I welcome the minister and his officials to the committee. I suggest that we invite the minister to talk us through the various sections of the draft order and, after he has formally moved the motion, we will put to him general questions and then questions on individual sections.
I have a few words of introduction to make. As you are aware, the budget revision is largely a technical exercise matching the authorisations that we require to the year end with the expected outturn as a result of all the different activities that have taken place during the year. On page 5, there is an example of the technical nature of the exercise. The reduction of £10.7 million in common agricultural policy market support reflects the reduced demand for CAP payments, but it is balanced by a reduction in receipts from the Intervention Board.
I think that I was procedurally incorrect. The formal moving has to be delayed until we have dealt with questions.
Fine.
I will kick off. You pre-empted the question that I wanted to ask on the Lockerbie trial costs. You mentioned a figure of £28 million, spread over several departments, and the contribution that is being made by the United States Government. Roughly what percentage of the costs will be met?
We cannot be precise on that. Negotiations are proceeding with a degree of good will. We have no final details of the proportion of the costs that the US Government will pay.
I thought that an arrangement might have been made when the trial began that a certain proportion would be met by the US Government, but that is not the case. The matter will be considered when the final costs are known.
Yes.
It might be helpful if we go through the document, department by department, as we did last week.
Before we do, I have a general question. How often are budget revisions expected to take place throughout the year? Does it vary? Is it once or twice a year?
There are three possibilities: summer, autumn/winter, and spring. In general, we try to avoid summer.
That is useful.
I will ask officials to provide precise information. The principle is that although some costs would have fallen on the Scottish system had the trial taken place here, and we would have been expected to bear some of the costs, given the significance of the events and the trial, the Treasury has agreed to pick up those costs that it can.
The briefing that I have received says that the estimated impact on Scottish Executive departmental expenditure limits is about £5.4 million. That is the estimated cost of the trial had it taken place in Scotland.
If there are no further general questions, we will begin department-by-department scrutiny with the rural affairs department, which is covered on page 5 of the document.
There are two reasons. The first relates to the expenditure of projects taking up funds, but the second relates to the administration of those. I understand that we are making payments more promptly, which requires us to draw forward money from next year. The change is accounted for more by improvements in the administration of funds than by an increased take-up of funds per se, although that is one element.
Also, there is the transfer of £31.7 million to the education department from the local government budget to cover payments for additional funds for schools. Will you, or one of your officials, explain the reason for that transfer?
Are you referring to page 18?
Yes. I should have said so.
As I recall, this relates to the funding from the budget revision, which allocated money to individual schools throughout the UK. Scotland's component of that is this £31 million. The funding flowed through the development department on its way to the education department, because it is a local authority payment for distribution. So this is the money arising out of the budget last year that went to schools on a formula basis: so much to secondary schools and so much to primary schools.
Is that some of the money that went directly to schools and did not touch local authorities on the way, or was it channelled through local authorities?
I was in the education department at the time and, as I recall, the money was channelled through local authorities because the education department is not authorised to give funding directly to schools so, technically, the money went through local authorities. However, there was an agreement on a formula, and local authorities passed the money directly to individual schools with minimal adjustments to the formula to meet local circumstances.
Why did the money go through the development department in the first place? What was the logic in that?
I would need to ask officials, but my understanding is that it was because the expenditure was related to local authority expenditure, and the home for local authority expenditure is the development department. That is why, as can be seen in the documentation, the money was transferred from the education department on its way to local authorities. My officials tell me that that is reasonably accurate.
I will continue from the convener's point. The top line of page 18 is:
Do you mean contractual in the sense of a contract between the Executive and local authorities or between—
Or between local authorities and the health department.
No, I do not think that it is done on the basis of a contract. It is done on the basis of a formula distribution in the normal way.
The idea was that this was health-related spending by local authorities, and the funding should have come from the health department. It is a similar point to that about the education spending that we talked about earlier. Local authorities made the expenditure to reduce bedblocking—in effect, to get elderly people out of hospital. The proper source of that funding should have been the health department, which is why the money was transferred to the health department.
