Finance Committee, 18 Jan 2000

Meeting date: Tuesday, January 18, 2000

Official Report 153KB pdf

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Inquiry (Scottish Executive Finance Functions)

We will consider first the inquiry, which we agreed we would undertake, into the finance functions of the Scottish Executive.

Apart from the introduction, our main purpose today is to consider the wording suggested by the clerks. It seems to be a fairly tight remit, as members will see. I invite comments on the suggested wording. Do members wish to take up that invitation?

I wish to ask—

What do we anticipate will be the outcome of the inquiry? A report? Will the Executive take cognisance of that report, or will it simply exist?

Yes, there will be a report. Are you asking what will happen to that report?

Yes. Why are we carrying out the inquiry? Obviously, we agreed to have one, but what is its anticipated impact?

The Executive receives all the committee reports. What it does with our report is up to the Executive. However, while we cannot force our views upon the Executive, we hope that anything agreed by this committee would be given due consideration by it. Does Ken wish to say something?

Sorry, Mike. I was only waving my arms around.

It is nice to know that you are awake.

It was my voice that clashed with Andrew's voice earlier—I wish to raise very much the same point. How much co-operation can we expect from the Executive in carrying out this exercise? Have we had advance notice from the Executive on its preparedness to allow us to investigate the subject with senior civil servants?

No, but the clerk has informed me that the Executive is also examining its finance functions and therefore will be prepared, in that sense, to give evidence to the committee.

Perhaps I should rephrase the question. Does that mean that the Executive has agreed that we can speak to senior financial officials?

I am not sure that the Executive has to agree that. If we ask for evidence to be given, I would expect whomever we request to be present to appear before the committee. If your question is, "Have we sought permission in advance?" the answer is no. Perhaps you anticipate difficulties that I do not foresee.

My answer is yes.

That is not really the issue. If we decide to hold an inquiry, we make that decision and then follow it through. It would be extremely embarrassing for the Executive if it did not co-operate with that.

Indeed.

The strength of the report lies in the unanimity presented by members of the committee in drawing our conclusions. It would be difficult for the Executive, or anyone else in the Parliament, to disagree with the report if we showed that we had investigated in depth and were together in our conclusions.

I just wanted to find out whether the Executive is already engaged in the process and whether we would be helping it.

In a sense, we will be contributing quite naturally to the Executive's consideration of its finance functions, in terms of the way in which those functions are developing in the early stages of the Executive's existence.

Reports do not have the sort of force that you might have been suggesting, but the Executive would have to have strong reasons for saying that it would not take on board our conclusions.

I just wanted to ask whether the Executive was aware—although obviously, it is—that we were about to undertake the inquiry and that we would engage in dialogue with it.

The remit of the inquiry seems to be fine to me. My only comment is that quite a lot of the Scottish Council Foundation's paper deals with whether there should be joint Treasury-finance functions. At our previous meeting, we considered Treasury functions and the brief is quite right to say that much of that work should be done in dialogue with the Enterprise and Lifelong Learning Committee. By going off on the subject of finance alone, are we missing the point of having a discussion about a wider Treasury function? That is the Scottish Council Foundation's suggestion, and while I may or may not agree with that approach, there is a discussion to be had on that issue.

To pick up on that point, the Scottish Council Foundation's paper was certainly interesting. The paper talks throughout about holistic government and measuring outcomes. The focus of the inquiry remit is rather too narrow, given the huge budget that is being allocated among various spending priorities. We should consider the impact of that spending on the real economy, or at least be informed about it. I suggest that we take that into account when conducting this exercise.

I tend to have a lot of sympathy with the point made by Andrew Wilson and Adam Ingram, that the focus of the remit is too narrow. Perhaps the emphasis should be on the financial side but, in view of the way in which the paper considers the structures as a whole, there is some sense in looking beyond the narrow remit. I am worried because I do not see how we could ring-fence or compartmentalise the remit so neatly, given that it could stretch out further.

