Finance Committee,

Meeting date: Tuesday, May 8, 2001

Official Report 155KB pdf

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Budget Process 2002-03

Item 4 is consideration of the budget process. I invite members who are reporters to other subject committees that are considering the budget to make interim comments. I am the reporter to the Justice 1 and 2 Committees, which have so far held only one meeting, so I have nothing to report at this stage. If other members want to make any comments, they should use this opportunity to do so.

I have been to one meeting of the Enterprise and Lifelong Learning Committee. It will have another meeting this afternoon, at which there will be detailed discussion. That committee will hold three meetings. The first, which I attended, was just to outline the process.

Item 5 on the agenda is also on the budget process. We should consider the way in which the committee wants to develop the research that was carried out by Professor Arthur Midwinter, whose report was published last week. I apologise for not being at the launch—I was confined at home with a throat infection—but I understand that it went well. Media coverage was certainly more than we get for many of the reports that the committee publishes, so that is a positive aspect.

I have a comment to make about the research that we might conduct. We must consider that research in the context of how we work with the Executive. The Executive will have received a copy of the report, and we should certainly be looking for a response from Angus MacKay and his officials. No doubt we will get that in due course, but we should consider whether there are any specific aspects that we want to flag up. With the resources that it has at its disposal, the Executive might be better placed to proceed with some of the research than the committee would be.

Elaine Thomson flagged up the point that Arthur Midwinter made about encouraging the Parliament's committees to move away from focusing too much on information on inputs—such as the amounts that are spent and real-terms figures—and instead to concentrate on accessing output information from the Executive. He said that that would enable a better picture to emerge of the expected improvements to public services from additional resources. That is something that I would certainly want to highlight.

We should consider two aspects: first, what research we should be encouraging the Executive to do; and secondly, what we want to do ourselves. That could be bracketed with agenda item 6, on external research, which we shall be considering next. Murray McVicar of the Scottish Parliament information centre is here and can offer comments at any time.

The research was a worth-while exercise. The report is substantial and we have a duty to translate the conclusions into deliverable outputs. Otherwise, the research will just sit on a shelf, and we should avoid that.

There are three areas in which we have a specific input to make to the continuing process. The first of those, as has just been identified, is the point that Elaine Thomson raised. Rather than conducting research that would be difficult for the Finance Committee, I suggest that we include in our guidance to subject committees on the treatment of the budget process the suggestion that they identify the key outputs in their own subject areas and how those outputs can best be measured through time. I think that conducting specific research would be quite difficult, but we can come back to that point.

The second thing that I think is important is the detailed research in the first half of the paper on cost inflation in the public sector. Again, we can feed that directly into the subject committees, so that they take cognisance of what is happening in their areas. For example, the two conclusions that were drawn were that, across the piece and across the past 30 years, cost inflation in the public sector has tended to be higher than general inflation because of the heavy preponderance of labour costs, which by definition run faster than gross domestic product inflation. Committees can keep an eye on that in terms of outputs. If labour costs are running faster than general inflation, one must spend more to stand still and to employ the same number of people. It is important to feed that in so that we can keep an eye on what is happening with pay negotiations in areas such as health.

My final point is about the general issue of the scope for change. I am not sure whether we reached a specific conclusion about how much scope there is for change. The most helpful conclusion that I was able to draw was that we are able to make an impact on new money—additions from the Treasury—as it comes in from the budget, rather than moving money about in the existing budget. That is something else that we should give guidance to the subject committees about, to let them know how they can contribute to the process.

Having made those three points, a summary note is called for from SPICe or from the clerks, in consultation with members, which we can give out to the other committees. It could contain the outcomes of the paper and our guidance to committees as a result of it. I would like that summary note to cover the three areas that I have mentioned.

It is a worth-while suggestion that we should give guidance to subject committees.

I agree with Andrew Wilson that there needs to be a user-friendly guide for committees on how to consider the budget process. However, I think that we ought to be fast-tracking something else in parallel with that; we should get from the Executive even a preliminary view of how it views Professor Midwinter's work.

We will do that.

We need to fast-track it. I am talking about a preliminary view, rather than a detailed view. That will help us in looking at where we need to go and what we are going to do with the work that has already been done for us. There might be areas in which the Executive needs clarification, and I do not doubt that Professor Midwinter and you, convener, will be able to provide that. However, having had that work done, it is important that we hear an initial response so that, by the time that we get into the next budget round, some action has been taken or agreed on. We talked to the Minister for Finance and Local Government about the need to review our working arrangements, and what I suggest would be part of that.

As I said, the results of the research have gone officially to the Executive with a compliments slip, but we should follow that up by saying that we expect a response as soon as possible. David Davidson mentioned fast-tracking. We should be realistic about that, but we certainly want to have something by our last meeting before the summer recess.

It might be helpful to have joint discussions with the Local Government Committee about ring-fencing. As we all know, local authorities get very excited in opposition to ring-fencing, but central Government of any sort likes to ensure that its priorities are being delivered, which often involves ring-fencing. It would be helpful to pursue that.

We should pursue the issues of outputs and outcomes, especially in relation to the use of new money, so that we can get better information about the improvements in services that could occur and what they might cost. The Parliament can then make an informed choice, or it can comment to the Executive—which would, I presume, try to make the first choice—on whether, if more money is available, we should mend the holes in the road or improve nursery schools. However, we will need better figures on the cost of both options in order to do that.

