Education, Culture and Sport Committee, 23 Apr 2002

Meeting date: Tuesday, April 23, 2002

Official Report 224KB pdf

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Budget Process 2003-04

This afternoon, we will take oral evidence on the Scottish Executive's annual expenditure report as part of the budget process for 2003-04. We have a number of witnesses this afternoon, the first of whom is Mike Doig, who is the vice-president of the Headteachers Association of Scotland.

Mike, I invite you to make some opening comments, after which members will ask questions.

On behalf of HAS, I should say that I am very pleased to have the opportunity to present some of our thinking to the committee this afternoon. Along with our colleagues in primary education, we very much welcome the additional funding that we have received, which is now beginning to address the years and years of cuts. It has been a novel experience. Moreover, it is eminently sensible that central resources have been clearly targeted at supporting Government initiatives, which allows local authorities both to continue to support projects that they want to support and to take on board central Government initiatives.

That said, we are concerned about a number of areas. For example, although the ring fencing of funding for specific initiatives helps to secure their implementation, it gives rise to some problems. All levels of our association have felt a fair amount of confusion about how much funding is available for which initiative and for how long. Things have become increasingly complex at the receiving end. Although I realise that there is a grand plan, I must point out that we are also on the receiving end of local authority initiatives. That can sometimes result in an overlap in issues such as social inclusion on which authorities have been running an agenda for some time.

Furthermore, ring fencing can give rise to perceptions of unfairness. For example, if specific curricular areas in secondary education are singled out for additional resources, people in the areas that are not singled out have something to say about that. In the most recent tranche of funding, we were asked to give specific priority to science and music. That was excellent, because those subjects mop up money. However, colleagues in other curricular areas then asked, "Are we going to get any money?", to which the answer had to be "Don't know".

A number of issues surround the mechanics of ring fencing. There is uncertainty over short-term funding, such as the education excellence fund, which has provided funding for the alternatives to exclusions initiative. In technical terms, funding for that purpose has ceased although I understand that other resources are being moved into place, partly from local authority sources. However, a degree of uncertainty is involved. What happens when the two or three-year funding for an initiative comes to an end? Because of that uncertainty, we find it difficult at school level to plan for the long term.

Secondary schools across Scotland perceive a growing disparity in the provision of delegated funding to schools by education authorities. I refer to variations in staffing formulae, different enhancements and so on. That disparity makes it difficult to make meaningful comparisons in education provision. We may be approaching a situation of resourcing provision by postcode. National funding does not take into account consistently variations in how local authorities take forward projects.

For example, in a number of education authorities, the effects of schemes including public-private partnership schemes are producing resourcing to a standard. If central Government provides ring-fenced funding for an issue, the well resourced get better resourced. A local authority neighbouring my own has, as part of a PPP, made a colossal investment in information and communication technology for its youngsters in all subjects and age groups. As the central funding for ICT is ring fenced, the authority will make another quantum leap forward, which means that the rest of us are left running even faster to catch up.

The nub of our concern is the evidence that funds are being diverted from school budgets to compensate for underfunding elsewhere. One or two well-publicised instances of that have appeared in the press recently. It is not appropriate for me to comment on individual cases, but such instances are difficult to track. I can account clearly to my local authority for Government funding in the past financial year. In the case of my school, the funding is £36,000. I can also account for the categories of expenditure.

I do not doubt that my local authority has returned that figure to the Scottish Executive as evidence of the funding. However, I cannot say to any degree of certainty whether other authorities might have taken an equal and opposite amount of money from their education budgets. In one or two instances, we are aware that authorities took money directly from schools and spent the funds on other initiatives. That is the crunch for us.

Thank you.

Thank you for that useful contribution. The budget process is political and practical. I will ask a practical rather than a political question. You rightly outlined the difficulties that all establishments face in trying to plan their finances carefully over a period of a year or longer. The arrival of what are welcome sums of money also causes difficulty, as they arrive piecemeal throughout the year and are sometimes hedged about with conditions.

For example, I am aware of certain projects to which inflexible conditions apply—they are broken down into transport, staffing and so on—that make it difficult to vire money. How much would you and your colleagues welcome a requirement for the school and the authority to be told about the totality of funding that will be available to them in the coming year? Would it assist you to have greater flexibility in decision making? How could we implement that?

Such an approach would certainly assist us, although that would require an appropriate framework in the local authority structure. I would have no problem with that, but I know of one or two authorities in which relations between the authority and school managers are a little difficult. That would pose a problem. However, there is no question but that we would welcome transparency.

And therefore better planning? That is what we are talking about.

Yes.

I will follow up your point about the relations between an authority and the school in relation to devolved school budgeting and devolved management of resources. Problems are being brought to our attention about the ability of an authority to give with one hand and take with the other. Figures that are meant to be part of a school's budgets are sometimes adjusted on the spreadsheet or budget notification without consultation with the school.

I know of a memorable case in which a negative sum appeared as if by magic in the school supplies budget because an adjustment was made following a decision that was taken by the director of finance; every school in that authority was affected. Should a clearer set of regulations or conditions be applied so that schools are consulted, know what is going on and are not in a grace-and-favour position in relation to devolved budgeting?

We would certainly welcome a more prescriptive approach to central funding that would include school managers in the discussions about the allocation of money to the local authority and disbursement to schools.

Local authority schools have tight financial regulations—we must be among the most tightly controlled organisations and therefore we are highly accountable. By extension, we depend totally on the local authority for our funding. That presumes a degree of trust and, in one or two quite well-publicised instances, that trust has been less than 100 per cent.

I would like to take that a bit further. The £36,000 that your school gets is a drop in the ocean compared to the resource that it takes to run that school. Schools are increasingly being given direct funding. Have we struck the right balance between direct funding to schools and direct funding to local authorities that they can then apportion to their priorities across their patch? Would you argue that schools should get more direct funding?

Let me put my answer into context. The classroom supplies budget for my school is £100,000 and the £36,000 that I have represents a colossal proportion of that money. The money goes on books, equipment and classroom and teaching materials for youngsters, so it makes a huge impact. The £36,000 is only a small amount if it is seen in the context of an overall school budget, of which 80 per cent or so is tied up in staffing costs. Head teachers have a relatively small figure to play about with and the impact of the money that comes from the centre is great. Therefore, we would certainly welcome a continuation of that channel, if we can sort out the guarantee that lies behind it. If the Scottish Parliament and the local authorities can ensure that that money is delivered at the chalkface, direct funding will continue to be an appropriate mechanism. Rather than looking at the principle, we should examine those cases in which the mechanism has not worked.

