Finance Committee, 26 Feb 2002

Meeting date: Tuesday, February 26, 2002

Official Report 223KB pdf

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Budget (Scotland) Act (Amendment) Order (SSI 2002/draft)

We come to agenda item 4. I welcome the Deputy Minister for Finance and Public Services and invite him to make an opening statement on motion S1M-2735, in the name of Andy Kerr.

I wish to make a short statement to outline one or two key points, after which I will be happy to take questions from the committee. With the help of my colleague, David Palmer, I will seek to answer as many questions as possible.

As members are aware, the spring revision exercise is largely a technical exercise to match authorisation to spend with the expected outturn in the budget in the light of the practical experience of running the budget during the year. Table 1.1 in the spring budget revision document—which committee members have all been given—summarises the changes that are being made. The table shows an alteration in the amount of authorised expenditure of just over £200 million, which consists largely of £80 million for enterprise and lifelong learning and £105 million for health.

I emphasise that the changes are purely technical. The alteration in the budget for enterprise and lifelong learning reflects a general restructuring of accounting for student awards. As a result of that restructuring, we have adjusted the estimates of capital charges and removed the bad debt provision that is no longer required. The estimates relate to annually managed expenditure and have no impact on the amount of resources available to the Executive. The alterations are balanced by an increase in the Executive's AME fund.

The alteration in health is in net expenditure and reflects an increase in income. Gross health spending has not changed.

I will continue on the technical theme. The spring budget revision document also includes the final allocation of end-year flexibility, which is carried over by departments into the current year from the previous year, to individual budget heads. As the committee is aware, EYF is a technical provision to enable better and much more focused spending. It caters mainly for planned spending over a number of years to get round the former public expenditure annuality rules. It also includes—significantly—slippages on capital works that result from a variety of factors.

There are a couple of policy-oriented changes in the budget proposals including—as was the case last year—provision for the cost of the Lockerbie trial. The sum involved is £17.3 million, which is spread over a number of votes: £11 million for police and prison costs; £4.7 million for court and Camp Zeist costs; and £1.6 million for Crown Office prosecution costs. The good news is that, by agreement with the Treasury, all the capital costs and 80 per cent of the current costs will be met from the UK reserve. In addition, the UK Treasury is negotiating with the American Government with a view to the latter's providing substantial compensation toward the costs that are involved. The outcome of those negotiations is awaited.

Although substantial sums of money are involved in those transactions, only a relatively small amount will fall on the Scottish criminal justice system and we have done well out of the special arrangements with the UK Treasury. In the circumstances, which are exceptional, the national reserve has been willing to pick up virtually all the tab.

That is all I have to say by way of introduction. I am happy to take any questions that members have.

I move,

That the Finance Committee, in consideration of the draft Budget (Scotland) Act 2001 (Amendment) Order 2002, recommends that the order be approved.

The minister has begun to address the committee's first two questions, but I invite my colleagues to probe the issues, if they wish.

The minister indicated that there are a number of technical changes to the budget of the Student Awards Agency for Scotland. I think that I am correct in saying that this is the second time this year that technical changes have been made to that budget. Has the process of making technical changes to student awards been completed? Why has the change been necessary? Will the process be applied to other aspects of the budget?

I will ask David Palmer to address the details. It would be rash to say that any process in budgetary matters is ever finally completed. All budgets are subject to change over time and different requirements are placed on them.

I asked the question because significant sums of money were involved in the June adjustments to the same budget head.

It is fair to say that we struggled to get accounting for student awards right. I suspect that, unless the rules change, we have now got it more or less right.

I will go back a step and provide a bit of history. When the Treasury set up the accounting rules for student awards, the awards were put under AME, because there was uncertainty. The Treasury also set up a range of provisions for offsetting bad debts and so on. When student awards were originally set up in the then Scottish Office, that was done without the inclusion of offsetting amounts. We came across that problem and are now trying to address the matter to ensure that proper accounting elements exist. The student awards amount must always come to the same proper bottom line. We are now, in effect, trying to get the accounting right because, although previously the budget came to the right figure, it did not necessarily stack up in terms of Treasury accounting rules.

We can, if it would be helpful, provide a fuller note on that.

