Finance Committee, 10 Nov 2003

Meeting date: Monday, November 10, 2003

Official Report 298KB pdf

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Subordinate Legislation

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Budget (Scotland) Act 2003 Amendment (No 2) Order 2003 (SSI 2003) (draft)

We now move to agenda item 3, which is consideration of a draft Scottish statutory instrument, which seeks to amend the Budget (Scotland) Act 2003. As well as the draft order, the committee has before it the budget document setting out the background to the proposed revision.

The Subordinate Legislation Committee considered the order on 4 November and had nothing to report. The order is subject to the affirmative procedure and therefore cannot come into force until it is approved by the Parliament. The Finance Committee will therefore debate the motion in the name of the minister, which asks the committee to recommend approval of the order. If the committee does so, the Parliamentary Bureau will seek to propose a motion recommending parliamentary approval.

I will ask the Deputy Minister for Finance and Public Services to move motion S2M-553. The motion will then be debated. Under standing orders, the debate can last no longer than 90 minutes, although I am hopeful that it will last significantly less time than that. At the end of the debate, I will put the question on the motion to the committee. Before we move on to the formal debate, I will allow members to ask technical questions; I know that our adviser has several. I invite the minister to speak to and move the motion in the name of Andy Kerr.

The autumn budget revision is a regular piece of Government business. Members will recall discussing the summer budget revision with Andy Kerr in June, and either he or I will be back in February with the spring budget revision. We look forward to the same pattern next year.

Budget revisions are necessary because the detail of our spending plans inevitably changes over time after the budget act has been approved. We therefore have to come to Parliament regularly to seek authorisation for those in-year changes. The autumn budget revision, which is usually the most significant because of the size of the proposed changes, reflects three main types of change to our spending plans.

First, there is the take-up of end-year flexibility. Andy Kerr discussed EYF allocations with the committee on 30 September and I do not intend to cover the same ground. Secondly, there is the take-up of allocations to portfolios from the Executive's central funds; an example of that is the additional allocations for the partnership agreement that were announced on 11 September. Thirdly, there is the transfer of resources between portfolios and between the Executive and Whitehall.

In addition, we are using this year's autumn budget revision to reflect changes to the machinery of government that were announced after the election, with the transfer of transport and European funding to what was the Enterprise and Lifelong Learning Department from the Development Department and the Finance and Central Services Department. Parliament authorises resources on a departmental basis, so we have to restate those departments' budgets in the revision. In order that those changes to the machinery of government should not obscure more substantive changes, the supporting document has been prepared as if those changes had taken place earlier in the year. We have done that in an attempt to increase the transparency of the documents and we would be willing to change that approach in the future if the committee would prefer.

The committee will notice that we have continued to amend the format of the supporting document, building in part on the committee's comments on the summer budget revision. Veterans of committees in the previous session of Parliament will be aware that this year's supporting document is approximately one third of the length of last year's document, for which I am sure we are all grateful. At the same time, we hope that we have included more useful information for the committee in considering the revision. I will be more than happy to hear the committee's thoughts on that.

I am happy to answer any questions or points about individual numbers in the document. I might only be able to offer an early explanation, but we can come back to the committee in writing on any particular points.

I move,

That the Finance Committee recommends that the draft Budget (Scotland) Act 2003 Amendment (No.2) Order 2003 be approved.

One of the measures that I have been keen to use on budget documents is how much the document weighs. This document is much more satisfactory because it is much lighter than last year's version. It also contains more useful information than it did previously. I congratulate all those who were involved in the document's production.

Credit for that must go to the officials rather than to any minister.

It would be helpful to get a clear analysis of how the additional allocations that were funded through the partnership advance the budget priorities, including closing the opportunity gap. As an adjunct to the information that we have been given, it would be useful to see how the allocation of £334 million that is distributed among various departments advances the overall budget priorities as stated in the "Building a Better Scotland" document. I know that that is not something that you can tell us just now, but perhaps you could return to the committee when you have more information.

