Finance Committee, 19 Dec 2000

Meeting date: Tuesday, December 19, 2000

Official Report 143KB pdf

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Education (Graduate Endowment and Student Support) (Scotland) (No 2) Bill

The agenda has been circulated. There has been a slight change in relation to the papers that were sent to members, which Callum Thomson will explain.

The bill that was sent to members was, unfortunately, the No 1 bill, not the No 2 bill. I apologise for that error. The main change is that the No 2 bill provides for funding raised by the graduate endowment to go towards the funding of student support. New section 2 says:

"The Scottish Ministers shall, in making budget proposals to the Scottish Parliament, include provision that the income arising from the graduate endowment for the financial year to which the proposals relate be used for the purposes of student support."

The revised policy memorandum and explanatory notes, which include the financial memorandum, are largely unchanged. The only notable difference in the financial memorandum is that the section on the graduate endowment says that an illustrative set of draft regulations on the payment arrangements will be published at stage 2, rather than on the bill's introduction, as the original financial memorandum had said.

I take it that everyone has the second version of the bill now. I think that copies were made available this morning.

The changes do not significantly affect our consideration of the financial resolution. The main point is that there is little information in the financial memorandum, which is on pages 5, 6 and 7 of the explanatory notes—there is little that allows us to glean much information or make much of a decision on the financial implications of the policy.

The Enterprise and Lifelong Learning Committee took evidence from the Deputy Minister for Education, Europe and External Affairs, Nicol Stephen, last week. He made it fairly clear that the amount of income that the Scottish Executive would receive from graduate repayments to use for student support could not be guaranteed. I will quote what he said, because it is important. He said:

"It would be wrong to bind future Parliaments, but we wish to ensure that, under section 2, Scottish ministers

‘shall, in making budget proposals to the Scottish Parliament, include provision that the income arising from the graduate endowment for the financial year to which the proposals relate be used for the purposes of student support.'

There must be a proposal from Scottish ministers to allocate the moneys in that way; if ministers did not make such a proposal, they would be in breach of the statute. It is then for Parliament to approve or not approve the proposals."—[Official Report, Enterprise and Lifelong Learning Committee, 12 December 2000; c 1463.]

That comment is all right, as far as it goes. However, I am concerned because the financial memorandum contains little that will allow us to arrive at a conclusion about what the financial effects of the bill might be.

I have a proposal to make, but I will invite members to comment first. It might be appropriate to ask Elaine Thomson for her comments, as she is a member of the Enterprise and Lifelong Learning Committee. Were you at last week's meeting?

Unfortunately, I missed the beginning of the meeting last Tuesday morning. That committee has discussed the bill in great depth, particularly some of the financial aspects, but has not really discussed the impact on the overall Scottish budget.

At this stage, it is not our job to comment on the students' costs.

Indeed.

I have a point that follows from the Nicol Stephen's comment. If a shortfall in income is possible, is it not right to expect the Executive to set out clearly what it expects the total cost to be, against which the graduate tax would be set? That would give a clear idea of the worst scenario for costs as a budget line.

As the committee has been asked to comment on the financial memorandum, it is perfectly reasonable for us to expect to receive such information.

We see again the hoary—or rather, thorny—perennial of the financial memorandum that is not a financial memorandum. It contains nothing that tells us what the graduate endowment will recoup and little that tells us about the associated costs. With the best will in the world, if any member made such a proposal to the Parliament as an alternative to anything, they would be slaughtered for providing such documents. However, at an advanced stage of a bill—not a manifesto or a policy—the Government does not appear to have an estimate of the cost implications.

I find it astonishing that the Executive can introduce such a major bill without knowing the full financial implications for the budget. The financial memorandum cannot be regarded as adequate for such a major piece of legislation. It was fine to have little information for legislation that was minor or had minor financial implications that ran to thousands of pounds, but the bill involves millions of pounds in the budget. I cannot associate myself with an approval of anything connected with the bill or with an attempt to make the financial memorandum seem competent at this stage.

We have been round this course before. The only difference is that, because we do not know how many entrants there will be, there is no way in which the Executive can give an accurate figure—it will vary from year to year. My understanding is that the Executive has several times given an approximate figure, which sticks in my mind, although I had better not say it in case I have got it wrong. The Executive has certainly given an approximate figure, which is all that we can expect in the circumstances. Perhaps the figure should be in the financial memorandum, but it may have been left out because it is so approximate.

An approximate figure is what we are looking for. The number of students will vary year on year, but not greatly. It is unreasonable to expect a difference of thousands. The numbers are relatively stable, so I believe that an approximate figure could have been provided in the memorandum.

I think that the Enterprise and Lifelong Learning Committee discussed these issues at its most recent meeting. I am sure that some figures were given for the expected income that would be raised. Obviously, the figure will change over time. At the moment, the figure is an estimate but, as the graduate endowment comes into play, the number will rise. An estimate has been made of the likely number of students in the next few years. Some of the information is available.

At the Enterprise and Lifelong Learning Committee's meeting on 12 December, Nicol Stephen said:

"By 2003-04—the final year of the CSR—the scheme will still cost about £50 million. We now believe that full implementation of the scheme"—

that must be in its initial year—

"will cost more than that—around £53 million."—[Official Report, Enterprise and Lifelong Learning Committee, 12 December 2000; c 1466.]

Those figures were given in evidence. There are no such figures in the information that we have been given. We should have them.