Yes please.

I wish to address the minister's comments on health. I think that you said that additional resources will come in, but there is no change in planned spending.

I said the gross spending has not changed.

Where do you intend to spend the additional resources? Can you clarify that, or is the money a sudden bonus that you did not anticipate?

No, it is not. The expenditure plans for the health department are announced, as David Davidson knows, through the normal channels. I am sure that the additional resources arise from an increase in income from the national insurance fund. David Palmer will clarify the technical details.

The resources come from increases in income from the national insurance fund, which result from higher-than-anticipated levels of employment.

Is there a direct connection with national insurance moneys that are collected from Scotland, or are the resources just a straight percentage of the national pool on a per-capita basis?

I think that the increase results from moneys collected in Scotland, but I am not 100 per cent sure. I would have to check.

Perhaps you could give the committee information on that. It would also be interesting to find out how many employees that national insurance represents.

I have a question on the underspend on the fisheries decommissioning scheme by the Scottish Executive environment and rural affairs department. There is also, on page 9 of the spring budget revisions, a reference to a transfer to the Forestry Commission. There is a saving of just under £15 million. To what extent are payments being delayed? How much of that £15 million is delayed payments, and how much is payments that will not be made? I am curious about the transfer to the Forestry Commission. Will it be returned later? I notice in the Forestry Commission entry that there is a transfer of £5 million to cover a shortfall in timber receipts, which I presume is because of low timber prices. Could you expand on that?

I understand that there are two factors. The first is a lower-than-anticipated cost per boat for decommissioning. The second factor is a delay in payments. The delay in payments will certainly all come back into the rural affairs budget. The lower-than-anticipated cost per boat is a saving to SEERAD, which has decided that it will—rather than carry the money over as EYF—push it towards priorities in the Forestry Commission, namely the fact that timber prices are so low that the Forestry Commission is struggling with funding.

So we are, in effect, saying that £8 million will not be spent on the decommissioning scheme because—

I do not know the split between how much is slippage and how much is a forecasting saving, but I could find out and let you know.

Slippage might be caught up with later, so the cash might still be required. We can examine the detail and give the committee more information.

Yes. Most of the environment and rural affairs budget is AME, so the bit with which the department has flexibility is not significant. Therefore, if £8 million were being transferred to forestry from fisheries, one would think that the money must be coming mostly from the decommissioning scheme.

I suspect that that is right. As far as I am aware, a target was set for 2002-03 to decommission 100 boats; the intention is still to hit that target. I am not sure of the split between forecasting error and slippage this year, but I could provide a note on that.

Undoubtedly, there is a continuing problem in forestry. The price of timber has fallen so much that the Forestry Commission is struggling to meet the income requirements for which it previously budgeted. There is therefore a requirement on us to provide from time to time short-term support for the Forestry Commission in order to allow its activities to continue. The policy dilemma is that the Forestry Commission has many assets. The Executive has not hitherto got into the business of forestry sales to compensate, which is why we must compensate for income loss elsewhere in the system.

I suspect that forestry prices will not pick up significantly, however at least £5 million has been allocated to the Forestry Commission's operating budget. That is about 7 per cent of the Forestry Commission's total budget. In effect, that is an extra subsidy. Will the sale of assets need to be increased? I seem to recall that Donald Dewar put a moratorium on sales.

Notwithstanding the fact that the Forestry Commission has significant assets, the Executive is not going down the road of selling those assets. That is why money must be brought in from other parts of the system to sustain the forestry budget. If I could predict forestry prices, I suspect that I would not be in this business.

Can the minister clarify the budget for the fisheries decommissioning scheme? During the debate in the chamber, we got the impression that the total sum would be available for decommissioning. We know that other demands must still be made on that budget. Demands are now arising from the consequences of decommissioning on some shore-based activities, which will need to be met from the enterprise budget.

I want the minister to clarify another point. This is the third time that a finance minister has given evidence on the budget and talked about support—in other words, state aid—for the commercial activities of the Forestry Commission, despite the fact that similar support is not available for the private and charitable sectors. Will the Executive be forever bailing out forestry activities, even though few jobs are now connected to those activities? Forestry provides some important jobs in certain areas, but not many. Can the minister clarify what the future budget requirements will be for forestry?