Basically, it is an accounting device. It is an audit procedure.
Yes.
It might be useful for us to give you further clarification. I was not clear whether the question was about a specific legal contract, or whether it was about the nature of the arrangement, under which we would expect certain outcomes from local authorities for that expenditure, because there would be understandings that this funding would impact on, and reduce, bedblocking. To that extent, there would be a contract, but we can give you more information if it would be helpful.
That would be helpful. If I may continue on the development department, on page 26, there is a large input in the capital budgets. Is that money that is being called early, or is it extra money that has been negotiated?
Could you point out the line that you are on?
I am on page 26, halfway down the page, just below the heading "Operating Budget", where it lists "Capital expenditure" and "Capital Receipts Applied".
I believe that that is the capital element of the anticipation facility.
Are there any further questions on the development department?
I notice that money is moving around for Bellwin scheme payments. Pages 17 and 18 show that money has come from housing and gone to local government. Why is that?
It is likely to relate to flooding, given the nature of the Bellwin scheme. It operates in relation to major flooding, or occasionally major snow or gales, that creates unusual damage to property. Again, we can find out specific information. I have just been informed that it is to do with flooding.
If there is nothing further on development, we will move on to the education department. Minister, about halfway down page 33, under the heading of level II, section (d), which deals with specific grants, there is an increase of £17.2 million from what are termed "Budget consequentials". Where was that amount before it was allocated to specific grants? Was it in the Scottish consolidated fund reserve, or had it been given to the education department and was awaiting allocation?
It is as we described in the previous discussion on the transfer from the development department. That sum was a consequence of the Chancellor of the Exchequer's pre-budget statement and the additional resources allocated to education authorities for distribution to primary, secondary and special schools. The distribution was on the same formula basis as we discussed previously in relation to the chancellor's main budget statement. The money was further additional cash coming into the education system and was distributed to schools by the education department.
This might be a pedantic point, but I do not understand why that money can go directly to education but the other allocations to schools have to go via the development department.
We will have to come back to you on that. You appear to have picked up a point that shows inconsistency between the treatment of the two sums.
It does not matter that much.
It is worth looking into.
A theme that runs through the book is the fact that not distributing funds directly appears to increase the amount of administration. Is that a quantifiable cost?
Are you talking about, for example, the way in which funds are transferred to the development department on their way to the education department?
Yes.
I would not think that the cost was quantifiable. The development department deals with all local authority expenditure matters and issues relating to the grant formulas and distribution mechanisms. That department is intimately engaged in discussions with local authorities about such matters. I would have thought that it would be a simple administrative process to house the funding in that department until the discussions between colleagues in the Executive and local government were complete and the money could be transferred to, say, the education department. I do not think that any financial burden will be attached to doing that.
We will move on to deal with the enterprise and lifelong learning department.
In part (b) on page 44, is there a reason why only two teaching hospitals are listed?
That is because they are teaching hospitals that are being built or, as is the case with the Western general hospital in Edinburgh, substantially altered. Because the changes in teaching provision have been brought about as a result of changes in the NHS, the NHS is funding the teaching elements in those two hospitals.
Could you say something about the Open University overpayment, minister? Part (b) also says that £5 million is being transferred to the Department for Education and Employment in respect of Open University overpayment.
Do you want to know why there was an overpayment in the first instance?
Yes. I would like to know what is going on there.
I will have to get back to you on that as I do not have that level of detail with me today.
As you may know, we have recently transferred funding for Scottish students in the Open University to the Scottish Education Funding Council. I imagine that some sort of balancing process has gone on. We will ask the relevant people and send you a note of the answer.
We will move on to deal with the health department. Minister, on page 58 the figure under the level II heading that jumps out and hits me is the £56 million decrease because of
Unless my officials can give me an answer right now, I will have to come back to you on the proportion.
I accept that.
