Budget Process 2004-05
The third item on the agenda is further consideration of the budget process 2004-05 and specifically stage 2 reports from the subject committees.
I invite Arthur Midwinter to take members through his paper, which analyses the subject committees' reports.
Professor Arthur Midwinter (Adviser):
I formally thank the committees for the expeditious way in which they delivered the reports despite the pressure on their time. I would also like to thank our clerks for their work in Motherwell yesterday, when we finished this paper after the committee meeting. I am sorry that the committee has to come to this document cold, as it were, but that was unavoidable.
There were three strands to my approach to this paper. If any of the issues covered in the reports could be regarded as purely functional—that is, if they are matters that the subject committee should pursue with the appropriate minister and department—I have not commented on them, as I did not think that they were consistent with this committee's role. Understandably, given the limited scope for change in the budget, a few reports raise issues relating to the redistribution of money within portfolios, but I have not summarised them in the way that I did in relation to additional spending proposals last year.
The other strands to my approach to the paper concern two broad themes that are directly relevant to the committee's work. In part, that reflects the lack of focus on budget choices due to the limited scope for change. The first theme relates to the fact that a number of committees have made recommendations regarding the structure of the budget, the information that is in the documentation and even provision for inflation. I have highlighted those recommendations because I believe that they are matters for the Finance Committee in its co-ordinating role, as we do not want to have an inconsistent set of information across the departments.
The third theme relates to a number of issues regarding what we can only call recurring problems in the budget process, some of which are said to have been raised in the first report on the budget process in the first year of the Parliament, such as priorities, targets and cross-cutting themes.
A general point is that, perhaps because of the truncated process this year, committees clearly felt that they were under pressure. Only two comprehensively responded to the issues in the guidance that we gave them, some said that, under pressure of time, they would consider one or two issues in detail and others did not respond in relation to some of the issues. That makes it difficult to have an unbiased, overall view of the process.
I welcome the positive comments from the Equal Opportunities Committee, which has, in past years, not been particularly happy with the Executive's performance in relation to information on equal opportunities in the budget documents. The committee approved of the new equalities section and the amounts of money that are highlighted in it. That section provides a model for the other two cross-cutting priorities.
I am worried that there is still a tendency for committees to ask for information that is available in other documents to be put into the budget document. In part, that is to do with the fact that committees have changed their advisers and new people have come in who are not fully aware of the system, but it is important to realise that the budget document is not a place where policy is made but a place where the cost of policy is detailed.
A number of the committees wanted changes in the format of the information that comes to them. The justice committees would like what they call a programme budget, which details not only the spending of the Justice Department but any spending that is in another portfolio that relates to crime. Similarly, the Local Government and Transport Committee wants to have an integrated local government budget that will detail not only the elements that are in the relevant minister's portfolio—the broad revenue support grant, the aggregate external finance figures and the capital allocations—but all the other spending by the functional departments that relates to initiatives that are delivered by local government, such as money relating to education-specific initiatives. I think that those are sensible recommendations from a policy perspective, but they are problematic in terms of the mechanisms for ministers being accountable to the Parliament.
As a contrast, the Education Committee took almost the opposite view. It said that it cannot find where the money is being spent on education because it is included in a vague way in the local government budget. Another recommendation was made by the Enterprise and Culture Committee, which wanted not only its committee budget figures but also the
"cross-cutting budget figures for spend aimed at economic growth",
which we discussed yesterday. The committee concluded that
"accounting practices and reporting mechanisms need to change to more accurately reflect it."
The minister replied that that was not possible at the moment.
Finally, the Environment and Rural Development Committee said that it was looking for the spending not only on its own programmes but on all other programmes that seek to promote rural development. Perhaps we need to have a corporate discussion with the other conveners about that.
I suggest that all those recommendations, which are ad hoc recommendations about specific budgets, ought to come to the Finance Committee for an overall look. Perhaps they should also be discussed with ministers when we look at how we can refine the process.
Another related issue is the Local Government and Transport Committee's desire for a specific inflation assumption to be built into the documentation. The committee said that it was worried about "wrongly estimated" inflation. However, inflation is always an estimate and it is always wrong. Wherever we go, there is a problem in that respect. That committee was concerned that "wrongly estimated" inflation might lead to recruitment problems or a reduction in services to fund pay increases. My view on the subject, which is stated in paragraph 16 of my paper, is that, given the committee's responsibilities for sound finance, that is not a line that the committee should sign up to. As the Local Government and Transport Committee's paper notes, there is a danger that these things can become self-fulfilling. My memory of days gone by is that the negotiations began when the inflation figure was stated. The inflation figure was the lowest point that any union would take when settling with the Executive, COSLA and so forth.