On the decommissioning scheme, we have made a commitment to the sums that were announced in Parliament. If money is required, it will be found for that purpose. Short-term cash transfers between budgets to meet other difficulties do not mean—

Are the transfers purely accounting practice?

Quite so. Although there has been slippage in the fisheries decommissioning programme, cash will be found if it is required for decommissioning. We have made a clear policy commitment to do that. The short-term transfer—which has happened because there is a short-term surplus of cash in the fisheries decommissioning budget—is in no way a long-term reduction in that budget, which is there to meet the policy requirement.

We support forestry in a variety of ways. In addition to funding the Forestry Commission, we give grants to other parts of the forestry sector. The budget as a whole sustains expenditure in both the private and charitable forestry sectors—to which Mr Davidson referred—and in the Forestry Commission's own lands.

As I said to Mr Morgan, it would be rash of me to predict future forestry prices. We can only monitor that situation over time. At the minute, the fact that forestry prices are low has an impact on our estimated income, which means that we need to balance that effect somewhere in the budget. Over time, prices might well rise so that we might have a surplus against the estimate. In that case, that money would become available elsewhere in the system for other purposes. I suspect that those matters will even out over time. Given the market conditions, it would be rash of me to predict what that time horizon will be.

With respect, minister, the grants are made for planting and maintenance; they are not market support in the sense that they make up for any losses that people might make.

I was talking about the effect that the reduction in income has on the Forestry Commission's ability to administer itself in total. The commission needs a budget for administration and if it is short of that budget, we need to support it in some way. That is not the same as providing state aid to the industry in the way that Mr Davidson described.

Brian Adam has a question. Is your question about something else?

It is in the same general area.

We must be careful not to spend all our time on forestry.

My question is not on the forestry side of the resource transfer, but on the fisheries side. I will also ask about the publicity machine.

I am still not clear about the business of the £14 million or £15 million that has been saved on the decommissioning scheme because of delayed payments. Will the minister clarify exactly what delayed payments are? Have payments been delayed because applications were not received in time, or have there been difficulties in processing the applications? Will the minister confirm that the £25 million will be available over the next two financial years?

Let me reconfirm that. The Executive has committed itself to a policy whereby it has made available £25 million for decommissioning and for the range of fine detail that decommissioning contains. That policy commitment will be met. Although the short-term cash transactions in the budget revision move money around within the budget, that is a pretty normal process within any normal budgetary year. We are happy to provide the committee with a note on more of the detail.

On the question of slippage against expenditure, in any budgetary situation a budget is an estimate of expenditure for the year. At the beginning of the year, a clear judgment is made that X amount of cash will be required for that year. In actuality, things might turn out differently: a scheme might not start on time; applications might be received at a slower than expected rate; the time scales for processing applications might be slower than was wanted; and applications might be for lower-than-expected values. There is a variety of reasons why planned or estimated expenditure can slip.

However, we have made our policy commitment. If cash is required, cash will be made available.

Will you give us a commitment to provide us with a note on why there has been slippage in the fisheries decommissioning scheme payments?

We will certainly do that. We will look into that and provide that information for the committee.

I want also to ask about what is perhaps a minor point. Page 10 of the spring budget revisions document shows that the environment and rural affairs department has apparently doubled the money that is set aside for publicity and information. An additional £750 million has been made available.

The amount is £750,000.

Sorry, it is £750,000, which is a slight difference. I know that spin is not yet quite that much out of control.

I assume that the same money is identified in schedule 3.7 on page 23 of the document, under "Publicity, Committees and Information". Is the increase related to the costs of the committees of inquiry into foot-and-mouth disease? Will the minister clarify why that budget line has been doubled for this year?

The increase is related to the television advertising campaign, "do a little - change a lot". It is vital to increase public awareness of environmental issues.

It certainly costs a lot.

I want to move on by asking about the moneys relating to the Scottish Transport Group. I understand that the Scottish Transport Group is in the process of being dissolved, which accounts for the figure of £168 million on page 38. There is also a disbursement of the surplus to STG pensioners. I understand that, for a number of reasons, the process is taking longer than anyone anticipated. I notice that a disbursement of the surplus is budgeted for this financial year. Do you expect that you will be able to resolve the situation?