I am of much the same view. One of the most valid comments in the Scottish Council Foundation's paper was that we must consider the Scottish budget in the context of the whole UK fiscal/Treasury scene. While focusing on the financial structures—given that we are about to approach the budget process and need to know intimately how the process is established and whether it can be tweaked—it is important that we are also aware of what comes through the budget papers on the qualitative side and where that sits in the UK economy. In common with my colleagues, I think that we should add some of the other suggestions to that approach as we go along.

I want to go back to the point raised by Adam Ingram and Andrew Wilson, on the significance of the proposed remit and whether it roams further and wider by going down the dangerous route of creating a turf war among the committees. For example, the issue of a Scottish economic strategy and the Executive's steps to formulate such a document, on which there is on-going consultation involving the Government's senior economic adviser, has been integral to the inquiry that the Enterprise and Lifelong Learning Committee is currently undertaking. The Executive is trying to understand and to create an appropriate framework within which economic policy in general is structured and within which the Parliament sits.

The Finance Committee should be aware that that aspect of the debate is going on in other committees. There is clear common ground between the interests of the Finance Committee and those of the Enterprise and Lifelong Learning Committee, in terms of the way in which public expenditure is allocated to support the general direction of Government strategy. However, there is a wider economic dimension that has already been considered with some care by the Enterprise and Lifelong Learning Committee, whose inquiry will conclude in the next couple of months or so. The Finance Committee should be aware of that point of detail.

As convener of the Enterprise and Lifelong Learning Committee, would you regard anything that the Finance Committee might do as overlapping that work?

It would depend on the remit, but in this proposed remit, there is no overlap. However, if the boundaries are stretched much further into the general treatment of economic policy, the Finance Committee will be in danger of covering some of the same ground that the Enterprise and Lifelong Learning Committee has examined, as it has approached the subject primarily from the point of view of the impact of economic development policy on economic policy in general. That is one way of looking at the matter and I am sure that the Finance Committee would approach it from a different point of view.

We should be trying to understand what an economic strategy for Scotland looks like, what it could do for Scotland and how different policy areas will fit in, as that touches absolutely every policy area that committees will consider. The Enterprise and Lifelong Learning Committee has started some work on that and, in the fulness of time, it will take evidence from the Government's senior economic adviser on that point.

I do not make these comments in order to be territorial or to suggest that the Finance Committee has no locus in this area. I am saying simply that that work is under way and that the Enterprise and Lifelong Learning Committee will take some steps along that route in the near future. However, input from other committees, including the Finance Committee, will be important in that debate.

I will lock horns with John, my colleague and mentor.

That should be entertaining for you all.

While John is correct, we are considering something a bit different and do not want to get our teeth into the area that he outlined, which, as the briefing paper says, is the function of the Enterprise and Lifelong Learning Committee. It is a subtle difference—what is the role of the finance department within the Executive's Administration and does it have wider Treasury functions? That is why we need a dialogue with that committee. While my inclination is not to do this, if our inquiry is to be rigorous, we should consider the full detail of the Scottish Council Foundation's paper.

We should consider other issues, such as revenue raising. The paper touches on the tax- varying powers, but an inquiry into Treasury functions, which examined only the finance side, would also consider business rates, council tax and the charges across every department. Then there are the wider questions about the impact of spending on the economy, which should lead to a dialogue between the two committees. I am concerned that we are going off down an alley that is too narrow. Perhaps we should have further dialogue with the Enterprise and Lifelong Learning Committee, and/or invite the Scottish Council Foundation to an early meeting of the Finance Committee, so that it can explain its thoughts on the distinctions between the two committees' roles, before we engage in the process of an inquiry.

