Presentation of Memorandum
The next item is the presentation by the Minister for Finance, Mr Jack McConnell, of the memorandum "A Financial Framework for the Scottish Parliament".
I notice that the minister has placed before us issues to discuss when he has finished his presentation. Instead of the order in which he has placed those issues, I want to separate them into two sections. The first will be a series of information questions—I will give him notice of those questions before we get there—and in the second we will focus on more substantive issues.
Thank you very much, Mr Welsh and Mr Watson. This is a historic meeting because it is not only the first joint meeting of parliamentary committees but the first meeting at which someone has presented a bill. I am very proud to be in that situation. If anyone had told me that I would spend my 39th birthday sitting in front of a finance and audit committee talking about financial accounting procedures after I had failed my first-year accountancy exams at university, I would not have believed them, but there we are.
As I said last Thursday, I am looking forward to working closely with the Parliament as a whole, with the two committees in particular and, for that matter, with the Opposition spokespersons on finance, in what I hope will be a constructive relationship. This bill is important, but maintaining such a constructive relationship is equally important and I want to develop it positively. I hope that this will be the first of many appearances in front of the joint meeting—or in front of either committee.
The memorandum contains a lot of detail. I want to highlight some of the background and then the specific points that we can address today, over the summer and in the autumn. We have a tight timetable. Although it is not essential for Parliament to pass the bill in its final form by the end of this year, I think that—as a point of principle—the procedures and audit arrangements should be in place for the final budget bill for the next financial year. That should happen in early 2000. Therefore, although the bill does not need to be passed until 31 March 2000, I think that it is important to have it approved by the end of this year.
To that end, we plan—following today's meeting—to go out to consultation over the summer. I want to make clear to the committee my hope and intention to present the final bill for debate, discussion and amendment in the Parliament and in these committees by early September.
The bill's proposals, which are in the document before the committee today and which we will take out to consultation over the summer, are based on the recommendations of the financial issues advisory group and the consultative steering group, which endorsed those recommendations. It was important for an independent body to make those recommendations, because the bill's proposals and the financial and audit arrangements are important to the whole Parliament, not just to the Executive. That body of work has been helpful to us and I want to repeat my thanks of last Thursday to the members of FIAG for all their work.
Committee members may want to raise other issues this morning, but I want to target attention on four or five key areas. First, I want to highlight the legislative process for budgets and budget amendments. In the memorandum, I have raised a specific point about the use of the word amendments. If we are trying to be transparent and clear about what we are doing, it is not helpful to give two completely different meanings to the word "amendment". It would be more helpful to use "amendment" to mean changes to actual legislation and to use a different word to describe agreed changes to the Parliament's budget.
That highlights a substantive issue about using primary or secondary legislation for budgets. FIAG earnestly proposed that primary legislation should be used both for the Executive's initial budget to be agreed by the Parliament and for any budget adjustments, revisions or amendments over the year. In the autumn, any committee discussion of the consultation exercises should at least address the principle of using primary legislation for the main budget. I am very comfortable with the proposal but I am interested to know whether committee members agree with it.
However, the substantive issue concerns budget adjustments. I want to draw the committee's attention to the fact that, if budget adjustments have to be approved by primary legislation, there is a four-week period during which the law officers can refer a bill passed by the Scottish Parliament to the Privy Council for adjudication should they be concerned about the bill's content and our powers to legislate on the matter. The law officers might never use that power, but if they do, it could delay implementation of the Parliament's financial decisions in a way that perhaps contradicts the very principle of the Parliament making financial decisions.
It might be more accountable and democratic to devise a system of parliamentary scrutiny of and decision making on budget adjustments based on the principles of secondary legislation, which still give full scrutiny powers to the Finance Committee in the main and to the Parliament as a whole and avoid that possible four-week lag before a decision is implemented. That would also strengthen the Scottish Parliament's power, instead of running it down. I think that that is an area in which dialogue would be useful and I suggest that we discuss it today and over the summer.
I want briefly to address the proposals for audit arrangements. The FIAG report recommended a specific structure for the relationship between the Accounts Commission, the new Auditor General for Scotland and the new body, Audit Scotland. The proposed arrangement has some technical difficulties, particularly the need for financial and other transactions and the relationships between Audit Scotland as a separate body, the Auditor General for Scotland's office, which will work for the Parliament, and the controller of audit at the Accounts Commission, which will work on local authority audit. Such a relationship may also have VAT difficulties.
We have a number of possible options to deal with the situation. There is the extreme option of scrapping the whole idea and simply having the Accounts Commission with the controller of audit, and Audit Scotland with the Auditor General for Scotland as two separate bodies, the first dealing with local authority audits and the second with Government audits. Another option suggests a more managerial relationship. The controller of audit would still work with the Accounts Commission while the staff of Audit Scotland would be managed directly by the Auditor General for Scotland. The controller of audit would commission work from the staff of the Auditor General, who would effectively be the chief executive of Audit Scotland. A further option is to make the controller of audit the chief executive of Audit Scotland and act almost as a deputy to the Auditor General, with the Accounts Commission as a body scrutinising and commissioning local authority audits, but with the staff of both bodies involved in one managerial relationship.
As of today, I do not have a firm view about which of those options we should choose. As well as putting the matter out for written consultation, I am meeting representatives from the Accounts Commission in July as part of the consultation over the summer. I would also welcome any questions or views on those options from the committees today. We will need to come back to this issue at the end of the summer.
I want to touch on three other areas. The issue of ministerial powers of direction for the detailed layout of accounts is to some extent a legal matter. As yet, we do not have absolutely clear legal advice on whether the power to direct the format of accounts should lie with individual Executive ministers—be it the First Minister or the Minister for Finance—or with the Scottish Ministers as a whole. However, I think that there is an issue about the role that either the Audit Committee or the Finance Committee and the Parliament could play in deciding the layout of accounts. As the Parliament ultimately receives the accounts, it should—through its committees—have a view about the layout of accounts to ensure maximum transparency and accountability.
I strongly believe that, apart from formal civic organisations meeting committees—and the Finance Committee in particular—as part of each year's consultation on the budget of the Executive and the Parliament, the Executive should consult the people of Scotland on its budget and that that should be done as openly and transparently as possible, partly as an information exercise.
Local populations find the information work done by most local authorities in Scotland on annual budgets helpful, informative and useful and the Scottish Executive should follow that trend. Members of the public should be able to give feedback on or contribute good ideas about our budget proposals so that we can take them into account. I hope that the committee will contribute views to or ask questions about that point.
Some aspects of the FIAG report are already covered in the standing orders and other aspects will be included in the bill, but a number of areas in the report are not appropriate for statute or legislation. Rather than make them the subject of Executive or parliamentary decision making, I propose that they should be the subject of written understandings between the Executive and the Parliament, which would be similar to the concordats that have been discussed and are expected to be implemented later this summer between the new Scottish Government and the UK Government at Westminster.
A written understanding on some of those areas between these two committees, on behalf of the Parliament, and me, on behalf of the Executive, would be very useful, make clear where the Executive and the committees stand and ensure that we have a productive and constructive relationship.
I am glad to be here today to take questions on points of information first, and then to discuss the issues. It is vital that we in the Scottish Parliament vigorously debate political choices and that we debate their financial implications where those exist. I also think that we can work together on many budget matters, on financial matters and, certainly, on audit—as representatives of different political parties, as parliamentarians and as members of the Executive—to ensure the fundamental principles of accountability, transparency and efficiency. Those principles allow us to spend money in the interests of Scotland to the maximum effect. If we follow those principles together, in a constructive relationship, we will do very well.