I am encouraged by your promise to monitor that and to ensure that the money gets to the right place. That is certainly reassuring.
On the back of that, I want to raise the issue of health. You have been most generous to the health department out of all the departments. Greater Glasgow and Clyde NHS Board has reported that it expects a £16 million overspend before the year end, and Lothian NHS Board expects an £85 million overspend before the year end. Other health boards across the country face deficits that may end up consuming more than half of the uplift. In some cases, two thirds of the uplift may be consumed.
There is the vexed question of whether more money should be thrown at health. If you are suggesting that that should be accompanied by reform, what reform do you see happening?
That is a very helpful question in looking at the interrelationship between health and local government services. It also addresses the previous question that Jackie Baillie asked me.
To put it at its bluntest, if integrated health and social care is not successful, individuals will present themselves at hospitals and A and E departments. None of the systems operates independently. People—our fellow citizens—are in local authority social care as it is currently constituted, health service primary care and health service acute care. They just happen to be in one bit of the service. It will be better for us if more of those individuals are in the community setting, supported in their homes, and assisted with care support in their localities. Therefore, we have to look at those as essentially a joint integrated service. The Government’s significant investment of new resources in integrated health and social care is designed to ensure that that service can meet expectations and requirements in the population and that we are effective in ensuring that individuals get the care that they require in the appropriate setting. That is the key priority that we must take forward.
I do not disagree, but there is a genuine fear that the squeeze on local government, which is one of the key partners that deliver at the community level, may distract from that. I do not think that anybody would want that.
I have said what the £250 million is designed to do. It is not just about an injection of cash; it is about cash and reform. Whatever people took out of my budget statement on 16 December, I hope that they took out the necessity of continued reform in health and social care as one of the key landmark messages of the budget statement. We have the legislative architecture in place to do that and the integration joint boards in place, and we have put more money in place to help with that. That is designed to ensure that the service can meet expectations and needs.
I turn to the police. I think that the Auditor General for Scotland reported last year on, and she certainly issued a press release at the end of December that talked about, the financial strategy that she required of the police. I think that her first report was in November 2013; she has reported again since then. She required the police to produce five underpinning strategies, which are still not in place. The conclusion is that Police Scotland and the Scottish Police Authority still operate an inadequate financial strategy. Are you confident that the money that you are giving them will be spent on its purpose?
I am. The requirements that Jackie Baillie talks about are all entirely reasonable, and they need to be put in place to ensure that we have very clear governance arrangements around the Scottish Police Authority and very effective budget management at the Police Scotland level and the Scottish Police Authority.
The five underpinning strategies concern procurement, estates, the fleet, the workforce, and information and communication technology. They are central issues. My understanding is that three out of the five have been submitted and that two do not have good enough financial information. I do not understand why you have confidence in the financial strategy when Audit Scotland says that there is a problem. I would simply say that, if you are putting in additional public money, I would be hugely encouraged if it were monitored, because the danger is that money that is given for reform will be spent on operational matters, as we have seen before.
I am happy to give Jackie Baillie an assurance that the situation will most certainly be monitored.
The chair of the Scottish Police Authority is clear about what needs to be done to put in place the correct, appropriate and most effective governance arrangements. The Cabinet Secretary for Justice is clear about what I require him to undertake in this area, and that will be taken forward by the relevant authorities.
I want to turn to infrastructure, but for the sake of time, I will ask two questions at once.
Earlier, we heard about the AWPR and projects such as those in Dumfries and Galloway that are now considered to be on rather than off balance sheet. Obviously, that diminishes our capacity to do more with the capital budget. Have you decided how those projects are going to be funded? Are you going to use additional borrowing, or is there enough capital in the budget to cope?
The capital budget works on the assumption that we will borrow £316 million in 2016-17, and it makes provision for all the projects that Jackie Baillie has raised. They will all be treated as public sector projects.
Can I be parochial—
I am staggered. That would be as out of character as the convener not asking the first question.
I know.
I could not believe it when I saw it, but there is a line in your budget document that talks about maintenance for the Forth and Tay bridges. Where is the Erskine bridge?
It was near Clydebank, the last time I looked. With any luck, it is still there.
Not if you do not maintain it. Where is it within your budget document?
I will need to check and get back to Jackie Baillie on that—and, despite my earlier flippancy, I will do that seriously. I suspect that the figure is contained in the network maintenance budgets—I think that the specific bridge budget figures might be at level 4. As for the Forth and Tay bridges, I will, if you give me a second, try to find the relevant section.
It is table 12.06 on page 127. There is a separate entry for Forth bridge and Tay bridge maintenance. As you will recall, the Erskine bridge was a toll bridge, so I was wondering why it was not shown in the same table.
I think that it will be included in the routine maintenance line, which is a few lines up and involves a much larger sum of money. That is my best assessment but, for the sake of accuracy, I will check whether that is the case.
