Finance Committee, 19 Nov 2002

Meeting date: Tuesday, November 19, 2002

Official Report 151KB pdf

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Budget Process 2003-04

We move to agenda item 2, which is the budget process 2003-04. I apologise for two matters. First, the submission from Arthur Midwinter came through by e-mail on Friday and I do not think that everybody has it with them. Secondly, Arthur is not with us.

I propose that we take a couple of minutes to look at the submission.

That might be sensible. I suspend the meeting for five minutes.

Meeting suspended.

On resuming—

I suggest that we deal with the points section by section, if that makes sense. The first section of the stage 2 report contains Arthur Midwinter's general comments. It might be worth our asking David McGill to ensure that the committee's final report begins to summarise the recurring problems that committees report to us.

We might seek an update on our review of the financial processes, so that we have an up-to-date record of changes that have been made and changes that are still needed as part of the budget monitoring process, which we started. We might consider how to conclude that.

One committee commented on the timing of the process. I am not certain whether that was about next year, which we have discussed with the minister, or was a general comment.

Two issues are raised. One is the time at which level 3 information becomes available. Only the Transport and the Environment Committee got round that, by delaying its consideration until the level 3 information was available. The other issue is the balance between the time that we spend on the annual budget and the time that might be more usefully spent on the three-year or two-year reviews following the spending round. We might explore that.

On top of the task that the convener just set David McGill, we are reaching a stage in the Parliament's history at which we need a chart that shows the changes in the process over the four years, to help the next members of the Finance Committee. Obviously, we will not have much time to do anything in the new year. Perhaps such a chart could be an extension of the report. That would be an aide-mémoire of development and of what has not been dealt with successfully. Many issues that are being raised were flagged up in a different form in years 1 and 2.

I have had informal contact with many members of different committees. They suggest that the amount of time which their committees are expected to give to consideration of the budget process, when they have a large legislative burden, means that their priority is legislation and not the budget process. Those members feel that a balancing exercise must be undertaken on the importance of the budget process as opposed to its contents, roll-out, policy terms and delivery terms.

We might have to ask whether it makes sense to involve committees twice during the process or whether there is a better way. Next year, we will be required to consider a single document, because of the election arrangements. All those points need to be swept up and thought through.

That task probably cannot be concluded in the stage 2 report. The committee might have to return to that in January or February. We might take up David Davidson's point. Perhaps we need to present our successors with an overview of how matters might be better organised. A lot of work has been done in that respect and we have taken definite action through which we can demonstrate how we have streamlined, refined or improved procedures that we inherited. Packaging that would be a useful task for the committee.

Such an approach might also require input from the Parliamentary Bureau and the Procedures Committee. The bureau is involved with the Parliament's work load on a cross-party basis and the Procedures Committee can make our proposals part of the procedures framework. A review of procedures is currently under way and it would be useful to make a contribution to that review.

We are mapping out an area of work. Perhaps we should leave it to the clerks and the Scottish Parliament information centre to identify what can best be done to progress matters. If members agree, a paper could set out what needs to be done and we could consider a report in the new year. In the meantime, we will need to put a couple of things in the stage 2 report.

A theme runs through Professor Midwinter's paper: committees are concerned about their ability properly to scrutinise allocations and the effect of allocations. The Local Government Committee is concerned about considering large revenue block and capital expenditure "in a vacuum". The Education, Culture and Sport Committee mentions the contradiction between local government complaining about allocation for the McCrone settlement, but asking for less hypothecation. The justice committees mention the absence of clear links between programmes and indicators. The Health and Community Care Committee is concerned about block allocations and the restrictions that they place on the ability to assess where spending has been applied and whether the claimed outcomes for that expenditure are being achieved. The Transport and the Environment Committee is expressly concerned about the fact that over £27 million has been allocated to reduce a backlog on road maintenance, but it cannot see if that expenditure has been applied to roads. No one can question that large sums of money are being allocated—looking at the increase in the overall Scottish budget is a simple exercise—but the inability to analyse and assess whether moneys are being applied to ministers' stated priorities is becoming increasingly difficult. The Finance Committee in particular should be concerned about that. We raised the matter with the minister yesterday, but we need to pursue it further.

