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Item 2 is the budget process. I welcome the Deputy Minister for Enterprise and Lifelong Learning and Gaelic, Alasdair Morrison, and his officials. I will let the minister introduce the officials.
I thought you were going to begin by congratulating the ministers, but you have congratulated the department and the officials.
I congratulate ministers and officials.
I will begin by introducing the officials. Sitting on my right is Ed Weeple, who is head of the lifelong learning group. On his right is David Stephen, the chief executive of the Student Awards Agency for Scotland. On my left is Douglas Baird, the leader of the enterprise and lifelong learning finance team. On his left is David Wilson, who is head of the enterprise networks and tourism division. I am sure that three of those individuals are well known to the committee by now.
Regarding the announcement to be made later this morning, when you talk about a multimillion-pound package, what is the definition of multimillion? Is it new money and is it directed specifically at capital or revenue spend in the further education sector?
I will endeavour to respond to some of the points that you raised. I will pass over to colleagues to explain the detail.
In the Scottish Enterprise budget, we have included the same categories as were set out in the document "A Smart, Successful Scotland", which was published at the beginning of the year. The heading "Growing Business" covers matters such as advice to businesses through the small business gateway and commercialisation activities such as the proof of concept funding. It covers direct support to businesses and, to some extent, indirect support through universities, spin-outs and the like.
Presumably, there have been changes since that document was published. It would be useful to get the up-to-date figures if possible.
I will contact Scottish Enterprise and get that information. I do not think that the figures will have changed significantly. Inevitably, however, there will be some changes at the margin in the course of the year, as there is with our budget.
The convener asked when the draft budget for last year will be finalised. The accounts for draft spend last year are currently being examined by the Auditor General for Scotland and should be finalised and available shortly. On the detail of the modern apprenticeships, it would be sensible to invite Ed Weeple to inform the committee.
The number of modern apprenticeships refers to the number of people in training. There are currently 15,000 people in training on modern apprenticeships every year in the Scottish Enterprise area and 1,500 in the Highlands and Islands Enterprise area. There are 16,500 people in training at present; the aim is to increase that number to 20,000 a year by 2003.
Do you also have specific targets for achievements?
There are specific targets for achievements. The targets this year are 17,500 for Scottish Enterprise and 1,500 for Highlands and Islands Enterprise, but we are only part of the way through the year and the numbers should rise.
The committee has previously considered how the numbers break down in terms of gender. What proportion of modern apprenticeships are taken up by women?
I do not have the figures with me, although we can provide them. In the past there has not been the take-up by women that we would have wanted. One of our aims is to improve that.
Might one of your targets be to encourage better take-up of modern apprenticeships by women?
That is indeed one of our targets.
One thing that struck me about the presentation, is that there remains a mystery around what the enterprise and lifelong learning department costs to run. I know that there are historical reasons for that not featuring as an item in the budget presentation, but it seems a little unfair that the committee is busy posing questions—sometimes abrasive questions—about how various publicly funded agencies operate, what they are doing and whether they are any good at doing it, while the department manages to remain invisible in that respect.
Annabel Goldie raises a question that some would describe as rather obvious. The department costs in the region of £10.9 million to run, although I use a broad brush. That is stated in the programme budget.
The information can be found in the budget documents that were published in January—not in the documents that members have before them.
On the Scottish Enterprise network budget, there is concern that, yet again, the administration figure is an unusually high percentage of the total budget. Why does the administration figure follow a plateau-like pattern? Surely Scottish Enterprise, in the course of its radical reappraisal, should be implementing significant savings in administration? Should there not be more evidence of that in the budgetary allocation?
Annabel Goldie has raised that question on a number of occasions. She will be aware that there has been a realignment of staffing arrangements within Scottish Enterprise. It takes a while—perhaps a year or two, or, in some instances, three years—before such realignment yields savings in pounds and pence.