As Elaine Thomson said, resolving the administration of that situation is taking time. The budget revisions provide both for the permissions to receive the income that we are due to receive under the negotiated arrangements, and for the expenditure of that income, which will be done as quickly as possible so that it can be concluded within the time frames that are relevant to the budget. The revisions are a signal of the fact that the Executive is preparing the ground so that it will, as soon as the cash is received, be able to administer and distribute the money in the way that was announced to Parliament and which was agreed by all the parties concerned. The purpose of the revision is to set the ground rules and provisions, so that we can act quickly as soon as the matter has been concluded.

I am sorry that we had that little distraction earlier—although it was fairly serious, if the convener does not mind my saying so—but I want to return to the health budget. Will the minister clarify once more his response to my question about the extra NI money? Is the extra NI money that appears in the spring budget revisions a replacement for other moneys from the block grant, or is it an addition?

I understand that it is an additional sum.

That is helpful, thank you.

I also want to clarify a matter that appears on page 155, which concerns the health department's income. I notice that there is a difference between the way in which income from general dental services is treated and the way in which income from things such as prescription charges is treated. Can you say why that difference exists? Are the treatment rules different?

The minister noted that there is quite a reduction in income. Is that because of commercial activities that are hidden within the budget line? I have previously made the point that it is unhelpful to have all those different items bundled under one figure. For example, the committee previously considered the commercial activities of the blood transfusion service. I feel that the committee would be better served if the blood transfusion service's budget was given on a separate line, so that we could follow through on our previous investigations. The same principle applies for the income from prescription charges that is collected from appliance suppliers and so on. Why will that income drop by almost £10 million?

We are getting into a level of detail on which I need to write back to the committee. Unless David Palmer can answer, I do not have at my disposal information on differences between accounting practices. However, I am more than happy to provide the committee with that information and David Davidson is delving down to a level of detail that I do not have at my fingertips.

We are talking about a revision. A change in the order of £10 million has taken place since the last revision, which means that it has taken place over a matter of a few months. That seems like a significant change.

I will need to confirm this, but the revision could stem from the original estimates' being out by £10 million. That is probably the most likely explanation, but I will need to come back to the committee with more detail. I am happy to undertake to do so.

How will the consequences of the McCrone settlement work their way through the spring budget revisions document? Are there any aspects of McCrone that you want to draw to our attention?

I do not think that there are consequences from the McCrone settlement in this document. Budgetary provision has already been made and allocated through the local authority block and the money is now available at local authority level to help with the implementation of the McCrone settlement. I am not in a position to comment on the extent to which McCrone is being implemented by local authorities throughout Scotland, but I have no reason to believe that the progress that people anticipated is not being made. There is still much to be done in the coming period; the future implications of McCrone must still be fully worked out and that matter is under consideration.

Is it possible to quantify for the committee the implications of McCrone? You need not do so now, but perhaps you could send us a note.

By "implications", do you mean how the costs will be built into future budgets?

Yes. We would also like information on the phasing in of that process, as you see it.

We would need to go back to our education colleagues, who are principally responsible for the policy, but I am sure that we could arrange to let the committee have the details on where we understand the current cost profile is leading. As I said, some matters must still be resolved among local authorities, the Executive and the unions. Matters of detail are still being negotiated as part of the McCrone settlement. Part of the challenge is to work out the final cost.

Perhaps the closure of the individual learning accounts scheme is of less financial significance but it is, nonetheless, important. The scheme's closure just before Christmas will have had financial consequences. How is that dealt with in the budget? What payments will need to be made to the companies that were discontinued? What budgetary implications will result from restarting the scheme?

Again, we will need to come back to the committee on the fine detail on that. We are happy to find out that information for the committee. As members know, various matters are being considered as a consequence of the winding up of the ILA scheme. I presume that all those matters will need to be taken into account as part of the reconciliation of final payments.

On future policy, I am aware that my colleague Wendy Alexander is examining the issue closely. I am sure that policy initiatives will emerge to try to ensure that the gap that will have been created by the change in arrangements will be filled at some point. The timing of that is a matter that I need to leave to Wendy Alexander. Perhaps the Enterprise and Lifelong Learning Committee will examine the matter in some detail.

