Finance Committee, 07 Mar 2000

Meeting date: Tuesday, March 7, 2000

Official Report 184KB pdf

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Accounting Policies

We move on to item 5 on the agenda. Members have received the memorandum from the Minister for Finance, in response to the letter that he received in the names of myself and Andrew Welsh, convener of the Audit Committee. Members will see the minister's comments and the fact that he wants our comments by the end of this week. Any decision that we take today will enable us to respond by then. The Audit Committee will indicate its views separately.

I agree with paragraph 25, that common standards must be applied across the public sector in the UK. We must start from that premise. It is vital that anybody, anywhere within the public sector operators and anybody who takes a view on them, understands that we operate to a common standard. We do so in business and other walks of life—why should we not do the same in the public sector?

That said, I did not find anything untoward in the minister's comments. Paragraph 11 states that

"the Treasury no longer has a role in the issue of any form of accounts direction."

I would like to tease out a little—perhaps with the help of the clerks—how the differences will come up and what effect they would have in the long term. Paragraph 12 also relates to that matter.

What do you mean by "tease out"? Do you want a response now?

Yes. The minister has asked us to comment. Item 11 states:

"the Treasury no longer has a role on the issue of any form of accounts direction".

Item 12 states:

"under section 96 of the Scotland Act 1998 ‘the Treasury may require Scottish ministers to provide . . . such information in such form'".

Is item 12 an extension of the current Treasury role of deciding which form of accounts we should use? If there is a variant—and there could be if, for the sake of argument, at the next election the Conservatives take Westminster and the SNP takes Holyrood—there would be a need for common working. We would not want friction. We are trying to establish a mechanism whereby everybody agrees that we are going down the same route.

No one would disagree with that, but you are looking at the earlier draft.

I am looking at the papers that were e-mailed to me at the weekend. I apologise; my wife was in several hospitals last week, so I just took what was e-mailed to me.

The updated version is attached to the minister's letter of 17 February. I think that your point about paragraph 12 has been clarified. The function of the memorandum is to clarify those points.

Given the amount of information that we received, I sympathise with Mr Davidson's problem. It might be helpful if documents were stamped clearly with a date, so that it was clear which document was earlier. The coding at the top probably indicates that, but a date would not go amiss.

There were four papers on my e-mail this morning from the Institute of Chartered Accountants of Scotland, about accounting standard setting and so on.

There are an unusual number of papers for this week's committee because there are an unusual number of items on the agenda. All my papers are headed with handwritten codes that coincide with the sheet outlining the relevant papers. Some are a paper copy only and some came by e-mail.

The point that David Davidson raised about paragraph 12 is addressed in Jack McConnell's revised version. We need some time to consider that again.

Could you point out the paragraph to me?

Paragraph 12—I do not think that the paragraph numbering has been changed.

There is a summary at the back of F1/00/6/5. Paragraph 29.2 states that

"the format of accounts will be determined by agreement between Scottish Ministers and the Audit and Finance Committees".

In other words, it is not dictated by the Treasury. It is saying that the Treasury lays down the accounting principles. However, we—along with the Audit Committee—determine the format of accounts. The Financial Reporting Advisory Board is setting minimum guidelines, which ensure that everybody is singing from the same hymn sheet. The implication—in fact, it is more than an implication—in this document is that we will ask for far greater detail than will be needed. What the guidelines are asking for is a minimum.

I accept your comments. My concern is that we should have a uniform system in public service throughout the UK.

That is what this does. When we discussed this before, I think that Andrew Wilson and John Swinney objected to the way in which it was done. I did not object, because it seemed that it was being done for cost reasons and in order to have common ground, rather than Treasury control. I would have objected to the latter, if I had thought that it was the reason.

The relevant Official Report shows that I said that I was reasonably relaxed about the whole format, but I thought that we needed more information at that stage about its implications. The comments that were made on the need for uniformity were fine, but the point of devolution is quite the reverse. That was the motivation behind what I said.

However, the point that is made in paragraph 29.5 is reasonably comforting. This is the sort of thing on which we could take advice, once we have an adviser in place. It is a matter of conjecture at present—we are looking at structures of which none of us has much experience. We will not know what the outputs will be until we see them, so we should not get too worked up at this stage. It seems reasonable to allow people to come back with a finalised arrangement after discussions with the Treasury and the chairman of the FRAB. I have no objections to what is before us.

Are we, as a committee, in a position to indicate that we are quite happy with the clarified version? We can inform the Minister for Finance by 10 March.

At the end of the original letter, it states:

"The Committees are asked to support the recommendation that officials should negotiate a suitable extension to the remit of the FRAB together with Scottish representation on the FRAB."

On the basis of the clarification, we are offering that support.

Exactly.