Enterprise and Lifelong Learning Committee, 24 Apr 2001

Meeting date: Tuesday, April 24, 2001

Official Report 166KB pdf

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Budget Process 2002-03

Welcome to the 12th meeting this year of the Enterprise and Lifelong Learning Committee. We have received apologies from Kenny MacAskill and Nick Johnston. I welcome David Davidson, who is attending in his role as a member of the Finance Committee. As we are about to deal with the budget process, I ask David to outline fairly quickly his role on behalf of that committee. You are always most welcome to attend meetings of this committee, of course, David.

That is very kind. I accept your warm words.

The Finance Committee's work is divided by examining the budget using a reporter system. Elaine Thomson reports on another of the Parliament's committees. That is to allow the Finance Committee to take a view on how other committees deliberate and on what is behind decision-making, when it comes to this or other committees' reports. The Finance Committee is then in a position to discuss in parallel where the various committees are coming from. That helps us come to a view when we produce a budget report—which will be presented to the Parliament—based on the budget proposals and on any notions that members might have on changes to the Executive's proposals. Committees have the freedom to do that.

I will be happy to be informally of assistance to the Enterprise and Lifelong Learning Committee in the process of carrying out my reporting role.

Thank you. I point out to members that additional paperwork has been placed by their seats, which supplements the information that has already been circulated.

I welcome Douglas Baird, who is a finance team leader in the education, enterprise and lifelong learning section of the finance department, and David Wilson, who is the head of the enterprise networks and tourism division.

As the convener said, I am the team leader for the enterprise and lifelong learning finance team. For the record, I point out that the finance team is not part of the enterprise and lifelong learning department—we are part of the Scottish Executive finance department, and we report to the Minister for Finance and Local Government, through the principal finance officer.

Last year, the part of the annual expenditure report that covered the detail of the enterprise and lifelong learning department's spend ran to 10 pages, and the total budget featured in one table. This year, in addition to a four-page feature and a summary document, the department's plans, objectives and targets now run to 20 pages, in a detailed document that provides breakdowns of expenditure at departmental level, which now feature in six separate tables.

The increase in coverage of the department's plans, objectives and targets is in response to recommendations that were made by the Finance Committee and other subject committees that there should be a much more informative document that would also be more readily understood and which followed plain-English guidelines. The annual expenditure report seeks to address as many of those improvements as possible, but it is recognised that the full range of improvements cannot be achieved at once. There is still scope for further development; for example, in achieving more consistency in statements of aims and objectives and improving and expanding on objectives and targets that are currently contained in the document.

That is all I want to say by way of opening remarks. David Wilson and I will do our best to respond to members' questions on points of fact and detail, which I understand is the committee's focus for today.

Will you explain the differences from the original paperwork that appear in this paperwork?

I sent a letter on 19 April for the committee's interest. A number of errors had crept into the final document—I did not want to take up time trying to explain them. If members have the paperwork in front of them, the summary document is perhaps of less relevance. Errors were made on page 16 of the summary document in quoting certain targets. Those have been changed to reflect the targets that are correctly stated in the detailed document.

Perhaps of more relevance in the detailed document are the first two amendments to tables 0.1 and 0.2, which are concerned with an overstatement of a resource budgeting addition within the Student Awards Agency for Scotland of about £56 million, which distorts any interpretations that are placed on it. That applies only to 2001-02. That distortion affects the real-terms table on page 89, so the figure of £2.114 billion in table 4.11 contains that £56 million error. I have provided the committee with a revised real-terms table, which shows the effect of that error having been removed and has brought the real-terms figure down to £2.059 billion. There is a better gradient of figures as a result.

Thank you. I open the meeting up to questions from members.

You mentioned that quite a number of improvements have been made to the presentation and format as a result of the Finance Committee's recommendations last year. I realise that Rome was not built in a day, but some of the Enterprise and Lifelong Learning Committee's recommendations from last year do not appear to have been implemented. In particular, the committee asked to see evidence of the Executive's consultation with organisations and parties that are affected by the budget. We also requested that the Scottish Higher Education Funding Council and the Scottish Further Education Funding Council budgets be presented in a cost-per-student-place format. Will you comment on those two matters?

You are right—there has been a process of consultation before conclusions have been arrived at on targets and objectives in the document. I apologise if the detail of that has not been made available to the committee. Most of the activity that has taken place has focused largely on 2001-02, because the three months from January to March is the time when letters of guidance, grant offer letters and so on are issued. It is important to get targets and objectives right for 2001-02. I can provide evidence of that consultation process having taken place. Where it has been possible to do so at the same time—but not in all cases—targets and objectives are reflected for 2002-03. The consultation has largely focused on getting it right for 2001-02, and for 2002-03 where possible.

