I am pleased to welcome the Minister for Finance and Local Government and his officials. For the minister's benefit, if he has not yet seen the agenda, I should explain that this agenda item is to be kept separate from our stage 2 discussion of the Budget (Scotland) (No 2) Bill, during which there will be no formal questions other than about the one amendment.
Thank you, convener, and good morning. I have a brief statement which, with the committee's indulgence, I will rattle through. I thank the committee for giving me the opportunity to be here today. I hope that we will have a useful discussion on the bill.
I will respond to that point. We are carrying out a review of the process and would be happy to take evidence from you, either in person or in writing, to feed into our review.
That would be useful. We will take advantage of that opportunity.
Thank you, minister. Members have a number of points to make on the budget documents.
To start the general questioning, let me say that this year's budget documents are, as was the case for the annual estimates, a significant improvement on those of last year. Thanks are due to your officials and to you, minister, for making those improvements—although I am sure that we will want to keep up that process of improvement.
We could, as we have done in the past, run through the various sections in order.
I will start with two general questions. The first relates to the reserve, which was shown in the documents for the previous stage but does not appear in the budget documents. Could you give us guidance on the situation with that?
The reserve does not appear in the budget documents because it has not been voted for a purpose. It still exists in the Scottish consolidated fund. If it is drawn down, that will be done by means of a budget revision.
Understood.
I have just noticed a mistake. The figure of £403 million opposite "Rural Affairs Department" and under the heading "Other expenditure outside Departmental Expenditure Limits" should not be there. The £1,560 million figure for the development department in the same column is for non-domestic rates. The £574 million figure against the health department is, I think, the receipt for national insurance relating to the health service and teachers' pensions.
Did you say that the £403 million figure simply should not exist?
That is correct.
Why are there only three projects shown under private finance initiative payments?
That is the number of payments that we make to PFI projects.
So only three of them come under the Executive's accounts.
Yes.
Are there any other questions of a general nature, before we consider the figures department by department?
Minister, one or two of your colleagues have recently been making announcements that do not seem to tie in with the figures in the budget. Where is the line in the sand? What is the date of the budget documents?
I am not sure to which announcements you are referring.
I will give an example. Ms Alexander made a statement over the weekend about a £25 million funding package of new money for learndirect. That does not appear to be included as new money in the budget documents, which show a movement of about £7 million. Where are we coming from on that?
So your question is by what date the figures in the documents were cast.
Precisely.
The date was just after the debate on the Finance Committee's stage 2 report, on 13 December, so the figures were finalised and taken to the printers around 20 December.
During the discussion in the Parliament on road maintenance, it was claimed that, although the proposals would save the Executive money, they would cost the local authorities a lot more money. That may or may not be true, but is there an argument for including overall public expenditure more widely in budgets in the future?
That question raises both a specific and a general point. The specific point is the process into which the Executive is bound under European Union procurement rules for trunk road maintenance work. Those procurement rules are specific about the way in which we judge best value for that expenditure; they do not necessarily allow a broad comparator across the public sector.
As there are no other general questions, we will move on to the various departmental heads in section 7 of the budget documents. We will take them by department as they appear in the documents. The first one is rural affairs.
There has been talk of a decommissioning scheme for fisheries, which would come under the figures on page 14; it has obviously arisen after 20 December. If that scheme were to go ahead, there could be a cost to the budget of £100 million. Where would that money come from?
Any call on the budget that is introduced after the date on which those documents are cast is a matter that we have to address once we know what the specific sum is. We would have to look elsewhere in the budget to see where there might be flexibility. I cannot give an answer to your question until we have a detailed proposal.
My question relates to pages 38 and 41; it is on the treatment of the water authorities. There is a substantial line under capital expenditure on loans in support of water authorities; it amounts to in excess of £0.25 billion a year over the next four years. How does that system of loans work? Does it come out of the revenue income stream that the Scottish budget receives and then get passed over to the water authorities? For how long do you anticipate that programme of capital expenditure to continue?
While the officials are giving some thought to those points, could Andrew Wilson redirect me to the pages that he is talking about?
Page 38 on the interest and page 41 on the loan. The loan is a substantial sum of money. Is it coming out of our general budget, as allocated, through the usual route? For how long will that lending process go on?
