Budget Strategy Phase 2011-12
The next item of business is a debate on motion S3M-6670, in the name of Andrew Welsh, on the Finance Committee’s report on the budget strategy phase. I invite those members who wish to speak in the debate to press their request-to-speak buttons.
15:47
I am pleased to open the debate on the Finance Committee’s budget strategy phase report. The report deals with the questions that will shape our political discourse for the foreseeable future, namely how the public sector in Scotland should be preparing for future budget cuts.
I make it clear from the outset that the Finance Committee considers the current financial situation to be the most significant challenge that the Scottish Government and the Scottish Parliament have faced since devolution. There are no easy or painless solutions to dealing with that challenge, and it is incumbent on all of us in the Parliament and in wider society to debate what needs to be done in a mature and responsible way with our arguments rooted in firm evidence.
The committee’s inquiry forms part of the new budget strategy phase, which was a key recommendation of the Finance Committee’s review of the budget process. Because the budget strategy phase is designed to inform subsequent scrutiny of the Scottish Government’s draft budget by committees, the Finance Committee agreed that it would be useful as part of the budget strategy phase to undertake an inquiry into the efficient delivery of public services. Our inquiry sought to understand the preparations that are being made by public sector bodies to deal with the new reality of budgetary reductions. We also wanted to understand the principles that will underpin the Scottish Government’s approach to constructing its forthcoming draft budget.
Key conclusions in our report were that the evidence of adequate preparations for cuts is, at best, patchy, that there appears to be a lack of urgency among some public sector leaders, and that there does not appear to be consistency across the public sector in preparing for budget reductions. Given that analysis, our report called on decision makers in all publicly funded bodies, as well as the Scottish Government and our parliamentary committees, to show far greater leadership. We all need to be more open and realistic about the impact of the budget cuts, and how we can deal with them. For example, we have called on the Scottish Government to set out more fully the principles that will inform the development of its spending proposals and to explain whether it has a specific strategy for protecting vulnerable people from the impact of those cuts.
The Scottish Government gave the committee an insight into some of the principles that will guide its future public spending plans. For example, the Cabinet Secretary for Finance and Sustainable Growth said that the Scottish Government “Will and wants to” retain current universal benefits. He also said that, if there were a real-terms increase in the health budget south of the border, the Scottish Government would pass on the consequentials to health in Scotland.
Commitments such as those will have an impact on other budgets. We have, therefore, asked the Scottish Government for a more detailed explanation of the consequences of its approach. Our call for more information will come as no surprise to observers of our Parliament's budget scrutiny process. The question of what information is needed by committees to fulfil their basic scrutiny role is a perennial one. Indeed, we should not forget that the architects of our budget process did not simply envisage a basic scrutiny role for committees. There was to be a much greater opportunity for the Parliament and its committees to play a meaningful role in the approval of the Scottish Government’s spending plans and to influence the Executive’s preparation of budgets.
Bearing in mind those principles—and the possible scale of the budget cuts—we received criticism of the lack of information that is available to interested parties. For example, the Royal College of Nursing said:
“We are currently unable to comprehensively analyse … health spending proposals”.
School Leaders Scotland claims that the lack of information on spending made
“evaluation of improvements in service provision and value added to learning meaningless across the country.”
Clearly, everything has to be joined together so that we get fact-based budgeting and a clear view of the task ahead of us.
The Finance Committee has repeatedly highlighted such gaps in knowledge. Our report calls on the Scottish Government to provide a supporting document to the 2011-12 draft budget that will set out the link between performance over the period of the previous spending review; Scottish Government priorities for the next spending review; and how those priorities are to be funded in 2011-12. Such a document will greatly help to demonstrate the link between past performance and future spending priorities.
Our report was not simply about identifying information that we would like the Scottish Government to provide. In a wide-ranging inquiry, we heard some detailed, and sometimes radical, suggestions for improving public services. Although this was an unavoidably broad-brush review, given the breadth and complexity of the issues that were raised, there are certain issues that are likely to feature strongly in the on-going debate about our public services.