Although I understand the Local Government and Transport Committee's desire to have an inflation assumption built into its budget, the Finance Committee should not sign up to anything that suggests that, if inflation rises above a figure, we should continue to buy the same volume of local services.
Paragraph 18 notes that the Local Government and Transport Committee's third recommendation is for a
"consolidated statement of support through all funding mechanisms".
We discussed something like that with the minister yesterday when we talked about getting a table that includes all the capital expenditure sources. We talked about a table that has not only the sources that are in the table at the moment but the capital grants, public-private partnership capital elements and so on. The proposal has merit not only for the Local Government and Transport Committee but for every committee.
I move on to paragraph 19, under which I address recurring issues. A number of committees asked for a consistent time series of spending data, which we have requested. The Education Committee in particular said that it found it difficult to trace trends in education spending because of the way in which the information is presented.
The Education Committee also said that it found it even more difficult to relate longer-term trends to outcomes, which is an issue that we are going to discuss further with ministers. I think that there is an agreement in principle, but we need to get to the detail of what ministers can and cannot provide. As an aside, Wendy Alexander mentioned the "Government Expenditure and Revenue in Scotland" report yesterday. My recollection of the GERS dispute is that it was almost all about the tax side and not about the spend side.
Indeed.
The debate was nearly all about attributing tax assumptions rather than spending assumptions. As the Treasury has recorded the spending levels for years, the problem is not insurmountable. It might be that the more detail we ask for, the more costly it becomes to generate it. If we were to ask for level 1 detail, that would be fine, whereas level 2 would be a maybe and level 3 might become problematic. That is that.
I move on to address recurring problems. In the guidance, we spoke about the problems of setting priorities, objectives and targets and about cross-cutting issues. Despite the progress that there has been in the past, a number of committees regard all of those as problematic. We acknowledged that issue with the Deputy Minister for Finance yesterday.
This is my third budget round. I feel that we are now getting to a stage where problems are becoming repetitive and committees are getting frustrated. Committees are at best dissatisfied and at worst almost disillusioned about their inability to get information in a form that would be useful to them. That is partly to do with the model and ministers need to rethink that.
In the past, we have said that there are too many priorities for them to be meaningful. When we went through the subject yesterday, it became clear that nearly every single department has something that it can claim is a priority. The position has been further confused by the recent statement that economic growth is now the top priority. The priority tends to vary according to which minister is before which committee. We need to rationalise that.
Committees are unlikely to get a minister in front of them who says that his or her portfolio is low priority.
Yes. We need to look at the question of priorities and also at what we can expect if something is called a priority.
Under paragraph 22, it is noted that the justice committees make a clear statement about the meaning of priorities. If a committee is getting less than the average increase, how can its portfolio area be a priority? If ministers want to say that there is another way to determine what a priority is and how it should be reflected, they should be clear about that. Ministers should do that rather than say that the committees are being too simple about the issue and that they also have to look at cross-cutting spending. At the same time that ministers say that, they admit that they cannot monitor cross-cutting expenditure. This is a big problem and we need to look at it in the review of the process.
The Education Committee's report made clear recommendations about the comparisons between the equalities section and the closing the opportunity gap and sustainable development sections. It said that the last two are "too vague", with no "reference to spending". That committee also said that that comes across as a "statement of intent", which is not something that should be found in a budget document.
The comment that I find most interesting of all, given the stress on health inequality that is at the centre of the Executive's policy, is the Health Committee's statement that
"the sums of money were relatively small at £49m or 0.6% of the health budget".
I move to paragraph 24, which takes us on to the discussion that we had yesterday on the continuing concern about identifying the spending for economic growth and economic development. Perhaps we are going as far as we can with that subject until we get into our own cross-cutting review. However, the Environment and Rural Development Committee noted:
"many of the recommendations made in the previous paragraphs have been made in every previous report on the budget."
Frustration is growing.
I will move on quickly to address objectives and targets under which similar arguments are made. Because of time, I will skip quickly through the comments rather than look at them in detail. The same theme emerges: committees are unhappy about the quality of targets and about whether they
"adhere to the SMART principles".
Under paragraph 28, it is noted that the Communities Committee asked for outturn figures to be included. If I understood the Deputy Minister for Finance's letter, that is probably what is going to happen as part of the proposals for reforming the budget process. If that is the case, it would certainly take us forward. On the basis of those kinds of recurring issues, it is pretty clear that the committees are approaching disillusionment with the process.