The answer is that it comes out of the general fund and will continue for as long as the investment is required in the water industry.
If, for example, the programme of investment is completed in five years' time, we will find that £0.25 billion is available within the budget—the programme will have finished and the money must have been found from somewhere to pay for it. When is it anticipated that the programme will finish?
I suppose that you are assuming that all other things were equal and that no further calls emerged from that sector.
Yes.
I am no expert on water investment, but I imagine that the time scale is quite long—I think that it will be longer than five years.
Sure—I can imagine that. I am making the point because the sum of money is so much more substantial than has occurred in previous years.
I do not know the detail of how that interest is calculated. I will have to check that, so the easiest solution will be to write to the committee with the answer.
Okay.
As there are no more questions on rural affairs, we will move on to the development department.
I am not sure whether there is a statutory reason for setting out the documents as they are. I accept the suggestion that the presentation could be clearer. I will defer questions about requirements for presentation to officials.
The only previously used heading that I did not mention was that of European funds, which now also falls under development. The other headings remain the same. I asked specifically about those headings that now fall under the development department heading.
We will take that on board for the next time that we present such documents. "Making a Difference for Scotland" was organised by ministerial portfolio, whereas the budget documents are done by vote. Each department has an accountable officer. That is why development includes matters that fall within the remit of more than one ministerial portfolio.
I understand that. I am thinking about people who have tracked the process from "Investing in You" through to "Making a Difference for Scotland" and this year's budget documents. I realise that one department deals with all the issues, but people tend to know of the Minister for Social Justice or the Minister for Transport. I would just like the documents to be a bit more accessible.
That is an important point. I am happy for us to follow it up and to try to find a better way of presenting the information.
The top line of page 43 appears to show a dramatic decrease in the capital budget for motorways and trunk roads. Is that because alternative funds have been provided, which are not included in the budget?
I think that the reduction is a result of a reclassification of minor works and improvements, which have been moved from the capital to the current heading in resource accounting terms. That accounts for the difference that you describe. I do not know whether that answers the question.
Have alternative funding streams such as private finance initiatives or public-private partnerships made a difference to the figure?
My understanding is that, in broad terms, the amount has moved from one expenditure head to another. You ask whether substitute funding rather than public funding is involved. I presume that substitute funding will form an element of the amount during the three-year implementation of PFIs and PPPs.
The more detailed motorways and trunk roads budget on page 45 shows that the programme costs expenditure under the operating budget will increase by between £37 million and £38 million from 2000-01 to 2001-02. The money has switched from the capital to the current heading because of the change to resource accounting definitions.
Have you a figure for alternative funding sources in the programme budget?
No.
Will the minister write to us with that?
Sure.
Page 64 concerns community ownership. It says that transfer debt will be almost £32 million and a note to that figure says that that amount excludes
The £44 million is not included.
In the year for which we are budgeting, what is the cost of community ownership of council houses likely to be?
For which year? For the whole three-year period?
No, for 2001-02.
The cost will be approximately £50 million.
Are there estimates for future years?
Not at the moment.
So the £44 million is not additional. Does that mean that the £49.96 million is likely to be the total?
That will be the global figure.
So when will the £44 million that is held in the fund for use in the repayment of debt principal be used?
That money is held in the consolidated fund against a transfer taking place. When a transfer takes place, that money will be used to repay the debt principal.
I should say that Fiona Hyslop wrote to me on that subject and I have written a response to her this morning.
Are there any plans to align the descriptions in documents such as "Making a Difference for Scotland" a little more closely with the budget documents? For example, I assume that, in the budget documents, the public transport fund is dealt with under the heading "Other Transport". I notice that the integrated transport fund appears under "Capital Expenditure", but I am not sure about the public transport fund.
Yes. The document is subject to the information that was available at the time. Necessarily, if issues emerge after the date on which the document is assembled, they will not be found in the document.
Page 45 has useful information about the projected £22 million that will be spent on the Kingston bridge, the completion of which will be a blessing to us all. Above that information, however, we read about 48 schemes for which there is no specific projected costing. Why is there a costing for the Kingston bridge project but not for the 48 others?
I could guess at the answer to that question, but that would not be much help to the committee. I will ask officials to give you something more concrete.