There is a transfer of £3 million into Scottish Enterprise to cover the projected overspend by Scottish Enterprise on ILAs, but as far as I can see that is the only reference in the document to ILAs.

In principle there might be an underspend because of the discontinuation—

You will be aware that there is a degree of uncertainty about the final reconciliation because of the circumstances that gave rise to that decision.

Will there be any indication of the additional administration costs associated with having to deal with the various claims in a short space of time? I understand that that was dealt with by an external agency.

We can certainly find that out for you.

Are you in a position to estimate what the underspend will be this year on the budget?

I rather suspected that I might be asked that question, but I would not care to speculate on that at the moment. I think that I have indicated to the committee previously that a variety of factors are at work in the budget. Such is the growth and the rate of growth on public expenditure that it becomes difficult to get all the programmes in line quickly enough to spend all that, given the rate of increase. It is a well-known phenomenon in all forms of public expenditure that when one increases the budget a lag is built in until one catches up with expenditure. That is happening progressively.

I know that there has been a recent exchange between the convener and Andy Kerr in response to his comments to the committee about various budgetary matters, including end-year flexibility. If it would be helpful to the committee, we would be more than happy to spend some serious time with you—formally or informally—to go through the phenomenon of what has become known as EYF. EYF is actually a technical permission to carry forward sums of money that are arrived at for a variety of reasons, not all of which are underspend. For example, the principal purpose of EYF was to stop the year-end surge that we used to get in public expenditure, when people felt that they must spend their annual budget before a certain date, otherwise they would lose it. Thankfully, those days are now gone.

What EYF also allows us to do, and what as a consequence makes up a significant part of the EYF total, is planned provision for future peaks in expenditure that we anticipate within a two or three-year time horizon. We can plan, on a two or three-year basis, to make provision for future expenditure, then incur that expenditure when the peak occurs. That also helps the overall management of budgets.

EYF is also capital slippage. I suspect that, in Alasdair Morgan's constituency, capital programmes for roads expenditure in the current year, which were planned for areas that were affected by foot-and-mouth disease, simply could not proceed because it was not possible to get access to the land in the normal way. There is capital slippage in that; it is a perfectly understandable and natural thing. We will use the EYF facility to carry forward that money so that it can be spent in that constituency. I am sure that Alasdair Morgan will welcome that. There are capital matters, and anybody who manages such budgets over time knows that things like bad weather or planning consents can affect capital programmes significantly. Something unexpected might be discovered on a site when a road is being built, and that delays things. For a variety of reasons, there is slippage on that front.

However, within the EYF total there is also additional income. Occasionally we get more grant than we had expected for certain purposes. That can come in fairly late in the year, so there will be items of additional income. One example in the current year is Motorola, where, in unfortunate circumstances, grant was in effect clawed back. That is extra income over what we expected; it is not an underspend. It counts against the EYF total if we do not spend it within the year.

A range of things take place within the EYF total. In other words, it is wrong to characterise EYF as just underspend. If the committee wishes to avail itself of our offer, it would be worth while spending some time going through the process in detail so that we get a much more sophisticated shared understanding of what it all involves.

That is a valuable suggestion.

I am slightly cynical because—whatever statements the Government makes about EYF—we have ended up with roads repairs in the Clyde area every February and March since time immemorial. Perhaps the logic is just working its way through the system.

It would be useful if you came to talk to us about the detail of EYF. You say that the bulk of EYF is planned to deal with peaks and troughs—that it is to do not with disease or weather conditions but with planning. If that is the case, can we have a little transparency? For example, if something that appears in one year's expenditure is really meant to be in the next year's expenditure, can we have it identified as such? It is easy to characterise EYF as underspend, but if it is planned well in advance in the way that you appear to indicate, that should be flagged up so that everybody can see that that is what it is.

In that context, we might consider EYF alongside the issues of contingency and reserve. That would be a reasonable package.

