Enterprise and Lifelong Learning Committee,

Meeting date: Tuesday, May 15, 2001

Official Report 108KB pdf

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Budget Process 2002-03

Good morning. I welcome everyone to the 15th meeting of the Enterprise and Lifelong Learning Committee. We will start sharp this morning, as I am sure that everyone has a fairly busy day ahead of them. I know that the committee has—we are going from here to our away day in Stirling.

There are apologies from Tavish Scott and David Mundell. Marilyn Livingstone and Elaine Thomson are delayed and will be late. Kenny MacAskill has to leave us early to go to the Subordinate Legislation Committee—he gets all the fun. I welcome David Davidson, who is the Finance Committee's reporter to this committee on the budget.

I welcome the minister to the meeting. I know that you are recovering from the flu and slightly deaf in one ear—that is a good excuse for asking somebody to repeat the question.

Thank you, convener. I will not tell you which ear it is. I begin by introducing my colleagues. You know Lucy Hunter, who is head of the Scottish Executive higher education, science and student support division. David Wilson is head of the enterprise networks and tourism division, Douglas Baird is team leader for the enterprise and lifelong learning finance team and John Henderson is assistant director of finance.

For the first time, the annual expenditure report sets out an overall aim for the enterprise and lifelong learning department—to create a highly skilled learning, earning, connected Scotland. It sets out four overall strategic objectives.

When I appeared before the committee last November, I said that the aim of our budget for the next three-year financial planning period was to put knowledge and learning at the forefront of our agenda. I am happy to confirm that position this morning. We are on track to deliver our commitment to increase the number of students in further and higher education by 42,800 by 2003-04 and we have significantly increased the budgets of the funding councils this year. To achieve our commitment, we will maintain that level of funding in real terms over the next two years.

We are also well on course to achieve our commitment to deliver 20,000 modern apprenticeships by 2002. We are providing the resources to deliver on our commitment to abolish the payment of tuition fees and to introduce a range of new measures to widen access to and participation in post-school education and training. Those resources are not confined to further and higher education but embrace our plans to extend education maintenance allowances and to deliver 100,000 individual learning accounts by 2002.

Our commitment to improve the contribution of the outstanding science and technology of our higher education institutions to the development of the economy is as important as our widening access agenda. We will be investing in a number of related programmes in order to achieve the commercialisation agenda.

Good and well-founded information and guidance are crucial in the developing learning market. The continued development of learndirect Scotland and of our strategy for a national, all-age guidance service—careers Scotland—to which we will divert significant additional resources, are also part of our plans.

We published "A Smart, Successful Scotland: Ambitions for the Enterprise Networks" in January. The document sets the strategic direction for the enterprise networks and introduced a new approach to target setting. We are part of the way through the process of implementing that new approach to targets and financial monitoring for Scottish Enterprise and Highlands and Islands Enterprise, and that work is reflected in the annual expenditure report.

A similar approach is being taken to the Scottish Tourist Board—now visitscotland—and, as a result of the PricewaterhouseCoopers management review of the STB, there is a commitment to revise and reconsider visitscotland's targets. That is why we have not provided a full new set of targets in the annual expenditure report.

"A Smart, Successful Scotland" envisages a new set of overall targets—at least one for each of the 12 overall themes that are set out in that document. Later in the year, we will bring to the committee a framework for considering precisely how much is spent in each area of Scottish Enterprise's and HIE's activities and which targets are related to that overall expenditure. That framework will be the basis of the department's monitoring of the enterprise networks.

I conclude by noting that members have been given additional information in the form of responses to a number of questions that were raised with officials on 24 April. I am happy to take questions on those responses.

Before we move on to questions, I note that I appear to have health problems every time I attend a meeting of the Enterprise and Lifelong Learning Committee. However, I can tell Annabel Goldie that she does not have to come to my rescue this week, as I have brought my own lozenges.

Thank you, minister. I also thank you and your officials for the additional information that has been made available since we last spoke to Mr Baird and Mr Wilson.