I will quickly address the block allocations. The document that I held up yesterday was provided to the Local Government Committee last year. The main concern is about two large blocks of money, one of which, according to the Health Committee report, accounts for 25 per cent of the entire Scottish budget. It is not possible to see the policy and financial assumptions that underlie changes as the money is passed to the health authorities and local government as a block grant. However, I found the document helpful and it would be useful if the clerks could check with their colleagues to see whether anything similar was produced this year on local government and on health. It was agreed with us that such documents would be produced, but I cannot see anything in the existing documents that suggests that such back-up information has been provided.
To summarise, the reports raise a series of concerns about budget structure and documentation, which are properly the preserve of the Finance Committee. I suggest that consideration of those concerns should be included in the Finance Committee's remit and considered as part of its co-ordinating role. I suggest that the committee note the significant problems with transparency that arise in relation to priorities, targets and block allocations. Progress has been made over the past three or four years, but we must take a serious look at the issue, and at how to proceed, with the Executive.
I thank Arthur Midwinter for synthesising the information, which must have involved an immense amount of work. He has given us a comprehensive summary. We are presented with a significant challenge and we need to move on several steps from our current position; we have made some progress on transparency and the quality of documentation, but committees are asking for significantly more.
I thank Arthur Midwinter. I ploughed through all the reports and thought what a nightmare it would be to try to make headway with them as he has done.
Most members of the committee agree that the real contribution that the committee can make in the second session of Parliament is to rationalise and restructure the budget process. If we are remembered for nothing else, the achievement that will stand the test of time is our being a financial issues advisory group mark 2, with four years' experience, and getting things right.
A clear agenda comes from Arthur Midwinter's paper and there are three things that we will definitely want to take on. To raise the temperature, I will suggest a process through which we might do those things. As we all know, parliamentary committees work best when they get cross-party agreement and I believe that there can be such agreement on this agenda. There are even ministers who would be happy for us to pursue the agenda; they find it difficult to pursue it internally, because things have always been done in certain ways. We got a flavour of that yesterday from Tavish Scott. I will suggest the first three areas and then offer three further, more difficult areas; we need to decide how much to bite off. I will then suggest how we should progress, perhaps with external consultation or conferences, in order to move the issues up the agenda.
First, as we have established, we absolutely need time-series data. Until we have that, we cannot be the stewards of the process and have integrity. What have we done in the past 10 years? There is no point in recutting everything that is spent on crime when we cannot tell how much the Justice Department spent five years ago and how much it will spend in two years' time. We must rise above other committees' frustration. We must have time-series data to rationalise the budget process and return the accountability that people want.
The second issue is capital spend—how much do we spend on current consumption rather than on investment for the future? The third issue is performance measurement—that is the issue that the convener always raises and it was touched on in Tavish Scott's letters. We should restructure the budget process so that phase 1 is concerned with whether we have met targets.
The three issues that I have mentioned are unarguable and the conveners of all the committees and the old financial issues advisory group would agree that they are essential. They are different from our inquiry about what counts as growth—that is a side issue. Three further issues come out of Arthur Midwinter's report, but I will take counsel from other members about whether the areas that I have discussed are sufficient for the committee to have consensus around. If they are, we can make them the monument to our achievement this year through a process that enshrines them for ever after.
The other three issues are more problematic. After we have addressed time-series data, capital spend and performance measurement, should we also take on the issue of the number of targets, which is more directly political? It is up to the Executive to decide how many targets it wants to set, but we should indicate what we think are the shortcomings of having too many targets.
The fifth item is the block allocations that are made. A quarter of the Executive's spend now goes to health boards, where there is no transparency whatever. The Education Committee raises the same issue in its report, in relation to schools. Do we want to touch on the question whether it is right that we should never have an idea of what the £3.8 billion that is allocated as grant-aided expenditure for schools and the 25 per cent of the budget that is allocated to health are spent on?
The final issue is the risk that dishonesty is creeping into the budget process because of the verbiage concerning sustainability and closing the gap. As a result, all discussion of the health budget is devoted to less than 1 per cent of that budget—even though we think that much more should be spent on preventive rather than curative care.
Our monument should be how we rationalise the budget process. We should deal with issues relating to time-series data and capital spend. We need a new process that includes a report back on performance every year. Optionally, we could also examine targets. We could say that in the long term it is not credible for us to have no idea how health boards spend a quarter of the budget and how local authorities spend their allocations. Finally, we could observe that there is much verbiage on less than 1 per cent of the health budget and that that is dishonest to people who view the document first and foremost as a budget document.