Will you furnish us with those details through the clerks?

Yes.

Will you also furnish us with SHEFC and SFEFC cost-per-student-place format?

I apologise, I was not aware of that point, but I will provide the information that the committee requires.

Thank you.

I would like to ask a couple of questions about table 4.10 on page 88 of the expenditure report. I was on a different committee last year when the budget process went through, so I am not sure how this committee handled the level 2 areas, about which I want to ask.

I wanted to ask about energy efficiency and the Scottish renewables obligation. The figure for energy efficiency that is given in the budget plan for 2000-01 is £2.2 million. The figure then rises markedly to £7.9 million, then drops and then increases again. Is there a reason for the variations? Does it relate to the Energy Saving Trust, on which there have been a number of recent parliamentary answers.

The figures for the Scottish renewables obligation rise from £12.9 million to £18.9 million. Can the officials account for that rise?

The Scottish renewables obligation figures cover the fossil fuel levy. That levy is set each year by the energy regulator to cover the cost of renewable energy projects. The levy has been set in such a way that the figures shown are, I understand, the actual amounts that are expected to be raised. There is a notional expenditure cost, because there is the offsetting release of the levy to fund the project, so it is not a true cost for the department. The figures in the table simply follow what has been set for the fossil fuel levy increase. I could look into the matter further if members wish.

If it is a notional figure and the income is therefore unpredictable to some extent—the figure is, I presume, based on an assessment—how will that work in practice? The Executive will, I presume, receive bids for projects and seek to spend.

I am not entirely familiar with how the department receives and assesses bids in renewable energy, but if the income that was raised was not sufficient, we would have to meet the shortfall.

Tavish Scott also asked about energy efficiency. I understand that the figures relate to receipts as a result of the climate change levy and to the release of funds. They concern the business use of energy. There is encouragement of the use of energy efficiency measures and renewable energy sources. The figures simply show our share of the receipts that are predicted for the years that are shown at the top of the table.

I presume that a bidding system or some other system to distribute those moneys will be established. How will that work in practice? I know that there are energy clubs in various parts of Scotland that would want to access funding.

I will have to come back to you on that because I do not have all the details.

I am sorry—it is my fault for asking level 2 questions.

I have two other questions. I do not know which page of the Executive document this refers to, but I have before me a table—table 2—in the briefing that was given to us by the Scottish Parliament information centre. Its heading is "Real Terms Changes in ‘Level 2' Budget Headings within the Enterprise and Lifelong Learning Department Budget". The table contains information on the Student Awards Agency for Scotland and a variety of other areas. According to that table, Highlands and Islands Enterprise will see a 2 per cent fall in its budget between 2000-01 and 2001-02. The Scottish Tourist Board will see considerable changes—up and down—in the coming years. An explanation of those variations would be helpful.

I refer Mr Scott to the cash figures in the annual expenditure report. The figures for HIE are: £66.9 million for last year; £67.9 million; £69.6 million; and £73.1 million.

I presume that those figures have been reflected in the SPICe report, but I am afraid that this is the first time that I have seen the report and therefore cannot comment on whether they are precisely the same figures that we are using at the moment. In effect, although they show a small year-on-year reduction in real terms, there has been an overall increase in cash terms. Much of that depends on which deflator is used and what the precise figures are. Although I will have to check whether the SPICe numbers are the same as ours, the trend for Highlands and Islands Enterprise has been broadly static in real terms. There might be a percentage point of a difference, but the figures were set on the basis that they should be broadly fixed in real terms.

It would be very helpful if you could provide us with a detailed breakdown in writing of why the figures do not appear to match up. I am not asking you to answer the question today.

It would simply be follow-up information. Is that okay?

We can provide that.

What about the Scottish Tourist Board figures?

I have not seen the SPICe figures for the STB. However, I refer the committee to the figures in the annual expenditure report. As the committee is aware, there have been a number of changes to the STB figures. In 2000-01, the base figure was £19.3 million in cash terms. As a result of the new strategy for Scottish tourism, £5 million more was added to that figure for last year, along with an extra £1 million for last year's spring marketing campaign and a small additional sum for running costs. Such in-year changes mean that the overall figure for 2000-01 is significantly higher than the figure in the report.