For the reasons that Brian Adam suggests, we would be happy to do that. Our intention is to try to give more clarity in the current round. When we begin to reconcile what is happening this year, we intend to ask how much of the EYF is planned provision for future expenditure peaks. How much of it—for the reasons I have indicated—is capital slippage? How much of it is real underspend, in the sense that things are taking longer to occur than we thought? How can we improve our management in such areas to ensure that that does not happen? How much is due to additional income? It would be helpful to everybody to have more clarity on that.

Unfortunately, EYF is sometimes characterised simply as an underspend and therefore somehow the result of sloppy management. However, it is a very useful facility. The public sector must have flexibility to carry forward money, to make plans, to target resources where it wants them to go and not to fritter away resources because it thinks that it might lose them. We must all move forward and refine our thinking. I would be more than happy to share our current thinking on that with colleagues.

That would be helpful.

I have a question about article 2(4)(b), which is on the front page of the Budget (Scotland) Act 2001 (Amendment) Order 2002. I notice that it amends vote 6—or whatever you call it—in schedule 1. I wondered why those items were being deleted from the apparent remit of the justice department.

I do not have sufficient detail to make a sensible comment. I would be happy to come back on that point.

On EYF, various ministers have agreed that we will get six-monthly statements of the roll-out of programmes. Such statements would answer some of the committee's queries on where voted budgets are in the roll-out. Presumably, the matter could then be clarified as you suggested.

There are two points there. We are more than happy to break up the total EYF figure into its component parts so that it is much clearer how the things that I have described arise.

I am not clear about your first point on the roll-out of budgets. If you are suggesting that the committee be given a six-monthly report on the state of the budget, I would be reluctant to give you a commitment on that today, because, for management purposes, we consider the information inside the system day by day and week by week to see how our budgets are running. Much of that information is refined over time and a lot of what happens within the budget is down to management discretion and how resources are deployed in the light of expenditure patterns.

In effect, we have had statements of agreement. We asked for three-monthly roll-out figures, and we settled for six-monthly figures. Are you suggesting that we will not get those figures?

No, I am not suggesting that we would not give you anything that we have agreed to give you. I was not clear what we had agreed to give you.

I think that Mr Palmer was around during those discussions. Perhaps he can clarify the matter behind the scenes.

I have a simple question, which I suppose is fairly unusual.

For a change.

There are a couple of points that leap from the assessment. You have not added any money to liquid petroleum gas grants. It appears that there is nothing in the budget to spend on that. Is that scheme at an end?

Can you give me a page number?

Page 77.

By definition, if we have not added anything it is not a spring revision.

There is nothing in the revision, so presumably the budget is static. The question was, are there still demands?

For that level of detail, I would have to go back and find out.

My other question is in a similar vein. Page 124 lists the Scottish Tourist Board figures. We have had a lot of statements from members of the Executive on support for tourism, in particular following the disasters of foot-and-mouth disease and September 11. There is no indication of any proposed change to the previous revision. I have picked up from the Scottish Tourist Board—or VisitScotland, as it is called now—that it has been reviewing its marketing plans. Are you content that there is likely to be no additional demand, or are we likely to see another revision if VisitScotland comes up with a different plan, bearing in mind the fact that it is conducting a review?

There is a clear commitment from the Executive to give more support to tourism in a variety of ways. Part of that commitment is in response to the great difficulties that followed foot-and-mouth disease. It is recognised that the events of September 11 had a major impact on tourism. As you rightly say, the tourism industry is reviewing its performance and future targets. Revisions were made in the autumn revision to bring the budget into line with commitments that ministers made. If there are changes with regard to tourism, they will be reflected in budget revisions or in the structure of tourism budgets. Be clear that the Executive is focused on improving support for tourism for the reasons that I have outlined.

So your current position is that there is no call to increase what you have already voted through.

That is right. If ministerial decisions had been taken to further increase budgets for tourism, they would be reflected in this revision.

May I return to Alasdair Morgan's previous question on the order? All that has been omitted is the comma.

I see. My apologies.

It is something that the lawyers do ad nauseam; they put a comma between "criminal justice" and "social work" for some reason. The comma should not be there.

I am glad that we are debating such weighty matters.

It is a very expensive comma.

I have a couple of questions on regeneration. Can you expand on the transfer to local government of £10 million from the local authority non-housing capital for better neighbourhood services fund, which is shown on page 224?