That is a helpful answer. Let us turn to the issue of ring fencing. Earlier, you suggested that certain things need to be ring fenced because we have to target resources and see growth in particular areas on the ground. Then you mentioned caveats. Various arguments are presented on either side of the debate about ring fencing. Have we got the balance right regarding the proportion of the funding for local authorities that is ring fenced for specific initiatives? If not, how would you change the situation?

It is difficult to judge that from my perspective, as the costs of local authority initiatives are not necessarily known at school level. It is difficult to know whether there is a balance. I return to the issue that I raised earlier. At school level, a built-in unfairness—injustice would be the wrong word—can be perceived because of the targeting. Until relatively recently, it was my job as a head teacher to delegate an appropriate amount of my school budget to the various curricular areas. Ring-fenced initiatives are outwith my gift and I have to account for the spending on the various elements.

Over a long period, the funding is bound to balance out. The most recent initiatives—there was quite a focus on science in the most recent tranche—fortunately tied in with a wee initiative that was under way in our science departments, which were working with our colleagues in primary schools. That was fortuitous, but external funding does not always sit with schools' own development plans. Head teachers must support the development planning in their schools through their schools' funding, and there can be a mismatch. I am unable to say whether there is an imbalance, but I would guess that, if that kind of support for schools were to continue over a long period, it would balance out. That returns us to the issue of uncertainty. We do not know what funding is coming, when it is coming or what it is coming for.

When I speak to teachers—especially head teachers—they tell me that they like ring fencing, as it brings funding to schools. However, people in local government tell me that we must stop the ring fencing, as it takes control away from the politicians and policy makers. Do you think that ring fencing leads to a lack of a strategic or joined-up approach in education? If you think that ring fencing is a good idea, should there be a mechanism to allow head teachers to talk directly to the ring fencers? That sounds a bit like anarchy, and local government would not like that. Do you think that we should abandon ring fencing? Is it a barrier to a joined-up, strategic approach to education, or is it a good thing that requires better communication methods?

Your second point is perhaps the key to the matter. As I suggested, it is not always clear to school managers exactly which funding ties up with which initiative and for how long. The problem with ring fencing is not the principle but the practice. It would be helpful if there were a better communication channel to complement the local authority approach. We cannot get away from the fact that state schools are controlled by the local authorities, and we have to work as closely as we can with them. However, it would be constructive to have another avenue of dialogue and information. That would get round some of the problems that have arisen over ring fencing through a lack of appreciation or a lack of understanding of exactly where it is coming from—I mean that in a cerebral, rather than material, sense.

That is helpful. I have another question on resourcing. Four out of the six secondary schools in my constituency are funded through private finance initiatives. The remaining two schools, quite rightly, are saying, "We don't get the resources. We need better information technology, sport and leisure facilities." Is it not inevitable that in replacing and refurbishing the infrastructure of schools, the ones that are not moving along will be concerned? Can we compensate for that?

That is a concern, as I suggested earlier. I am not sure whether it is a concern within authorities, but it may be a concern across authorities when the nearest school down the road is taking part in a totally different ball game, by virtue of its status as a PPP initiative.

To be honest, no reasonable school manager would quibble with the need for more fairness in the situation that you describe. If four schools have a step-up in resourcing, in the end the local authority and the Government are paying for it. There should be no quibble, therefore, with the view that the schools that are not in that position could be allocated some of the funding that might otherwise have been allocated. That is different from saying, "We will give you the central funding with one hand and take it away with the other."

A consensus approach and a clear understanding of what is happening are required. No fair-minded manager would have a problem with that. Our association's concern—I return to the postcode issue—is that, increasingly, youngsters are getting a distinctly poorer deal in some parts of Scotland than they are elsewhere.

Could you expand on that point? Are they getting a poorer deal because of investment in PPP or because of historic issues?

It is the cumulative effect of things: the historical underfunding in some local authorities; the unpredictable effect of the PPP system; and the latest raft of central funding. Increasingly, those are distorting the picture.

A survey that our funding committee convener put together stated that comparing provision across Scotland

"was made problematic by the confusion of categories of funding across authorities"

but that

"evidence was sufficient to establish that significant differences do occur, rendering unqualified national comparisons of performance unsound."

That is the subtext. There is an assumption that, by and large, youngsters throughout Scotland are getting a similar deal. That has not necessarily been the case for youngsters in the areas of greatest deprivation. Some of those youngsters are now—belatedly—getting a super deal and super provision.

I would like to explore further a point that Mike Russell raised. His first question was about certainty. He made the point that, rather than being drip-fed further moneys, if moneys were decided in advance, you would have a degree of certainty.

However, politicians have a propensity for wanting to make good-news announcements of additional money in budget statements, for instance. If head teachers could choose, would they rather that the money was held back until the next financial year, which would allow them to be certain of it, or would they sacrifice that element of certainty in order to get the money more speedily?

They would not sacrifice the element of certainty. The last time that I spoke with colleagues, we found that we shared a concern that we were scrambling to get the money through the system. Issues relating to local authority money need to be discussed at school level. We need to invite bids from the various specialists that have to be considered in the whole. They inevitably come to two or three times the money that is available—surprise, surprise—and I and my senior colleagues have to discuss how to get to the bottom line. That result is translated into orders, which are sent back to departments and have to be invoiced. All of that has to happen before the end of the financial year, which is too tight a time scale.

We would welcome an intimation as to whether the Scottish Parliament thinks that that model of funding should continue. I point out that that model resulted in our not knowing last year how much we were going to get this year. Perhaps a balance could be struck between having sufficient advance notice to allow us to do a bit of forward planning and the ability to allow the people in power to address issues as they think necessary. Having the best of those two worlds would be our ideal situation.

That is an interesting answer.

In England, additional funds that are announced concern, in the main, per capita funding that goes directly to schools rather than to the local education authorities. When money comes up to Scotland through the block grant as part of our share in the increase in spending, it goes to local authorities. That has resulted in some interesting decisions, such as that which meant that one Edinburgh primary school received £400,000 while another school just two miles away received only £100. [Laughter.] Yes, that is quite a discrepancy.

Is there a view in your association that there should be per capita funding for such disbursements and that local authorities should use other mechanisms for alleviating what they might think are particular differences, be they postcode problems, building deficiencies or whatever?