Similarly, the £24.8 million figure for 2001-02 has also been increased; another £5 million has been added to deal with the foot-and-mouth crisis. The figures have moved on in many respects since the SPICe report came out.

Will you provide some explanation of whether that £5 million did or did not come from the enterprise budget?

As Douglas Baird will confirm, the £5 million and £1 million last year came from the central reserve, as will the additional tourist money this year.

I have the SPICe figures in front of me. The high figures in that table are the same as those in table 4.11 on page 89 of the budget document, which is a similar real-terms table.

That is fine.

I presume that the figures for the Scottish Qualifications Agency in table 4.10 on page 88 of the document refer to the grant to the agency from the enterprise and lifelong learning department budget. However, the SQA will receive other money from local authorities and, perhaps, from the education budget.

Yes. The enterprise and lifelong learning department does not sponsor or fund the SQA. The money that is referred to in that table is for funding the staffing costs of an accreditation unit for companies that seek accreditation of courses that they wish to run.

Is it possible to get a breakdown of what the enterprise and lifelong learning strand covers, and of other financial strands to the SQA?

The only ELL strand is the £1.4 million and £1.5 million that are mentioned in table 4.10. That is our only funding to the SQA. All other strands come from the education department or from elsewhere.

I was asking whether it is possible to get an overall financial breakdown of where the different strands of money that support the SQA come from.

Okay. That might take a little while; I will have to contact other departments.

That information would be interesting.

Page 82 of the budget document gives information about objectives and targets, and I refer in particular to the 90,000 Scottish Enterprise individual learning accounts—ILAs—and to the further 10,000 ILAs that come out of the Highlands and Islands Enterprise budget. Will those figures be achievable in that period? It is all lumped in as a block in one financial year. No record is given of what might be achieved in 2000-01 and, apparently, no indication is given of where things will go in 2002-3. I would like an indication of the phasing and progress in moving towards those targets, and of what the actual cost per individual learning account is expected to be.

Given that we have finished the financial year, is the 2001 figure for actual performance, or is it still a target?

The background to those figures is the first programme for government commitment for 100,000 individual learning accounts by 2002. The figure for individual learning accounts for 2002, shown in the table on page 82, is a cumulative total and indicates that, by April 2002, we will have met the commitment for 100,000 individual learning accounts. Some of that overall total of 90,000 for Scottish Enterprise and 10,000 for Highlands and Islands Enterprise will be met by the end of April 2002. It is a cumulative figure. Clearly, some of those individual learning accounts will have happened in previous years.

Given that the committee is supposed to take a view on spending and the relationship between spending and targets, one of the difficulties that we have is that the method of presentation of figures, as exemplified by the figures for individual learning accounts, makes it difficult to achieve that. If all that you are doing is setting out the target, it is difficult for us to identify the financial monitoring process or the draw-down of funding that is required to see how that process is getting on. If something went wrong in that area or some other area, how would we be able to identify that on the basis of the figures that we have?

Let me answer that by giving you some background information on what we are doing in terms of targets, which should supplement the introductory comments that Douglas Baird made. The key point about the presentation of the report is that, in effect, we are part of the way through a process of reconsidering the broad approach to targets and financial monitoring of the activities of Scottish Enterprise, Highlands and Islands Enterprise and the Scottish Tourist Board.

I refer members to page 70, at the beginning of the more detailed section about the enterprise and lifelong learning department. For the first time, the document sets out an overall aim for the department, which is

"To create a highly skilled, learning, earning, connected Scotland."

It then sets out four overall strategic objectives for the department. To my knowledge, this is the first time that the department has explicitly set down a set of overall objectives. For each part of the enterprise and lifelong learning department, we then seek to put in place specific objectives and targets for the delivery of individual programmes.

Let me talk through what I am involved in with Scottish Enterprise, HIE and the Scottish Tourist Board. "A Smart, Successful Scotland: Ambitions for the Enterprise Networks" provided the strategic direction from ministers to the enterprise networks. Part of that process was to reconsider the overall targets that Scottish Enterprise and Highlands and Islands Enterprise were being tasked to deliver. Page 82 shows more detailed targets for Scottish Enterprise.

We published "A Smart, Successful Scotland: Ambitions for the Enterprise Networks" in January. We always recognised that it would not be possible to complete a review of the targets and to set up the appropriate procedures to meet them during the year 2001-2. There is a commitment to review each of the targets over the course of the next few months, to have in place for next year and the subsequent year a revised set of overall targets for each of the key programmes and to put them in the context of the 12 overall themes within those documents.