Those points have been made, on and off, for a couple of years. This is not a matter for the committee to consider now, but would it be possible for us to hold a brief conference in the new year involving the conveners of the Parliament's subject committees and the original members of FIAG? FIAG did a good job five years ago, but times have moved on and we have learned a lot. We could ask the members of the group how the Executive could present its spending plans in a way that would meet the criteria of accountability and transparency that people wanted. Could we organise a seminar that allowed us to focus on that issue?
At the moment, we have an opportunity to achieve unanimity in the Parliament and the wider community on such matters. If we let that opportunity slip in the first year of the session, it will be hard for us to recover it. Yesterday, we received a strong sense that Tavish Scott is under pressure from officials who say, "We have not done it this way before. This is a lot of work." We have an obligation to put the issue on the agenda and to say that the founding principles of FIAG—transparency, accountability and discussion of the 50 per cent of public spending in Scotland that is under the Parliament's control—should be revisited. A half-day seminar with the right participants might help to give the issue the sort of push that is needed.
I will make a couple of comments to supplement what Wendy Alexander has said. She has put her finger on a number of the matters that we need to consider. I will add two issues to those that she mentioned and highlight a problem associated with one of them.
As the Finance Committee, we should try to ensure that the budget for the Executive and other organisations contains a mechanism for driving efficiencies. There should be a framework of management that encourages more efficient delivery. I am talking not just about performance measurement, but about creating a management or administrative culture that encourages the generation of efficiencies—perhaps including rewards for efficiencies—so that people who do things more efficiently do not necessarily lose resources as a consequence, which is often the way in the public sector.
Another issue is funding streams. Organisations outside the Executive continually highlight the complexity of bidding for and trying to secure resources, because of the different ways in which funding streams operate, the short time scales for bidding and so on that are often put in place and the time that people are given to ensure that the money is spent. We need to pick up on that issue.
The complexity that I think we should highlight is the issue of mixed accountability. One issue that emerges from the subject committees is that they want to scrutinise the budgets over which they formally have some policy responsibility. A difficulty is that those budgets are often managed by other bodies that have their own mechanism for accountability.
To my mind, there is a question over the appropriate method. Should a policy framework be set at the top that then guides the use of resources further down, in an ever more controlled way? That would be a centralising agenda, if you like. Alternatively, should we have a devolved budget agenda, whereby when management responsibility is handed over to a health board or local government mechanism that has its own system of accountability, the process for financial scrutiny is, to a certain level, also handed over to that agency? Those two models may be extremes and we will probably find that there is a mechanism in the middle that would be more acceptable, but we need to be clear about how we deal with mixed-accountability issues. We will perhaps need to be clearer than either we or the subject committees have been up till now.
On the process that we should use for taking forward the discussion, I agree that we should end up by taking the issue back to some kind of conference of people who know about it. That would probably be a good way forward. Right at the start, when I first became convener of the Finance Committee, we went through an exercise whereby we invited the FIAG members back for a useful discussion about how things were going. We have put in place some of the useful suggestions that emerged from that discussion—the most significant of those suggestions is probably the process of scrutinising financial memoranda, which is dominating our present business.
However, if we were to hold such a conference now, it would just be about problems. Before we have the conference, we need to have some ideas about solutions. I think that we are in a much better position to do that now, but we need to be able to say what we think we might do and to test that out with people. There is a balance to be struck. We need to consider the best time to hold such a conference and how to go forward. Perhaps we need to build on the paper that Arthur Midwinter has provided and do a bit more work about the direction that we want to go in before we see whether we could use the consultation with other agencies as a means of driving that forward.
I commend Wendy Alexander on the two sets of three points that she made. They were really crisp and I think that she will justifiably get the support round the table that she is looking for.
The need for time-series data is fundamental. Without those, the work and credibility of both the committee and the Parliament will be pretty much totally undermined. Frankly, I do not think that it is an option to continue to let the Executive off the hook on this issue, as that would undermine the Parliament's credibility.
Two issues strikes me about the need for measurement. For the block allocations, I agree that there should be a permanent process of value audit, benchmarking and external scrutiny. We should have all the processes of recognition and reward for those who have proved to be successful in squeezing out cost, retaining budget and doing other things to maximise throughput in their objectives. We need to make heroes and heroines of such people.
