Budget (No 4) (Scotland) Bill: Stage 2
Good afternoon and welcome to the second meeting of the Finance Committee in 2010. I ask everyone to turn off their mobile phones and pagers.
The first item on today's agenda is stage 2 of the Budget (No 4) (Scotland) Bill. As well as having copies of the bill, members will have a note from the clerk. I draw members' attention to two procedural points in the paper. First, only a member of the Scottish Government can lodge an amendment to the bill and, secondly, as stated in paragraph 5 of the paper, it is not possible to leave out a section or schedule of the bill by disagreeing to it because, to do that, it would have been necessary to lodge an amendment.
Before I start our formal proceedings, it will be useful to allow the cabinet secretary to make some explanatory remarks about the bill and give members an opportunity to ask questions.
Thank you, convener. I am joined today by Alyson Stafford, our director of finance; and John Williams, of our finance directorate.
The committee will be aware that I have given consideration to the points that were raised and the recommendations that were made by the committee in the stage 1 process, and that I sent my formal response to the convener on 18 January.
Today's meeting of the Finance Committee focuses on the content of the Budget (No 4) (Scotland) Bill, as approved in principle by the Scottish Parliament last week. As members of the committee are aware, there are a number of differences in the presentation of budget information between the draft budget and budget bill. However, there are no changes to the spending plans that were outlined in the draft budget.
In order to assist the committee, I will explain the main differences with reference to table 1.2 on page 3 of the supporting document. Column A sets out by portfolio the 2010-11 budget as shown in table 2 of the draft budget document that was published last September; column H in table 1 sets out the draft budget as it needs to be restated for the budget bill; and columns B to G provide the details of the adjustments that are necessary to meet the statutory requirements of the parliamentary process.
The major adjustments that are set out are: the exclusion of £91.8 million of non-departmental public body non-cash costs that do not require parliamentary approval, which are mainly in relation to capital charges and involve bodies such as the national institutions, Scottish Enterprise and Scottish Natural Heritage; the exclusion of local authority supported borrowing and judicial salaries amounting to a little over £330 million which, again, do not require parliamentary approval; the exclusion of an element of Scottish Water capital charges to reflect differences in budgeting and accounting treatment; and the inclusion of international financial reporting standards adjustments of a little under £300 million, which have been agreed with Her Majesty's Treasury in order to reflect the adoption of IFRS across central Government from 1 April 2009. I remind the committee that the conversion to an IFRS basis is spending-power neutral.
Adjustments have been made to portfolio budgets to reflect the requirement that a number of direct-funded and external bodies require separate parliamentary approval, including the National Archives of Scotland, the Forestry Commission and the Food Standards Agency Scotland.
The specific grants that were included in the overall 2010-11 local authority settlement have been restated. They remain under the control of the cabinet secretaries who have responsibility for the policies: for example, the police grant remains the responsibility of the Cabinet Secretary for Justice. Full details of all grants that are treated in that way are included in the summary table on page 74. I again make it clear that those are essentially technical adjustments and do not change in any way the budget that has been scrutinised by this and other committees, and which has been approved in principle by the Parliament.
At this point, I wish to acknowledge the agreement of the committee to the change in the format of the budget bill. That has led to simpler and clearer presentation in the bill itself, and it will also promote more effective in-year management of the resources that are available to us. However, the committee will note that the supporting document has remained unchanged and contains all the detail that was previously provided in order to ensure proper parliamentary scrutiny.
As I made clear to Parliament last week, I remain committed to an open and constructive approach to the 2010-11 budget process, and I continue to seek consensus on a budget that will meet the needs of the people in Scotland during the difficult times that we now face.
I hope that members of the committee have found my remarks to be helpful. I will do my best to answer any questions.
I read with interest the Government's response to the committee's report. In relation to the unanimous recommendation that level 4 information be published, the response is that
"Budgets below Level 3 are the responsibility of individual portfolios"
and that they
"are not subject to Parliamentary scrutiny".
Is not that something that we, rather than the Government, should decide?
The level of presentation of information that the Government makes for budget bill purposes is to level 3, which is essentially the level to which parliamentary agreement is sought. That is the context within which I would answer that point.
In previous years, whenever a committee has asked for level 4 information, that information has been provided. This year, it was, in some instances, provided rather later than the subject committees might have wished. Given that there has, in the past, been a practice of providing that information when it has been requested, what is the Government's objection to providing it as a matter of routine, as the committee suggested? That was a unanimous recommendation; it was not one that was reached following a division.
There is no objection in principle. The point is, as you have said, that when committees ask for level 4 information, the Government provides it. That remains my position. We have provided level 4 detail to committees on a number of occasions during my term in office as the Cabinet Secretary for Finance, and we will continue to do so.
We also got a less than enthusiastic response to our call for more information on capital expenditure. The response to the unanimous recommendation that we should be given an indication of capital expenditure over 10 years seems to be that the infrastructure investment plan that follows the spending review gives sufficient information. Is that really the greatest level of detail that the Government is prepared to share with the Parliament about future trends in capital spending?
The level of information that the Government makes available to the committee on capital expenditure is entirely consistent with all of the arrangements that were put in place by our predecessors and were subject to discussion with and the agreement of the Finance Committee.
The Government sets out, in a spending review period, a three-year expectation with regard to capital expenditure. Of course, as we all know, the pattern of the three-year expenditure over which I have presided has changed because of changes that have been applied to our capital budgets by the United Kingdom Government—some at our request, in relation to capital acceleration, and some not at our request, such as when the Department of Health baseline was changed.
That three-year picture is presented to Parliament and we report annually on performance in relation to capital expenditure and we set out the infrastructure investment plan, which is the longer-term document. The committee asked for 10-year information, which is why I referred in my response to the infrastructure investment plan, which provides a 10-year horizon on capital expenditure.