We have discussed the issue before, so we are aware of the committee's concerns. At the committee's meeting on either 15 May or 24 April—both of which I attended with Douglas Baird—I mentioned the review that we are conducting of Scottish Enterprise's running costs. We are working closely with Scottish Enterprise on that. Significant spend is required to achieve the transformation of the organisation. I believe that that transformation is widely supported and that it will yield some savings, but it is unclear when those savings will be seen. We are assessing the situation in the context of the overall controls that we have over Scottish Enterprise's running costs. I gave a commitment at a previous meeting to provide the committee with a report of the review. That report is not yet complete, but it is in hand.
Annabel Goldie has raised that issue previously, both in the committee and in other fora, and her point is not lost on the departmental ministers or our officials. It is also recognised within Scottish Enterprise, as Robert Crawford has demonstrated over the past year or so.
I am grateful to the minister and his colleagues for those comments, but my point is that the issue has been raised repeatedly. When the business community sees that percentage of the budget being allocated to administration of the enterprise network, its reaction is one of incredulity. I do not apologise for raising the point again, because it is important. I would like the minister to adopt a slightly more rapacious attitude to the allocation of budget, the point being that organisations should demonstrate savings or they will suffer budget loss.
It is not often that I am invited to demonstrate rapacity, but I will take Annabel Goldie's point on board on this occasion.
May I ask a final question?
Of course. You deserve another one after that.
I refer to a point that I have raised previously in connection with the FE sector: the known position of outstanding repairs to and maintenance of much of the infrastructure and fabric of the sector. I note that capital is referred to in the budget allocation. The capital figure follows a fixed pattern over a period of years, but I am slightly unclear about that. I cannot get much more information from the document on whether that particular financial difficulty is being acknowledged. Am I correct to assume that the capital allocation on page 85 of the document is intended to address that difficulty, or is it intended to address something else?
In the committee's stage 1 report on the budget process, it recommended that the capital budget should be identified separately. The projected levels of capital expenditure of £21 million a year, plus last year's one-off allocation of £10 million, mean that capital expenditure over 10 years will reach about £220 million. That sum approaches the level that the Scottish Further Education Funding Council indicated is required following a survey of the condition of its estate.
My first question is on modern apprenticeships. On page 79 of the document, the Executive says that it will
The ambition is to reach and, in some cases, beat the targets that are established. Flexibility is the name of the game. In some instances—for example, in the construction industry—we have demonstrated how age barriers for modern apprenticeships were dispensed with, for sound and proper reasons, to attract more people into the system. Ed Weeple may want to add more detail.
The modern apprenticeship target of 20,000 is a clear objective. Modern apprenticeships are designed with the help of the industrial sectors and the qualifications are built round that. Over and above the modern apprenticeships, there are vocational qualifications at level 3—higher national certificates and higher national diplomas. As we know, Scotland and the UK tend to be rather weak in level 2 and 3 qualifications. The modern apprenticeship was designed for a specific purpose, which is highlighted in the programme for government and remains the target.
I think that you are aware of the point that I am making. If we had some sort of pooled targets, and if young people on the skillseekers programme were offered more choice and flexibility, that would help us to meet the targets. It would also give people a choice. However, I shall leave that point; I make it at every meeting.
Around 170,000 individuals have already opened an ILA and more than 51,000 learning episodes have been undertaken so far. Ed Weeple can give a breakdown of where the people come from.
The original concept was that the individual learning account should be open, specifically to ensure that it became an accepted part of the education, training and learning infrastructure. There are issues around social exclusion. Some of the measures taken, particularly the discounted rates, are targeted specifically at those for whom learning is unfamiliar. In developing the concept of individual learning accounts, one of the important aims is to begin a process of targeting those people who require that kind of assistance. The original concept was specifically to have the accounts open at the beginning and to consider targeting as we move forward.
I want to ask about the further education sector, but I also want to return to some of Annabel Goldie's queries, which opened up an interesting area. If I understand table 4.1 of the draft budget correctly, I estimate that around 95 per cent of the department's total spend is spent on non-departmental public bodies. David Wilson said in response to Annabel Goldie's question that the Executive has controls over Scottish Enterprise's running costs, but I would like to understand the process by which the Executive monitors that 95 per cent spend. Annual grants or funding relationships are passed to those organisations, which are then presumably told to get on with it, under their strategic and operational requirements. Are the officials saying that there is a weekly, monthly or annual process that keeps control over those running costs?