A broader point is involved. In the past year and a half, we have continually said that we reckon that financial memorandums are short on information. Callum Thomson has reminded me that, when I wrote to the then Minister for Finance to express those views, Jack McConnell said that

"it is vital that financial memoranda are laid out in the clearest possible terms. I have asked officials to look at internal guidance on the preparation of financial memoranda for Executive Bills with a view to improving information on the possible impact on Departments' budgets and I hope this will be helpful."

Although that letter was written more than six months ago, no action has yet been taken. I believe that we must take these matters up with the Minister for Enterprise and Lifelong Learning and her department.

The point is that we must send the memorandum back, as it is invalid. It does not qualify as an adequate document for this committee to work with. We can do nothing with it. If you want someone to move that it be sent back to the minister, I am happy to do so.

The committee seems to have decided to send the memorandum back. We seek further information and want to make a general point about financial memorandums. Do not forget that, every time we discuss a matter such as this, we say that we hope that we will not have this responsibility for much longer. However, there is as yet no sign from the Procedures Committee of when the matters might be devolved. While we have responsibility for the matter, we have a responsibility to ensure that the maximum amount of information is available. That is not the case in this instance.

The committee seems to be saying that we should write to the Minister for Enterprise and Lifelong Learning to ask her to ensure that her officials provide further information in a revised financial memorandum that can be submitted to the committee in the new year. I do not think that there are any time constraints—[Interruption.] I am informed by the clerk that there must be a stage 1 debate by the end of January. That means that there will be time to deal with the matter when we return from the festive recess.

The explanatory notes say that the graduate endowment for new entrants in the academic year 2001-02 will be £2,000. They then say that, for subsequent entrants,

"the endowment may be index-linked."

We should ask for that "may be" to be clarified.

The powers to vary that are in the bill.

So the notes mean that the endowment may be or may not be varied. I understand.

At the moment, we are unable to form an opinion on the financial memorandum because of the inadequacy of the information. Is it agreed that we should write in the terms that I outlined seeking further information with a view to dealing with the matter at one of our meetings in January?

I thought that you said that, rather than simply having additional information cobbled together and made available, you would like the document to be revised. We want the document to be rewritten, do we not?

If we get additional information, it will be in the form of evidence from officials, I would think. I am not sure of the technicalities involved in having the memorandum withdrawn, rewritten and resubmitted.

My query was to do with whether the financial memorandum was valid. I do not think that it is, but I would take advice on that. We need to stress that the memorandum must be given to us in the correct manner.

While we are all agreed that financial memorandums can be improved, I must point out that the layout of this one is no different from those that we have seen with other bills. I agree that we should ask for more information on the bill and its costs and remind the minister of the letter that we wrote to Jack McConnell, but I see no reason for suggesting that the financial memorandum should be changed.

I am looking through the standing orders. Rule 9.3.2 says:

"A Bill shall on introduction be accompanied by a Financial Memorandum which shall set out the best estimates of the administrative, compliance and other costs to which the provisions of the Bill would give rise".

The Executive might reply that the financial memorandum contains its best estimates, but our point would be that the financial memorandum does not allow us to make an informed decision. I am not suggesting that the memorandum be rewritten. It needs to impart greater information, which is what we are seeking.

Since the first time that we were presented with a financial memorandum, we have been saying that the information that we are receiving is inadequate. In every case so far we have said that that was not important because the sums were so paltry. This bill, however, is a major piece of legislation and represents a major financial commitment. This is, if you like, the doomsday scenario that we predicted when we first saw a financial memorandum.

This financial memorandum is a serious example of the problem.

Exactly.

I agree with what Andrew Wilson has said. The only way that I would support the memorandum would be if the minister's comments to the Enterprise and Lifelong Learning Committee were appended to it and if those comments were sufficiently clear. If that had been done, I would be reasonably comfortable about the matter. If it is not done, the financial memorandum will be wholly inadequate.

I agree with that. Our clerks have provided me with an extract from the Official Report of last week's Enterprise and Lifelong Learning Committee. The information has not been presented to this committee, but we have managed to elicit it. However, that is not the way in which the business should be conducted. If the information is presented to us, we may be able to give the financial memorandum a stamp of approval.

It is important to stress that we have had to elicit the information, as it has not been presented to us formally. I totally disagree with Elaine Thomson. Given the amount of money involved and the fact that the minister was prepared to give a figure to another committee as part of his oral evidence, the figure should have been included in the document. We should send the financial memorandum back, particularly as there is no immediate rush. That will make our point emphatically.

I endorse what other members are saying. The information seems to be available and I do not see why it is not in the document.

On students who have graduated and may be eligible to pay, paragraph 27 of the explanatory notes says:

"It is being assumed, however, that any additional cost will be marginal."

I would like to know a little more about that. The information does not necessarily have to be in the financial memorandum. Information about the rate of failure of students to pay loans must be available. I would like to know whether "marginal" means 1 per cent, 10 per cent or something else and on what basis the assumption is being made.

Are you suggesting that the basis is the way in which student loans have operated?

Yes. We should know what the devolved rate is.

Some of that information has been presented to the Enterprise and Lifelong Learning Committee, which has requested additional information on the point that Mr Macintosh raises.

The clerks will check with the clerks of the Enterprise and Lifelong Learning Committee and circulate the information.

Are we agreed that we should write to the Minister for Enterprise and Lifelong Learning and proceed when we have further information, which will be at our first or second meeting in January?

Members indicated agreement.