That concludes questions from the committee. I have some of my own, but I will try to be brief. People always say that when I come in with a load of questions at the start it leaves less for them to ask about, but I think that the questions that have been asked have led to even more questions needing to be asked. Do not worry, though—I will not ask all of them.
Cabinet secretary, I wonder whether you could set the scene for the draft budget, as you have not done so so far. Has it been heavily influenced by the UK effectively cutting your fiscal resource DEL by £371 million in the financial year beginning 1 April?
The Government’s spending plans are clearly heavily influenced by the context that is set by the UK Government. In real terms, we have seen a 1 per cent reduction in our total DEL budget. As I set out in the budget statement, our fiscal DEL will have been reduced by 12.5 per cent in real terms between 2010 and 2020, meaning that we no longer have £1 for every £8 that we have available.
When we look at local government, SEPA and other areas in which there will be reductions in the money that is going to be available next year, the reality is that you have less money to play with. Given your manifesto commitment to increase health spending by at least the rate of inflation, that does not leave you a lot of room for manoeuvre, does it?
I still have to fulfil the Government’s commitments to public services. We have provided specific funding assurances on health and policing, but our having to live within a constrained fiscal envelope has required us to make the decisions that we have made. Last week, we discussed my decisions to boost income in the Scottish budget and in those areas where I have chosen not to increase income.
As has been mentioned, health is getting a substantial real-terms funding increase of £444 million—I am only going to mention real-terms figures—or 3.5 per cent. Within that figure, however, sport and legacy funding will see a significant reduction from £60.5 million to £42.5 million. Why is that?
That is to do with the winding up of major events that have been undertaken as part of the sport programme.
Are you talking specifically about the Commonwealth games?
Commonwealth games things will be working their way out of the numbers, and there will be Ryder cup comparisons and a variety of other events.
We have touched on disinvestment in the preventative spend agenda. However, Perth and Kinross Council has agreed a package of transitional funding of over £1 million for 2015-16 and 2016-17 for the implementation of evidence-based programmes while remodelling the spend on children’s services to increase the sustainability of prevention and early intervention. Such work is being undertaken in that area, although perhaps not as much as we would like.
In his evidence, which combines many of the responses that he received, Professor Cairney states, with regard to the preventative spend agenda:
“We need more Scottish Government direction, such as detailed guidance to accompany the Community Empowerment Act”.
Professor Cairney’s evidence also states that we need to
“Produce a ‘long-term public sector reform blueprint with agreed outcomes and milestones for all agencies that are seen as targets that must be met’”.
What is your view on that? Are we going to go forward in that vein?
I believe that all the guidance that anyone would ever require is out there. The Government’s response to the Christie commission was the establishment of the four pillars of the reform programme: prevention; people; place; and performance. The Government has set out a very clear framework that we intend to act within. We have also followed that up, in some cases, with major structural reforms, such as the reform of the police and fire services, or service reform, such as the integration of health and social care. Those significant reforms must be contemplated. To me, the guidance exists. I also think that there is something contradictory about saying that we need much more guidance on community empowerment. By its nature, community empowerment is about saying, “If they fancy doing it this way in Lochinver and they fancy doing it that way in Pitlochry, who are we to judge?”
The Government has tried to set out an agenda for reform not in a restricted and constrained way but in a fashion that enables public authorities and community organisations to work together to find solutions that meet the needs in their localities. I will give an example from your locality, convener. On a recent visit to the island of Arran, I was struck by the fact—it was subsequently confirmed in a conversation that I had with the chief executive of the local authority—that the council’s view of how public services should be designed and operated on Arran, which is a distinctive community with distinctive needs, is different from the view that it takes on public services in the rest of North Ayrshire. We have to be open to different methods of delivering and deploying services to meet the needs of individual localities.
16:00
In the past, we have heard from Government that prevention thinking should underpin all decisions, but it appears that there is still a lot of procrastination out there. How do we break up the log jam that has caused the committee great frustration in recent years?
We have to see the issue in its proper context. A lot of good stuff is happening. In previous years I have gone away from Finance Committee meetings with a strong sense that the committee was frustrated about the level of progress being made, and I have gone on to press public bodies and my officials to undertake assessments in that regard.
I have also engaged in quite wide discussions. The committee might be interested in taking evidence on the matter from Professor James Mitchell in relation to the what works Scotland project that we established to review and assess the progress and pattern of public service reform. Professor Mitchell, who is an independent academic commentator, has certainly described to me some really quite encouraging performance and activity in the country.
There is evidence of significant progress out there. Does it need to be sustained and continued? Yes, it does. Must it be intensified? Yes, and the Government is determined that that will happen.
Thank you.