It is clear that, to a great extent, the budget process is not working. Committees think that they cannot satisfactorily scrutinise expenditure. That is hardly surprising when the Health and Community Care Committee's report states that the committee is concerned that

"the Minister has indicated that he is dissatisfied with his ability to monitor budget expenditure."

It is therefore hardly surprising that committees cannot do so.

We have also expressed concern about another area. When committees or the public have been consulted about the budget and have made suggestions, it has not always been obvious which suggestions have been taken up. It is all very well for us to scrutinise the budget and for people to be consulted about it, but we need to be able to identify clearly where consultation has influenced it. That has not always been clear. As part of the process, we should ask ministers to identify specifically where they have changed their view as a consequence of public consultation or a committee's review of the budget process.

I think that we could do the committee job. We can track through the recommendations and responses. The Executive would need to address how inputs by members of the public have resulted in changes.

One of the biggest problems that we have flagged up year after year is that we do not know the outcome and output figures from the previous year when we are into the current year, so we do not understand the effectiveness of a particular vote on a line. Such a situation is very hard to deal with because of the complexity of Government financial procedures and the fact that we are beginning to move towards time horizons for delivery that are longer than we have been used to before.

Either way, if we are carrying out a scrutiny exercise, we seem to be bogged down in the process itself instead of examining how the budget and any new moneys are being applied. That is what subject committees would rather be doing instead of asking whether they have the right information or enough time for scrutiny. They need information about what has been delivered for a set sum of money to ensure that they have options about what they can do or that they can make recommendations about where support might be needed for a certain area or for a priority that has been changed. However, if we are concentrating on priorities, that is a different animal from the one that we have been examining for the past three years.

When the Executive consults, sometimes it takes people's views on board and sometimes it does not. Perhaps it should highlight when it has taken those views into account or explain why it has not done so. That would improve confidence in the consultation process. Very often, people have the mistaken impression that, because they have been consulted and have expressed a view, their view will automatically be accepted. There are often good reasons why that does not happen; similarly, there are good reasons why it should. It is important that the Executive explains why it has or has not taken up certain suggestions.

Certainly the Finance Committee's role is to scrutinise the budget. It does not write the budget, nor is it responsible for its delivery or the outcomes—that is rightly the Executive's responsibility. I happily endorse Tom McCabe's comments as an elaboration of my own point.

Although there is increasing frustration that committees are simply discussing the budget process instead of budget choices and priorities, the argument itself is circular. It is difficult to have meaningful scrutiny of budget choices if the underlying process and reporting are not correct. I agree with Tom McCabe that the process is not yet correct for committees to be able to carry out scrutiny. For example, there is very real tension about the local government and health budgets, because it is hard to see how money is being spent to drive a policy forward if all that is being reported is what is happening in departmental silos. In spite of what the minister said yesterday, the matter needs to be explored further.

The Enterprise and Lifelong Learning Committee has effectively said the same thing. It has to report on policy-driven, cross-cutting budgets, which often requires the sort of information that we are all seeking. Perhaps the Executive needs to carry out more work on how it has reported on matters historically and find out whether there are any opportunities to develop new reporting mechanisms that better meet our current needs.

On Elaine Thomson's point about silo thinking and departmentalising issues, Arthur Midwinter's précis of the Rural Development Committee's report contains a vital comment about considering that committee for a cross-cutting review, given the complexity of the area within which it operates. Arthur Midwinter's report also mentions

"the narrow and imprecise basis of department targets".

We have already flagged up the problem of tying departmental targets to a cross-cutting situation. I appreciate that it will be difficult for everyone, including the Government, to get a handle on that matter, because of the way in which the departments are structured. However, I feel that the issue will play a big part in any future considerations of what the Parliament is supposed to do with the Government's spending proposals.

The committee must be careful that it does not underestimate the considerable progress that has been made in shedding light on budgetary arrangements. Over the past three years, we have achieved substantially greater transparency and far more of a handle on the budget process. If the comparator is Westminster, we are far further forward with our system for scrutinising the budget.