In addition, if we consider the issue from a proper macro perspective, instead of having cross-cutting review after cross-cutting review, there is a need for a mechanism that will allow all departments to work together to play a part in a small number of national objectives, such as growth, life expectancy or population decline. People need to be asked what part their budget spend plays in contributing to those national targets and what part the spend of other departments contributes to their own portfolio objectives. However, there is the danger, which Arthur Midwinter pinpointed, that there could be an element of double accounting—
At least.
Yes—it could be triple, quadruple or multiple accounting. If we can interrogate on the basis of how well portfolio objectives support national objectives, and evaluate through on-going mechanisms to what extent portfolio objectives are being met, we will have something real, tangible and understandable that does not require such a volume of paper that it could not be assimilated even by Einstein—and I am not Einstein.
I have a lot of sympathy with the convener's points. We heard a strong message yesterday about timelines, and the inability of partner organisations to work together efficiently because of the different regimes that are imposed on them—sometimes by the Executive and sometimes by others—which prevent them from pooling resources and working together efficiently. Further analysis of that problem and the production of solutions would make things on the ground work a lot better than they are working at the moment.
We all want to see time-series data. We also need to examine the level of expenditure that is required to get meaningful results. Level 1 time-series data might not tell us what we want to know. There would then be problems about how much we could dig down to other levels to find out what we wanted to know.
There are issues around the block allocations and the fact that much of the budget goes elsewhere. We should not manage that from the top down. That would go against the philosophy of local government and against a lot of what we said when the Scottish Parliament was established about the importance and credibility of local government, and the fact that we and the Scottish Executive should not be telling local authorities how to spend every last penny that they are given.
The fact that we do not hold the data does not mean that the data are not there. The data on education spend must be within the budget documents of each local authority. The data on health spend must be within the annual reports of health boards. Other data are available from the work that is done by the Accounts Commission. It is a research issue. We can bring together the data to get a nationwide picture of health spend and education spend. It is not that the data are going down a black hole and we cannot find them. The issue is whether we want to commission work to find the data and bring together all the sources of data to establish what is happening at a local level.
On a point of information, health data are more problematic than local authority data. Information on local authorities is gathered and published, and it is just a straight research job. However, as we know, the way in which the health data are recorded cannot tell us how much is spent on different diseases. If cancer or heart disease is a priority, we cannot monitor that. We get data on how much is spent by hospitals and how much is spent in primary care.
In that case, there might be a message for the Executive about its requirements on health boards and the way in which they publish data, so that information can be made more accessible.
A consistent system that used information technology to record data would be helpful.
The adviser's report and the reports from the various committees make profoundly depressing reads. There has been a fundamental breakdown in communication between this committee and the subject committees if only a very small minority of them actually provided answers to the questions that we wanted answered, which were to do with alternative spend and other issues. Wendy Alexander's suggestions are good, but we have to focus on practicalities and how we make progress.
I am more relaxed about time-series data, which are great for satisfying curiosity about how many Sir Humphreys have been successful over the past 10 years in their department areas, but I have a serious problem over whether such data accurately reflect the effectiveness of Government spend in some areas. That leads to looking at block allocations. I agree with what Elaine Murray said about education. However, the information on health exists to a certain extent. Every Clinical Standards Board for Scotland report on a particular area considers the effectiveness of local health boards.
I am not sure about the doctrine that equates effectiveness in public services with the size of the budget. Some of the best evidence that we received was from Andrew Walker, who said that it is far better if issues such as early interventions are focused on. Less money might be spent differently and outcomes might be much better. We have become obsessed with thinking that a large budget equals an Executive priority. The Executive might establish a priority in an area, but the focus should be on the most effective outcome rather than the biggest budget, otherwise we could get caught up in chasing the wrong targets.
I agree entirely with what has been said about capital spend. Linking in with local government is crucial. I suppose that performance measurements are also a failing of the committee. We have found out only this week about some mechanisms by which the Executive and the finance department interact with other Executive departments in determining performance. I would like the committee to consider such matters in more detail with the policy and delivery unit. What mechanisms exist to hold other departments to account? What annual discussions are held when the budget document is being put together? Departments can determine whether Governments are effective. If we are separate from the process, there will be parallel universes and people could sit there happily chuckling away to themselves, as we are asking all the wrong questions.
The convener was right to mention efficiencies. That takes us back to studying the next steps agencies under Mrs Thatcher. Certainly, there was a big agenda for driving through efficiencies. Some scope has been lost. I do not know about equivalents in Scotland. Are we scrutinising such matters?
