I refer members of the committee to the draft agreement and the covering letter from the Executive and remind them that, in considering the Public Finance and Accountability (Scotland) Bill at stage 1, this committee agreed to the proposal that ministers should direct the form of accounts following consultation with the committee.
Before we start, I would like—for the record, more than anything else—to express a concern that was also felt by the Finance Committee; it will, I hope, be relayed back to the Executive. My concern is that we are considering these documents after the closure of amendment deadlines for stage 2 of the bill. Much of what we may do in the form of amendments is subject to the finalising of these written understandings between the Executive and us, so we are concerned about the fact that we are getting to see them so late in the day.
It might be helpful if I were to clarify for the committee that members have until this Friday to lodge amendments for stage 2 of the bill.
I think that Andrew was expressing a concern on the record, and I am sure that the minister will note it.
Members indicated agreement.
Are there any comments on paragraph 2, "Background"? This is about ministers'
I am quite happy with the general statement, but it might be helpful for it to be made a little more specific. I believe that that point was also raised at the Finance Committee. Perhaps the third sentence could read: "Accounts should include a comparison with the previous financial year, including percentage change." That would make the paragraph easy to understand immediately.
If I have understood you correctly, you are trying to clarify what the comparison should be. You are saying that, included in the comparison, there should be a figure for percentage change, rather than just the figures themselves. Do members want to comment on that?
We are saying that the accounts should be set out in such a way that they can be understood by laypersons. It is a good suggestion to include a plus or minus figure for percentage change, which would indicate upward or downward movement. Could that be incorporated?
A percentage change figure would indicate that.
Aye, but we need to include a plus or a minus.
Can I seek clarification from Sarah? She will recall the amendments that we suggested to the written understandings between the Executive and the Finance Committee, which made many of the same points. What is the distinction between the form of accounts and what we were suggesting with regard to the Executive's budget proposals?
I think that the Executive's intention is that budget supporting documentation and the form of accounts should mirror each other closely. It is, therefore, entirely reasonable that the same points should be made. We should also assume that the Executive, in accepting points that the Finance Committee made about budget documentation, would apply the same points to the form of accounts.
I do not want to go through the same discussion as I had in the Finance Committee. Brian alluded to transparency. There are other points that need to be addressed, which I raised at that committee meeting, but I will leave them to one side. Can I assume that the relevant information will be picked up from the Finance Committee?
If the committee wishes, the clerks could read information across the Audit Committee and Finance Committee, but I would want to be clear that that was the wish of the committee.
Is that the wish of the committee?
Members indicated agreement.
The changes that were proposed were, for example, to provide information on year-on-year changes, to remove inflation from the figures and other obvious points. Those changes will improve transparency. I think that the Finance Committee agreed to them unanimously.
Should I compile proposed changes in a draft and circulate it to members, so that they can see what the Finance Committee's views were?
Members indicated agreement.
Paragraph 2 of the draft document states:
I think that that point comes up later in the document.
Does it?
Paragraph 8 states:
Yes.
If there are no more comments on paragraph 2, I will sum up. If I have this right, we are saying that after
Members indicated agreement.
Paragraph 3 deals with powers of direction. This part of the document tells us which bodies are covered. Are there any comments?
Your opening remarks included a statement that the minister had the power of direction in consultation with Parliament. We represent Parliament on this matter. Although reference to that consultation appears in paragraph 5, it does not appear in paragraphs 3 and 4. Paragraph 3 could have included reference to consultation.
I support that view. That point also occurred to me. There seems to be an inconsistency in the document.
I was going to suggest that the final sentence in paragraph 3—
Do you mean in consultation with either Parliament or the Audit Committee?
I think that it should read "in consultation with the Audit Committee".
With that amendment, we would be making a statement about the Public Finance and Accountability (Scotland) Bill. I do not know whether the bill will require the Scottish ministers to use the powers in consultation with committees. We can say "and will use them in consultation", because that is our written understanding.
In that case, I am willing to go along with "and will use them in consultation", but we should specify that we should be consulted.
What is your final form of words?
I am looking to Andrew for them.
We should make the point that we want the ministers to activate those powers, because I would like to ensure that the form of accounts across the public sector is the same. We need a form of words to do that, so that the accounts of non-departmental public bodies, executive agencies and—less important—local authorities slot in with the form of accounts of departments of the Executive.
That is a different point.
But that is what the paragraph mentions.