In fairness to David Wilson, I shall allow him to elaborate on that point.
I may have misled you slightly, so please allow me to draw a distinction. We have formal controls over the running costs of Scottish Enterprise—staff and administration costs, building costs and the like. That is standard in all NDPBs. A process is used whereby the department and the NDPB agree on the NDPB's running costs. Similar procedures are adopted in all NDPBs.
The process of controlling budgets is broadly similar for the funding councils. Administration costs are separated from overall programme budget costs. Allocations to higher education institutions are a matter for the Scottish Higher Education Funding Council alone. Legislation prevents ministers from having a view on courses, curriculums or institutions. The same statutory guidelines do not exist for further education, but ministers adopt the same principle that the overall budget is a matter for the Scottish Further Education Funding Council. Ministers do not attempt to second-guess in detail the allocations that the councils make.
I will ask about Highlands and Islands Enterprise. I share the concern that has been expressed about administration costs, because I have done the sums. In the current financial year, 18 per cent of HIE's budget will be spent on administration and that figure will be 22 per cent next year, which is significant in anyone's terms. I was interested in the argument about "A Smart, Successful Scotland". Will some of that additional administrative cost be covered by the Executive's reappraisal of its economic policy and strategy in that document?
Tavish Scott made several points. This year, changes in administration costs at HIE have been affected by a redundancy issue, which we have covered. If administration costs had to be increased because an activity must be performed, we would discuss that with the body involved. If an increase were required, that would be agreed if appropriate after discussion.
As David Wilson says, flexibility within HIE is the name of the game. Resources can be directed where the need arises in one of the local enterprise company areas and moneys can sensibly be moved around. That has been one of the great legacies of the Highlands and Islands Development Board.
Indeed, Shetland and the Western Isles make much better locations than Inverness.
As the member for the Western Isles, I fully appreciate the challenges that island colleges face. In an earlier response, Ed Weeple outlined the relationship between the funding councils and ministers and the guidance that is given. Tavish Scott will appreciate the fact that the sums of money are given by ministers to the funding councils rather than to individual colleges. Nevertheless, I am willing to discuss the point that he raises with Wendy Alexander and officials. It would be wrong for me to make any further commitment.
I have been following with interest the debate between Annabel Goldie, Tavish Scott and the minister on Scottish Enterprise. I would like to pursue the matter further, as I find the situation profoundly unsatisfactory.
Annabel Goldie has consistently raised this point, and I have tried to be as helpful as possible. As I have said, the potential administrative costs to Scottish Enterprise and Highlands and Islands Enterprise are not lost on ministers. Robert Crawford, of Scottish Enterprise, ran with this agenda and has tried—rightly—to reduce administrative costs.
Everyone accepts that, but we are trying to quantify the costs as part of the budget process. When was the work started and when do you expect it to be completed?
Again, I can respond only on the time that I have been in this position. Robert Crawford is in a similar position. The process has been going on for some time. It is difficult to quantify, because it does not yield results, as has been explained in previous replies. When staff numbers are reduced, a cost is attached. It is in later years that one begins to appreciate where the yield is.
The committee understands that. It is true that there may be additional costs in the short term, but why is it so difficult to produce estimates? When will that happen?
I will cover that. If I may, I will correct a slight misapprehension. It is not that the work has not been done, but that the clear picture that we would be content to make more widely available has not been finalised. Members must think about the context. Robert Crawford has made public statements about the likely level of redundancies at Scottish Enterprise. In the annual accounts that were published recently, there is a statement about 180 redundancies last year. There are likely to be fairly significant redundancies this year. Inevitably, there must be discussions with the trade unions. It is a very sensitive matter and we cannot simply pluck numbers from the air and say, "This is the number that we will set." The aspect of the process of change that will lead to redundancies and the cost implications are, to a degree, uncertain.
