Finance Committee, 11 Feb 2003

Meeting date: Tuesday, February 11, 2003

Official Report 274KB pdf

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Outcome Budgeting

We move to item 3 on the agenda, which is outcome budgeting. Again, we will receive evidence from the Deputy Minister for Finance and Public Services.

I do not have anything in particular to say about outcome budgeting, other than that we understand that in our reports to the committee on the issue we are making progress. We want to make progress in the spirit in which we have been discussing the issue. I hope that our officials and the committee's clerks can work together to ascertain how in practical terms we can move the issue forward.

We think—as I think the committee does too—that there is something to be said for getting more precision into outcome budgeting as a means of getting a much better handle on what difference our resources and spending make to people in communities throughout Scotland. I indicate our support for making further progress on the issue of outcome budgeting.

I would like some clarification. Obviously, the Executive welcomed the initiative from and support of the committee on the issue. However, the Executive's response states:

"Pure outcome budgeting is probably unachievable by large, complex organisations."

Can we assume that that does not apply to the Executive, even though it is a large and complex organisation?

Earlier today, I was reading our response. I would not want to tie myself too firmly to the particular words that you quoted. The spirit in which we want to discuss the issue is that we think that we can make progress on it. The reason for that comment in the response is that although we want to make substantial progress on outcome budgeting, we still need to have regard to inputs and outputs in terms of budgetary control processes. The comment is intended more to signal that although we can move down the road of outcome budgeting, elements of input budgeting will still be required. The comment is not intended to indicate that we cannot make progress on outcome budgeting.

I am just reading the Executive's response and wondering whether the term "outcome budgeting" is helpful, as perhaps we are looking for something that is too radically different. Perhaps we should be talking about a budget process having greater regard to outcomes that are sought and whether they are achieved.

You might be right. I have not given particular thought to the language that was used in the response. The term "outcome budgeting" came about because we were not satisfied with where we were. We wanted to focus much more on the outcomes of the spending that we were approving and not so much on the inputs and outputs. I am relaxed about how we describe the issue. We just have to make progress on taking the issue forward in a practical way and ascertaining how far we can get. We have agreed with the committee for some time that there is a need to focus much more on outcome budgeting and concentrate on what the money buys rather than just the volume of money.

I refer to my earlier comments about the changing roles of Audit Scotland and the Audit Committee, and how the subject committees are picking up on outcome reports from the Auditor General for Scotland. I think that the subject committees sometimes start consideration of such reports more quickly than the Audit Committee does because the reports are the meat of what they seem to be involved in. However, we must return to the fact that we cannot do away with inputs and outputs—the actual moneys voted and spent. We have got to look at that for some kind of control process.

We need to make an advance on the usability of the figures that are available to the Parliament and its committees, because they act on behalf of the public in addressing not just how much money is going in, but what is happening on the ground. We cannot duck the issue. I understand why you cannot apply that to everything, but we need to continue to work together to find out what aspect of that we can apply in practical terms to the government process. As Elaine Thomson said, the issue is aiding the public's understanding of what happens when money is voted and spent and decisions are made, and of whether the policy is operating correctly and delivering. I am happy that we move on with this exercise.

I concur. We have been moving to more precise information, and although some of it is still imprecise, we are moving in the right direction. I know that the committee supports that in relation to our target setting. It provides us with a much better basis for moving the agenda further forward to measure outcomes much more effectively.

As these things are relative, and as we are not going to move in the big-bang way that we did with resource accounting and budgeting, has the Executive given any thought to measuring the efficacy of outcome budgeting by using the new targets that are being set to determine whether there has been a measurable difference between using the new approach and using the traditional approach?

I do not think that we have done an exercise that shows that outcome budgeting—whatever that ultimately is—is by definition more efficient than other forms of budgeting, but we have all gained a strong sense that if we want to know the impact of our spending, we have to look not at the spending but at the impacts. That means that we have to shift the agenda forward.

I return to the point I made earlier that we will begin to see how we can make progress in relation to our targets, but there is an awful lot of work to be done. Nobody should be under any illusions about that. However, the committee and the Executive have a common agenda and are trying to move forward. To the extent that the outcomes of expenditure and its impacts on people's lives—and where it does not impact as we first thought—can be measured, that adds to the overall efficiency of the spend and aids understanding of what works, why it works and where we ought to concentrate spending in the future. We have not absolutely measured efficiency in that sense, but that points us in the direction of where we can improve the efficiency and use of our resources, because we are focusing on the outcomes and not the money itself.

Wonderful as it is to set targets—and they can come back and bite you, as has happened to the Executive on a number of occasions—you do not have a programme that says, "This is how we used to do it. This is how we do it now, and this is why it is so much better." I am not aware that you are doing that formally. Does the Executive have such a programme?

I am not sure that I fully follow your point. If you are referring to the way in which we compose budgets in outcome terms, we do not have such a specific programme. We are working incrementally and organically towards that, as we see change happening. On the other hand, if you are asking whether we are monitoring what we are doing in relation to the activity on the ground as a result of spending, whether it is working and why it is working better than other approaches, and how we can apply those lessons to other bits of the organisation, the answer is yes. We have growing performance and monitoring mechanisms inside the Executive to deal with departments and what they are trying to achieve and how well they are achieving things. We will monitor that much more effectively than we have been doing in the past and bring about change to other parts of the organisation as a consequence of the lessons we learn. However, I am not sure whether that was your point.

I am looking for an evidence-based approach that addresses not just the individual target, but the process. Is there evidence that the process will deliver a change?

There is evidence, in the sense that we as finance ministers see the changes in behaviour in the Executive as a result of requiring people to focus on the outcomes that they are pursuing. If you are asking whether that has been systematically evaluated, it is fair to say not yet. After the recent spending review, we spent some time reviewing that. In fact, Richard Dennis and his team were largely responsible for a lot of the backroom work on that. We spent some time evaluating how well that process performed, how we would change it in the future, and how we could develop it to ensure that it is even more productive. I have seen with my own eyes, and—this is anecdotal—I know from conversations about outcomes and focusing on targets and trying to require people to state the outcomes that they are going to generate from the income, that behaviours have changed, but there is a long way to go on that.

Do you not think that, valuable as the anecdotal evidence is, it would be better if it were more formal?

I am quite happy to look at that. We have received reports inside the Executive on how well the process has gone in the past three years, and we have got ways of beginning to measure that. I think I am correct in saying that we have never brought anybody in externally to help evaluate that, but I am more than happy to think about that.

That has exhausted the discussion. Our last issue is to consider how we take the issue forward. Would the committee be happy to pass the work on to the incoming Finance Committee in the new session for further consideration?

Members indicated agreement.

I thank the minister and the officials.

Our next item is the Scottish Parliamentary Corporate Body. It is down on the agenda as not happening before 3.15, so we will have a 10-minute break. I am sure that committee members will be pleased to hear that.

Meeting suspended.

On resuming—