There is no doubt that we seek some sort of relationship between the allocation of money and the school roll. If we want to put resources in front of youngsters in the classroom, it is obvious that there should be an arithmetical relationship between the money and the roll. A lot of authorities have banded the money so that larger schools get larger amounts without any calculations being done. That is helpful enough—the calculation does not have to be done down to the last pupil. The money can relate to factors such as levels of deprivation as well as to the roll. We recognise that, because of their circumstances, certain schools might need more or less money than others.

English schools are a different matter, because they are directly funded. We are all funded through local authorities and no mechanism exists for us to have our own cheque books. I am not certain how welcome that would be. We do not frequently ask ourselves about having our own cheque books. The mechanisms of the English system are completely different.

I will continue the spirit of generosity by allowing Brian Monteith a final question.

Thank you very much, Deputy Convener. I know you for your generosity of spirit.

I want to explore the answer that Mike Doig gave about PPPs. It seemed that you were concerned that investment through PPPs was skewing the benefits of finance being available to schools. Have I interpreted you correctly? Will you explain further what you mean by that?

PPPs have provided Glasgow—an area of considerable deprivation—with new schools. Balfron High School in the Stirling Council area had needed to be replaced for a long time and there was no sign of that happening until PPP was used. PPP appears to be neutral in the sense that it is used to replace schools, whether they are in good areas or bad. PPP is neutral because it is more about replacing the fabric than about taking deprivation into account. Might we have to find other means of providing resources for helping schools in which deprivation exists?

This afternoon, I have been concerned with the kind of funding issues that relate to the classroom. Unlike the situation in England, fabric issues are not part and parcel of my budget.

Balfron High School and the Glasgow schools have been completely kitted out with new pupil furniture. Those schools will not need to spend much money on classroom furniture for several years to come. A school outwith that kind of scheme, such as my school, has a huge task every year in allocating relatively limited resources to replacing knackered tables and chairs.

I also mentioned ICT in relation to Glasgow, where the schools have been superbly kitted out with state-of-the-art equipment. Other schools are running just to stand still with ICT. Regardless of the politics behind the PPP projects, they have been brilliant for education in Scotland. The schools that have benefited from PPP have made a quantum leap forward. Their resourcing continues from a higher baseline and, as far as I can determine, the gap is not being narrowed.

That was very useful.

We have discussed repeatedly the funding of special educational needs programmes. We have dealt with the issue primarily in terms of the local authority's role in relation to the Scottish Parliament's role. How do special educational needs affect your budgeting in schools and how should those needs be progressed? We hear about funds following the pupils and so on. Please tell us a little about how the funding of special educational needs works in schools.

Special needs is a difficult issue for us, because of its complexity. Even providing learning support for youngsters is a complex matter. There is no one-size-fits-all solution. As one is dealing with youngsters on an individual basis, there is a danger that ring-fenced resourcing might not have a significant impact on a youngster in a particular situation. However, it is up to school managers to use our budgets to redress such situations. In my opinion, we will never have enough money for special needs youngsters and for inclusion. Costs are staggering, but we try to keep the issue up front. The issue is not easily resolved at school level. Allocating expenditure to special needs on the basis of pupil numbers, for example, would not work. The case must be exceptional at school, local authority and national level.

I thank you for your contribution and welcome your observations. What secondary school are you from, Mike?

Bearsden Academy. I was at Cumbernauld High School.

It is good to know that you occasionally look at Glasgow with envy.

I do. Many youngsters on my roll are from there.

Thank you.

The next witnesses represent local government. Helen Law has been in front of the committee a number of times and I welcome her back. She is the education spokesperson for the Convention of Scottish Local Authorities. David Dorward is Dundee City Council's director of finance and David Cameron is head of education at East Lothian Council. Again, I am conscious of time. Witnesses may make opening remarks and members will then ask questions.

As usual, I will be brief. I am grateful that the committee has again invited us to give evidence. We hope that we are building a relationship whereby COSLA works in partnership with the Scottish Parliament and the committee. We think that a joint agenda is important. We cannot function if there is a competitive agenda.

The committee knows that we will raise the issue of ring fencing. COSLA would not like to continue that approach. There are too many bids, too many plans and too much bureaucracy. We should be given the money and if local outcome agreements are entered into we will deliver on them.

School buildings are mentioned in the paper. Two years ago, COSLA and the Association of Directors of Education in Scotland made a joint submission that said that £1.3 billion was needed, that schools had been underfunded for quite a long time—20-odd years, I think—and that we needed to act on that.

On the excellence fund—which now has a new name that escapes me at the moment—we were grateful for the discussions that reduced the number of headings, but we think that the continued ring fencing of significant funds is counter to the spirit of outcome agreements.

The excellence fund is the national priorities action fund, which sounds impressive. Does any other witness wish to say something?

I am happy to respond to questions.

I have an observation. I was surprised by the lack of detail on education in the Scottish budget papers. There is a section on education that says that the majority of expenditure on education in Scotland is in the local government section. A magnifying glass is needed to see the word education in the local government section of the budget volume. If I were to produce for our members a budget of the same detail as the Scottish budget, it would be thrown out.

I appreciate that hopeful and positive start to this afternoon's discussion.

I thought that it was positive.

The committee has identified a number of ways in which we believe information should be accessed and presented. Your contribution in that regard is welcome and will assist us. For a change, I am in agreement with Mike Russell—I need to watch myself.

I want to pick up on ring fencing. Having operated local outcome agreements, which are being piloted, I know that there is much to commend them and that we are still learning about them. How would you structure a local outcome agreement on education that would avoid ring fencing? Do you think that it would be possible to mainstream equality on a race and gender basis by using outcome agreements, which is perhaps more sophisticated than simply using budgets?

I refer that question to David Cameron. Because East Lothian Council is party to an outcome agreement at the moment, he will be able to answer the question in more detail.

The discussion of local outcome agreements is bedevilled by confusion because, although such agreements provide ring fencing, they do so by agreement and by making councils democratically accountable for the delivery of targets. That is a vitally important development.

There is no doubt about the fact that there must be clarity about how national priorities will be met and delivered. One of the tensions that the Executive faces is that it has attempted a policy of non-compliance that has been highly successful and popular in schools, particularly as regards flexibility in the curriculum. If we want to combine the principle of non-compliance with the delivery of agreed priorities on which there has been wide consultation and to which the equality agenda is absolutely central, local outcome agreements represent the best way forward. Ring fencing at national level is a very blunt instrument for the division of funding.

