Item 2 is consideration of the Executive's response to our stage 2 report on the budget process. We should all have copies of the letter from Andy Kerr, which sets out usefully his response to the 14 recommendations that our report contains. The response to the issues in our report is itemised. I have a number of issues to raise in that context.
Useful is certainly not the word that I would use, convener.
It is useful that the response is separated out into issues on which we can reflect. The content is a different matter.
I was unaware that I would have to speak to this item.
It would be useful if you would give us an overview.
Right. I considered the minister's response on the basis of my familiarity with the information and the reports that have been coming before the committee this year.
No, they have not. You are giving them information that I received only relatively recently.
My view is that outcome budgeting is still a somewhat theoretical concept and that there is little evidence of progress elsewhere. Our problem with it is that many outcomes require a longer time scale than that for annual budgets. My advice is to accept the minister's offer of a separate statement on progress.
We should stop at this point and deal with those recommendations.
On recommendations 2 and 3, the minister is being less than helpful to say the least. I refer particularly to the response to recommendation 3, in which he says that his colleague Mr MacKay had
That might be the tenor of the views of the committee more generally, particularly in relation to recommendation 2. Do members wish to make additional points, as opposed to simply expressing dissatisfaction?
As I am the only member present who has been on the committee since the beginning, I can put the responses in context. The committee has made a progressive move to seek clarity and objectivity in the style of the information that has come to us. We have been doing that for three years.
I do not have too much to add. The minister's response is saying in effect that what is going on is perfectly satisfactory. If we were to accept that response, it would imply that we, too, accept that our recommendations are tosh. I do not think that we take that view.
I do not dissent from the comments of other members. I would like Arthur Midwinter to tell us whether it is possible to distinguish between what one might call sensible savings by a health board or a council—perhaps they wish to save up for a big bit of machinery or to build a new road—and lack of spending, which might be caused by mere incompetence, a lack of demand or failure to manage spending? Can we distinguish good saving from bad underspending?
We might address that issue later in the process.
The way in which the information is currently gathered would not allow us to make that distinction as it is presented in aggregate figures. Much of the underspend is slippage either on capital or on the housing stock transfer. The kind of detail that Donald Gorrie refers to is held at local authority or health board level. Those bodies are required to report only the global sums.
It is appropriate for the committee to seek greater clarity in respect of end-year flexibility and for the committee and the Parliament to seek a fuller opportunity to comment prior to final decisions being taken. However, we must be careful about the terminology that we use. Brian Adam mentioned cuts. End-year flexibility is not a reduction in the global sum available across a range of disciplines in the Executive, but a reallocation. It would be easy to misrepresent that. If we are interested in clarity and having the opportunity to comment, we should steer away from terminology that could be interpreted as merely politicising the issue.
We have quite a lot to do this morning, so I would like to draw things together. Arthur Midwinter made a point about the imbalance between concerns about process and examining figures. It is the view of the committee that that imbalance should be corrected and later in the meeting we will consider mechanisms to allow committees to do that. Indeed, the appointment of Professor Midwinter is intended to facilitate the process.
As far as EYF is concerned, the Executive must have an internal system in which project audit or account managers have day-to-day control over their programmes and all that the departments would have to do is collate that information and feed it out through the minister. At any point in time, I imagine that any account manager on any project within the Executive's spending knows roughly where they are and when they expect to do things. We must not give the impression that EYF is a naughty thing—all that we have to do is make sure that EYF is an open thing.
That is right.
My concern was that the table that was published—after the statement—did not go into the kind of detail that would enable us to see where the changes in the programmes had taken place. We were not given any commentary on why the changes had taken place. It may well be that there were cuts or that there was a slippage in the programme, but we could not tell that because it was not open.
Yes. In that context, the point that Arthur Midwinter made in respect of recommendation 1—he said that there should be a separate statement—might take account of some of what Brian Adam suggests. It would be useful for us to remit the table to Arthur for him to consider whether that format could be developed to give us greater information.
It is worth considering how that might be done. I received last year's tables about the time that they were published, and even for a specialist it was quite difficult fully to understand the changes. I had to work at it and it took a bit of effort. All that it would need to meet the committee's requirements would be a written report on the rationale for the changes. I recollect that most of the changes were pretty sensible. However, that should be recorded. That would make it easier for both the committee and the Executive. I am happy to examine the matter and consult with Executive officials.