The Minister for Enterprise and Lifelong Learning was keen that, rather than lay down a set of targets that we had not exhaustively reviewed or considered, we should ensure that we have a full process and full targets. We have been doing that over the past few months. We will bring to the committee later in the year a framework for considering precisely how much is spent in each area of Scottish Enterprise and HIE's activities, and which targets are related to that overall expenditure. That framework will be the basis for the department's monitoring of the enterprise networks. In turn, information will be provided to the committee.

As the convener said, Rome was not built in a day, but we are seeking to move towards the situation that I have outlined.

Something similar is going on with the Scottish Tourist Board. As a result of the PricewaterhouseCoopers management review of the STB, there was a commitment to revise and reconsider the targets for the STB. That is why we have not provided a full new set of targets.

My concern is similar to that of Tavish Scott, who was on the same committee as I was last year—not this committee—when we were conducting the budget review. That concern is that we are being asked to conduct a budget review without appropriate financial information against which to do that.

I will paraphrase what David Wilson said. You seem to be saying that this year you are at the stage of setting targets, but that you cannot include spending with the targets. You hope to be able to do that next year. Perhaps next year we can do a more detailed evaluation. I do not think we are at that stage yet.

One of my concerns is that, because of the way in which the information is laid out, the budget categories in some parts of the budget documents will be difficult to align to the target categories in some other parts of the budget documents. Some issues of phasing will be attached to that. A lot of work must be done to bring those things into a shape that allows us to drill down into the budgetary process.

I accept many of those comments, but I do not want to talk down the information that is in the budget documents. As Douglas Baird said, there is a lot of additional information compared to last year and we can provide further details on many aspects of last year's budget. We accept that we do not yet have a comprehensive monitoring framework for budgets and targets for the whole department. However, we are moving significantly towards that.

I will finish on that point. We need to be able to monitor performance in trying to meet targets to identify those that are not being met for whatever reason—it might be that the targets are inappropriate, that the organisation is not capable of meeting the targets or that circumstances have changed. We are not yet in a position to make any such judgments or inferences about, for example, ILAs, on the basis of the information that you have given us. I would be interested to know how much progress we are making towards that target.

I will raise another general issue. One concern of mine is that, particularly in the further education sector, we have changed to a system of funding on a per capita basis. The number of students that a college is able to attract determines its income levels. Those can fluctuate quite sharply from year to year, depending on local circumstances and the mix of students that a college happens to get in any year. We are talking to SHEFC and the Scottish Further Education Funding Council about that process.

Do you know of any financial mechanisms that would allow us to deal with the volatility in the sector that is caused by existing funding methods? Furthermore, can you suggest any sensible financial alternatives that might damp down such volatility? The issue does not really affect the higher education sector, where people enrol for much longer periods, but the management processes in the further education sector might be inefficient because of the volatility of the funding mechanisms.

The funding for SFEFC shown in the document is largely a single lump of money that is passed to the funding councils; how they choose to disburse the money is largely up to them. In future, it might be possible to supplement the annual expenditure report with information about funding decisions that is drawn from the funding councils if that can be done before the deadline for delivering the report. SFEFC and SHEFC announced their allocations just a couple of weeks ago, which was well past the printing deadlines for this budget document. That said, I accept that we might be able to make the section more informative.

Staying with the issue of funding for Scottish further education, I refer you to page 77 of the document. Given the known accumulation of capital repairs to Scottish further education colleges, has SFEFC or the department attempted to procure an estimate of the likely capital expenditure for the colleges? Despite the declared aim of

"continued investment in the modernisation of the colleges … and college buildings"

it is very difficult to tell from the document what money is intended for capital purposes and what money is left over for educational purposes.

The figures for SFEFC include a capital element, which I undertake to identify for the committee. The funding councils identify the capital repairs and needs for the sectors and apportion certain amounts from their allocations to cover them. I do not know any figures relating to the most recent survey of the estate, but it would be useful to include a breakdown that distinguishes between current and capital allocations.

That would be helpful.

Page 81 contains information on the Scottish Enterprise budget. I note that the administration element of that budget remains fixed for four years, but I am not quite clear about certain matters. We know that Scottish Enterprise has been trying to implement a programme of rationalisation of administration; does the figure of £61.3 million in table 4.6 represent where the organisation has reached in that aim, or will there be further savings in administration over the next three years?