Local outcome agreements must be built around national priorities, must reflect how local authorities intend to deliver those and must set clear outcomes that are appropriate to the local context. Because of the current funding situation, funding streams must be identified in local outcome agreements. Were the funding situation to be different, the budget allocation to local outcome agreements would need to be clearly stated and clearly related to priorities, so that the Executive could make a sound judgment on whether best value was being delivered and commitments were being honoured.

I share your desire to move away from emphasising inputs towards emphasising outcomes. However, we know that Scotland is not uniform. What happens when a local authority is clearly not meeting the targets that it has agreed in its local outcome agreement with the Executive? What remedial action do you suggest should be taken against that local authority?

The current doctrine is that steps should be taken to support schools that are failing to meet their targets. The terms used in respect of councils that failed to meet targets that had been agreed in local outcome agreements would probably be "challenge" and "support" rather than "take action against". I welcome that.

The main issue that bedevils the local outcome agreement pilot in East Lothian is the question of accountability. Accountability must be built in at the point where the agreement is accepted. The key issue is whether the targets set by the local authority are both ambitious and realistic. The process is exactly the same as that which we undertake in relation to school development planning—the same criteria would be critical in determining whether a plan was accepted.

The key word is "agreement". At the outset, a local outcome agreement must be an agreement that is subject to close examination either by Her Majesty's Inspectorate of Education or by a division of the Executive, to ensure that there is clarity about what will be achieved and about the mechanisms that will be used. We must accept that the system is not free range. As I have already said, there is no doubt about the fact that there has been consultation on national priorities and that they have been agreed. We want to and must deliver on those. The flexibility that we ask for relates to the manner of delivery.

COSLA's view is that ring fencing is currently too restrictive and prescriptive and that it weakens local democracy.

Both Helen Law and David Cameron raise an important philosophical question about what we expect from local authorities and how they fit into the overall dynamic of education in Scotland. The Government may set policy, but it is implemented, refined and developed in the context of local authorities working with schools, which themselves have a degree of autonomy. We should develop that idea in the debate on the purposes of education and perhaps we can come back to it then.

I want to ask a broader question about the relationship between resources and priorities. On Saturday, The Scotsman carried a story on a report on East Lothian Council's inclusion policy. I am sure that David Cameron will be familiar with the report, which, it made clear, was not a criticism of East Lothian. The report deals with inclusion and mainstreaming—Jackie Baillie raised those issues a moment ago—and how they are delivered through schools. That report is only one piece of academic evidence, but it suggests that although mainstreaming has been fairly successful in the primary sector, in the secondary sector, the biggest problem is in the resourcing of support for teachers and schools in delivering the inclusion agenda. How does that fit into the consideration of resourcing to meet the priorities that we are discussing?

There is a real question of the different attitude of primary and secondary sectors to inclusion. It is clear that one of the barriers that must be broken down in the secondary sector is the commitment that teachers have to subject delivery, rather than a recognition of their fundamental role as teachers of children. Secondary teachers would argue, with some justification, that the flexibility in the primary sector allows teachers to meet the needs of more demanding children more effectively. We would want to question that further in the context of the McCrone agreement. The national agreement clearly sets out an expectation of professionalism and commitment from teaching staff. We need to start by defining where that ends, rather than defining the resources that we will pour into the system without such definition.

The resourcing issues between primary and secondary schools in East Lothian are intriguing. There is not a significant difference in the level of investment in the two sectors, but there is a significant difference in how well the policy is accepted and how well the youngsters are accepted. That is exacerbated by the perceived demand for the raising of levels of attainment in purely numerical terms. That is a much greater pressure on secondary staff, in terms of the delivery of the Scottish Qualifications Authority targets and so on. They see youngsters who are particularly demanding as a distraction from that target, which teachers have seen as the highest priority, certainly in terms of HMI reports and public scrutiny of school performance.

That is a key issue.

Yes.

The demand that is put on teachers by a set of published criteria, which do not reflect accurately the range of demands on the establishment, must have resource implications. That link is never discussed, but the demands of the public and political perceptions have implications that may to some extent skew the delivery of resources or how they are used.

Indeed. We accept that fully. East Lothian Council intends to make a major investment in increasing the resources that we make available for youngsters with special educational needs. We are responding to the issues raised in the report. We recognise fully the commitment to the presumption of mainstreaming, but we regard that as an end, rather than as a means. We must work towards mainstreaming, using the means that we have available, which have been proven to work successfully with such youngsters. We will invest in increasing and enhancing our specialist provision. In the short term, that might be perceived as cutting across the mainstreaming policy, but it is not. We do not expect youngsters to learn to swim in the deep end: we allow them to learn in the training pool and work their way through the shallow end until they can cope successfully with the main pool. That is the aim and it will require investment.

The member is right to identify the conflict that is created by apparently competing priorities. The national priorities have been singularly helpful, because they have given us a broad base of targets. If the targets and the priorities are perceived as having equal weight, we will be in a healthier and more balanced planning situation than for years.

I have a final point for David Dorward.

I am pleased.

Quite right. We had a productive exchange, rather than a difficult one. We are almost in agreement.

Most education expenditure, in David Dorward's local authority and throughout Scotland, tends to be on staffing. Can you expand on the issue of teacher numbers, which is crucial, and say what the staffing expenditure figure is?

The highest proportion of education expenditure is on staffing, which includes not only teaching staff, but support staff. I do not have the exact figure, but we will provide that. I hazard a guess that 75 per cent of the education spend is on staffing—of all kinds.

David Cameron pointed out that increasing staffing in schools is the second of the two aspects of the McCrone agreement that we must balance. This committee must return to that, as it will soon be crucial. The McCrone agreement expected the teaching profession to increase its professionalism and become more flexible. However, that expectation is predicated—frankly—on having more staff. How much can staffing be expanded within your current budgets?

Although teacher numbers are increasing, school rolls are falling. However, because of educational needs—to which David Cameron alluded—particularly in the field of special needs, we would not expect teacher numbers to fall.

I assume, therefore, that you would be surprised to know that the Executive is projecting a fall in teacher numbers of 2,900 between 2004 and 2010.

