Enterprise and Culture Committee, 07 Nov 2006

Meeting date: Tuesday, November 7, 2006

Official Report 217KB pdf

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Budget Process 2007-08

Agenda item 5 is an open discussion of the issues that have come up in our interviews with various bodies in the past few weeks on the budget process for 2007-08. A paper has been circulated by the clerks, and the purpose of the discussion is to highlight the issues that members would like to be included in the report, which we have to agree next week.

We have been sent some follow-up information. From Highlands and Islands Enterprise, we got some information about the costs and potential economic impacts of other projects that it requires and suggests should be included in wider economic development. It has given high priority to the A9 in particular, but it has also considered other issues such as what will happen in the local area post-Dounreay. It is fair to say that we did not get that wider perspective from Scottish Enterprise, particularly in answer to questions from Karen Gillon. We have raised this point before, and we should highlight the need for us to encourage Scottish Enterprise to take a wider view, particularly when we are considering where to maximise the spend on economic development. At the end of the day, that is primarily what the committee is all about.

Are different remits attached to Highlands and Islands Enterprise and Scottish Enterprise?

Yes.

Do we appreciate the differences between the two remits? Perhaps we are asking the same questions of the two different organisations and it is not appropriate for us to do so. I do not know the answer to that.

The answer to the question goes right back to 1965, when the Highlands and Islands Development Board was established. In addition to having a remit for economic development, it was given a social remit for the development of local communities. The board's remit was carried on into its successor organisation, Highlands and Islands Enterprise, which was established under the Enterprise and New Towns (Scotland) Act 1990. In 1975, when the Scottish Development Agency was established, it was given only an economic remit; it had no social remit. That remains the case with Scottish Enterprise. Its remit is entirely economic; it has no social remit.

It does, however, have a remit for regeneration.

Yes.

That, of itself, gives Scottish Enterprise a social as well as an economic remit.

We are getting into the realms of semantics.

Absolutely.

Highlands and Islands Enterprise can legitimately put money into community development projects—the sort of project that leads to capacity building in a community—but that is outwith the scope of Scottish Enterprise's remit. In this case, what we are asking Scottish Enterprise to do, which is to take a wider view on where it could do more or prioritise projects in terms of their economic impact, is a legitimate question. That is entirely within the remit of Scottish Enterprise.

The clerks have done extremely well in encapsulating the major issues. My first point is on the first bullet point under the "Tourism, Culture and Sport" heading:

"Scope for a ring-fenced budget for Scottishscreen within Creative Scotland".

I accept that the question was raised, but the bullet point should be rephrased to include the benefits or disbenefits of doing that. The trouble with hypothecated budgets is that they are seen as a spending limit. Any opportunities that may otherwise have arisen to spend more money, if that is warranted, or use the money for other things if insufficient projects come forward, is lost. We should rephrase the bullet point to take account of that.

I turn to qualitative measurement, which Susan Deacon has raised on a number of occasions. I am still struggling, like members on other committees, to find a way of seeing the impact of the budget across the range of Executive priorities. I am happy to bang on about that again. What contribution does qualitative measurement make to health improvements, for example? I am thinking of the impact that jobs or better skills make. I would like to see the Executive's key priorities under its umbrella strategy being measured in that way.

My final point relates to a bullet point under the "Enterprise and Lifelong Learning" heading:

"Levels of expenditure on regeneration activities, including that in communities outwith national priority areas".

The point is connected to my concern about the roll-out of the metro regions. For me, those two points are linked and should be identified as such in our report.

In relation to sport and culture, I will pick up on what Christine May touched on about the wider benefits of spend across the Executive. I am conscious that, almost since the inception of the Parliament, a search has been under way for the holy grail of measuring spend on cross-cutting issues. In the evidence that the minister and his officials gave, I was struck by the fact that they said that they had been able to capture some of that in relation to the spend on arts and culture. We have not quite caught that point in the key themes. Perhaps we could.

I turn to the bullet points under the "Scottish Enterprise" heading. In the final report, I would like to see a joining up in some way of the third-last and last bullet points about transport. The third-last bullet point mentions the

"Lack of explicit transport priorities within SE"

and the final bullet point is about linkages across the agency. There are, however, other questions about linkages, particularly between Scottish Enterprise and the strategic transport agency. I suggest that we encompass those questions in this section of the report.

Is everyone happy with that?

Members indicated agreement.

Before Murdo Fraser speaks, I assure Shiona Baird that we have quite a lot of time for this open discussion so she will be able to make a further contribution.