We did not get the answers to those questions until August. I do not know if we got them all. I lodged a series of questions asking for a breakdown.
Are you talking about EYF?
Yes, I am talking about the EYF changes.
We have decided to flag up the issue about the timing in response to the previous comment. I hope that that will be taken on board. We will ask our adviser to assist us in examining the format and considering what might be achieved by improving it. Unless we are clear about what we want, it is difficult for the Executive to provide the information that we are looking for.
The next comment that I have is on recommendation 5, which I have dubbed "Agency spending"—the response refers to the different types of service delivery body. The minister's reply seemed unduly complacent. Health and local government account for about 80 per cent of the Scottish budget, most of which is accounted for in block allocations. The committee needs to know that national priorities are being reflected in local budgets in the aggregate. The committee does not need to know that every authority is following the line—that will not happen—but it does need to know that priorities are being met. Discussions about that are on-going. I am going to a meeting with health officials about that budget and I had some discussion with the local authority officials some months ago.
I am concerned about the two paragraphs at the bottom of the second page of the minister's letter. The last sentence on local government confirms that the Executive collectively shelters behind the argument that local government is its own democratic master and that we should not interfere in the way in which a council spends its money. I accept that. However, the Executive argues that, if that is the case, it should know nothing about local government spending. Professor Midwinter made roughly the same point as I am making. We should know what is being spent, at least in aggregate, on education, music, nursery schools and so on and whether it has gone up or down. We should get aggregate figures for local government expenditure on local government specific services. Likewise, in health, we have no idea how much is spent on cancer as opposed to heart attacks.
I agree with some of what Donald Gorrie has said. Ministers answer questions in the chamber by indicating that they do not have any input into the remit of NDPBs. That is patently untrue at the structural level, which is what we are considering here.
Local government is in a delicate situation. The Government issues grant-aided expenditure guidelines for all services, but there are significant discrepancies, not just between individual councils' GAE but in relation to the aggregate figures. It would be a useful exercise for the Local Government Committee to examine the discrepancies between aggregate GAE for individual services and outputs, as opposed to outcomes. We need information at an early stage on local government outputs relative to the GAE allocations, but the Executive does not have that information. The Local Government Committee might not be the only committee involved in such an exercise, as the Social Justice Committee has an input into housing budgets. Perhaps the Finance Committee would be the appropriate committee to undertake that work. I agree with Professor Midwinter's suggestion that we should try to work out mechanisms through which a substantial part of the budget could be reviewed—my suggestion that we examine the discrepancies that I mentioned is one such mechanism.
I have my own view of that suggestion—I shall bring in Arthur Midwinter.
Last year, when I was the adviser to the Local Government Committee, that committee decided that it did not want a breakdown by services, on the ground that it was for local authorities to determine that expenditure. However, later in the year, the committee decided that it wanted such a breakdown, which I provided from my own information. The information is available for local government and can therefore be provided quite easily, although that is not the case with health. The Executive will have to think about how it can produce that information.
The minister's response to recommendation 4 does not say whether the Executive will indicate to the committee what progress is being made.
The response is a non-answer.
We should respond to that point by saying that we want to know what processes are under way and what will happen.
Perhaps Professor Midwinter could ask each of the spending departments how they review the budget outcomes once the budget has been allocated. For example, what in-year discussions are held between the health department and health boards or trusts? I am sure that that question could be asked of other areas, as it is obvious that each department has a different mechanism. It would be helpful for the committee to know exactly what happens. The departments do not simply hand over the money and wait for an audit report to be produced at the end of the year.
There are monthly returns for local government and I assume that the same process applies to health.
I do not know.
I can check that for you.
That would be helpful.
I would be surprised if the Executive did not have that information.
On the Executive's response to recommendation 6, after we made our recommendations, we asked the minister whether the Executive could separate out local government expenditure from the rest of the finance and central services budget. In the budget that we saw, those items came under a single line. Perhaps we could take up that issue again by writing to the minister.
My only comment—it is more of a question—relates to the Executive's response to recommendation 10 and equality proofing. I think that there is a great danger in the committee chiding the Executive for not equality proofing the budget when, personally speaking, I would not know how to go about doing that either. How does one equality proof a budget document that is constructed around functions and staffing costs, for example? It is easy to say, "You are not making any progress on equality proofing," but it is difficult to see what progress could be made. I made a similar comment to officials from the Scottish Executive environment and rural affairs department, who wanted to organise the budget in a totally different way that showed expenditure on each area of the country rather than on individual functions.