The McCrone agreement is predicated on an increase in teacher numbers. We are going to try to keep those numbers steady, at least, though school rolls are falling. My point, which is not a political one, is about whether resources are equal to the task of increasing teacher numbers. I accept David Dorward's reservation about how the figures are presented, but in terms of the figures that are in front of us, can we increase teacher numbers?

My view is that the funding of the McCrone settlement is key. That settlement did not refer only to pay and conditions, but to other elements. COSLA would argue that the funding was insufficient, but at the margin. However, when it comes to the distribution of that funding, there are question marks over whether some authorities have received enough funding. Some authorities have received only enough to fund the teachers' pay element, which has left other elements, such as classroom support, continuous personal development and practitioners—

And the induction year.

Yes—that refers to probationers. Some authorities—not all, but perhaps a handful, or under 10—would have had difficulty funding all the elements of McCrone because of how the funding was distributed. Equally, other authorities are on the other side of the fence because they received enough funding to implement fully the McCrone settlement. McCrone was a three-year deal, so significant sums of money are being invested in the education service. The distribution of that money is critical to whether authorities can implement the settlement.

How did we arrive at the agreement on distribution? I understand that it was a joint agreement. Have factors subsequently emerged that make the distribution more problematic?

It is true that the bottom-line figure looks as though it is the right figure, but there has been a distribution problem. However, COSLA agreed that that was the bottom-line figure and is not arguing for a rejig. A lot of work has been done on the McCrone settlement, but there is a long way to go. Significant investment has been made in education. It is now time for teachers to deliver.

I agree that there is not as much in the budget on education as we would like. I agree with David Dorward's comments about local authorities, but we want to know how we measure what is being delivered. I am not sure whether the budget document helps us to do that. I am particularly interested in mainstreaming and equality issues. It is all very well to set a budget aside, but I want to know—I am sure that local authorities want to know, too—whether we are managing to deliver. How should we measure progress on those issues? I do not think that ways of measuring delivery are included the budget document.

The timing is superb, because this year we have seen the advent of the improvement plans. The Standards in Scotland's Schools etc Act 2000 has taken us forward tremendously.

The key issue is that we review the improvement plans and ensure that targets are set. We have attempted to do that through our service improvement plan within the authority. That has been assisted by the Executive team's work on national priorities. The emphasis that has been placed on, for example, the lowest-attaining 20 per cent has been a helpful move forward.

It is possible to set and agree with schools targets that deal directly with certain issues. Targets can deal directly with the attainment of disaffected, alienated or disadvantaged groups. The Executive's initiative on looked-after and accommodated children is a clear signpost to how the targets can be built into plans. As I suggested, the kernel of the process is at the point of agreement. The service improvement plan and the local outcome agreement should eventually become one and the same document—the service improvement plan becomes the local outcome agreement once the agreement has been struck with the Executive. That allows for a meaningful dialogue to ensure that the comprehensive outcomes are set. I believe that that can be achieved.

On the McCrone settlement, we have talked about the distribution in relation to the bottom line. From comments that I have read and views that I have picked up, I know that the word is that that is a problem for COSLA—as COSLA and its members agreed the bottom line, dissatisfaction about trying to deliver McCrone with the funding that has been made available means that COSLA has to have internal discussions to rejig the distribution. Correct me if I am wrong, but I think that you said that you do not want to rejig the distribution.

I did not want to raise that as a problem at the committee. The bottom-line figure was agreed and I wanted to close off the issue at that point. I realise that there are some difficulties within authorities, but I did not see that as a matter to bring to the committee.

Some members have suggested that, if authorities pursue the route of public-private partnership for capital investment, that will have a long-term consequence for the mainstream budget. Members have suggested that if a city authority such as Glasgow or Dundee goes down that road, there will be diminished resources for the education service in years to come. Can David Dorward clarify that matter for me? I am puzzled.

The main criterion that the Executive set when it asked local authorities to submit outline business cases was affordability. Therefore, in putting together that case, authorities had to demonstrate to the Executive that any scheme that they were proposing for PPP was affordable within their current level of resources. If authorities follow that line for long-term planning, they should be able to assess, before they enter into a PPP, the consequences of entering into that scheme for their revenue funding. The larger the scheme and the greater the number of schools that are included in it, the higher the proportion of a council's budget that is committed to funding those unitary charges. If an authority had to cut its services overall, its ability to do so in education—which may have a larger proportion of PPP costs—would not be as great as it would have been if that scheme had not been in place.

I return to the original point. Before a council enters into a PPP scheme, it must be sure that the scheme is affordable. An authority should be well aware of the financial consequences before it enters into such a scheme. In Dundee, we have taken the view that such a scheme would not add a penny to the council tax; such a scheme must be affordable before we would enter into it.

The Executive is to convene a joint working group with COSLA, which will consider aspects of PPP, traditional funding and any other forms of funding that local authorities can use.

The question of PFI and PPP expands on the questions that members asked about ring fencing—effectively, that is what those projects are. However, there are other issues concerning equity. In times of cuts, the traditional area for cutting back is maintenance, yet the maintenance of PPP schools would be fixed. How would an authority address that?

That is part of the juggling of priorities that authorities continually face.

Surely an authority would not be able to provide an equitable distribution of resources between schools that are PPPs and schools that are not. It would discriminate against the ones that are not PPPs if it had to cut maintenance. There would be no even basis on which to proceed.

I would like to consider both sides of the equation. The fact that some schools had been taken into PPP schemes would mean that a council would have more capital resources available to carry out the maintenance of the remaining schools. Over the past 15 years, the education service has seen cuts in maintenance. In many schools, PPP schemes are the only way of addressing the serious problems with the fabric of the buildings in the time scales that we are talking about.

The important aspect of PPP schemes is their ability to deal with a large number of buildings whose fabric is poor in a short period. Under the traditional method of capital allocations, it would take much longer to deal with the same number of schools. Investment in the fabric of the buildings improves the education that is available and it would take councils much longer to deal with the fabric of school buildings if it were not for PPPs.

Are you saying that cuts that were made in maintenance budgets as far back as 15 years ago were false economies, as greater capital spending is now required?

Hindsight is a wonderful thing.

Some people recognised the fact at the time.

At the time, councils faced the difficult choice of either cutting budgets in front-line services that they did not want to cut or charging higher rates, poll tax or council tax. They recognised that that was a difficult choice, but they had to make the choice based on the condition of the fabric of their buildings at the time.

There was also the difficult decision about feeding miners' children.