It would be helpful to invite a representative of the Scottish Council Foundation, given that its paper must be a year old. As members will see, it reflects seminars that were held in the middle of 1998 and it was presented, I think, in April of last year. It would be helpful to have an update, which could take account of events that have taken place since then, in terms of the Scottish Council Foundation's proposals that the Parliament should not follow the Treasury model of having one committee with a remit for finance and economics, or on the role of the Chief Secretary to the Treasury and so on. It might be useful to have that at the start. It might even be worth doing before we agree on the remit.

We need advice on what we should be considering. Presumably, the clerks have already drawn up a list of prospective witnesses. Perhaps we can discuss that today.

I do not think that there is much disagreement around the table, apart from a few obvious ones.

Those are just the ones that you see in public.

We do not want to duplicate the work of the Enterprise and Lifelong Learning Committee but I would like to add a sentence to the document. The document should say that the investigation will have regard to the wider economic policy pursued by the Executive. That is a vague form of words but, given that the convener of the Enterprise and Lifelong Learning Committee is a member of this committee, it should be possible to avoid duplicating work.

Will we examine ways in which the Scottish Parliament can raise extra funding and the impact that that would have on the settlement that is given to Scotland each year? I am thinking of things such as borrowing consents to local government and specific charges to raise extra finance. Such matters are important to our understanding of how local government will work.

That might be possible as we are expanding the remit a good deal. We originally planned to conduct a brief inquiry, but we are broadening it considerably. The budget process is about to start and we do not want to stray into that area in the first inquiry.

The distinction between the Enterprise and Lifelong Learning Committee and this committee is important. We should, however, be able to find a form of words that says that we are examining the Executive's function.

Given that we want to have a short inquiry, there is much to be said for having a tight remit. As there is a potential for overlap between this committee and the Enterprise and Lifelong Learning Committee, we should consider other aspects of the matter.

I see the problem in terms of time; it is important that we keep the remit narrow. We can flag up issues that we can examine later. If we broaden the remit too much, we will end up having forgotten the evidence that we took by the time we get round to writing our report. House of Commons select committees often find themselves in that position.

We have encountered a problem that we will have to deal with again. The overlap will occur not only with the Enterprise and Lifelong Learning Committee. For instance, Andrew Wilson mentioned business rates, which might overlap with the work of the Local Government Committee, which has been examining that issue. We have to communicate with other committees to ensure that they do not feel that we are trespassing on their areas.

David Davidson mentioned that he thought that there would be a list of potential witnesses. I thought that he was going to ask for a list of specialist advisers. It might be useful to get an adviser before we decide on our remit. I am in favour of getting advisers in as early as possible, as they can be useful in focusing inquiries.

You will have noted that the clerks suggested that we might not need specialist advisers if the inquiry is to be short. If the inquiry is expanded, we might need them.

I agree that we should keep the remit narrow. However, we could ask other committees that are conducting inquiries into aspects of Treasury functions to give us copies of what they are doing. That would let us examine everything together and let us decide what to do after this inquiry.

I have a few words that could be added to the opening paragraph, so that it would read: "As the Parliament and Executive prepare to embark on the first full annual budget process, the Finance Committee considers it appropriate that its first inquiry should examine the structures for financial management, control and allocation of public spending by the Scottish Executive and that these are appropriately linked to the delivery of the Executive's policy priorities in the context of actual and anticipated conditions in the Scottish economy."

That is a bit of a mouthful, but it would ensure that we examine not just the cheeseparing aspect of the Treasury functions.

I have a slightly shorter form of words. We could delete the final "and" in the last sentence, insert a comma after "public spending" and insert "and mechanisms for directing Scottish economic policy". That would ensure that we were not examining the economy.

The point that I made originally was what Richard has just said. We want to examine the function and structure of the department rather than wider policy issues that affect other committees. We need to come up with a form of words that says that we will consider the other Treasury functions that it would be appropriate for the finance department to have. Should the finance department examine only finance or does it have a wider Treasury function? That is the point of the Scottish Council Foundation paper and would widen the scope of the inquiry a little. Perhaps the clerk could suggest a form of words that would be agreeable to everyone.