Perhaps that is a subject for further discussion between the Finance Committee, the Equal Opportunities Committee and other groups, but I do not think that we can take it much further, other than to say that we are still interested in it.
On recommendation 8, we sought as a matter of urgency the development of an electronic system for providing information. We should press the minister to give us an indication of the timetable within which he believes that that system might be available. It is clear that he is willing to set up such a system. However, unless we get a timetable out of the Executive, we will end up continuing to press the point as a matter of urgency.
I suggest that we take a slightly different approach. Later in the meeting, we will consider how to streamline and reorganise the budget process. Perhaps we should consider the electronic system a bit more carefully in the context of Arthur Midwinter's comments in that discussion. We want to work with the Executive on the development of the system; we do not want to hand that work over to the Executive and simply ask it to provide us with the information. We want to be involved in the process of deciding the format in which information should be presented.
As a first step, convener, would you write to the minister with a request for clarity on whether all the accounting and software systems in the Executive are unified? We got the impression from previous ministers that different departments used different software packages, which caused some difficulty when people outside the Executive conducted cross-searches. That is the problem that we are trying to get at.
Can you shed some light on that point, Professor Midwinter?
No.
I can certainly ask about that problem. It is not simply a software issue; it is a budgetary framework issue.
The problem is integration.
Under the Executive's response to recommendation 9, should we pick up on the issue of the bidding processes? We are told that the bidding processes are the reason why the Executive cannot provide us with the information that we seek. Given that decisions about some budget areas are increasingly based on bidding processes, should we try to get further information on how those processes are working and what mechanisms the Executive is using to make allocations in that context? We should not stop pursuing the matter for the reason that the Executive has given us, as modernising government is an interesting area.
You make a good point, which I had not thought of. The bidding process is a pro-departmental exercise. In other words, each department has private things that it wants to do and the process cuts against the joined-up government that is meant to exist. The Executive does not say, "We must do more about X and organise the budget accordingly." You are quite right that we should continue to pursue that matter.
Do you have any comments on the responses to recommendations 11 to 14, Professor Midwinter?
No—I thought that the Executive's responses to those recommendations were straightforward.
I would like to make a comment about the response to recommendation 11, on past performance. It would be helpful if we had an additional column in the budget documents about what had been spent in the previous year, as that would give us information on which to base a comparison. If we want further discussions about outcomes and outputs, a separate document is required. I find it annoying that, when organisations produce proposals for spending money, often there is no information on which to make comparisons with previous proposals. All documents should give information about the most recent year for which figures are available so that comparisons can be made. We should pursue that issue.
At this stage in the Finance Committee's development, it might be more beneficial to have a paper that examines the previous five years, rather than the previous year, separately from the Executive's budget. That would allow members to see what has been happening and to address problems that may recur. At present, members do not know whether problems exist and information on one year may not be sufficient, as that year may not be typical. A bad winter can throw all the figures out. I suggest that a separate paper be produced that provides outturn figures by programme for the previous five years of spending and a commentary that allows members to identify trends or departments that have particular problems.
I could live with that.
It would make sense.
I qualify that suggestion with the comment that we require the information to be translated into real-terms figures, which we have always required in the past, as that would allow us to make the comparisons. We also require an indication of the deflator that has been used, year on year, within the different sectors. That would give us an actual comparison of the availability and potential of spend.
I do not understand why you would need that information in order to identify whether there has been an underspend. I understand that you might need it in order to compare trends in spending in real terms, but you would not need it to measure underspend, as in that case it does not matter whether you use cash or real-terms figures.
I am talking about future proofing.
Perhaps that is another issue that we could remit to Professor Midwinter.
It would be quite easy for me to convert the figures for members, if required, but I am not clear about the benefits of providing real-terms figures for the previous five years. If you were interested in monitoring performance, you would want to know what proportion of the budget was unspent, but that information is not related to cash or real-terms figures.
Obviously I am turning into an anorak, convener.
A well-suited anorak.
On how we proceed, there are two possible categories of response. On the basis of the discussion, some of our responses should be instant. There are other areas where the committee is asking Professor Midwinter to do further work to clarify how we might progress the matter. Is the committee agreed that we should prepare a response that gives an immediate answer where that is appropriate and that gives a holding response on those areas in which we are asking Professor Midwinter to do further work?