I appreciate that. Many of us had to make difficult choices in the early 1980s. I recall those generous rates support grants that we used to receive from Brian Monteith's colleagues.

I thank our witnesses for their contributions. Some positive ideas have been identified, which will be useful as part of our overall assessment.

I welcome to the committee Cathy Jamieson, the Minister for Education and Young People, and Mike Ewart and Riona Bell from the Scottish Executive. We apologise for the lack of cameras in the room. Mike Russell and I have put in our formal complaints.

We have heard evidence from the Headteachers Association of Scotland and we have had a productive session with representatives from local government and COSLA. We look forward to your contribution this afternoon, minister. If you want to make any opening remarks, we would be pleased to hear them, after which we will open the session to questions from committee members.

It is always a delight to come back to the committee. I am sure that you will all have your opportunities to be seen from a suitable camera angle at a later stage.

I am happy to be able to give evidence to the committee. I know that members have been giving detailed consideration to the areas on which they want to focus. I hope to be able to answer your questions, but I am aware that there will be specific information or details that you will want to see in written form and mull over. I will be happy to provide that.

You have heard from COSLA and it is important to stress that delivering education for young people in Scotland involves a partnership between what the Executive can do and what the local authorities deliver to young people in schools. The bulk of the money that is spent on education and children's services is not spent by the Executive directly; it is channelled through the local authorities, health boards and other bodies. We want to see more joined-up working.

It is also important to stress that we have tried to maximise use of the money that has been made available to us. For example, in 2000-01, an additional £100 million was added to the planned budget for education and young people for 2001-02. Where there were opportunities for additional resources, we looked to use that substantial funding, particularly for looked-after children, additional sports facilities and support for young people who require help with behavioural problems and who have special educational needs. There were also additional costs relating to the national agreement on teachers and to school buildings and resources. I stress that we tried to ensure that all the money that was available to education and young people was fully used and fully spent. From this financial year, anything that is unspent—a relatively small amount—will be used to meet the key priorities for the coming year.

When Nicol Stephen gave evidence to the committee on the budget last year, he emphasised the intention to improve where possible the budgeting processes and the documents. Perhaps not all the information that people would like is in the 2003-04 budget documents, but a clear attempt was made to meet the Finance Committee's suggestions for clarity in reporting. If members have issues to raise, we can pick up on them.

I will talk about some issues in which the committee may be interested. Indeed, members have raised some of those issues and will want to discuss them more. Members may wonder why we have not identified a budget line for the Scottish Qualifications Authority. In 2001-02, we used end-year flexibility to cover the SQA's deficit without reducing planned expenditure in other areas. We hope to do the same in 2002-03, but we must be honest about the fact that there will be a challenge. We are discussing with the SQA its financial strategy for returning to self-financing status. We will have to take that into account in the forthcoming spending review, to ensure that the necessary resources are available from 2003 onwards without making an impact on other areas of work.

One of the most notable changes from last year's budget is the transfer of pre-school education funding to local authorities. From 2002-03 onwards, local authorities will have an additional £137 million with which to provide pre-school education to all three and four-year-old children whose parents wish them to have it. In the education budget, we have transferred responsibility for the changing children's services fund from the heading of young people and looked-after children to the heading of children and families. That reflects the belief that we must take a wider approach to integrating children's services. We will continue to work closely on that issue with our colleagues who work in health and social justice.

We propose that the excellence fund should soon become the national priorities action fund. We agreed with COSLA that the structure of the excellence fund should be reviewed. That review has been concluded at official level and we await the outcome of consideration by COSLA's political leaders. In the proposals, we attempt to secure greater transparency by separating out the school building element, whose aim is to provide local authorities with support to meet their PPP commitments.

The core of the fund will be reformed in two ways. We propose to align it more closely to the national priorities and to give local authorities more flexibility in using their allocations. The proposal is to have five core programmes: school in the community; social justice; discipline and ethos; school national grid for learning infrastructure; and new national qualifications. That is intended to replace the 20 original programmes. The fund will also be used to support centres of excellence.

A significant part of the current allocation of the excellence fund—the figure will be £64 million in 2002-03—will be added to grant-aided expenditure. That is because it is important to find the right balance between targeting money on key policies to fulfil our overall targets and objectives and giving local authorities more flexibility to address local needs.

I hope that my setting out the context in which we are working helped members. Mike Ewart, Riona Bell and I are happy to deal with detailed questions.

In a sense, my question is about targeting. In the past two years, much work has been done on mainstreaming and equality issues, which are important to education. Last year, I raised with Nicol Stephen the fact that I felt that the budget papers did not reflect the work that was being done and did not monitor outcomes. This year, I still feel that the document does not do enough in relation to monitoring the work that has been done and that it does not highlight some of the work that has been done around mainstreaming and equality issues. Can we change that? If we are talking about targeting and delivery, we need to know exactly what is being delivered and whether it is working.

As you know, we are attempting to support, by a number of methods, the policy of mainstreaming where that is in the best interests of children and young people. An amount of money that is deemed to cover special educational needs goes through the general allocation to local authorities, but there are also specific grants. Specific money was given to local authorities to assist with the implementation of the Education (Disability Strategies and Pupils' Educational Records) (Scotland) Bill. Do you have specific questions about how the money is distributed?

I am interested in how we measure success in relation to getting the money and resources to where they need to go. There are good intentions, but the reality relates to delivery and I can see no clear indications of how that is to be measured.

It is important to stress that, in the move to give local authorities more flexibility with their resources, it is intended that we will build on the work that has already been done with local outcome agreements. It is important that we know that the money that is being allocated for particular purposes does the job that it is meant to do. Through changes to the excellence fund, for example, we have attempted to ensure that, as we have used particular budgets as a lever to get change at a local level, opportunities are created for local authorities to set their own targets and priorities on the basis of local need. The local outcome agreements are central to that, which is why we have continued to move down that line in relation to the national priorities action fund.

Do other members wish to make a contribution?

I want to ask a question that follows on from the Parliament's debate last Thursday. In the initial draft budget document, a figure in excess of £15 million was set against social work training in 2003-04, which would have seemed appropriate and welcome, given the establishment of the Scottish Social Services Council and the terms of the action plan that was announced last week. In the more recent document, however, that figure has come down to £10.2 million, which is a decrease of about 50 per cent. What is the reason for that discrepancy? Does it mean that there will be a decline in predicted expenditure on social work training?