I will start the questions. Three tranches of £5 million each have been made available over recent weeks to deal with the fallout from the foot-and-mouth crisis: £5 million has gone to the Scottish Tourist Board; £5 million has gone to Scottish Enterprise; and £5 million has gone to Scottish Enterprise Dumfries and Galloway. I am fairly clear about where the £5 million for Scottish Enterprise Dumfries and Galloway has gone, or is going. However, can you give us an update on the £5 million that was allocated to the Scottish Tourist Board and the £5 million that was allocated to Scottish Enterprise? Has that money been spent? If not, when will it be spent and what will it be spent on? Is there any indication that those funds have had an impact on assisting with the problems associated with the foot-and-mouth crisis?

I am happy to provide that information. I will begin with the £5 million that has been given to visitscotland. A lot of that money—about £2 million to £2.2 million—will be spent on additional marketing campaigns. Other moneys will be spent on assisting customers across Scotland with quality assurance schemes—paying for what the customer would have paid for. Money will also be spent on area tourist board contributions—that is, it will be spent on reducing the customer's liability for those contributions.

The £5 million that was given to the enterprise network was divvied up: £4.5 million went to Scottish Enterprise and £500,000 to HIE. They are in the process of spending that money.

Scottish Enterprise paid the third tranche of £5 million to Scottish Enterprise Dumfries and Galloway. That money came from within Scottish Enterprise's budget.

How much of the Scottish Enterprise and HIE money has ended up with companies and how much has ended up with consultants?

I do not have the exact breakdown with me. As you will appreciate, convener, these are operational matters for HIE and Scottish Enterprise. However, I am more than happy to request both HIE and Scottish Enterprise to furnish you with the details. Perhaps Mr Wilson is in a better position to answer that question.

We do not have the detailed figures with us, but much of the support that Scottish Enterprise and HIE will be providing will be advisory to businesses—that will form a key contribution. Some support will also be given directly to companies; how that can be done with the additional money that is now available is being considered.

When can we expect an announcement on the consequentials of the £200 million that has been made available as a result of this year's UK budget?

Cabinet ministers are discussing that. I do not have the date of when such announcements will be made, but the matter will be considered actively over the next few weeks.

I thank your department for providing extra written information on Scottish Enterprise's administration costs, minister. I note that the paper states that the network's last review of such costs was carried out pre-devolution,

"during … the Policy and Financial Management Review",

and that the current review of the enterprise network structure is another

"opportunity to scrutinise the position in more detail".

It seems that concerns about administrative costs for the enterprise network fall under two heads. First, by any common assent, they are regarded as proportionally high. Secondly, as a welcome consequence of the review, there has been an earnest attempt to address administration costs. However, from the further information that you have provided, I am not clear about the role that you and your department envisage having in attempting to keep a grip on the matter. Although fine-sounding words have been written, such as the opportunity for agreement on changes to

"lead to a better defined and more up-to-date approach",

I do not see the teeth—specifically with regard to who is reviewing what when, and what outcomes might be expected over two or three years.

Annabel Goldie raises a number of important points. I recognise and appreciate the concerns that she has raised, not only today but on previous occasions. We are addressing those concerns in the enterprise and lifelong learning department, and the new chief executive, Robert Crawford—although he is not that new now—is implementing a number of structural changes within Scottish Enterprise. There is a need to review and to consider potential savings across the network. The business transformation process is already yielding benefits and there is a commitment, both at department level and within Scottish Enterprise, to drive down overheads. For example, why should we have 14 finance directors and 14 personnel departments across the Scottish Enterprise network? Those are the sort of questions that are being asked. Benefits are being yielded and the money—this is a point that Annabel Goldie is right to make; she has been making it consistently for some time—will be properly deployed. We appreciate that concern; Robert Crawford has already got into it and is delivering.

The other bête noire that I wanted to pursue was capital funding for the Scottish further education colleges. I am again grateful for the further explanation that the department has provided on that. Although I see what has been identified as priority funding to address a backlog of maintenance, repair and upgrading work, I am not clear about the extent of the problem. Reference has been made to an estates condition survey published by the Scottish Further Education Funding Council, but I do not have any figures for that. What is the backdrop liability for outstanding capital works to our colleges?

I do not have that figure to hand, but we could get it from SFEFC. When we allocate the council funding, it is provided as block grant aid. That is intended to be split between research, teaching and other grants. Douglas Baird may be able to direct Annabel Goldie to where we could best find that information and he may be able to say when we could furnish her with it.