That £61.3 million is the baseline figure; in other words, it represents the controlled running costs that the department sets for Scottish Enterprise. We have been in discussion with the organisation over the past year—that will continue this year—about an increase in that figure that will allow Scottish Enterprise, essentially to spend to save and to make a further reduction. I am happy to provide further details on that. For the past two years, we have had an agreement with Scottish Enterprise that has allowed it to transfer money from the programme budget—which is outlined in the other rows in table 4.6—into administration to fund its business transformation project and its redundancy programme. Although the £61.3 million is the baseline figure, there will have been an increase both last year and this year to fund the spend aspect of the transformation project, after which we expect savings.

Does that mean that, for 2002-03 and 2003-04, the £61.3 million figure might not be a constant and that the amount for administration might be that figure minus X?

I will provide some further details on that point. Scottish Enterprise is providing us with further information, but I do not expect that figure to be any lower. It is more that the increase for which we have allowed this year and last year is not on-going, so we expect the figure to move back to £61.3 million.

You have said that money is shifted from other elements of Scottish Enterprise's programme to fund the business transformation project. Do we know where that money is being shifted from?

We leave that judgment to Scottish Enterprise. However, in the main, the money is likely to come from the reduction in spend on some training programmes because of the current low levels of unemployment.

That leads me on to my next question. Do the figures under the heading "Skills Development" in table 4.6 anticipate a heightened demand for skills and retraining because of the difficulties in the electronics industry?

No. The figures in the table represent the overall funding. We expect Scottish Enterprise to have considerable flexibility to transfer money into the electronics industry, if necessary.

Finally, I refer to the Scottish Tourist Board figures on page 85 and return to a point that Tavish Scott raised. Does the increase from £19.3 million to £24.8 million between 2000-01 and 2001-02, which is shown in table 4.8, represent the money pledged by the Scottish Executive in the chamber?

Both those figures should be increased by £5 million for two separate reasons. They were the base figures that were set as part of the process, but last year and this year, ministers decided that additional money should be given to the Scottish Tourist Board. The current spending figures for 2000-01 will be £25.9 million instead of £19.3 million; and the money allocated to visitscotland this year will be £29.8 million, which includes additional funding because of foot-and-mouth disease.

That means that there will be a fairly sharp decline in 2002-03 and 2003-04.

Yes. However, when ministers announced the additional funds to deal with the foot-and-mouth outbreak, they also gave a commitment that, if necessary and subject to how events turn out, additional funds would be made available. As a result, I would not read too much into that reduced figure; we must see how events unfold in the foot-and-mouth outbreak.

I refer you to the "Administration" row in table 4.8. You said that you have had discussions with Scottish Enterprise about the level of administration costs. Have you had similar discussions with the Scottish Tourist Board?

Part of last year's increase to £25.9 million included an additional £300,000 to deal with some aspects of the on-going process of change. We are also in discussion about additional running costs if they are required as a result of the management review.

I, too, was slightly confused by the overall figure for Scottish Enterprise. Although table 4.11 shows what savings are being made, I am confused about exactly where they will be made. You said that there will be an increase in administrative costs from a training budget as a short-term measure to allow a spend-to-save scheme, but I do not see that in the figures.

It is not included in these figures. Ministers have agreed that Scottish Enterprise can transfer funds from the programme budget into its administration budget to allow for its business transformation project. Those funds will therefore not be additional to the overall figure.

So, you are saying that, although the overall decline by the fourth year is shown in the figures in table 4.11, the breakdown of it is not. In other words, Scottish Enterprise is heading towards a budget of £370 million in real terms, as shown in table 4.11.

There will be transfers within that overall funding total. There will be an overall reduction in real terms in Scottish Enterprise's budget.

So, the broad strokes of that change are in the document, but the internal transfer figures cannot be found in the document as it stands.

They are not in this document, but I have offered to provide them.

Fine. I just wanted to clarify that.

The budget blocks in table 4.7 and the attached notes, which apply to both Highlands and Islands Enterprise and Scottish Enterprise, are provisional until the operating plan has been agreed with the Executive. Can you give us an update on that?

The budget blocks are the four rows in table 4.7: administration, developing skills, growing business and strengthening communities. You will be aware that the latter three are the three headings in Highlands and Islands Enterprise's overall strategy document.

As part of the overall review of the role of the sponsor department with regard to the enterprise networks and the targets approach, we are considering whether we should classify those budget blocks differently and put them in the context of the three overall objectives in "A Smart, Successful Scotland". Furthermore, we are considering what restrictions the department should place on virement between budget blocks by Highlands and Islands Enterprise, with which we are in discussion. The budget blocks are provisional, as we are likely to change their allocation to link them more closely to the overall strategic objectives that are set out in "A Smart, Successful Scotland".