I want to add one small point. Although this issue did not come up in last week's questions on the lifelong learning budget, we should flag up in the report that, further to Andrew Cubie's remarks last week, we are aware of the funding situation for Scotland's universities. We perhaps need to put down a marker on the need for Scottish higher education to compete with the universities in England, given the situation on top-up fees. It might be worth while stating in the report that the committee will keep a watching brief on the issue in future years to ensure that no budgetary disadvantage creeps in.

Is that agreed?

Members indicated agreement.

Another cross-cutting issue on which our report should comment is sustainability. I only touched on the issue in my questions to the minister but, in light of the Stern report's emphasis on the economic impact of climate change, can we ask that the draft budget places greater emphasis on the aspects of sustainability that can be highlighted and identified?

Returning to the convener's comment on Scottish Enterprise, I think that there is much more understanding that sustainability involves a three-pronged approach on economic, social and environment issues. Somehow or other, that does not come across in the budget documents. We need to start considering how we can ensure that we include all three elements. However, that might be more for a legacy paper.

My final point—this may or may not have been mentioned at a previous committee meeting—is that I am conscious of the fact that we are always looking forward to the budget for the next year but we never seem to have the opportunity to look back and assess how well the previous budget delivered. We keep on putting money into various portfolios without finding out whether the money is just going into a huge pot without actually delivering. Is there any way in which that can be addressed?

Again, the committee might consider that issue as more appropriate for a legacy paper. Given the tight timescale for the normal budgetary process, it is difficult for us to look back in detail. As Susan Deacon pointed out, we also need to consider how much money was invested and what outputs came out on the other side.

Convener, is that not part of our remit already? The Finance Committee receives reports from its adviser that look back at the previous year's spend as well. I can quite understand that there might be scope to widen or extend that role, but such exercises are already carried out.

The reports show the spend but they do not necessarily show the outputs or the association between the two. Perhaps that needs to be considered further. However, the Parliament has been grappling for six years with that question, to which there is no easy answer.

On presentation, although Stephen Imrie and his team would no doubt do this anyway, I suggest that our report needs separate chapters—one for tourism, culture and sport and one for enterprise and lifelong learning—for the two different portfolios. Also, last week we deliberately split the panels between enterprise and lifelong learning. Obviously, we recognise the compatibility between the two elements of Nicol Stephen's portfolio, but we raised some specific issues on lifelong learning that we would not want to be lost by being mixed in too much with enterprise issues.

I suggest that our report should also highlight two other issues that need to be addressed. First, the Executive needs further to consider part-time student support. That perhaps ties in with Murdo Fraser's point, but the issue affects both the further education and higher education sectors. Secondly, the Executive needs to continue to monitor the international competitiveness of our offer to industry—such as regional selective assistance and so on—to ensure that we do not lose companies. As Jack Perry rightly said, the issue needs to be looked at to ensure that we stay ahead of the game. I am not saying that we are not ahead of the game but, given some recent events, the issue certainly needs to be examined.

Another lifelong learning issue that we flagged up is the role of the Scottish Further and Higher Education Funding Council and whether, when it allocates funding to FE and HE institutions, it incentivises efficiency in future years. The Minister for Enterprise and Lifelong Learning said that he would raise the matter with the funding council and get some further information. I wonder whether the matter could be flagged up in our report. Another issue is whether the funding council uses its funding formulas to help institutions to deal with rurality. The minister could not respond directly on that because it is the responsibility of the funding council, but it is still worth raising.

The point that we made about Careers Scotland should also be included in the report.

Yes, and we should include Christine May's point about the balance in Scottish Enterprise's budget between the centre and the local enterprise companies.

I have a question. Obviously, I was not here for the previous committee meetings, but I see no references in the paper to the formation of creative Scotland, apart from the point about the scope for a ring-fenced budget for Scottish Screen within creative Scotland. A lot of questions are being asked about the setting up of creative Scotland and the bill that will establish it. I wonder whether it would be worth while to flag that up as something that must be examined in the future.

We could include a reference to that. We asked the Minister for Tourism, Culture and Sport whether Scottish Screen's budget will be ring fenced within the budget of the new organisation. The gist of her reply was that, because more money will be available for the new organisation than is available to the two separate organisations—the Scottish Arts Council and Scottish Screen—there should not be a problem. However, it is fair to say that the position should be monitored.

In January, we will have a round-table discussion on creative Scotland with all the key players. We do not have time to hold a full inquiry, but we will have that session and we will want to raise the issues then. It is clear from what Patricia Ferguson said that a lot of the questions are still unanswered.

I raise the matter only because we should be aware of it and monitor it.

As there are no other points, is everyone happy with that?

Members indicated agreement.

The clerks will use the feedback to prepare our draft report, which we then need to finalise next week.