That is a fair point. We will come back to you on that.

I have several technical points to raise with the two Richards, but first I would like to say that the introductory section is much better than it was. Before, the reader was taken straight into the detail, but now we are given an overview of the changes. That is helpful.

Page 10 talks about an estimating change in relation to the common agricultural policy. Does that reflect an internal change, a European Union change, a Treasury change or something else? What is meant by it?

I will let Richard Dennis answer that technical question, if that is all right with you.

It is an internal estimating change. As you know, in relation to the CAP and annually managed expenditure, we tell the Treasury what the forecast is and it changes our numbers to reflect our latest forecast. That is reflected in our budget documents as well.

Page 17 talks about the Scottish Natural Heritage pension liabilities. Can you explain the transfer to us?

The SNH pension is joining the principal civil service pension scheme. The SNH scheme was being scored as a non-funded pension scheme while it was an independent-by-analogy scheme. Because the Treasury knew that it would have to meet those contributions eventually, it has given us a lump sum that we will pay to the principal civil service pension scheme to fund the liabilities that result from the transfer. In effect, the money is going around in a circle.

I wanted to ask about the £50 million for decommissioning aid. Is that £40 million for decommissioning and £10 million for transitional funding?

Yes.

Is that sum cash limited or might more funds be available if required?

That budget figure is cash limited.

Will that position change?

It will change if the Minister for Environment and Rural Development enters into the process and asks for more resources. All ministers are able to do that in relation to their portfolios.

Does that money include the sum that Mr Finnie talked about back in February that might be available for the processing sector if it came up with imaginative schemes that it wanted money to pay for?

I would have to check what Mr Finnie said. I believe he said that in response to a question that you asked in the chamber, and that he was referring to an existing budget for the processing sector that was announced by a previous deputy minister. The best way of giving you a clear answer would be for me to write to the committee at a later date.

I have some more questions in the interests of clarity and transparency. Page 37 contains the phrase:

"Identification of capital provision within resource budget".

What does that mean?

We are simply increasing the capital budget by the amount by which the resource budget is going down. That money was wrongly classified in the original budget documents.

On page 41, there are two items that appear to be too large to be classed simply as "Other expenditure" and "Purchases". Do you know what they are? Are they catch-all categories or are specific items allocated to them?

I have detailed explanations of every change and I would have to look that one up. Would you rather that I wrote to you with the explanation?

Yes.

On page 48, we read about a

"reclassification of resource and capital".

Is that the same as the line that we just discussed, which reads:

"Identification of capital provision within resource budget"?

Yes.

On page 49, is there any need for concern about the drop in the money that is available for access funds, given their centrality to policy issues?

No. I would guess that that is simply an adjustment to reflect demand so far, but I will confirm that in writing, too.

Okay.

On page 50, what is meant by "Indirect Capital"?

That is the old-fashioned term for a capital grant.

I take the opportunity to be given a lesson on such matters every year.

We have a host of new committee members. Will you explain to them how the transfer of national insurance contributions operates? They are a bit worried that they have lost £0.5 billion from the health budget. How does the transfer work and how is the calculation done?

I will take another tack by saying that the transfer simply does not matter for committee members.

That answer was given last year, too.

My predecessor would have given that answer. Basically, a share of national insurance contributions is assumed to form part of the funding of the health service, so a share comes to Scotland. The Treasury makes that notable adjustment. Rather than give us direct budget cash, we are seen notionally to receive a share of national insurance contributions. Regardless of the process, we receive the same amount of money.

So we are talking about a presentational matter.

Yes. There is a detailed way of working out the share that we receive, but it has no practical import.

That is the key issue.

Finally, page 65 mentions "Reducing the Underspend". What does that mean? A small amount of money is involved.