It is important that we summarise the process and seek opportunities to streamline it. We have already asked the clerk to pick that up and come back with an indication of how we can do that.

There are some specific issues of principle and identifiable subjects to which we need to pay some attention. One of those is hypothecation and allocations within budgets. That must be explored, particularly in the context of what the Deputy Minister for Finance and Public Services said to us at our meeting yesterday about local authority budgets and the possibility of scrutinising them.

A further issue is that of targeting. There clearly needs to be some kind of process by which we consider how the Executive establishes targets and how those targets can be monitored and identified.

A third point was raised by Brian Adam, and relates to the transparency of the consultative process and to whether we can shed some light on how the mechanisms within the process are handled.

We will leave a number of issues arising from this discussion to be taken forward, if that is agreeable.

I see no dissent. Let us turn to the Local Government Committee's report. We heard a positive response from Mr Peacock yesterday in relation to the main points that were raised by the Local Government Committee, and our adviser will want to pursue further the matters raised with the Executive.

Targeting is highlighted in the Enterprise and Lifelong Learning Committee's report, and we can feed in the comments made.

The Social Justice Committee's report highlights the gulf between the budgets that come directly under social justice and the funding that has been allocated to meet the broader social justice targets. That is one of the reasons for the apparent mismatch between the budgetary allocation, which is dominated by housing, and the broader area.

That also applies to the rural development budget. Most of its budget relates to the handing out of subsidy payments, and it has little specifically to do with rural development.

Arthur Midwinter highlighted the point made by the Social Justice Committee about the plethora of Executive priorities, which another committee also raised. It is easy for ministers to say that something is a priority, forgetting that somebody else has said that they are to have fewer priorities. I am pointing out a human trait, rather than trying to make a party-political point, but it does not help us in our budget scrutiny.

The point about targets is made in the Social Justice Committee's report as well as in the Enterprise and Lifelong Learning Committee's report.

I was interested to note that the Education, Culture and Sport Committee spent a remarkable amount of its time on a very small part of the budget. The education budget did not seem to be discussed at any great length. The Education, Culture and Sport Committee raises the issue of hypothecation and a contradiction regarding the position of local authorities in that respect.

The justice committees have a number of specific recommendations, which all involve more money being spent on justice.

On a philosophical point, I would disagree with paragraph 6 of the justice committees' report. It is possible for something to be a priority but for its share of the budget to decrease, with the actual size of the budget still increasing. I do not agree with that point that the committees make on the justice budget.

I agree. It is not just about how much is spent, but about how the spending is focused and targeted. That relates to the convener's earlier comments.

There is also the issue whether the amount spent on crime is the best indicator of how effectively crime is being tackled. There is an issue of cause and effect there.

There is no shortage of real indicators in relation to crime. We do not need to rely on examining how much money is being spent tackling it.

I am surprised that the justice committees have not made clear their concerns about the capacity of the justice systems to cope. There are no specific recommendations on capacity, although there are hints about it. The issue is whether the court system and the prison system have sufficient capacity and whether there are enough police.

I would be in favour of an investigation into the cost-effectiveness of the criminal justice system. I am not sure whether that should be done by the justice committees or through some other mechanism. Such an investigation should assess how efficient the criminal justice system is by using realistic indicators to measure the delivery of outcomes against targets and the way in which people are processed through the system. One hears horrendous stories about witnesses not turning up and cases not proceeding for a variety of reasons. I presume that that is wasteful.

Wasteful! You could run a small country on it.

The cost-effectiveness of the criminal justice system is a genuine budgetary issue that needs to be looked at.

One of the problems is that justice has come into the goldfish-bowl arena, where it has never been before. All sorts of stresses and strains have emerged, because the public have lived with the system for years, but have not really understood the roll-out. The media seem to be taking a great interest in the justice system these days. It was valid to make the point that

"the period of the prison estates review is longer than the spending review".

Such comments are valid, not only in relation to the justice budget.

The report of the Health and Community Care Committee highlighted the ring-fencing contradiction.

I liked the comment that the committee was

"totally and utterly dissatisfied with the level of information"

that is available to the committee and the minister. I am not sure what the distinction between "totally" and "utterly" is, but it is obvious that the committee was not happy.