Perhaps the form of words that I suggested could refer to "Treasury functions for directing Scottish economic policy" rather than "mechanisms".

How would the sentence then read?

It probably does not make sense grammatically, but it would read: "As the Parliament and Executive prepare to embark on the first full annual budget process, the Finance Committee considers it appropriate that its first inquiry should examine the structures for financial management, control, allocation of public spending, and Treasury functions for directing Scottish economic policy by the Scottish Executive."

"By" might not be the right preposition any more, but I am sure that our excellent team can find the right preposition for the sentence.

I have to say that we should consider whether the Executive should be directing economic policy. By including "economic policy" in the text, we are directing the inquiry. Quite rightly, John Swinney was concerned about that.

Richard Simpson's first sentence included the issue of the ability to measure outcomes, whether in policy terms or in another way. That is important, as the outcomes are missing from the model. At the moment it is all just hard numbers, which allow the model to be audited but which do not reveal whether the spending has allowed policies to be delivered.

There seems to be general agreement that we should extend the remit slightly into the realms of economic policy, bearing in mind what John Swinney said about what the Enterprise and Lifelong Learning Committee is doing.

I will ask Sarah Davidson and her colleagues to come up with a suitable form of words. As we might not meet next week, the wording will be circulated to members, who will be able to give their views to Sarah at that point.

It was suggested that we might not need specialist advisers. However, if the remit is broadened, we might. How does Sarah feel about that?

The decision is entirely up to the committee. We had thought that, as there was a fairly small pool of people who would be witnesses in the inquiry, it might be useful not to tie any of them to the committee but for the committee to hear what various people had to say.

If committee members felt that it would be helpful to have a specialist adviser—whether they were from the Scottish Council Foundation or someone who was involved in the discussions that led to the preparation of the paper that you have before you—that would be possible, bearing it in mind that we are already looking for an adviser to help with the budget process.

I feel strongly that we should have a specialist adviser because the inquiry could become technical. It would be useful to have someone who could suggest lines of questioning that we, as laymen, might not be quick to spot. I am sure that we get excellent advice from the clerks and the Scottish Parliament information centre, but an adviser would help to ensure that our questioning was rigorous.

I take a different view from Mr Raffan. The decisions about structures are political ones that have been arrived at by ministers in the context of the structure of the finance operation in the Scottish Executive. We have to take a similar approach.

We often allow inquiries such as this to become overly technical. We have to think about the manner of approach and the type of information that are appropriate for political decision making in Scotland. That is more important than the technicalities of the issues. If we look at those points of detail—the arcane Scottish Office technicalities that have been replicated in the Scottish Executive—the inquiry could take for ever. We have to approach the issue from the point of view of members of Parliament or other people who are accessing the Scottish Executive for guidance on the formulation of policy and who want to make decisions on financial issues.

I do not want to spend too much time on the issue of a specialist adviser. Should we get the clerks to draw up a list of potential advisers?

Could the specialist adviser who will assist us in the budget process also help us with our short inquiry? The area of expertise involved is likely to be the same.

I support that suggestion. Finance has not been my strongest area in the past and, although I am learning fast, having an adviser at this stage would help us understand some of the technical language and convolutions in the system.

We would have to get someone who was prepared to broaden their advisory role.

We could simply ask Graham Leicester, who wrote the Scottish Council Foundation paper, to assist us. The issues involved in the inquiry are quite different from those involved in the budget process. We are talking about the structure of the civil service. We could send him or one of his colleagues a copy of the Official Report of this meeting and ask them to give a presentation at the start of the inquiry.

I would like to clarify the fact that we pay for special advisers. On what basis are we inviting Graham Leicester?

To speak to his paper.

That is fine. Sarah and her colleagues will circulate a suggested wording that we will be invited to endorse so that we can get a work plan for our next meeting, or a meeting in two weeks' time. Is that reasonable?

Members indicated agreement.