I think that Riona Bell has the specific figures.

The money has not come out of the budget; it has been reallocated from the social work training line to the line that deals with young people and looked-after children. It is a budget management adjustment rather than a decline in the resources available.

Okay, but if it is going to young people and looked-after children, it will not be spent on social work training.

Additional resources were put in just before the end of the previous financial year to boost social work training. The money went directly to local authorities and it was up to them to find the best ways of using it at a local level. We will supply the committee with a detailed breakdown of where that money went.

It would be helpful for the committee to receive that information, but the issue also raises a point about changes in the presentation of the budget documents that make year-on-year scrutiny difficult.

That was exactly the follow-up point that I was going to make. It is hard for us to compare documents with different headings and to trace funds when they are transferred from one heading to another.

I, too, experience that difficulty. Some of the questions that I was asking in preparation for this meeting were to do with the fact that, in some budget headings, additional resources had been made available during the year, although that is not reflected in the budget document. As I understand it, the current presentation of planned expenditure is what was asked for to make it easier to see year-on-year changes. If members say that it is not easier, we will take those comments back to the right places.

I would like to address two issues, convener. Perhaps I should say temporary convener, as we seem to have lost our deputy convener.

I was trying to speak with a deeper voice.

That is fine. I will begin with the evidence that we heard from COSLA on the McCrone agreement. Helen Law believes that the allocated sum is adequate but that there are difficulties with individual local authorities. However, some local authorities claim that the sum that they are being offered is inadequate. Is consideration being given to what additional resources might be required for the funding of the McCrone settlement? For example, additional resources might be required for the induction year. Where will the additional money come from and how much is it estimated to be?

Michael Russell will be aware that the overall funding of the McCrone agreement was decided on in consultation and discussion with local authorities. I am sure that Helen Law emphasised that point. I am aware that some local authorities are concerned that the allocation that they will receive is perhaps not what they hoped for. The knock-on effect of that is the suggestion that other authorities might receive more than COSLA, in reconsidering the matter, thinks necessary. There are concerns about ensuring the best possible outcome for the induction year. We must place a number of people and ensure that they get into the process. We are working hard on that. I ask Mike Ewart to update the committee on the process and the time scales, as he is the person most directly involved in the matter.

Discussions with local authorities about the details of the placement are on-going. We do not expect the issue to be resolved until the middle of May. The question is how much additional support the authorities require to provide places for the number of students above the original number that was anticipated when the McCrone settlement was reached with COSLA in January 2001. We expect that any resources that are required to meet the shortfall can be met from EYF arrangements for the present year. For future years, that shortfall will be part of the spending review planning. We expect the numbers to be reduced significantly in future, given that the base from which we will work this year is larger than that in the original plan and given the additional time that is allowed for scaling down the number of students over and above the original number.

That is a helpful step forward. That information will be of great interest to the large number of people who are affected. As the minister knows, I have made representations on behalf of some of those people.

David Dorward from Dundee City Council estimated that approximately 75 per cent of education budgets, from whatever source, are spent on staffing. I do not think that the minister would dispute that figure, although it is not exact—perhaps Mike Ewart has the exact figure. Although there are increases in the budget, which was drawn up before the Chancellor of the Exchequer's budget, the increase in employers' national insurance contributions will have an erosion effect on the figures. What efforts will the Scottish Executive make to overcome that effect? If the effect is not overcome, the anticipated increases in the budget, which are already earmarked, would be considerably less than expected. The erosion effect will be substantial; it will certainly be around £50 million, but it might be more.

I will begin by following up on Michael Russell's point about the welcome news for people who might be affected by the McCrone agreement. It is vital that we progress the matter. I assure members of the committee and other MSPs who have made representations on behalf of their constituents that we take the issue seriously.

In the light of the changes in national insurance contributions, which will have an effect, we must examine the issue in detail to discover whether there will be an effect in the overall scheme of things.

Members will not be surprised that the issue of national insurance contributions arises wherever people are employed. Education is not the only area of local authority or public sector spending that will be affected.

I did not indicate that I did not realise that. I indicated that there are expectations of increased budgets in the hard-pressed education sector—that is what we are interested in—but that those budgets will be affected by increased costs. The increase in national insurance contributions is substantial, not marginal; unless serious consideration is given to the issue, there will be less, rather than more, money.

My final point is on PPP. In Arthur Midwinter's briefing for the Finance Committee, there remains an expectation that the outcome of the first round will be made available—or at least, that it will be made known to ministers—by the end of April. When will the announcements be made to local authorities and the Parliament? Will those announcements be made in a way that will allow them to be scrutinised and discussed?

As Mike Russell is aware, we are looking at all the bids in detail. A considerable number of more significant bids were received than might have been expected originally. Some local authorities have taken the opportunity to look at their entire school estate, whereas others have chosen to look at a more scaled-down potential operation that would allow them to do some basic pieces of work now with a view to doing other work at a later stage.

It is important that I set that exercise in context. We must realise that there is no quick-fix solution to the problems. I am sure that the local authority representatives outlined that point in their submissions to the committee. Work requires to be done over a long period of time and we are in the process of discussing with COSLA how best to take that work forward. We must put in place a proper strategy so that whatever we announce in this round of bids is seen as the beginning of the process rather than the end.

Members will also be aware that the Minister for Finance and Public Services has given assurances about the future of PPP/PFI initiatives. Obviously, I want to discuss the implications of those assurances with him. We hope to make an announcement as soon as possible after we have examined all the bids and discussed the matter in the Cabinet. I do not have a date for the announcement, but I hope that it will be made in May.

Jackie Baillie indicated that she would like to ask a question. Do other members want to get in? Are you okay, Ian?

Yes.

Do you wish to ask a question?

Yes.

I will let you in.

Speak up, Ian.

Sorry, convener. I was waiting—I thought that you were going to call Jackie Baillie first. I am not quite prepared.

I want to ask a question that I have asked before on how the education budget is handed over to local authorities. If, as we were told earlier, 75 or 80 per cent of the GAE for education goes on staffing costs, the remaining 20 per cent is the amount that local authorities have to play with to provide other core services. The minister knows that I am interested in the idea that there is an unequal distribution of school transport, for example, and that there are issues around special educational needs that are difficult to budget for. Those issues might arise because of an in-built bias in the direction that particular councils might take. How are those imbalances judged and taken into account?