As Mr Brownlee will perhaps appreciate, it is difficult to be more specific about the timetabling of projects beyond an immediate three-year period in as much detail as I suspect he would like. For example, I do not yet have confirmed the size of the capital budget in 2011-12, which is only 14 months away. I am happy to put as much information into the public domain as possible, as Mr Brownlee will appreciate, given that he is a signatory to the letter that I have received from Opposition spokespeople requesting further information, which I am currently considering. The range of information that we put into the public domain is pretty comprehensive on this point. We report prospectively and retrospectively. I simply ask Mr Brownlee to understand the challenge of doing that when we do not even have certainty about the size of our capital budget in 14 months' time.
We accept the challenge. On the specific recommendation, we accept that you do not have information on the top line of your capital budget, but what we asked for was an indicative profile. Beyond the information to which you have already referred, which is in the public domain, the Government must, for planning purposes, have more information than is published. Is that the case?
The Government will have further detail that underpins the material that has been published.
I remind the committee that we have a very heavy agenda. I am anxious that committee members ask the questions that they want to ask, but please make them snappy.
What I am asking about is material to one of the most significant areas of discussion about this year's budget. The committee made a unanimous recommendation about this information. It seems to me that the response from the Government is in effect, "You're not getting any more than what we choose to publish." That does not seem to me to be how a Government should respond to a committee of the Parliament.
If Mr Brownlee has taken my remarks in that fashion, I assure him that that was not the intention behind my explanation. I hear the convener's strictures about the ground that we have to cover today, but I was simply making the point that we have set out a 10-year infrastructure investment plan, which is a published document. At the start of a spending review, we set out our three-year horizon on capital expenditure with the projects contained in it. We have to revise that, as we have had to do during this spending review, because of external changes. In addition to that, we report on our performance in delivering against those capital budgets. That is a pretty substantial amount of information to put into the public domain. If the committee wishes us to put information beyond that into the public domain, I will certainly consider doing so. However, I would not want the committee to take from what I have said that I have any unwillingness to share information. What I am saying is that we have taken a considered view about what is available. I certainly consider that that gives a pretty broad understanding of the Government's capital priorities.
Given that we are talking about the Government's capital priorities, I point out that, in the stage 1 debate, mention was made of the amount of slippage that there is in a number of major capital projects. Is the cabinet secretary giving any consideration to lodging an amendment at stage 3 that would put the Glasgow airport rail link back into the capital programme?
I certainly do not have any plans to do that.
You also said to Mr Brownlee that you are currently considering how you will reply to the letter from the various spokespeople. Even if that were to show that there was a fair amount of slippage, as far as you are concerned, GARL is not going to be in the 2010-11 budget.
As Mr Whitton knows, I have made no provision in the 2010-11 budget for the Glasgow airport rail link. My reasons for doing that are to do with the fact that it is abundantly clear that the one matter about which I am certain is that the budget will not be larger in 2011-12 than it is in 2010-11.
I can also see, as I have communicated publicly, that we have major capital projects that will be significant factors in our capital budget, such as the replacement Forth crossing—which is the subject of a bill that has been introduced to Parliament—and the Southern general hospital in Glasgow. I appreciate that, if those new commitments are emerging and I know that the budget will get smaller, we must ensure the long-term sustainability of our budgets, which Mr Brownlee is forever pressing us to face up to. That is why the Glasgow airport rail link is not in our plans, as it has a four-year time horizon and provision must be made for it over a four-year period. I see absolutely no sense in making provision for it in 2010-11 when I know full well that making provision for it in the three successive financial years from 2011-12 onwards will be nigh on impossible because of pressures on the budget. However, I have always made it clear that I am happy to discuss proposals as to how we might achieve that.
Let me say something about capital slippage, which I addressed in my closing remarks to Parliament in the debate last Wednesday. Inevitably, there will be capital projects that go slower or faster than we plan. For example, the Edinburgh tram project is going slower than planned, but the M74 project is going faster. As a matter of routine budget management, we take decisions about how to adjust to those pressures. As I told Parliament, the situation is reviewed frequently by the director of finance and me. A development can hit an operational problem and can be stalled. We need only look at Princes Street to see such challenges. At operational level, we take decisions to ensure that capital is spent fully and effectively.
The argument about there being an opportunity to spend because of slippage would have validity if I had reported a significant underspend on capital budgets, but I have not, and have never done so. We have spent to within £5 million of a multibillion pound capital budget. I hope that that helps the committee in its understanding of the challenges that we have in relation to the capital budget.
We turn to the formal proceedings on the bill. We have no amendments to deal with but, under the standing orders, we are obliged to consider each section and schedule of the bill and then the long title, and to agree to each formally. We shall take the sections in order, with schedules being taken immediately after the section that introduces them, and the long title last. Fortunately, the standing orders allow us to put a single question when groups of sections or schedules are to be considered consecutively. Unless members disagree, that is what I propose to do.
Section 1 agreed to.
Schedule 1 agreed to.
Section 2 agreed to.
Schedule 2 agreed to.
Sections 3 to 5 agreed to.
Schedule 3 agreed to.
Sections 6 to 10 agreed to.
Long title agreed to.
That ends stage 2 consideration of the bill. Parliament has already agreed that stage 3 proceedings will take place on Wednesday 3 February 2010. Members might wish to note that the deadline for the Scottish ministers to lodge stage 3 amendments to the bill is therefore 4.30 pm on Thursday 28 January.
I suspend the meeting for a short time to allow the cabinet secretary's officials to change over.
Meeting suspended.
On resuming—