Are there any comments on the Transport and the Environment Committee's report, or on that of the Rural Development Committee? The Rural Development Committee recommends that expenditure on rural development be considered for a cross-cutting review next year. Although we cannot commit to such a review at this point, I presume that members would want to pass that on to the incoming Finance Committee, as it has been raised repeatedly.

We have seen some of the impact on the wider rural economy. Whether the impact results from foot-and-mouth disease, a downturn in tourism or the current fishing crisis, it affects the communities that live in rural areas. The Rural Development Committee has a wide basket of responsibilities and a number of ministries are involved in issues that affect rural development, such as housing, planning and transport infrastructure. A cross-cutting review would be a useful exercise. It would involve a fair chunk of work.

It is a difficult area. The Minister for Environment and Rural Development has no specific budget for rural development as such. He has only what other ministries have. A couple of years ago, when I was a member of the then Rural Affairs Committee, I asked Ross Finnie whether he would like to have a small budget that he could use in a particular area, if necessary, because other ministries were not reflecting his priorities. I cannot remember what his answer was. If one wants to give genuine consideration to rural development, one must ask whether dedicated resources are necessary. Alternatively, the issue could be dealt with in cross-cutting groups and by trying to influence other ministers.

I think that Ross Finnie feels that he has to jump around the headline issues in the main parts of his brief and to pick up what comes out of other ministries. As well as the economic drivers, there is an endless list of issues affecting rural areas, which includes education, health delivery, transport, access, social inclusion and deprivation. A cross-cutting review of rural development would involve a great deal of work. I do not think that the Finance Committee could do that on its own—it would have to do it in parallel with other committees.

I am sure that you are right. Further, there are some differences in the applicability of the concept of "rural" in that context as there are quite diverse circumstances in what is generally called rural Scotland.

Indeed, we have spoken of mini-new towns being developed in rural areas.

It might be best if we asked SPICe to examine, during the first three months of the new year, the issue of how a rural development cross-cutting review could be conducted, so that we could hand to an incoming committee some thoughts on that, should the members of the new committee decide to deal with it.

I do not know that we should start something that would commit a committee to a course of action after the election. What that committee decides to do should be a matter for that committee.

My suggestion would not commit that committee to that course of action. I am saying only that we should ask the researchers in SPICe how that kind of analysis could be undertaken.

It would be quite feasible for SPICe to pull together a scoping paper before the election that would outline who the main players are and where the tensions lie. However, I do not think that we can commission any other sort of direct study.

I was not suggesting that we would.

I would have thought that a scoping paper would concentrate on the areas that we should consider in relation to cross-cutting. The Rural Development Committee is not the only committee that we might want to include. The fact that some resource has been put into dealing with rural development would flag up to the next committee the priority that the members of this committee had placed on the issue. That might not necessarily be the case, however.

It might assist the next committee, if it decides to embark on the course that we are talking about, if we came up with some thoughts about what is rural and what is not rural. You can think of about three definitions off the top of your head. The Highlands sort of rural area is completely different from an intensively farmed sort of rural area, which is different again from the sort of rural area that is within travel-to-work distance of a large urban area. All of that needs to be taken into consideration in relation to policy development.

I suggest that I speak to the convener of the Rural Development Committee about the issue of the scoping paper and so on. As David Davidson says, we are in the process of piloting two cross-cutting reviews and we might want to get a report back on how they have gone before making further progress with the matter that we are discussing.

Next, we have to deal with the report of the Equal Opportunities Committee. In paragraph 22 of his paper, Arthur Midwinter makes a clear recommendation in that regard. Are people comfortable with what he is suggesting?

Members indicated agreement.

What is happening with the issue that Nicola Sturgeon raised under the first agenda item?

We decided that we would talk to the Health and Community Care Committee about its view. I would guess that we should discuss how to deal with Nicola Sturgeon's proposal in the context of our discussion of the report.

What would the formal mechanism be? Are you suggesting that the clerks would simply provide some text for the draft report? I wonder whether they might need a steer from us on that, as a political decision is clearly involved.