I am guessing as well, but I think that the situation is a reflection of the fact that the Kingston bridge project is an on-going project with a fairly tightly defined time scale and end date. I do not know if the money is in the budget to procure those 48 schemes. I do not think that anyone has a clear idea of what those schemes are and they have not been tendered for.
The point is that there are 48 schemes to be procured, I assume, from the budget line headed "Maintain condition and value of strategic trunk road and motorway network".
As an example, the M74 northern extension that the Minister for Transport announced last week is not even scheduled to begin until 2005. No actual costs will be incurred until such time as planning permission is granted. I do not know any details about the other schemes.
The specific expenditure set out in that table, unlike the 48 schemes above, represents performance targets. Those figures are at a fairly rudimentary stage.
They are imprecise at this stage.
On page 74, there is a line called "Voluntary Issues" and another called "Equalities and Equality Development". Could you give us a rough idea which voluntary issues are dealt with under that heading? I assume that there are voluntary activities that would come under the education department and so on.
The voluntary issues in that line are only those that are dealt with in the development department under the social justice portfolio. Those would not include spending in the other departments.
That is a rather detailed question. Perhaps we could get something in writing on that.
Yes.
Am I right that that expenditure is for social inclusion partnerships and so on, dedicated to specific areas, rather than across the country?
As far as I understand it. However, we will confirm that in writing.
On page 92, there are two lines: "Freight Facilities Grants" and "Piers & Harbours Grants". There is a major increase in those over the three years. Can you indicate which programmes those refer to?
I have nothing to hand that gives me detailed information on which piers and harbours are involved. The lines reflect a general commitment arising out of the spending review 2000 to provide additional provision for piers and harbours grants to improve standards. In particular, those will allow the larger vessels that are being commissioned to berth. That is what that spending line refers to in general.
What about the freight facilities grants?
We are surmising that Sarah Boyack made a recent announcement in relation to those grants, but we cannot recall what that announcement was. We will write to you on that.
We owe the minister some apologies for our more detailed questions. However, if we get written information it will certainly help with our more general thoughts.
Okay. We will write to you on that as well.
Let us move on to the education department.
On page 115, on schools, there is a substantial reduction in capital expenditure. Is that being substituted from other places?
My understanding is that £10 million was transferred to the excellence fund, which funds the national grid for learning. That accounts for a substantial element of the change.
I will ask a substantial question on superannuation pension payments, which is not an issue that has received much attention from the committee or anyone else. I refer members to page 105.
That is obviously something on which we will need to give you a note. I think that the contributions to those schemes are determined by the Government actuaries.
An extra 10 per cent call on the employees represents quite a big shift.
We will find out from the Scottish Public Pensions Agency and give you a note.
If there is nothing more on education, we will move to page 117, on enterprise and lifelong learning.
Page 119 refers to performance targets. Could the minister explain how he and his department will audit those targets, and what the cost of doing that will be to his department?
I do not know what the mechanism will be for monitoring the particular set of performance targets to which you refer. The Executive is examining the outcomes and outputs that we expect from budgets. That relates to the kind of information that we expect to make available in such documents in future years, which is an issue that we have discussed with the committee. We are considering the testing mechanisms that we can introduce to ensure that, as budgets are committed throughout the year and as we look back annually on budget expenditure, we are able to audit properly the achievement of performance and policy targets generally. I have no further information on how these performance targets will be audited. We will come back to you on that.
What is the relationship between the finance department—or Treasury—and the other departments when performance targets are set? How much of a handle do you as Minister for Finance and Local Government keep on that?
Historically, departments have been substantially responsible for setting their own performance targets. Increasingly, we have dialogue between finance, at the centre of the Administration, and the other departments about the performance targets that should be set, so that they are achievable and challenging.
That last point is interesting. It amazes me to see on page 129, on Scottish Enterprise, that the number of jobs that are associated with inward investment projects is targeted to fall from 19,500 to 8,000. That is a substantial drop of 11,000. That is neither ambitious nor challenging. Would you pass a request from the committee to the Minister for Enterprise and Lifelong Learning to review why she seeks such a considerable fall?
I have a range of matters to discuss with all ministers.
We will move on to page 151, on the health department.