We would have to approach SFEFC to get the best information that it has. We have with us a survey that was completed in May 2000 to inform the funding council about future funding needs. Essentially, it outlined what money needed to be spent on the estate. I am sure that we can get the information from the funding council.

Could the department publish information about the funding council's priority needs and what funds are attached to address those needs? It would be helpful if that point were clarified. The picture is incomplete unless we know the dimensions of the problem. Although we can procure that information from the funding council—

We also need the department's point of view.

Yes.

In another inquiry, we have found that there is a bit of a vacuum between funding and policy and strategy. We expect the department to tell us what its policy and strategy are. What is the minister looking for from funding councils? That is what we are trying to get at. How do you measure the bang for the buck?

For example, suppose that the backdrop to the survey is that something like £200 million or £300 million is required. That would help us to get into perspective the statement:

"Ministers have targeted an additional £52 million over 5 years".

Quite simply, that would mean that some colleges would fall down. The picture is incomplete. As the convener has indicated, it would be helpful if we had a steer from you or your department about the future of this item of expenditure.

We have made it clear that the £52 million will be spent on improvements. There is a great backlog, which was caused by years of neglect, and property needs to be upgraded. The funding council will provide the information that you are looking for as quickly as possible.

Good morning, minister. I want to touch on some of the things that you mentioned in your preamble and in the answers that you have just given. On higher and further education, you will be aware that many of the universities are already in deficit and others are sliding towards deficit. What are your plans to address that?

We are committed to further and higher education. Our department's intention from the outset has been to skew funding towards knowledge and learning. There have been serious ramp-ups in funding to those sectors over the past few years and the most significant increase has been realised this year. The figures are in the budget document—given that David Davidson is a member of the Finance Committee, I am sure that he will be fully aware of them. We will continue to invest heavily in knowledge and learning over the years until 2003-04.

If we take a broad-brush approach to the department's budget, we see that, of the £2.2 billion that the department spends, something like £1.7 billion is spent on further and higher education. If we look at the skills and learning agenda, we see that, if we account for what Scottish Enterprise and HIE spend, that leaves us a couple of pounds short—in broad-brush terms—of the £2.2 billion. We are serious about skewing funding towards skills and knowledge.

I appreciate what the minister has said, but he is talking about money that is directed towards the provision of teaching. I am concerned about the current deficit position, which is another problem. In his dealings with the funding council and with the universities, has he given some sort of plan by which the universities can restore the equilibrium within their funding?

We give money to the funding councils, which best decide—in dialogue with the universities and the other institutions—how to divvy up that money. Our department's priority is to ensure that the further and higher education sector is well provided with resource. With your permission, convener, I will pass the question over to Lucy Hunter, who is eager to come in.

It may be helpful to draw to the committee's attention the fact that SHEFC monitors the financial health of all the institutions that it funds. The funding council has not indicated to us that there are serious deficit problems in the sector. There are regular reports on institutions' financial health—the reports are done annually or more frequently than that, I think—which the council considers carefully. Action plans will be agreed with individual institutions, if those are felt to be needed in particular cases.

The minister referred to commercialisation. I presume that some of the money is being put in through the funding councils. Does the Executive have specific ambitions about the outcomes from commercialisation?

Commercialisation is, we appreciate, a big challenge. There is no room for complacency. We are considering how we can proceed with commercialisation. There is around £31.5 million, which is divided unequally between Scottish Enterprise and SHEFC. Scottish Enterprise has £18 million for proof of concept. That money is spent on project-based initiatives. The remaining £13.5 million is left to SHEFC, which is considering ways to assist universities to realise commercialisation potential.

My final point concerns your comments about the Scottish Tourist Board. You said that you do not have targets in place at the moment and that there is a review of objectives. Will figures be available for the next stage of the budget so that the outcomes can be measured and the fund flows can be identified for the STB?

I also noted that you talked about funding from the £5 million that was given as a result of the foot-and-mouth outbreak going directly to ATBs to support membership. In that funding stream, is it identified that, as the enterprise and lifelong learning department looks after tourism in the round, you are moving to a direct funding model? If so, will you be moving budget money away from the local government sector into the enterprise sector, or would it be an additional sum?