We could also explore better ways of spending existing money. To oversimplify the point, if we could get all the young people playing football incessantly, that would save on health bills, so perhaps a lot of the health money should go towards encouraging people to play football. That is an exaggerated example, but the principle is there. We should consider whether there are better ways of spending existing money to achieve the outcomes that we want.

I agree with most of the points that have been made, but I have two brief comments. The report deals with outputs, and I wonder whether we might formally ask the Audit Committee whether it has any helpful comments.

My second comment is on efficiency savings and relates to what Donald Gorrie said. The issue of efficiency savings is still around but it is not specified anywhere in the budgets. There are two ways of shifting money: one is to create efficiency savings and the other is to move the new money around. That is something that we should bear in mind.

We are left with the problem of how the various UK spending rounds link to us. The current issue is budget consequentials which, I presume, we will hear about in the not-too-distant future. They are a constant problem. It is important to get all those things right—in the right order and at the right time—and for the subject committees to say what they want the next piece of money to be spent on, should it become available.

Are you suggesting that the subject committees should look ahead, rather than simply responding to budget proposals? I think that that is a good idea, but we have to bear in mind the pressures on the committees.

What we have said to the committees is that, if they want money to be spent on a particular area, they must indicate where it should come from. There should perhaps be a subtext to the effect that, if they cannot find where money might come from, committees can say what they want money to be spent on if there were budget consequentials.

At the moment, none of the subject committees has any input to the process. This committee has no formal input to budget consequentials, which are sizable chunks of money. We should try to find a way of making an input. The best way of doing that would be to say, for example, that the roads programme should be speeded up if additional money becomes available—if that was what we felt was appropriate.

That is the sort of thing that should emerge from the committee's current proposals. If, having examined our section of the budget, we say that we are not suggesting cutting anything, but that we think that such-and-such a project should be supported, I would expect recognition of that to emerge from the process—if not this year, then in future.

I want to follow up on Richard Simpson's point about efficiency savings. As part of our agreement with the minister—we will work on a new one—we should require that, if the phrase "efficiency savings" is used, it must be spelt out in real terms where savings will be made and what the implications will be. That has, since time immemorial, been a political issue, but we need to make some progress. If a committee says that it feels that efficiency savings could be made and the money spent on new football pitches, for example, it should be required to give details of where those efficiency savings would be made.

We have to put that in the context of what Arthur Midwinter and Jim Stephen said—that the record of efficiency savings was minimal.

Donald Gorrie made two proposals. One was that we should meet the Local Government Committee to consider ring-fencing. I cannot remember, off the top of my head, what the second proposal was.

I felt that we should examine the best ways of using the new moneys and outputs, and better ways of spending existing money. As I understand it, the Finance Committee could be a vehicle for the Parliament to help it to determine its views on the best use of new money, which would then be put to the Government. The Transport and the Environment Committee often says, "The roads are in a hellish state—we need to spend millions," and the Education, Culture and Sport Committee often says, "We need more nursery schools." The Parliament, I presume, must have some mechanism for deciding priorities. Would that be the province of this committee? Would we simply feed in options for the Parliament to vote on? At the moment, the Executive decides all those things while we merely sit back and accept its decisions. I feel that we should have some influence over the proceedings.

If we received competing proposals from subject committees, we would be required in our report to say which proposals carried the greater weight. That would be a pleasant position to be in, because we have not had anything of that nature coming to us so far.

There is no formal mechanism for committees meeting jointly unless they are undertaking a joint report. It might be interesting to ask the Local Government Committee to respond on the issue of ring-fencing. I would be surprised if, in that committee's inquiry into local government finance, ring-fencing was not at least touched on. We could write to the committee and draw its attention to our report. It might be premature to have a joint meeting at this stage, but it would be interesting to hear the Local Government Committee's opinions.

Okay.

If we are to consider ring-fencing and ask one committee for its views, we should perhaps also consider other committees. Richard Simpson will be able to advise us on this, but the Health and Community Care Committee will have opinions on ring-fencing in health because it seems to be causing difficulties in some trusts. We do not want to have a full-scale inquiry, but other committees—not only the Local Government Committee—might have an interest in the matter.

I do not think that we want to involve the Health and Community Care Committee at the moment. It is considering a totally new regime of performance management which, we hope, will sort out some of the current problems with what central Government wants as opposed to what individual health boards want. There will be a new mechanism for determining how money will be spent in relation to national priorities, which will be a different ball game. A new contractual system might be of considerable relevance to other committees, such as the Local Government Committee.

I make a plea that we do not fall into the academic trap of allowing research to produce ideas for other research. We should try to produce outcomes from what was a substantial bit of research that had a substantial cost to the Parliament's budget.

I suggest that we produce a short note on our conclusions on what the outcome of the research really means. Four or five specific points have been raised in the discussion so far. We must translate that into a way in which to make a specific difference in our guidance to other committees. We should not use the research to produce ideas for new research. At times, we run the risk of considering things that would perhaps be better considered by other committees. We should focus on the overall budget and movements within it.

I suggest that we ask the clerks, in consultation with the Scottish Parliament information centre, to produce a report that includes some of our main conclusions. We could fire that out with a note from you, convener.

We have already said that we will produce a summary note of the committee's conclusions on the research. We could attach to that our view of what should happen, and that could go to the subject committees. That would be helpful for them.

Members indicated agreement.

Because of the time, and because—as reporter on behalf of the committee—I must attend the joint meeting of the Justice 1 Committee and the Justice 2 Committee, I will pass the chair to the deputy convener for the last item on this morning's agenda.