On bidding for resources, the evidence that we heard yesterday from the Deputy Minister for Finance and Public Services about how agencies are linking in to the time frame in putting together budgets and bidding programmes, especially with local authorities, is important. We must ensure that the Executive is putting together the budget properly—I think that we are doing that—and consider whether our task will be to determine the effectiveness of the spend and whether services are being improved. I do not think that we have got the mechanism right, or that we would learn much more from another seminar than we have already learned from witnesses who have appeared before the committee over the past six months.
We should do more work on how the Executive decides whether it is reaching its targets. Fundamentally, if we are going to influence the effectiveness of Government spend, we should scrutinise the work of Executive officials who are already making such decisions and ensure that there is public accountability in such matters.
I speak as a newcomer to the Parliament and to the committee, and as somebody who is so economically naive that it is unbelievable. Having said that, I have sat through many meetings and I think that yesterday's meeting was something of a watershed in that we have finally started to get to grips with matters. Since May, we seem to have been bombarded with facts that never interrelate. Everybody talks about their version of the truth, but nothing seems to link up with an economic philosophy. That is why I am encouraged and persuaded by Wendy Alexander's view that, whatever one's political philosophy, there must be a set of figures somewhere by which one can say what has been achieved. For example, we should be able to look back to the end of Maggie Thatcher's era and over a 10-year period and say, "That's what was achieved."
What has been achieved in those 10 years and how can we measure such achievements? How can we in the Scottish Parliament judge whether what has happened over the past four or five years has been effective unless a set of targets is set out at the beginning and we look at them four or five years down the road and say, "That's what has been achieved against the targets that have been set"? There should be not only transparency, but real transparency.
We should know what the honest targets were and be able to see what has been achieved against those targets. We can then ask whether our way of making the economy work is better than that of our predecessors or whether we are failing. I do not believe that we are in a position to make any of those judgments. That is why I am persuaded by Wendy Alexander and Arthur Midwinter. How can an accountant or anyone else pass judgment on a set of accounts unless the targets are clearly defined and there is a trail that takes us to where we are today? That would give every member a chance to ask whether the Executive has done what it said it would do. That is how we should progress the debate.
I do not think that Wendy Alexander was suggesting taking us back to the days of Mrs Thatcher.
She was.
I think that she was talking about figures at the time of John Major.
We should not beat ourselves up too much. There is a sense that there are areas of dissatisfaction, but it is fair to say that significant progress has been made in casting light on areas of British Government that have long been hidden. Although we have a big task to get things more as we would want them, we should not beat our breast too much over the whole exercise.
It is crucial that we walk before we run. It is almost unheard of for a parliamentary committee in Scotland to set a positive agenda that goes anywhere—that is what we are trying to do. We are trying to be the ones who elicit the information on how much we spend, how much we are investing for the future and what are the efficiency mechanisms. It will be a triumph to manage that.
I want to be really precise about the limits of what we are trying to do. We have a dysfunctional budget process so there is not a snowball's chance that we are going to be able at this stage to fix the really difficult issues of effectiveness of spend. I agree with Jeremy Purvis; I do not believe that effectiveness necessarily equates to total spending. However, until we know how much we are spending, how much we are investing in the future and how we are attempting to measure that, we will not manage the rest.
I will use an example from Westminster. On the day that the Chancellor of the Exchequer arrived in the Treasury, he probably knew that the existing effectiveness measures were screwy and inadequate but he decided that he would give the Bank of England its independence, that he would create the new deal by taxing the utilities' windfall profits and that he would stop the double taxation of dividends. He thought that all that would set the tone and that the rest would follow on from it.
I have listened to Andrew Walker, and no one in Scotland is better than Kevin Woods on the difficulties of effective performance management and how to get top-down and bottom-up processes. We will not solve that problem in the next eight weeks, but that is not our first duty or responsibility. Our first duty is to get a clear view of the dysfunctional aspects of the budget process. Let us not try to claim that we can solve the problems with efficiency or effectiveness, or indeed, that we can resolve the question about top-down versus bottom-up. I do not believe that producing time-series data, finding out how much the capital spend is and being clear about the performance measurement regime will prejudice our being able to tackle the difficult issues for years 2, 3 and 4 that were mentioned by Elaine Murray, Jeremy Purvis and Des McNulty.
I contend that if we do not know how much we are spending and how much we are investing in the future, and if we do not have a procedure for reporting back on performance, there is no chance of our being able to get a handle later on those genuinely complex issues. We should have the honesty to say that we cannot fix the problem now and that our first responsibility is to get some transparency on spending.