I refer the minister to page 154. Obviously, we have not had level III figures this year. It is very difficult to read the operating budget. For example, the second line refers to income from a variety of sources, but there is just a single figure. A range of things have been lumped together, including commercial activities and taxation in the form of prescription charges collected by dispensing doctors, pharmacists and hospitals. It would be very helpful to have a breakdown of those major sources of income. A single figure for prescription charges would be helpful, for example. Such a breakdown would allow us to consider the construction of the budget. I found this section particularly unhelpful, but the point applies to other parts of the document.
We will take that matter up and consider how we can provide additional information.
I refer the minister to the community care objectives on page 160 of the document. Does the budget allow for any changes in the Executive's developing community care policy? Is there any system to allow for such change and development?
Are we talking about free personal care?
That is one aspect. However, Susan Deacon has announced community care developments at various times and I am not sure whether they have been included in these figures.
Free personal care will be a matter for the 2002-03 budget onwards. I am not immediately sure which financial years Susan Deacon's other announcements fall into.
If they were going to be implemented in 2001-02, they would be included in this budget.
We will move on from the health department to the justice department.
Convener, I am sorry to be such a jack-in-the-box, but we have to keep up with the new minister. On page 171, there is a line for retained income under the heading "Police Central Government". Presumably, some of that income will come from money that the police have charged and retained under part V of the Police Act 1997 in relation to checking on volunteers working with children and so on. Does that mean that the budget documents will contain a new line, or had that income already been considered when those charges were brought in? What will happen on that issue in the future?
I do not think that the line contains any part V charges, as they are not yet active.
Not at all?
No. They are not active as yet.
Okay. It is just that some of the police forces thought that those charges were being made. In that case, is the retained income derived from general charging such as football control?
I am not sure about the exact charges, but I do not think that they are part V charges. That regime is not yet operating.
We now turn to page 202, which shows the budget for the Scottish Executive administration.
It appears that the share of the budget spent on administration has risen this financial year, even though reducing that figure was one of last year's targets. Why has that figure risen this year, and on what basis do you think you will reduce it next year? I hope that that question is clear to everyone.
On the basis of the three-year budgetary cycle, it is clear that the expenditure line is declining in percentage terms.
I asked why it was going up this year and how it was going to be reduced for next year.
I do not have an immediate answer for why the figure is going up this year, and I will get back to you on that point. I will examine the issue of how we reduce future budgetary expenditure in my general review of Executive expenditure.
Okey-doke.
We can provide the committee with those figures, subject to anything that might be commercially confidential. I am not sure whether any of that information will be.
Okay.
Page 208 of the document shows the Scottish Executive's operating budgets. I notice that there has been a huge drop in income from payment for services. Has that happened because of some new accounting process?
That reflects the transfer of HM inspectorate of schools to agency status.
We move to page 210, the general register office.
That was one of the most controversial departments during the stage 1 debate, was it not?
We move to page 235, the Forestry Commission Scotland.
I want an explanation of the £46 million and the £45 million sums under cost of capital. They are substantial sums.
That is the capital charge on the forests.
Oh right.
So I would imagine that it is 6 per cent of whatever the value of the forest is. I do not know the background figures.
That is how it has been applied?
I think so.
It would be interesting, for our RAB inquiries, to work out how the forest is valued. Is it the timber value or the recreational use?
In the first section, you have performance targets for the production of timber, yet if you move further down there appear to be no figures for either the gross value or the net value—or any income whatever—from the timber activity. I questioned your predecessor last year about support for the commercial activity on the timber side of the Forestry Commission. The responses were fairly vague. I do not blame the representative for that, as he did not have the details with him. However, it is important in the budget scrutiny that we consider timber production from forest enterprises and get details of the commercial activity that goes on.
I am not sure that we fully understand the question.
What is the value of the business that the Forestry Commission has in timber production?
Can we write to you on that?
Yes.
We move from the Forestry Commission to the Food Standards Agency. I want to ask about the operating budget. It is lower in 2001-02 than in 2000-01. Does that simply reflect start-up costs?
Are you referring to the total funding requirement?
Yes, on page 243. The net operating budget is a bit lower. There must have been start-up costs. If there is another reason, I would be interested to know.
That is probably a reasonable stab, convener. We are not certain, but we will try to confirm that.
There is nothing else on that, so that concludes our consideration of Scotland's budget documents. I thank the minister and his officials for assisting us. We look forward to receiving further information, as agreed, in the near future.