What is the time scale for that?

We intend to have everything in place in good time for setting targets for next year, probably by the autumn.

For both enterprise networks, the sooner forward planning is in place, the better. The situation was the same last year for health boards, which complained that they did not have the prospect of forward planning. If this happens annually, is it the most effective means of assisting the enterprise networks?

One reason why we are still using those budget blocks—they have not changed for about five years—is that we do not want to chop and change the way in which we ask for financial information from the enterprise networks. However, as "A Smart, Successful Scotland" sets the overall direction of the enterprise networks, ministers and we took the view that it was appropriate to set the whole arrangement for financial monitoring in that context.

I have a specific question on that point. Do you have any estimates of the likely transfer of resources for Moray, Badenoch and Strathspey Enterprise?

I cannot give you a precise figure off the top of my head. There will be a transfer of resources from Scottish Enterprise to HIE, and commitments have been given that Moray, Badenoch and Strathspey Enterprise's overall budget will be at least as great as it would have been under Scottish Enterprise.

The Scottish Enterprise section of the budget document talks about

"Revised budgets. Reduction of £10m each year due to transfers to HIE".

Are those transfers quite separate?

That is a completely separate issue. The £10 million reduction is to amend the figures in the consultation document following changes in the funding arrangements. Douglas Baird will know the details of that better than I do. The most prominent of those changes is the funding for learndirect Scotland, which was initially allocated to Scottish Enterprise. Scottish Enterprise implemented that organisation in its early days, but it is now fully established as an independent organisation. We had planned on the basis that learndirect Scotland would be with Scottish Enterprise longer than it was, which is why there has been a reduction in Scottish Enterprise's budget.

Have you received representations from Highlands and Islands Enterprise on the way in which the budget is set out, as there seems to be a delay in the annual process?

I cannot recall any recent representations from Highlands and Islands Enterprise. However, we are in regular discussions with HIE, both on the detailed monitoring arrangements and on the overall level of funding.

I have a specific question on the SFEFC budget. Annabel Goldie and Des McNulty raised issues concerning college buildings, information and communications technology facilities and financial stability. I was going to ask about those too. In addition, there are targets for cumulative growth in student numbers from the most deprived 20 per cent of postcode areas. First, is that money hypothecated within individual colleges' budgets? Secondly, how do you monitor the take-up of that hypothecated budget within the overall budget?

The targets have been agreed with SFEFC, which, through its funding formula, will aim to deliver on them. It will have responsibility for monitoring and achieving them. I suspect that the targets will feature in its corporate plan and that their setting will be a matter for the funding council. The department will want to ensure that the funding council is on track to deliver them.

So, is that part of the budget hypothecated?

Yes.

I return to a question Des McNulty asked about financial stability. There is hypothecation to bring in students from deprived backgrounds. However, as Des McNulty says, sometimes, especially in individual courses, there is a lot of fluctuation and there seems to be no safety net. Is monitoring being carried out of the impact that those fluctuations have, not only on individual enrolments, but on enrolments of students from disadvantaged backgrounds?

I have a strictly financial background, so I could not give you a definite answer to that. I will check with the sponsor division and the funding council and get back to you on that.

I would be interested to know the answer to that. There has been a change in philosophy towards getting bums on seats, and I wondered what impact that is having. If you could find that out, I would appreciate it.

Does the business transformation project that Scottish Enterprise is undertaking include its k-web?

The project is the k-web, but Scottish Enterprise does not want it to be portrayed as simply using the internet and dealing with customers over the internet. It is much more about transforming the way in which business and internal processes are conducted. Increasingly, it is being called the business transformation project. It goes wider than the k-web, but includes it.

Resource accounting and budgeting are being implemented. Will they affect any specific areas in the enterprise and lifelong learning budget?

You mentioned that the various different organisations are setting targets and objectives in developing their budgeting. Are you including factors such as gender, ethnicity and disability? Generally, what progress are you making on gender-based budgeting?

At present, all the impact of resource budgeting falls on the Student Awards Agency for Scotland. Although we would call them resource budgets, all the other lines are still, in effect, cash budgets—there is no difference. The impact on the SAAS is a consequence of our having to include an amount for bad debts—due to unpaid student loans—and for what we call the cost of capital, because student loans are regarded as a form of capital. When we grappled with the resource additions for the SAAS, there was a £56 million error due to an overstatement of the estimate for bad debts.