It would be helpful if the committee gave us a steer, but we would normally simply include some draft text for the committee's consideration as part of the draft report.

We need direct and official contact between the committee and the Health and Community Care Committee. We do not know what discussions it has had about hepatitis C compensation and whether it made a decision to postpone any direct comment until it had thrashed out the point with the minister. It is important that we know whether, if it made that decision, it knew that we had a deadline by which to produce a report. We needed to have the Health and Community Care Committee's input earlier. That may have meant that it needed to push the minister, but I am sure that the minister would have understood the time scales involved.

At this stage, I do not think that it is our business. I accept that Nicola Sturgeon put forward her view with sincerity, but the minister still has to make a final decision. There may have been indications—however they came about—that that decision may not be to Nicola's liking, but at the moment, that is not definite. The minister reports to the Health and Community Care Committee, and it is essentially a matter for that committee. The minister has to report to it and the decision has to be taken by it. This debate is premature and in the wrong location.

I do not see the situation in that way at all. The issue has not come up all of a sudden; it is just that the process for dealing with it has come up because of the publication of the interim report. It is an issue that has been around in Parliament for a long time, and successive ministers have struggled to deal with it. I understand the reasons for that, and the final report will address the general issue of compensation as opposed to the specific issue of hepatitis C compensation. It is reasonable to consider whether we vary the budget to allow for that compensation. I do not think that it is a party-political decision, but it is a political decision, and I do not think that it would be unreasonable for us to do that. I understand the concerns that some may wish to involve the Health and Community Care Committee as part of that process. That is reasonable, but I do not think that we should dismiss the request out of hand.

I suggest that we get more information through a dialogue with the Health and Community Care Committee to find out what stage the process is at and what its views are. The matter needs to be discussed in the context of the general discussion of our report, which will take place by the timetable. We should be able to get information via the clerks to feed into that discussion, which needs to take place in that context.

I am also concerned that if someone is a member of a committee, we need to know what efforts they made to try to have the committee deal with the matter. It does not matter whether they were in a minority or had support. We have already had a parliamentary debate on the subject, and my memory of that, which is probably a little vague, is that we were going to look to a full report about not only hepatitis C compensation, but the general principle of compensation. If a report comes out that affects other parts of public service, it will have a long-term impact on how we make decisions in Parliament on spending and compensation. That is vital. We cannot unravel that for just one case.

I agree with David Davidson. I do not think that Brian Adam can have it both ways. He recognises that the forthcoming report will deal with compensation matters in general, and we have been asked this morning to deal with a specific matter. Although we have a great deal of sympathy with the individuals involved and one way or another would like to see an accommodation for them, the fact is that we have been asked to set a precedent towards something akin to no-fault compensation. That would have huge consequences across the Scottish Executive budget. Although Nicola Sturgeon has raised a specific question this morning, a generality is behind it of which we need to be aware.

On the other hand, the minister asked for the specific issue to be treated in the interim report. He asked for that presumably so that he could make a decision on the issue regardless of the generality. One case has already been dealt with in relation to HIV infection.

I raised two points with Nicola Sturgeon. The first was whether it was an interim report and when the final report was expected. The second point was whether the minister had made a final decision. As I understand it, the door in both cases has not been completely closed.

We can look at this in two ways. The first concerns the particular issue, and the second is the principle of amending the budget. One criticism that has been levelled in the Parliament, consistently by some members, is that no alternatives to the budget have been proposed. However, a specific alternative has been proposed within the Parliament's agreed framework—a zero-sum budget—and it would be unfortunate if it did not go forward for consideration. That is especially important as it is the first time that we have had such an amendment, whether it is from a committee or a member.

On the specific proposal, a large number of people have been waiting a very long time. The Parliament has aired the matter over several years, which is to its credit, but it would be unfortunate if we did not at least address the issue rather than postpone it because another report is on its way.

That is not what I am suggesting. I am suggesting that the specific proposal be dealt with in the same way and at the same time as the other specific proposals coming forward from parliamentary committees and as part of our report. That is the appropriate way for it to be dealt with, and that is how we should handle it.

Is that agreed?

Members indicated agreement.