I want to touch on some issues that came out of this morning’s workshops. We were, of course, talking to people from your constituency, some of whom had broad concerns and some of whom had specific concerns. People welcome the dualling of the A9, but there is concern that while the road works are going on, Pitlochry and other towns such as Dunkeld might be disadvantaged. What will the Scottish Government do to mitigate the impact of the works and ensure that Pitlochry and the highland Perthshire economy continue to thrive during that period?
There will have to be the most intense active engagement with communities on the question. As developments are planned, it is essential that we have proper, deep engagement with communities about the implications of the work. Signposting and information must be clear, to enable people to understand the dualling adjacent to the A9, and that can come about only if there is good, high-quality engagement with local communities. As for some of the planning issues that have already come up, I as the local member am involved with Transport Scotland and the designers in a lot of conversations with individual residents and businesses about mitigating the impacts.
Thank you.
Other issues that members said emerged from this morning’s discussions included community broadband, flooding and farming. On the last, for example, the farming community expected 90 per cent of people to receive 90 per cent of their grants before Christmas, but that did not happen. One issue is broadband capacity to cope with questionnaires, and another is the cost per application, which we were told this morning is an astronomical £10,000.
According to the table on page 102 of the draft budget document, the budget for payment and inspections administration will increase from £45.6 million to £55.6 million and the budget for common agricultural policy compliance improvements from £14.2 million to £26.2 million. The explanatory paragraph on the following page comments on the need to
“operate the CAP efficiently and effectively”
and so on. Why is such a significant increase needed? It seems odd to farmers that so much additional money is going on administration at a time when they are not getting the grants that they think that they should receive.
There are essentially two points here, convener. The first is that we dealing with significant reforms to the administration of the common agricultural policy as dictated by the European Union and as configured to meet the aspirations and interests of the farming community in Scotland. The Cabinet Secretary for Rural Affairs, Food and Environment has, with my support, been managing a very challenging project to put in place an administration scheme that will enable us to make the payments as timeously as possible within the reformed common agricultural policy. That work is under way and payments have begun to be made.
Secondly, there is an absolute requirement for our schemes to be EU compliant. I appreciate that the budget document indicates that the costs are going up, and a lot of that is about information technology systems and the additional compliance and inspection that the European Union requires of them. However, the cost of our failing to be EU compliant would be even worse than the cost of compliance. Yes, the costs are difficult. Would I prefer the money to be spent on other things? Yes, that would be easier. However, the money has to be spent on administration in order to guarantee compliance, because the cost of non-compliance would be an even greater factor for the Scottish budget.
Thank you.
Finally, I will touch on another point that came out of this morning’s workshops with your constituents. On flooding, someone commented that Forestry Commission Scotland no longer clears out ditches, burns, culverts and so on in the way that it used to. As far as your constituents are concerned, that is increasing the flooding risk. You talked about the Scottish Government’s allocation of £235 million for flood prevention schemes, but according to your constituents, if some of that work was actually being done, there would be no issue. Page 101 of the budget document indicates that the Forestry Commission’s budget is being cut from £64.1 million to £61.3 million. Will that not have an impact on activities such as ditch clearing and keeping burns free of branches? It seems a fairly modest matter, but it has led to considerable concern among your constituents.
One of the key points in this respect relates to the work in the different areas that are affected. For example, we have protected in its entirety the £36 million budget for woodland grants, which form a key part of the Forestry Commission’s work. The contraction relates to certain programme costs, which are being reduced. However, that is much the same kind of change to the budget that is being applied to most other public bodies in order to guarantee a level of efficiency and good utilisation of public finances.
One of the issues in relation to the interaction between forestry activity and flood prevention is planting. The maintenance of the woodland grants scheme is therefore central to enabling landowners and land managers to continue an active programme of afforestation. You will notice as you go around this county that much of the landscape is changing because 40-year-old forests—well, forests that have been there for the entirety of my life—are now beginning to be felled.
I am sorry, but I thought that you said that the forests were 40 years old. [Laughter.]
It is hard to imagine, convener, but I have been around longer than some of those forests. I know that that will stun you.
Thank you for the correction.
However, as those forests will have been very significant resources for capturing water, we have to be very careful with the degree of appropriate harvesting that is being undertaken and to ensure that we are also afforesting. That is why the woodland grants scheme is so important and why we have maintained those resources; we want to enable more of the hill ground to retain more water and to prevent that water from reaching the flood plains and estuaries more quickly, which is what would happen if these woodland activities did not take place. There is a very fine balance to be struck in relation to the management of the issue.
Thank you very much for answering the committee’s questions today, cabinet secretary. Do you wish to make any other points before we close?
I have nothing to add, convener. Thank you.
Thank you very much, and I also thank colleagues around the table.
As agreed earlier, we will now go into private session for the last item of business.
16:09 Meeting continued in private until 16:12.Previous
Draft Budget 2016-17