Table 4.2 on page 73 includes a line headed "Resource Budget Additions for Student Loans". That is the sole resource budget component in the whole of the SEELLD budget.

On Elaine Thomson's second question, I recall that when the committee took evidence from Alasdair Morrison last November, it asked about gender monitoring. I mentioned that things were happening in SHEFC and SFEFC in that regard. David Wilson will be able to address that point with regard to the enterprise bodies.

Gender monitoring is becoming increasingly important. Members will be aware that ministers set out the "close the gap" initiative on equal pay. As part of that, and as part of the women's week events, the Minister for Enterprise and Lifelong Learning announced a specific target of 37 per cent of business starts being undertaken by women in Scottish Enterprise's area.

Increasingly, the gender angle is being given prominence in the overall business birth rate agenda, with a specific target, which we will monitor. We are in discussion with the Scottish Enterprise network and Highlands and Islands Enterprise about monitoring skills and training programmes, specifically with regard to gender, background and disability. There is a greater push in the SEN and in HIE to ensure that we have all the necessary information and that the required specific policy approach is implemented.

I will provide a note with further details if members wish. A lot is happening in both the Scottish Enterprise and HIE areas.

I would be happy to receive further information on that if you felt able to supply it. You mentioned the Scottish Executive's recent announcement on the "close the gap" initiative. Is the closure of the gender pay gap one of your objectives?

The overall objectives will relate to the 12 themes in "A Smart, Successful Scotland: Ambitions for the Enterprise Networks". There is no gender-based theme among the 12, but some of the sub-targets will cover gender-related issues, such as narrowing the gap in unemployment. That is consistent with some of the more general issues, for example closing the gap in earnings. We are considering that, although not necessarily as one of our 12 overall objectives. We expect to have a hierarchy of objectives among the 12, and to have others underneath.

I will ask first about the higher and further education budget. I should perhaps have brought this information with me, but do you know how the plans for this year compare to last year's projections? Is the outturn greater than predicted, or less than planned?

In relation to?

In relation to the amount of money spent and the number of students in further and higher education: we cannot see from the figures how the outturn figures compare with what they were expected to be last year or the year before.

All the money allocated to SHEFC will have been paid out. As far as I recall, money was not held back or the full budget not paid out at the end of last financial year.

I was concerned that there may have been an easing-off in the finances for higher and further education following events at the Scottish Qualifications Authority. I was trying to find out whether we could see that in the budget figures and to ascertain whether the expansion in further and higher education is the planned expansion that the Government has promoted as a matter of policy, or whether it is partly to do with a relaxation in the rules, prompted by the fall-out from the SQA. Do the figures help to illuminate that, or will we have to look elsewhere for that information?

I am not aware of any changes in the budget in that regard. The budgets reflect planned expansion, which is what we hope to deliver.

My understanding is that the relaxation in the numbers was met from within SHEFC's provision. We expect organisations—certainly the Scottish Tourist Board, Scottish Enterprise and HIE, which are, together with SHEFC and SFEFC, the organisations that spend the vast majority of the overall budget—to spend the total amount for most programmes. In effect, they spend what they are provided with.

The only exception that springs to mind—and we are getting into the arcane details of public expenditure—is the Student Awards Agency for Scotland, which we would describe as non-cash-limited, because we cannot control the overall level of spend. The spend depends on the take-up of grants and so is more difficult to predict.

SHEFC and most other bodies will spend the money allocated to them. If they do not spend it all, they can carry forward funds from within the total—they can draw down the money from the Government one year and spend it the next—subject to controls by the enterprise and lifelong learning department.

Can they draw down the money and, for example, if the number of students does not match, keep it themselves?

They can, to a maximum level of 2 per cent.

So, should the figures for higher and further education for 2000-01 be the same? Will they have changed since last year?

It should be the same figure.

It should be the same figure.

Yes. SHEFC gets its allocation, announces what it will distribute to institutions and will distribute that sum. It may hold a certain amount back for certain initiatives, but that is about the extent of it.

That is right, but the Executive announced, halfway through the year, that it would look favourably on universities and colleges that accepted students who appeared to have been disadvantaged by the problems at the SQA. Has that had a financial effect? Are you saying that, if there was a financial effect, it would be entirely absorbed by SHEFC?