I am not clear. I want clarification from the clerk on what is meant by powers of direction. The paper includes three paragraphs under the heading "Powers of direction". Paragraph 5, as Brian indicated, says that
I would read that to be so, but I have no more information than anyone else.
If the committee wants to clarify that, it is entitled to do so. Paragraph 5, as I read it, says that the Parliament will be consulted on any changes that are made by a minister. Andrew Wilson is introducing the specific proposal that the same form of accounts should be used by other public bodies. Andrew, if we understand you correctly, you want assurances that the powers of direction will be activated and that the same forms of accounts will be used.
I want all bodies that are in receipt of public funds to account for their budgets. If one follows the route of spending, from the enterprise budget, for example, to the agencies, the budgets do not mirror one another in a way that makes them easy to compare. What I am getting at is that there may be difficulties. I am asking, therefore, for advice before we amend this paragraph.
In other words, you want to know what the technical problems are.
Yes, but there may also be problems with the extent to which the Executive can set down the form of accounts. It can do so for executive agencies, but may find it more difficult for those bodies that are more at arm's length.
So, you are after clarity.
Yes.
We will, therefore, ask the clerk to examine that issue and to give us a draft so that we can ensure clarity and uniformity in the presentation of accounts. Perhaps the clerk could check the technical difficulties that may arise in finding a form of words that will achieve what Andrew seeks. It is an important point.
I want to pursue the point that Annabel and I raised. We want to include in paragraphs 3 and 4 a reference to consultation with the Audit Committee.
We will ask the clerk to examine that. You want to clarify whether paragraph 5 is applicable.
We might be able to do that by inserting an amendment to paragraph 5 that says that the Scottish Parliament must be properly consulted before any new direction is made, including those mentioned in the foregoing paragraphs. We will, however, clarify that that sentence is generic.
Something along those lines would certainly satisfy me.
Have we now dealt with paragraphs 3, 4 and 5?
I was concerned about the final sentence in paragraph 4, which says that directions
That brings us to the point on paragraph 5, which the clerk will look at. We have said that directions
One of the discussions that we had at this morning's meeting of the Finance Committee resulted in a commitment from the Minister for Finance—in lieu of an amendment, which Brian Adam withdrew—to include certain information, such as sources of funding, in the supporting documents. Brian can comment on that.
A concern that I have expressed a number of times is that, to have proper clarity and transparency about where moneys come from, we have to identify clearly moneys that have been recycled, in terms of mandatory efficiency savings—which are typically 1 per cent for further education colleges and 3 per cent for health trusts. There is also the 6 per cent return on capital that is expected from health trusts and the Keeper of the Registers of Scotland, and there may be others of that ilk. That should be clarified in the budget bill and supporting documents. The minister was reluctant—that is putting it kindly—to accept my amendment to that effect this morning, but he assured me that he would consider examining it in the written agreement. I want the minister to bring forward proposals for amendments. We will have to revisit this.
This paragraph set down the purposes, the amount, the expected income and proposed treatment, but what you want is a closer identification of recycled moneys within that.
Yes. The source of money should be absolutely clear.
Do you have a form of words to cover that?
We had an understanding from the minister that he would address the identification of recycled moneys and come back to us. I do not know whether it would be useful for us to produce one form of words and end up fighting over the thes, anys and ands. I want to have it on record that we are considering the matter, almost as a reminder to the minister of what he agreed to do.
You have now got that on the record—no doubt the minister will read it. When I report the views of this committee, I shall certainly ensure that that is brought to the attention of the minister.
There seems to be silence in the remaining provisions about reserves or other capital. It is important that the Parliament is presented with a budget bill that, apart from dealing with revenue issues—I think that Brian Adam is trying to get at this—gives information about whether there are accumulated revenues. If there is a percentage increase or decrease in revenue performance, we are entitled to know whether capital has accumulated or been lost as a consequence of the operating budget account for the year.
I moved an amendment this morning that covered some of those points, but the minister declined to accept it, although he said that he would address the issue. My amendment was that, in terms of the new resource account budgeting procedure, any carry forward should be limited to 2 per cent, and that that money should be spent on the purpose for which it was voted on in the previous year. The minister had one or two technical objections to the detail and also objected to the principle; he said that he would prefer to deal with the matter in this written understanding. Again, we should expect the minister to come forward with some details.
There cannot be a full understanding of the budget bill if the Parliament is not privy to whether there are reserves or carry overs.
Do you wish to leave this as a comment, or do you wish to propose a form of words?
Again, my recollection is that the minister offered to put something on that point into a memorandum of understanding. We should leave it to him and his officials to come forward with a form of words that we can consider.