With regard to long-standing arguments about how bodies should be organised to allow for the optimal delivery of public services, the cabinet secretary appeared to give a clear steer to public sector leaders to consider taking far greater steps towards sharing services. As increased collaboration now seems increasingly likely, the committee has asked the Scottish Government to say how greater collaborative success could be measured, and we have sought reassurances from the Government that it will play a more active role in driving that process.
The committee also heard more fundamental arguments about who should be providing public services. Organisations representing business interests and the voluntary sector both advocated strong cases for strengthening their involvement. We look for details about how that can best be delivered.
I have no doubt that today’s debate will be the first of many that deal with the impact of the spending cuts. However, my intention today is to frame the debate in terms of how committee scrutiny of the Scottish Government’s spending plans can be made as effective as possible. The Finance Committee will continue to play a lead role in shaping the debate. We will, for example, take evidence on the findings of the independent budget review group before the draft budget is published.
We also recognise that people look to Parliament to face up to the biggest challenge for Scotland since devolution. For the search for effective and fair solutions, I thank all Parliament’s specialist committees. I also thank all members of the Finance Committee for their positive and thoughtful input in facing up to the massive fundamental budgeting problems. The Cabinet Secretary for Finance and Sustainable Growth does not have an easy task. However, we all have a duty to try to assist in ensuring that the Parliament and Scotland come through this crisis in the best possible shape and in the best interests of the people of Scotland.
I move,
That the Parliament notes the 4th Report, 2010 (Session 3) of the Finance Committee on the Budget Strategy Phase (SP Paper 455) and refers the report and its recommendations to the Scottish Government for consideration.
15:55
I have taken the unusual step of lodging such an amendment because of the unusual times that we live in. Before I start, it is important to remind the Scottish National Party that this is a Parliament of minorities.
Last year, the cabinet secretary set up his joint group, which was made up of the main shadow finance spokespeople, to get buy-in for his budget. The main reason why he did not fully get that was that he did not share all the information, in particular the details of his capital budget. In the previous year, he had tried brinkmanship, which resulted in a tied vote. However, this year, things are very different.
Page 1 of the report makes the situation clear:
“Measures undertaken by the UK government to tackle the budget deficit will have a significant impact on public spending in Scotland.”
The committee’s remit asked:
“What preparation should be underway now by the public sector to ensure the efficient delivery of public services within a period of tightening public expenditure?”
Mr Swinney’s current response is that he cannot produce a draft budget until he sees the amount allocated to him by the United Kingdom Government’s comprehensive spending review, which we now know will be published on 20 October. Apparently, though, the Scottish Cabinet discussed the economy at some length this week, with an update from chief economist, Dr Andrew Goudie. However, Mr Swinney said in a note to the Finance Committee that we will not get the Scottish Government’s detailed announcements until 24 or 25 November, although—stop the press—at 3 o’clock that was changed to 17 or 18 November. There then follows a truncated timetable, including the Christmas recess, before we get to the second stage debate and the Government’s response to the Finance Committee’s budget report.
As Mr Welsh outlined, this time round we are looking at unprecedented cuts. Parliament and its committees, especially the Finance Committee, must have enough time to interrogate the Government’s course of action. Danny Alexander, Chief Secretary to the Treasury, told the Finance Committee this week that all UK departments were currently interrogating their budgets for savings and he was confident that Mr Swinney’s department was doing the same. Mr Alexander also said that, although he could not give definitive figures for Scotland’s budget for the next three years before the CSR announcement, he anticipated that it would be between 13 and 25 per cent less. Those are his best-case and worst-case scenarios. What is Dr Goudie’s update?
Does the member accept that, even with the best will in the world, Mr Alexander cannot be held to the prognosis that he gave?
With the weight of the Treasury behind him, the chief secretary clearly has half an idea of what he is talking about.
As I said, those are the chief secretary’s best-case and worst-case scenarios, and that is what Labour is asking Mr Swinney to produce. He has already had evidence from the Centre for Public Policy for Regions, which estimated a possible real-terms reduction of 12 per cent between last year and 2013-14. In April, in an earlier report, Dr Goudie estimated a five-year real-terms contraction in Scottish Government departmental expenditure limit expenditure equivalent to a cumulative decrease of 12.4 per cent. Today, the Fraser of Allander institute has warned that a cut of 14 per cent to the Scottish budget could lead to 126,000 job losses.