We can get to the time-series data. The victory will not come when the Executive does that once; the matter should be high enough up the political agenda that those data are produced regularly and in such a way that we solve the problem of committees' not knowing what is happening in the areas in which they are interested and in capital spend.
On performance measurement, we need to create a public forum in which the Executive is asked how it thinks it is measuring efficiency before we get to questions about whether the system is too top-down or too bottom-up. We need transparency. Yesterday, we were told that the policy and delivery unit was doing performance measurement, which astonishes me given that that has historically been the role of the analytical services division, which does the numbers. No one knows who is meant to measure effectiveness.
If we did those things, we would make life immeasurably easier for committees next year and we would set an agenda that would allow us to tackle the much thornier issues—which even Scotland's best cannot resolve—in years 2, 3 and 4. My contention is that, until we sort out the first set of problems, we will fail to tackle the second. I am mindful of the pressure on the committee and of all the things that we have to do, but the issue is not just about time-series data, capital spend or performance measurement; rather, it is a question of how to enshrine those in the process and in the public mind in such a way that they form part of the constitutional fabric of Scotland, just as we tried to do with the social justice report by saying that it would be published every year so that no one could hide from what was happening in relation to poverty. My view is that it is not about having a private chat on the tough issues; it requires a very public discussion about what is possible and what should be happening and an admission that we should leave the more difficult stuff until later.
I find the whole subject to be very interesting. I am only six months into politics—if that is what we are doing at the moment is called—and everyone says that the Finance Committee is the most important committee of all. I am inclined to agree with everything that Wendy Alexander says. I am as naive about finance as most ordinary people are and the thing that frightens me about my encounter with politics and everything associated with it is the amount of inefficiency and waste. Even though public money is being poured down a drain, everyone stands by and says, "We've always done it that way; let's keep it that way, because we're all comfortable. Let's not rock the boat. We don't want change; everyone's frightened of change." As a country, we will go under if we do not start to do things as efficiently as possible.
All my working life, I have had to struggle to make ends meet financially. Anything that was done had to be accounted for, right down to the last farthing, which was a quarter of a penny in old money. I have no doubt that Arthur Midwinter will be able to tell us what percentage of a real penny that is. Seriously, however, without efficiencies, we are nowhere.
We should look at ourselves; we should look inward. With all due respect to every civil servant who works for the organisation that we are currently employed by, what is their first priority? Is it efficiencies? Are three people doing the work of four, or rather are three people doing the work of two? That does not come into the calculation at all. We are talking about the protection of a system that needs not a shake-up, but an explosion under it to shake it to its very foundations, in order that we can start from scratch and build up a proper picture. Let us please include efficiencies.
Look at the people who were here this morning: the legal system is a gravy train. I wish that someone would give me the job of erecting the buffers along the line to stop them running away with public money. To carry on in the manner in which we as a Parliament are carrying on is totally unacceptable. I think that we, as the Finance Committee, have a say on 1.8 per cent of the spend; the other 98.1 per cent is just going out on the gravy train and no one is trying to stop it.
I am keen to persuade Jeremy Purvis on the time-series data, because I honestly think that that is the best and only way to get effective control of current and historic spending. It is also the best way of refocusing spending on different priorities as we move forward in the longer term. An example of that is moving new money from intervention towards prevention in the health service. Without such data, we risk becoming almost a laughing stock, because our scrutiny will be as much a function of anecdote, conjecture and opinion as the defence that spending departments give us. We are likely to achieve a stand off that will bring us all into disrepute.
I am looking for a mechanism that allows us access to proper data at macro level that we can measure against macro targets, and a mechanism that gives us the ability to drill down at departmental level so that we can see the data and the impact that the spend has had over time on departmental targets and achievement. When we have that framework, we can go to work much more meaningfully.
If John Swinburne continues to make statements like those which he made today without bringing examples to the table, we will not move forward in any meaningful way. If John Swinburne's evidence had come from a minister, we would have ridiculed him.
Jim Mather talked about trying to find areas in which there are no efficiencies. I have regular meetings with the health board, the local council and the enterprise body in my area in which we go through line by line the work that they are doing. As Professor Midwinter and Elaine Murray said, the difficulty is in collating that information centrally so that we can see it. That is crucial; the practicalities are important. If three civil servants are to do the work of four—or of two—I would prefer their time to be spent on getting information about current and future spend, than on getting information about what spend was 10 years ago, which can serve only an academic or a constitutional argument, neither of which I have much interest in.