Does it satisfy the committee that these views will be on record for the minister to read?
Members indicated agreement.
Annabel Goldie also brought up the question of capital. I am not aware that for this purpose the Executive sees the difference between capital and revenue. There was no specific discussion about capital but—
There is a loose reference to a projected balance sheet. A balance sheet usually implies an inclusion of capital and liabilities. Again, I want capital specifically to be included with reference to the budget bill.
Is there not reference to a capital expenditure plan? I understand the point, but are we worrying about something that, in fact—
It seems to me, Euan, that if we want transparency of the financial position for what will effectively be a national budget for Scotland before the Parliament is asked to approve or disagree to proposals for raising or spending money, we will need to know whether there is any carry over. We will need to know whether there is anything that may mitigate the need to raise or to spend money.
I do not disagree with a word of that, but I would have expected those things to be included in the capital expenditure plan that is mentioned.
If the Executive decides that it wants not to spend capital, but to hoard it, all that the Parliament will ever know—if they simply have to produce a capital expenditure plan—is that there are some capital expenditure proposals. We will never know what the kitty of capital is.
The system is being set. Once systems are set, it is usually difficult to change them. It is important to get things right at the outset. We are working from a fixed budget, so clarity is important if we are to understand how the fixed budget is operating.
Could we perhaps have some explanation from the officials of whether there is any distinction between capital and revenue in terms of the budget? Annabel raises an important point. I suspect that the Executive does not want to hoard capital, but the only reference that we will have to that will be the capital expenditure plan. The capital will come from the current revenue, or at least be financed from the current revenue. We need some guidance on that.
You have asked for guidance, Brian. I am sure that we can expect an explanatory note from the clerks on that point about capital and revenue.
By what date must we finalise our comments on the memorandum?
There is no specific deadline, although the minister has said that he hopes to have agreed a final version with members of both committees before stage 3 of the bill, so that, if members are still not happy, they can table amendments. That gives us about another four weeks.
Clearly, there are a lot of gaps, so we need further information. The part of paragraph 7 about the capital expenditure plans—
We have not reached that yet. That comes next—we are waiting with baited breath.
We need further information to clarify matters. We are unsure about what some of this means.
That is the purpose of this meeting. We are now clarifying which areas we want further information on. I would like us to make reasonable speed. Once the clerk has prepared the background papers that we are requesting, I hope that we will have an early opportunity to look at them. The purpose is not to delay the measure; it is to get clarity. That is why it is useful to collate these details.
Members indicated agreement.
Paragraph 7 is about the operating cost statement, the balance sheet, the capital expenditure plan, the operating budget and
Following from what Annabel was motivated by in the last section, I wonder if the following would be helpful on the last two bullet points on page 2 of the document.
Do you have a form of words for that, or do you want the clerk to work on it?
What I said was roughly what I had written down.
Forget roughly; we want exactly. I understand that you are looking for a listing of the capital assets, complete with the changes that have taken place, and a listing of all new projects. You also want individual statements on PPP and PFI projects, so that we have a clear picture of what is going on in terms of capital. Is that correct?
Yes.
I ask the clerk to consider that and advise us on how to proceed. Are there any further points on paragraph 7, or can we agree it with that caveat? We are agreed.
We need to know the level that it is intended to disaggregate to. At that point, perhaps we could include the clarity on savings and return on capital that I referred to earlier. I would expect us to have disaggregation of the budget well below departmental level. I have lodged an amendment, which we will come to later, that suggests that information be disaggregated to a sub-programme level. We are looking for a fairly open account. If all we have is a line that says we are spending £5 billion on education, we will know nothing. We need the information at, for example, a little below how much is going into the excellence fund for education. We need an agreed form of words about the required level; we also need clarification on the recycling of the money to which I referred earlier.
Some clerk has toiled for years to get this into shorthand; now we are turning it back into longhand. However, we are doing it for a good purpose. You are saying that instead of the phrase "disaggregated to the same level", you want the details of the level to be spelled out to a reasonable level to clarify where the funds are coming from.
To begin with, we should go for as low a level as reasonable, although reasonable is never a good word to use—it is too open to interpretation. If we then discover that we are getting more detail than we need, we can say so.
Brian makes a good point. I, too, was unclear as to what "disaggregated to the same level" meant. I do not know to what level it is reasonable for the Executive to have to provide that further definition of financial amounts. Perhaps the clerk can advise us on that.