“politicians ... should provide greater leadership by communicating openly to the public the scale and impact of likely budget reductions.”
Those are not my words but those of our convener, Andrew Welsh, a senior SNP member, who was addressing Dr Goudie in an evidence session. Dr Goudie agreed with him, stating:
“Openness is an extremely important issue.”—[Official Report, Finance Committee, 11 May 2010; c 2228, 2229.]
By the end of July, as the convener has intimated, Mr Swinney will also have the report of the independent budget review team, led by Crawford Beveridge, who is a member of the First Minister’s own Council of Economic Advisers, detailing where they think that the SNP should make cuts.
Paragraph 13 of our report states:
“Various bodies warned that any cuts had to be carefully planned.”
One of those bodies is the Convention of Scottish Local Authorities. If the concordat with local government is to mean anything at all, surely Mr Swinney should give local authorities an early heads-up on what is coming over the horizon. They are certainly making their concerns known and planning thousands of job losses.
At paragraph 17, the evidence from the Chartered Institute of Public Finance and Accountancy advised that there was a strong consensus that all areas of spending should be examined for possible cuts, and it assumed a 15 per cent reduction in the departmental expenditure limit—that is also within the best-case and worst-case scenarios outlined by the Chief Secretary to the Treasury.
On page 7, the committee has detailed three key factors that it asks the Government to consider, with a request for more specific information: first, how it will fund its commitment to maintaining universal benefits and what impact that will have on other budgets; secondly, what impact the decision on maintaining health consequentials will have for the rest of the budget; and, thirdly, the number of public sector jobs estimated to be lost and details of proposed pay restraint.
There is no reason why Mr Swinney cannot produce a draft budget based on best-case and worst-case scenarios, outlining his thoughts on where budget reductions will fall. This is not the year for surprises such as the Glasgow airport rail link cancellation. If he does not want to do that, he could at least give Parliament a statement of separate budget line scenarios in September, because it is not only the comprehensive spending review changes that he is deciding on, as he must also factor in the £332 million of budget cuts already announced but deferred to next year.
By seeking to delay until after the UK spending review in the autumn, Mr Swinney is not only causing confusion but preventing proper scrutiny of his budget. Local councils, health boards and other public bodies need time to plan properly for what is coming.
Page 6 of the Fraser of Allander report states:
“The potential cut to the Scottish Parliament and government budget is unprecedented. In such circumstances it is incumbent on the Scottish government to explore a range of options that can embrace cost savings and revenue raising as well as spending cuts.”
Paragraph 131 of the Finance Committee’s report states:
“it is essential that the Parliament and the Scottish Government begin working together now in ensuring an effective response to the forthcoming budget reductions.”
Finally, paragraph 132 quotes from a CPPR report. It states:
“The Scottish Government needs to start to outline where it envisages making upcoming cuts ... over the summer, rather than waiting until after the UK Spending Review in the autumn. ... there is no excuse to delay clarifying major changes in funding for those bodies that will need to put them into practice”.
Mr Swinney must put the Parliament and Scotland before party and political advantage and outline his thinking in September so that the Parliament, its committees and its members can have enough time to consider what is right for Scotland.
I move amendment S3M-6670.1, to insert at end:
“and calls on the Scottish Government to provide the committee with more detailed financial information as requested, including a draft budget by September 2010 or budget scenarios that make clear where savings will be made, so that the Parliament and the public bodies affected by any proposed budget reductions can consider and debate them fully.”
16:02
It is without doubt a very serious financial situation that is faced by the country, by the UK Government, which was left, as I confirmed to Parliament openly, an atrocious financial legacy by the previous Labour Government, and by the Scottish Government into the bargain. I made that clear and it was also made clear when Dr Andrew Goudie set out the analysis that was undertaken of the public finances set out by the previous UK Government back in April. The point was reaffirmed by the analysis that was published by the Fraser of Allander institute.