I am aware of Ian Jenkins's interest in the provision of education in rural areas. He has asked previously whether rurality is taken into account in relation to issues such as school transport. The short answer is yes. There are a number of different ways in which different needs are identified, and the number of different distribution formulae has been identified as part of the problem. For example, the formula that was used for the roll-out of new community schools was different from those that were used in other areas, such as rural schools and school transport, which were taken account of through GAE. The process can be quite complex and I am sure that COSLA will have made representations about that.

Someone told me that, when they looked at the budget for the core paths network some time ago, they discovered that Glasgow got more money for core paths than any other local authority.

I am sure that we could write a note about that particular issue, as I know that you have raised it before. I assure you that rurality is taken into account when we are considering school transport.

I have lots of questions, minister—subject to the convener allowing me to ask them. We heard evidence from COSLA on the usual issue—too much money is ring fenced. COSLA is saying, "Take all the ring fencing away and give us the money", and Councillor Law suggested that local outcome agreements, which I know you are piloting, could provide the way forward. I asked the COSLA representatives how they would encourage local authorities that were not keeping to their side of the bargain in a local outcome agreement to take appropriate action to rectify the error of their ways.

I would hope that, through constructive discussion with local authorities, we would be able to agree in advance the measures to be assessed. That is what we have been doing in the pilot areas for local outcome agreements, to ensure that everybody is clear about what is expected and that everybody is committed to delivering it.

There have been areas of concern and I am sure that Jackie Baillie is aware of them. People have sometimes suggested that money that was intended for particular initiatives did not get to the front line. A careful balance has to be struck between central direction and local flexibility. In my opening statement, I said that, where things are working well, we should give local authorities flexibility and ensure that they have the resources to back up local judgments.

I hope that we would not reach the stage of having to do anything terribly drastic. However, I will give an example to do with looked-after children. A significant amount of money has been given to local authorities with a particular purpose in mind. We have made it clear to the local authorities several times that we will put information that they give us into the public domain. That will lead to accountability and the local authorities are co-operating.

Instead of asking how you tackle rurality issues, I want to ask how you tackle disadvantage and exclusion. I know that there are formulae for the allocation of mainstream education funding to local authorities, and I know that you use the instrument of specific grants, but what proportion of overall education expenditure in Scotland is targeted on closing the gap between those who are most disadvantaged and those who are not?

We are trying to strike a balance between initiatives to raise general educational attainment levels and other measures to close the gap. We acknowledge that we need to do more to close the gap. Moneys from the changing children's services fund have been earmarked to allow local authorities and their local partners to change the way in which their services operate so that they can adhere to the social inclusion agenda and help to close the gap. Sometimes we have to put in resources to bring about that kind of change. We are attempting to do that.

On specific grants, different distribution formulae are used depending on what we hope to achieve. I am thinking in particular about special educational needs and improving behaviour in schools. Money has been targeted on pupil support and on the work of the discipline task force. In different ways, we are putting in money to bring about change.

I am interested in the proportions of expenditure simply because, if we are to move the debate away from equality of inputs and towards equality of outcomes, we will need that kind of raw data. It is easier to put in specific amounts of money than to engage in the debate about how much of the mainstream funding should go towards tackling disadvantage. I would like to return to this issue and tease out further information.

In earlier evidence, we heard that the Executive's targets on attainment levels meant in practice that schools focused less on children who were least able to achieve and more on children who were on the borderline. I am concerned that some of the Executive's targets send out the wrong message.

In setting any target, we must recognise that we are not just talking about the number of young people who attain particular levels in exams. Our priority is to ensure that every child has the best possible opportunity to fulfil their potential. That means that some of the targets that require to be set focus not on academic achievement, but on issues such as the school's ethos and the way that young people are included. Those issues must be taken into consideration when we look across the national priorities. It is not the case that we can measure attainment simply through academic output. That has been made very clear in the way that targets have been set and in how additional resources have been allocated.

I have a much broader question about mainstreaming equality. I know that the schools division of the Scottish Executive education department has introduced a mainstreaming pilot. I am also aware that, in education, there are different levels of attainment between boys and girls, and gender gaps in the use of information and communication technology. I wonder how you plan to address those issues and whether, as a matter of course, everything that you do has to take equality into account.

I want to reassure the committee that we take equality issues into account in everything that we do in the department and in the way that we allocate resources. This committee and others in the Parliament have given us some helpful steers on how best to build equality into legislation and on resource allocation.

I want to build on that point. Earlier, we discussed with David Cameron from East Lothian Council the academic report from Strathclyde University that was reviewed in The Scotsman on Saturday and which addresses the very issue that Jackie Baillie has raised. We also talked about the fact that, while progress is being made in primary schools, people are finding it difficult to make the same progress in secondary schools. I should point out that that is not a criticism of East Lothian Council. One of the problems is resourcing the training and development of teachers to address the issues adequately. I realise that the issue is complex, but how are you addressing it in the budget plans?

We must recognise that a considerable amount of very good work is being done in this area. I am aware of the work that is being done in East Lothian Council; indeed, I have visited schools in East Lothian that have taken some new and imaginative approaches and have made significant efforts to make social inclusion a reality. There have also been attempts to include some very needy young people who have particular special educational needs in certain primary schools.

However, we need to move towards including more young people. Mike Russell will be aware that we are trying to improve the ratio of adults to young people in classrooms and that we have allocated money for classroom assistants. Other initiatives are continuing. Moreover, it will be important to provide continuous professional development for teaching staff to ensure that they can deal with certain issues when they arise in the future.

So, in the light of the type of analysis that has been conducted in East Lothian, increased resources will be provided for continuous professional development for teachers.

I will avoid that attempt to put words into my mouth, and say that there will be on-going support for the Executive's inclusion policy. We want to continue to close the gap and ensure that young people get the best out of education. As a result, we will make a very strong case in the spending review for the resources that we need to deliver those objectives.

The point that the Strathclyde University academic review made—and which is not seriously in question—is that resources were not adequate to the task and that other things needed to be done. All I am asking is whether you will take account of that as time goes on.

I assure you that we will do so. I know from discussions that I have had and from my visits to East Lothian that people are trying to address that situation locally. The people there know that they have done a very good job at primary level and recognise that it is not simply a question of allocating more and more money to solve problems. They might also need to do other things. That discussion is also taking place in other areas of Scotland.

No other members wish to speak, so I thank the minister and the civil servants for their time and their contributions this afternoon.