I have a similar point. If we were to suggest an amendment, it would not be acceptable to use a phrase such as "as low a level as possible". We have to be much more specific. I have some sympathy with the level of detail that Brian suggested, but that may well become impractical. We need to work out our exact wording. The sentiments that Brian expressed are laudable and right. We want meaningful information.
Convener, it is not unreasonable to ask the Executive to clarify what it means by disaggregated level.
From what members have been saying, we have a technical problem. We need some technical expertise to inform this committee's judgment as to what the reasonable level is. We require technical expertise to ensure that we do not go into massive detail and also that we do not make it so large a unit that it is meaningless.
The meeting this morning?
It may have been last week.
John Swinney raised this issue at the Finance Committee.
Can you remember what was decided?
Scott's point is reasonable in that I would like a disaggregation that goes as far as is humanly possible. Whether that is given on paper or in electronic format can be decided later. If one does not want to examine it in more detail, it is possible to examine it one level up. I want the greatest possible transparency.
We want to clarify what that means.
I read paragraph 8 a little differently from other members. I took it that paragraph 8 was saying that the disaggregation would mirror whatever was agreed as the conduct in paragraph 7. We have agreed, in relation to paragraph 7, to investigate how far we can show capital commitments for individual smaller items. We have also said that we want some indication of public private partnership accounts and so on. By definition, paragraph 8 says that we disaggregate that side of it to the same level. Therefore, we do not have a problem. If we make progress on what has been discussed in paragraph 7, by definition paragraph 8 will come down to the same level.
That should be clarified.
When I was trying to produce an appropriate amendment, I discussed this issue with those who were advising on the amendment and the form of words used was "sub-programme level". Rather than trying to tie it down to amounts of money, that probably achieves what Andrew is looking for, but does not go as far down as asking how many paper clips are going to be ordered this year.
It is clear that the committee knows what it wants. We must get technical advice as to what is feasible, so that we can make a judgment. Can I ask the poor, overworked clerk to consider this matter to see whether the experts can tell us what a reasonable level would be? What the committee is searching for is clear. We should find out what is technically feasible, so that we can make a judgment. Would that be fair?
I agreed with Scott's suggestion that this should be done by dialogue, rather than us saying, "This is our list of demands", and the minister saying, "This is all that you are going to get."
We are trying to come to a judgment as to what this committee thinks is reasonable. There will be dialogue between this committee and the minister. In seeking out technical expertise, the clerk will ensure that the issue is considered. We seek to get the maximum clarity so that we can understand the mechanism, which is our duty. We need some technical input to say what is reasonable and what is unreasonable.
The principle is that the accounts and the budgets should be mirror images of each other. That improves clarity.
Yes, because otherwise there is a shifting of focus.
I made the point that clarity with regard to recycling of money in terms of the savings and the return on capital might be included. I am trying to remember whether the minister made a commitment to do that.
He said that that information will go in the supporting documents. He did not want it in the bill. That was discussed this morning.
I have one further point. There ought to be a statement that says that a review of this agreement can be initiated at the request of this committee. If we feel that the agreement is not delivering what we want, we should be able to request a review of the agreement.
Is that not covered as well under paragraph 5 of the powers of direction? It will be done by the minister in consultation with the Audit Committee.
That implies that it is done by the minister. That relates to the powers of direction. I want only to put in writing that we can ask for the whole agreement—not just the particular part that is referred to by 3, 4 and 5—to allow the committee to seek a review.
The minister has all the powers of review and this committee has the right to ask him or her to come and explain what he or she has done, but you are saying that the committee should have the power to ask for a review. The committee cannot instigate one, but it can put a request to the minister. What you are asking for is an additional right of this committee to seek a review.
Why are we inhibited from asking for a review at any time? Surely it is within the power of the committee to review this matter at any stage. Do we need to spell that out?
I am not disagreeing with what you are saying, but mentioning that if it is in writing, no one can dispute it.
The document is an understanding; no legal rights or obligations are conferred. Brian is asking for it to be written into that understanding that the committee can request a review. It has no power to instigate one, but it could request one. Is that agreed?
I think that that is understood.
We are all happy.
We are asking the clerk to produce a paper on the level at which number 8—the level of budget documentation—should be looked at, and to ask that this committee has the ability to request a review. That has completed section 8. Are there any other comments?
I want to return to section 7. If you are harmonising the entire discussion, the same technical questions would apply to section 7 as to section 8.
Thank you for that clarification. We expect the clerk to give us further papers to scrutinise.
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