On a related issue, I found it hard to identify within the revisions the contingent changes associated with the changing role and functions of Communities Scotland, in particular with regard to the additional responsibilities that it is taking on in terms of monitoring regeneration services. There will be a transfer of functions from the Executive to Communities Scotland, but it is difficult to see a budgetary counterpart of that.

I wish to be clear about the question. You are saying that Communities Scotland is being asked to take on a greater regeneration role. Are you asking whether there is a consequent flow-through of cash from other parts of the Executive budget?

Yes.

I am not clear that there is, in the way that you have described.

I am not 100 per cent clear, but has Scottish Homes been wound up yet? I am not clear that it has.

Certainly Communities Scotland has been established.

I know that we set up a budget for Communities Scotland in the budget that we have just produced. I am not clear whether there are any financial implications for Communities Scotland this year. I would have to check that.

I presume that the previous budget would transfer to carry on existing activity. If your question is about the extent to which the budget has been enhanced because of the additional responsibilities for regeneration, we will come back to you on the detail of that.

On your earlier point about the transfer of—

Local authority non-housing capital for better neighbourhood services.

I am sorry. What was the question?

Page 224 refers to a budgetary revision of about £10 million.

It is the second item under the heading "Local Government".

I wonder whether that is an accounting change or a change of priority.

Again, I will have to come back to you on the detail of that. I suspect that the figure simply represents a reclassification of expenditure from non-housing capital to revenue for that purpose. That is probably the underlying reason. I will clarify that for you.

The amount is taken out of capital and put into the operating budget. It is simply a swap of that nature.

I can confirm that the figure of £10 million simply represents a transfer from the capital revenue accounts of the Executive to cover that new expenditure.

Where is the disappearance of the £10 million from the capital budget shown?

On the face of the order itself—

Should there not be a consequential change of £10 million to the relevant capital budget part of the revised position for 2001-02? On which page would that appear?

Local authority capital is voted on the face of the order. It never goes in the budget documents booklet. That is simply one of the funnies of the Budget Bill process.

Does the fact that the figure appears on the face of the order preclude it from appearing in the detail of the budget revision, given that the revised position of not just the operating budgets but the capital budgets is detailed?

We can examine whether that would be helpful for the presentation. Technically, for the purposes of the order, local authority capital must be on the face of the order. Article 2(3) of the order indicates the relevant reduction.

So the £10 million transfer is part—a substantial part—of the reduction that is indicated in the order.

The reduction is about £11.1 million, of which £10 million relates to the social justice matter that we have just discussed. Some other, smaller matters also relate to the total reduction. A specific transfer between capital and revenue that Argyll and Bute Council requested has been allowed. There is an additional provision from EYF for Bellwin expenditure. There is some additional income from the Treasury in relation to foot-and-mouth disease. A variety of matters make up that particular total.

A question was asked about the transfer to children and young people and specific grants on page 89. There are nearly £40 million of revisions.

Which figure are you looking at?

The transfer to children and young people and specific grants. Significant revisions are obviously taking place, particularly of specific grants.

That reflects the fact that the education department took the EYF and plonked—for want of a better word—all of it in schools.

That is a technical term.

The department did that despite advice from some quarters that it should not. The department is now allocating that money.

When EYF was allocated to the education department's budget, it was put into a single budget line. The department is allocating the money among its budget headings. That is the reason for the sum.

I thought that departments had to make a case for EYF to be allocated to them.

That is true. Notwithstanding the fact that the education department made a case, it allocated the money to a single budget line and is now allocating that to the headings for which cases were made.

The department has simply put a chunk of the money in a single budget line as a holding pot, from which I presume that it is distributing the money to the projects that it made a case for.

It seems difficult to reconcile that with transparency.

The committee's comments on that will be helpful.

That has been a concern to the committee.

The department should not have done it.

No members have further points for clarification, so we will go into formal debate. As members and the minister do not wish to speak, I will put the question.

Motion agreed to.

That the Finance Committee, in consideration of the draft Budget (Scotland) Act 2001 (Amendment) Order 2002, recommends that the order be approved.

I thank the minister for coming along and for giving helpful answers.