Around November last year, ministers considered the Executive's prospective total underspend and the amount of EYF that was likely to be generated and they realised that there was room to commit additional in-year spending. Members might remember the two main mechanisms that Mr Kerr explained in detail at the meeting on 30 September. Portfolio ministers were asked whether spending was scheduled for this year that could be brought forward or whether there was additional one-off spending that would deliver good value for money last year. Where spending was brought forward or additional spending was committed, it was clear that there was a need to reimburse portfolios this year for such spending. That is why some money came back into the budgets.

On page 43, which gives details of the Enterprise, Transport and Lifelong Learning Department budget, a relatively small amount appears under European structural funds. Has the underspend that we heard about in previous meetings had an impact on the revised European structural funds, or is it not connected? On the underspend, the minister told us that he could not say what the Executive's policy was in respect of areas of Scotland that had not managed European structural funds well. I wonder what the Executive's response is.

The amount is not a response to that specific point. For Scotland as a whole, the European structural funds budget is ring fenced so that any underspend in one year becomes available in the next year. The money rolls on until it is eventually spent. However, that does not particularly answer what you have asked. We must chase up what is happening.

My experience in the Highlands and Islands is that the money rolls on and the aim is to spend it in a six-year programme period. However, we will chase up what is happening.

My question relates to the European Commission's mid-term review of the six-year period, which is this year.

We will find out about the matter.

Listening to the minister talk us through the components that drive change in the budget was interesting, but there seems to be one missing component—transfers as a result of portfolio reorganisation, efficiency, policy successes and so on. Is there a mechanism in train to make heroes of those who successfully manage portfolios, squeeze out costs and release funds for reallocation?

I suspect that we would take forward that matter on an individual departmental basis at the moment. However, it is an interesting point. I will reflect on it and discuss it with colleagues. I believe strongly in celebrating our success in the budget and that we should try to encourage and champion what we do well. Nevertheless, at the moment the focus is internal, on individual portfolio departments, rather than across the Executive. We will return to that point.

I would like to develop that a level further. If we are to conduct external scrutiny, if there is to be comprehensive benchmarking and if you are going to ask people to justify their budgets, having something like that as a carrot or motivator—a mechanism whereby recognition and credit could be given, which could be in someone's career interest—would be entirely beneficial, healthy and helpful.

After being serious all day, I compliment Richard Dennis on the cavalier manner with which he dealt with the matter of pensions for civil servants. Is there any chance of getting him transferred to look after senior citizens' pensions credits? That would be greatly appreciated.

I am sorry, but there is no chance of that. Richard Dennis is too important to us.

Well, one has to keep trying.

It was a fair try.

Remember the Bosman ruling.

Yes. Wait until the end of the season.

We now have to go through the formal process.

Motion agreed to.

That the Finance Committee recommends that the draft Budget (Scotland) Act 2003 Amendment (No.2) Order 2003 be approved.

We are required to report to the Parliament. As such reports are normally very brief—two lines—I propose that we seek to agree the text of our report by e-mail correspondence. I hope that members are content with that.

Ever since the Finance Committee agreed to come to Motherwell, Motherwell Football Club has been on a blue streak. John Swinburne will perhaps be particularly aware of that.

We have not lost a goal and have taken 12 points out of 12.

The team has been doing superbly well. I put that down entirely to the fact that the Finance Committee decided to come here.

If only the Parliament could meet here and save £400 million, we would win the league.

We should work out who needs our support and go there accordingly.

I thank all members for coming out here today. I also thank the officers who have supported us—the clerks, the official report, and so on—and the portering staff who have come. I thank Motherwell civic centre for accommodating us and North Lanarkshire Council for making us welcome. I formally thank all the participants of this morning's workshops. I will write to everyone who took part, thanking them for their contribution.

Today has been a successful example of the Parliament getting out and engaging with the people of Scotland. We have also had a successful afternoon with Mr Scott, who goes away unscathed from all the questions that we have been firing at him. I look forward to seeing the members of the Finance Committee again at 10 o'clock tomorrow morning.

Meeting closed at 15:53.