I am sorry to keep pressing this point, but with the greatest respect, you are still not telling us when that is likely to happen. You tell us that the work has been done and that you want to consult on it further before you put it in the public domain, but you must understand—as I am sure you do—that the committee is trying to come to a rational judgment on the budgets and how they are spent. For the last time, do you have an estimate of when the information will come out?
The enterprise and lifelong learning department has a budget of £2.25 billion, so even the sternest critic of Scottish Enterprise's administrative budgets would concede that the administrative savings that we are talking about are on the margins and will not leave the committee in a position to make significant recommendations.
The committee may note that we have still not had an answer to the question.
Someone else can respond on the detail and the arithmetic, but no one finds it strange that in the past 18 months, we have increased visitscotland's budget by 95 per cent. When the strategy was launched 18 to 20 months ago, visitscotland's budget was around £19 million. Today, the budget is about £35.5 million, which is a significant increase. As everyone appreciates, visitscotland is currently considering its north American commitments; visitscotland is best placed to examine such operational matters. No one will find it strange that we have committed considerable sums of money to address foot-and-mouth and to ensure that our main tourism agency is properly funded. Even Mr Hamilton would concede that a 95 per cent increase in 18 months is reasonable, if not considerable.
Mr Hamilton may beg to differ. I would like to see the £13 million added in. I have a range of other questions, but I will pass the baton to other members.
If there are any outstanding issues that we do not cover this morning, members can write to the minister either through Simon Watkins or as individuals for further clarification.
Absolutely. I will try to respond as quickly as possible and with as much information as possible. Individual members have written to me on several issues following an appearance before the committee.
I want to wrap up this part of the meeting by 11 o'clock. There are two members still to ask questions.
I am sorry, convener; I thought that you were going round the table and did not realise that I had to indicate that I would like to ask a question.
Are you indicating now that you would like to ask a question?
Yes.
Elaine Thomson indicated her wish a while ago.
As the minister said, the bulk of the department's budget goes on training and skills and further and higher education. Some challenging targets have been set in different areas and there is a lot of extra expenditure, which seems to have been very successful. There was a commitment to deliver 100,000 individual learning accounts by 2002 and I note that 130,000 ILAs have already been opened. Given that that target has been exceeded and that others are being met, do you intend to reconsider the targets and set more challenging ones? Are you considering a continued percentage increase in the number of people taking up training or education?
Elaine Thomson raises an important point about the individual learning accounts target. When we set our initial target, we believed that it was an ambitious one, even though we have now exceeded it. We are constantly reviewing such targets and how we can best use ILAs or modern apprenticeships. As I said, in the construction industry, we removed the age barriers to allow a greater number of people to access the modern apprenticeships. We discuss reviews of all targets regularly.
Ministers are considering where to take individual learning accounts. The next phase of the policy is being developed. Wendy Alexander hopes to be able to announce fairly soon how she will develop individual learning accounts. I am not in a position to make a firmer statement on that at the moment.
The point has been made that across the Scottish budget—not just in enterprise and lifelong learning—large sums are allocated to NDPBs. Has any consideration been given to how openness and transparency of information can be improved? MSPs have an interest in how large amounts are spent within such bodies. Other committees, including the Finance Committee, have suggested how information could be presented in more helpful ways, perhaps by using new technology to provide links to other organisations that are producing operation plans and so on. I am thinking of Scottish Enterprise, for example.
It is fair to say that there is a considerable amount of information in the public domain relating to the learning agenda. For example, the two funding councils publish their plans in their annual accounts and all the institutions that they fund offer substantial information about their activities.
The accessibility and clarity of information are two key issues, which members of the committee have raised on other occasions.
I return to an issue that Annabel Goldie asked about and that we raised at stage 1 of the budget process. We asked where in the budget documentation the budget of the enterprise and lifelong learning department appears. You replied that it would be included in the January documentation. Unfortunately, when preparing for this meeting last night I did not have a copy of that documentation to hand to examine it.