It does not surprise me that David Davidson has raised that issue. He has raised it doggedly on many occasions in different forums. As Mr Davidson knows, we were committed from the previous year, when Henry McLeish launched the tourism strategy, to review the direct funding of ATBs in February and March of this year. That is, we were committed to reviewing the possibility of taking the funding from local authority control.

That review has not been put on the back burner, but it has been delayed for obvious reasons. Since the outbreak of foot-and-mouth disease at the beginning of March this year, we have been working in a totally different context. We have had to realign our thinking on tourism and that realignment has involved us putting additional money on the table for tourism.

David Davidson asked about direct funding of ATBs. That question will not go away, because it exercises some people within the industry, but we must recognise that, in Edinburgh and 40 miles further west, the councils take tourism seriously. The remarkable sums of money that they put into tourism—rightly so—contrast starkly with other parts of Scotland. We will not be able to resolve the direct funding of ATBs today—we will be debating it post foot-and-mouth disease.

I am sorry, minister—I am not hanging on to any particular theme; I am considering the budget consequences. That is what today is about. If you are considering changing to direct funding of ATBs, as part of the global budget strategy, we must consider how the cake is cut between the different departments. Obviously, if there is a move to direct funding of ATBs, the money will move from either the Executive's reserve or from the local government budget into tourism.

I ask as a member of the Finance Committee whether there are any indications of when we will get that information, so that we can consider the budget in the round.

I make the obvious point: the information will be made available when the matter is actively debated by ministers and departments. The sum that we are talking about is in the region of £7 million to £9 million, which currently goes to local authorities. That will be debated and discussed by ministers as we make progress and review tourism in the round.

Out of which Scottish Enterprise budget did the £5 million for Dumfries and Galloway come?

As you can appreciate, an organisation that is in receipt of around £0.5 billion per annum is, rightly, able to realign its thinking and priorities according to events. Scottish Enterprise, rightly, decreed that the situation in Dumfries and Galloway needed additional resources. Robert Crawford and his team—having discussed the issue, reviewed the situation and waited for the foot-and-mouth outbreak to evolve and, thankfully, recede—decided, correctly, to allocate £5 million, much in the same way as Highlands and Islands Enterprise was able, with assistance from the Executive, to allocate money in response to the BARMAC situation a year and a half ago.

I appreciate that, but we are dealing with budgets and expenditure headings. Which item or expenditure heading in the Scottish Enterprise budget has the £5 million come from? Presumably, the money is allocated somewhere, even if it is only in a contingency fund.

It will be allocated under some heading, rather than slushing around aimlessly.

Could I have that heading?

I do not know the exact heading from which the money came, but I appreciate that we are talking about an organisation that is in receipt of £0.5 billion.

The issue comes back to Annabel Goldie's question about reducing overheads. Scottish Enterprise is realising savings by reducing overheads. That is an on-going process and we want to keep it moving in that direction. I cannot say categorically, but perhaps some of that money came from savings from the restructuring of Scottish Enterprise. Mr MacAskill should write to Robert Crawford, who, I am sure, would be delighted to tell Mr MacAskill exactly where every farthing came from.

I will happily do so. I note that additional money has been given to visitscotland to deal with marketing that was made necessary as a result of the foot-and-mouth disease outbreak. In response to a letter that I sent to visitscotland, the organisation said that, although the marketing budget in the 1997 to 2000 period fell from £20 million to £19 million, the administration budget rose from £3.7 million to £4.7 million. Can you assure me that visitscotland's marketing budget will increase?

I am happy to give that assurance. Of the £5 million that we gave to visitscotland, I understand that around £2.3 million has been allocated for marketing spend. That will augment the excellent work that is being done by the British Tourist Authority, which is liaising closely on the best way in which to market Scotland and the UK. Members will appreciate that great emphasis is being placed on our largest market, which is the UK market.

I am asking about the budget, not about the emergency funds that have been directed to visitscotland because of the foot-and-mouth disease outbreak. As I said, the marketing budget in the 1997 to 2000 period fell by £1 million, while the administration budget rose by £1 million. Can we ensure that, in the allocated funds for 2002-03, the marketing budget will go up?

Having spoken many times to Peter Lederer, the new chairman of visitscotland, I am in no doubt that he appreciates the importance of marketing. For the first time, the two people who lead visitscotland are involved in the industry and are widely recognised—by people in this room and across the industry—as world leaders in that field. They understand fully the importance of marketing and of driving up quality in the industry. There is no question but that a proper and sure emphasis will be given to marketing.