Changes to the external financing limit reflect changes to capital plans and the reduction is mainly because of trusts' making use of funds in their bank accounts rather than borrowing from the department. The trusts' external financing limit is essentially the difference between the funds raised by the trusts to undertake their activities, including the acquisition of assets, and the income that they receive for undertaking those activities. In a number of respects, the changes reflect a different mechanism for securing resources for activities, rather than changes in funding per se.
The only thing that I would add to that is that, rather than a reduction, the change reflects a transfer into non-voted resources.
I accept that, but what about the frequency of that sort of revision? Is it likely to happen again?
We would need to check with health colleagues and let you know.
We will come back to you on that.
Can we have a breakdown of the trusts that were involved in this?
Yes, I am sure that that can be done.
Mr Dickson spoke about a "transfer into non-voted resources." What will that mean? This is a revision to the budget a matter of weeks before the year ends. Will it be regarded as end-year flexibility?
This is a change to how financing is raised rather than to the amount of financing. What the trusts do now will still score against expenditure somewhere else in the system. The two things should balance each other out in the end-year position. The question here is about how resources are raised.
Thank you. The figures for the Scottish Executive justice department begin on page 68, but as no one seems to want to raise any points, we will move on to the Scottish Executive administration on page 86.
I have two quick questions. What is the difference between the Executive administration and the Executive secretariat?
The Executive secretariat is, in effect, part of the Scottish Executive. It is a department like the development department or the finance group.
Is that a recent thing?
Since devolution.
It passed me by.
The reference is to increased income from outward secondments. When our staff are seconded, we get money back from the employers.
Oh, right. That is a good idea.
I have a question on the same table in regard to the figure for the transfer of capital budget to current budget as a result of the refurbishment of St Andrew's House. It is a fine art deco building and I hope that the refurbishment will maintain that. Where do the costs stand for that refurbishment, which seems to have been going on for some time?
Do you mean the overall cost of the total refurbishment?
Yes, what is it costing?
We will have to come back to you on the full amount.
I accept that. It just caught my eye.
It was simply a transfer between capital and revenue.
We are preparing a note on the full costs for the convener on the back of last week's debate on the Budget (Scotland) (No 2) Bill.
On the same point, will the note refer to the costs of the move out of New St Andrew's House?
That move took place some time ago. I am not sure how relevant that information would be to the costs of the current refurbishment of St Andrew's House, which would have taken place irrespective of what happened to New St Andrew's House. I imagine that most of the staff transferred to Victoria Quay.
I understand that there was some continuing liability for the building.
Do you mean continuing liability for New St Andrew's House, while we transferred that asset?
Yes.
I am not sure. We would have to check that.
The note that we are preparing includes the costs of acquiring Victoria Quay, but we could ask whether David Davidson's point on New St Andrew's House could be included.
I speak strictly from memory, but I understood that New St Andrew's House was rented. I cannot believe that there was any continuing liability.
Yes, I believe that the company that owned the St James shopping centre also owned New St Andrew's House. I seem to remember some wrangle about that.
I will check, but I do not think that there was any continuing liability.
We will move on quickly. The next sections are on the Crown Office and procurator fiscal service, on page 90, and the General Register Office for Scotland, on page 94. It might save time if I were to ask members if they have points that they wish to make on any of the remaining sections.
I am sure that this means nothing in particular, but page 102, on the Scottish Executive secretariat, tells us that the budget revision increases the departmental expenditure limit by £1.7 million, but no breakdown or reason for that change is given.
That must be one of those well-known typing errors.
That snookers my next question. Where are special advisers and related activities covered in the budget? Do they come under the figures for the secretariat, or do they fall under those for administration?
They come under the main Scottish Executive administration budget.
I wish to clarify what is said on page 102. We dealt with that matter during the autumn revision. It was left over after that.
I give members a final chance to raise points about the remaining sections.
I move,
That the Finance Committee recommends that the draft Budget (Scotland) Act 2000 (Amendment) (No 2) Order 2001 be approved.
The question is, that motion S1M-1600, in the name of Angus MacKay, be agreed to. Are we agreed?
Motion agreed to.
Thank you, minister. I should have welcomed you on your first visit to the Finance Committee. We look forward to seeing you on future occasions.
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