I do not want to rush the minister, but I ask him to keep his answers short and to the point. We have a heavy agenda and I am trying to keep to our timetable.
The issue that Ken Macintosh raises requires further clarification and I am happy to provide him with that in writing. In the broadest sense, the First Minister and the permanent secretary to the Scottish Executive are responsible for the running of our department and other departments. I cannot provide an answer now to the specific question that the member asks, but I will do so in writing.
Perhaps you could copy your response to other members of the committee.
I have two short questions. The first relates to the saving that has been made on student loan defaulting. I put that to the representatives of the Student Awards Agency for Scotland.
Rightly, a large chunk of money went to visitscotland following the foot-and-mouth outbreak. The body received a 95 per cent increase in its funding. Scottish Enterprise received £4.5 million and Highlands and Islands Enterprise received £500,000. Additional moneys went to the Dumfries and Galloway Tourist Board and to Dumfries and Galloway Council.
I will answer the question about uptake, but I should also mention that the £5 million that went to Scottish Enterprise and Highlands and Islands Enterprise is not included in these figures because it came from end-year flexibility in the department's budget, rather than from the budget consequentials. The money is not noted in these figures, but it has gone to Scottish Enterprise and HIE. As the minister said, Scottish Enterprise also found additional money for Dumfries and Galloway.
In that case, I will not use this occasion to make the case for more resources for Dumfries and Galloway, although they will undoubtedly be required.
Dead right you will not.
I asked the minister a number of parliamentary questions on the effect that the funds that are spent in various areas are having. The measures that are contained in the document are fairly crude. It is important that we are able to say that, for example, the £11.9 million that was given to visitscotland to deal with the effects of the foot-and-mouth outbreak made a difference to people. I do not think that that is necessarily the job of the organisation that received the funding as that could lead to a culture of self-justification. Many members will recognise that that culture exists to a certain degree in non-departmental public bodies—we hear about what a good job they are doing rather than what sort of job they are doing. What is being done in your department to determine the effectiveness of the funds deployed other than the setting of simplistic targets?
The simplistic response is that the effectiveness of the money that was given to visitscotland will be determined by the number of tourists who come to the country.
I will be happy to do so. However, I am not clear about what assessment is being made of the effectiveness of the allocation of the funds in terms of the performance of the organisations.
I will continue to use the example of visitscotland. That organisation is working to a strategy that is being refined as we go along. We are working in circumstances that are different from the ones that we faced four short weeks ago. We will assess visitscotland in terms of its strategy on tourism and ensure that the money is spent accordingly.
It might be helpful if the minister would circulate the impact assessments to the committee when they are made.
That would be helpful. It is important that we ensure that additional funds are allocated in the most effective way and that we have a basis on which to judge that. For example, I might have argued that less money should be given to the centre and that more money should be given to local organisations.
I am happy to make that information available in writing to David Mundell. I can assure him that we do not simply thrash around and throw money in any direction.
David Mundell's point follows on from my answer to Tavish Scott's question. An official will be liaising closely with any body to which funds are given. The key role for the department is the setting of the overall policy and the direction that the organisations should take. However, once the operational decisions are taken by the NDPB concerned there is a clear monitoring and evaluation role for the department. That role will come through both in the additional moneys for foot-and-mouth and the like and more generally in terms of the overall activities. That is a clear role for the department.
I am confused about how your budget, as set out in the document, dovetails into the rural development budget and funding development activity in rural areas. That is slightly unclear at the moment. You will recall that, on a number of occasions in the chamber, I asked why Wendy Alexander rather than Ross Finnie responded on the foot-and-mouth issue. I would appreciate greater guidance on the connectivity between your department and the environment and rural affairs department, particularly when it comes to funding.
I am happy to respond in writing to David Mundell.
It would be useful to copy that response to all committee members.
It goes without saying that any written response to a member will be copied to the other members of the committee.
Thank you, minister.
I will ensure that you get that detail.
Thank you.
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