Part of our remit is to inform the Finance Committee whether we think that you are meeting your objectives. In the appropriate table in the extract from the budget statement that deals with the estimated objectives and targets for 2000-01, which is now complete, the estimated out-turn for about nine of the targets is not available. I appreciate that that document was published some months ago, but it would be extremely helpful if we could have both the targets and the outcomes for the financial year that has just finished. If we do not have that information, we will be unable to comment intelligently.

I will respond intelligently and say that you will have the information as soon as possible.

I hate to suggest more objectives and targets, but I wonder how the Executive monitors the extra help that it gives, through the Scottish Further Education Funding Council budget, to under-represented groups from disadvantaged backgrounds, especially those with special needs. Will the money that is allocated in that way be monitored to determine whether it is being used effectively? If it is being used effectively, will there be increases in that funding in future years? At the moment, the objectives and targets seem fairly broad. I am aware of the good use that is made of that money in colleges in my constituency, and I would like its effective use to be rewarded.

That is an important point about an important area, and the Executive is committed to widening access for the groups of people whom Ken Macintosh mentions. The information that Ken Macintosh requests will be made available to us by the funding council. It is important that we continue to drive forward the agenda of widening access for sections of the community that, sadly, have hitherto been unable to access education. The money is being well spent, and we are seeing the benefits of targeting resources at those groups.

We have time for a quick final question.

In response to the convener, you said that we would get the targets and out-turn figures when they were available. For the sake of the budget process, which is already tightly squeezed, can you commit to a date on which they will appear?

I would be delighted to give you a date, but I shall have to defer that question to Executive officials. I appreciate why committees, for their smooth working, expect to receive that information. As I said to the convener, you will have the information as soon as possible.

Most of the information should be available now, as we are in the middle of May and the financial year ended on 31 March. Are there any further questions?

Members indicated disagreement.

I thank the minister and his officials. We will submit our report to the Finance Committee and we look forward to seeing you again soon.

Before we move into private session, I give David Davidson the opportunity to say a word or two in his role as reporter from the Finance Committee to the Enterprise and Lifelong Learning Committee, about the way in which we should format our response to the budget proposals.

I appreciate that we are in a difficult situation, as standing orders do not allow reporters to sit in on committees' private deliberations. My colleagues will experience the same difficulty when they attend meetings of each of the spending committees, but it is important that the Finance Committee receives comment about whether those committees agree with the objectives that the Executive has laid out.

You have said that you need to consider outcomes and to know what you are comparing, and I appreciate that you will try to do that as best you can. It is also important that the committee comes to a view about any shifts in the resources that the committee thinks the department has at its disposal. Whatever is spent over and above what has been allocated must come from somebody else's pot, but that is a problem for the Finance Committee, not for this committee. Similarly, if there are savings to be made, or if the department can give up something, we would like your comment—even if it is, "No, not at all."

The Finance Committee is seeking to institute some research into outcome budgeting, which is not just about cold numbers or cash; outcome budgeting translates into service delivery, which is what the committees will be looking for. For example, the public is interested in knowing—I say this for the sake of argument, not to be controversial—how many nurses and policemen there are and how many children there are in a class. In the Enterprise and Lifelong Learning Committee's remit, the Executive has set targets on, for example, modern apprenticeships and the question has been asked about the quality of out-turn—how many people passed and how many failed. You will be best placed to deal with such qualitative aspects.

If you make a bid for a move of funding—even a shuffle within the total that you have—it would be helpful for the Finance Committee to know why you have decided on that. I suggest that, once the committee has come to the end of its deliberations, I should speak to the convener and the clerk so that I can be advised on how your discussions went and the reasons for any particular difficulties or recommendations.

I thank you for your hospitality this morning and look forward to seeing you again soon.

It is a pleasure. I do not think that any member would object to Simon Watkins and I holding a follow-up meeting with David Davidson to inform him about the progress that we have made and the reasons for our conclusions. Is that agreed?

Members indicated agreement.

I am sorry that you are not allowed to stay with us for the rest of our meeting.

Not at all. I shall raise the matter with Murray Tosh.

We will move into private session.

Meeting adjourned until 10:10 and continued in private until 10:55.