Yes. Initially in such a situation, the effect would be absorbed by SHEFC, if it were able to absorb it. By and large, it tries to keep a small contingency fund for such things. If the situation did not materialise, it would pay out at the end of the year in any case. No additional funding was required for that situation.

That is interesting. The budget for further and higher education is fixed and will not vary. The plans and the outturns will always—or virtually always—be the same, unless there is a real disaster. Is that right? You give SHEFC and SFEFC the money and that is it; it is set in stone—it never varies.

Are you asking whether it varies in-year?

I am referring to the comparison between the money for further and higher education funding and for the SAAS, for example. The SAAS figure is variable, while the figure for the funding councils is fixed and totally predictable—you will give them a certain amount of money, which they will draw down, and that will be it.

Yes—and the funding is designed to deliver a maximum number of students. That is indeed how it works.

I take the example of the Scottish Tourist Board. A commitment was given at the start of the year that, after the completion, announcement and publication of the budget process, it would receive £19 million—if we use the figure for last year—during the year. Because of policy developments and for a number of other reasons, ministers found additional funds from the Executive's central reserve. Apart from such in-year changes, the various organisations will usually spend the money that is allocated to them.

May I ask another question?

Can you make this the last one, Ken? We need to wind up this section.

I have three points to make, if I may.

Right.

Shall I make them very briefly?

Yes.

I want to ask for an explanation of the line headed "Miscellaneous", on table 4.10 on page 88. The figures seem to rise rapidly, from £1.7 million to £8.9 million. I also want to ask about the "Unallocated" line. By definition, it might be difficult to describe what "Unallocated" is, but can you tell us what sort of things are covered?

Is the departmental assistance budget capped? The witnesses said that it is completely demand led. How predictable is that budget?

Finally, are the administrative costs of the Scottish Executive included in the departmental budget or are they entirely separate?

They are separate.

Which committee will consider the Executive's administrative costs? That is perhaps a question not for you, but for someone else.

I refer you to page 8 of the annual expenditure report. Table 0.2 has an overall figure for Scottish Executive administration.

Mr Macintosh asked about the "Unallocated" heading—

And the "Miscellaneous" heading.

The miscellaneous budget contains 31 or so small budgets, which are of varying amounts. Offhand, I could not say why there is such a marked increase—rising to £8.9 million in 2003-04—across the miscellaneous budgets, but we have tried to identify what the key increases are.

For 2001-02, the "Unallocated" heading contains £1.0 million, which is, in effect, money that was left after all the allocations were made—one might call it a small contingency fund. I know that in the past the committee has been interested in end-year flexibility and similar matters. Now that we are at the end of 2000-01, any unspent moneys that are lying under last year's "Unallocated" heading will be carried forward—less any 25 per cent clawback—and added to the £1.0 million that is unallocated. That money will be available for distribution during the year to deal with any pressures or extra spending that is required.

So the £8.3 million that was unallocated last year was a sort of outturn. Was it planned that it would be unallocated?

No. I should make the point—it may clarify Annabel Goldie's earlier question about the STB—that the spending figures for 2000-01 in table 4.10 are plans. The table shows the budget at the outset of 2000-01. Although that is now historical, it does not reflect any in-year changes that took place. The reason why we quote plans is to get a measure of consistency in making comparisons.

The £8.3 million changed because it was added to with money from the previous year. That caused an increase that caused further in-year additions. What is left over will be brought into this year. So at the start of 2000-01, the figure of £8.3 million was correct, but it changed rapidly when we brought in the underspend and unallocated moneys from the previous year.

We must bring this item to a close. I thank Douglas Baird and David Wilson for attending.

The minister will give evidence to the committee on 8 May, when we will discuss the budget. I ask that the figures that require to be updated in the tables are updated before then and that they be circulated in advance, so that we are aware of the more up-to-date questions that we want to pursue. It would be helpful if we could get the follow-up information that has been requested before 8 May. Also, if the £200 million in additional money that resulted from this year's UK budget has been allocated by 8 May, it would be useful to know how much of that has been allocated to the enterprise and lifelong learning department and for what purposes.

Finally, on a small but important point, one of the issues that representatives of Electronics Scotland raised when we met them this morning, and which apparently was raised last year, was the pass rate for modern apprenticeships—not the completion rate, the pass rate. Could you supply us with information on the pass rates and completion rates for modern apprenticeships, as well as the throughput, which is listed in the annual expenditure report, so that we can tell Electronics Scotland that we have kept at least one promise?

I thank Douglas Baird and David Wilson. No doubt we will see them on 8 May.