Notwithstanding that, there is a broad basis of consensus on the kinds of things the committee wants to happen. Professor Midwinter's report summarises a number of issues and the discussions that we have had about moving from a line-by-line approach to a more strategic approach to the budget show that that is an area into which we would like to move.
Three strands emerge from our discussions about how we can progress. One includes the issues that we would like to raise in the context of our stage 2 draft report—we should aim to incorporate some of the issues and approaches into the stage 2 draft report. When it comes to the debate in Parliament on that report, I would like the committee to present some kind of co-ordinated view about how we wish the report to be implemented, although there might be differences of emphasis or priority.
The burden of incorporating those issues falls to Professor Midwinter for now, in that he will be involved in drafting the stage 2 report with Susan Duffy, the clerk. We probably want to see a summary paper before we debate the stage 2 report—that includes at least the highlights of the issues that have been discussed today. I do not request a lengthy paper, but a relatively brief outline paper that would allow us to advance. I am giving you work to do, Professor Midwinter.
What is the timetable? Are you looking for a summary paper in advance of the stage 2 report?
Stage 2 begins in two weeks today, so I suppose that what we are looking for—
The report has to go to you on a Thursday, so Susan Duffy will have to work at the weekend.
We might have to work before that. We will have to discuss what we can achieve with Susan Duffy and Professor Midwinter. I ask members to indulge us in trying to work out what we can do. If the report cannot go through the stage 2 process, there is additional time before the stage 2 debate, so we could present a supplementary paper in that context. Let us work on the mechanics of that and see how we can implement it.
Wendy Alexander's suggestion that we should perhaps have a conference in the new year is a good one. The utility of such an event will depend on how clear we are about what we want to do, so if members are agreeable I would like to take some soundings on that and to examine any issues that might arise with regard to bidding for resources for that.
The third point is about how we carry the arguments forward into our consideration of the spending review, because the first application of what we want to do is likely to be in that context. There are issues that we need to address. Is that a fair summary of how we might like to proceed?
Members indicated agreement.
Wendy very usefully divided up the two sets of issues, on one of which there is almost common agreement. I disagree with Jeremy Purvis about time-series data. We cannot seriously evaluate whether a Government has met its priorities if we do not have trend data. The matter is not, as far as I am concerned, about the constitutional argument if we are seeing what has happened and whether or not health has been a priority. We can do that only with real-terms data over the period.
It seems to me that the first three points that Wendy Alexander raised—time-series data, capital spend and performance reporting; let us call it that rather than performance management—do not need to be in the seminar. They are on the agenda now and we just need to push the matter. As Wendy said, cross-party support for their inclusion will put great weight behind us in persuading the Executive. After yesterday's meeting with Tavish Scott, I feel that we are pushing at an open door on that issue.
The other points about how many targets there are and about block allocations are more problematic and could be aired later at the conference.
Jeremy, did I hear you say that you studied under Mrs Thatcher? That took me aback—it took me 10 minutes to work out that you were actually studying next-step agencies rather than studying under her.
I was in primary school.
The committee has never discussed the best-value studies. They are the only things that I know of that the Executive does that might be similar to what Jeremy Purvis was asking about, but those reports are never in the public domain. As I understand it, a comprehensive review goes on annually. I have seen one document privately; it would be useful to get some kind of report from the minister at some stage on how those reports operate. I was concerned by what I read in the papers over the weekend, but I am delighted by the positive way in which the committee is responding to make sure that the process is driven forward. We now have a way ahead.
Are members content to proceed along the lines that I suggested and according to the prioritisation that Arthur Midwinter highlighted? We might be able to move forward on those three fronts quickly and on the next three fronts a bit less quickly but nonetheless determinedly. Is that agreed?
Members indicated agreement.
When will we be considering the draft report?
We intend to look at the draft report on 25 November, which is two weeks today.
Last year, it took us about 10 days to pull it all together and get it into shape, just with the mechanics of thinking about drafting and getting it ready. I am not sure whether you want a summary in between, which is what I thought you were suggesting. I would prefer to have next Tuesday to work on the report. Were you looking for something next Tuesday?
Further clarification has helped us to identify where we should go so, if members are agreeable, rather than go over remnants of this discussion again next Tuesday we shall let Arthur Midwinter get away and do his work, and we shall have a report to consider the following Tuesday. Is that agreed?
Members indicated agreement.
I thank Arthur Midwinter and the clerking team for all the work that went into that debate.