Last week, I made it clear to Parliament that I believe that the position that the current UK Government is taking will reduce spending too far and too fast. That view has undoubtedly been reinforced by the analysis of the new budget undertaken by the Fraser of Allander institute.
There is no doubt that we have a very acute financial situation in front of us and, in that respect, the Finance Committee’s report is of great assistance to the parliamentary process in addressing the way forward.
With regard to the cabinet secretary’s view that the reductions are being made too fast, does the Scottish Government have a view on what percentage of UK gross domestic product net borrowing should be by 2014-15?
I reiterate the point that I have just made and have made to Parliament before, which is that I think that the reductions that the UK Government is making are too fast. That view is validated by the Fraser of Allander institute’s analysis that what is being done has significant consequences for us.
The Finance Committee report essentially centres on two themes: leadership and open debate. Those are at the centre of today’s debate.
On the issue of leadership, the Scottish Government started preparing for the spending review some time ago. It is why I established the independent budget review in February.
David Whitton said that we live in unusual times. I could not agree more. Is the minister willing to produce separate budget cut scenarios, as suggested by David Whitton? I would like those scenarios to be communicated not just to the bodies that will take the decisions but to the public. Perhaps STV could help the Government to ensure that the people who will feel the cuts get to talk about them and prioritise.
In a sense, that is my point about open debate. I established an independent budget review not to report to me but to report in public. The review report will be published at the end of July, which will start a process of dialogue and debate on the options. The request that Margo MacDonald makes is perfectly satisfied in the steps that I have taken. If there are ways in which we can enhance the communication of that to the public, the Government is prepared to encourage and facilitate them. Indeed, that was part of the Cabinet’s discussion on Tuesday about the way in which we handle the spending review. It is important that we encourage debate within Parliament, within the wider community and with the public of Scotland about the challenges that we face.
The Government has been clear about the approach that we will take to the spending review. That is reflected in the remit that has been issued to the independent budget review. We will concentrate on three principal areas of activity: promoting economic recovery as part of our work to deliver increased sustainable economic growth; protecting the services on which the public depends; and taking action to combat climate change. Those will be the themes at the heart of the decision-making process of Government. However, we need to have extensive debate and discussion on those propositions, which is why we have the independent budget review. The review will assist us in creating a dispassionate analysis, which will allow us to have that debate.
Mr Whitton made great play about the importance of our bringing forward our best estimates. He was unfairly dismissive of the position of the Chief Secretary to the Treasury, who was pretty clear on the issue at the Finance Committee meeting on Tuesday. I have an account of the meeting rather than a precise transcript. When asked by Mr Whitton whether, if I were to ring in September to ask for an indicative baseline for the Scottish budget, the chief secretary could answer, the chief secretary said that he doubted it because the Barnett consequentials will not have been settled by then. That is my point about making judgments on setting out a budget when we do not have the final information.
David Whitton rose—
I have to decline. I will give way to Mr Whitton in my closing speech, because I am going to quote him now.
On 11 May, in the Finance Committee, Mr Whitton said to the chief economic adviser:
“I would have thought that it was incumbent on you as the Government’s chief economic adviser to give a factual outcome rather than a series of estimates.”—[Official Report, Finance Committee, 11 May 2010; c 2236.]
If Mr Whitton remains true to what he said on 11 May, he is asking us to do something that we cannot do because we do not have the financial data available to us.
David Whitton rose—
In a responsible fashion, the Government will set out the information from the comprehensive spending review, once we have that information. However, in advance of that, we will facilitate wide debate on the issues that the people of Scotland and the Parliament need to address. The Government will be a full participant in that process.
16:08
The convener mentioned the review of the budget process which, although only recently concluded, took some time. Given the substance of Mr Whitton’s argument—some of which was compelling, although I did not agree with all of it—I am left to conclude that the review of the budget process did not address the issues that the Labour Party raises today. There is an issue about timing, which we will need to consider, particularly in relation to the comprehensive spending review.
Prior to the election, the previous Chancellor of the Exchequer refused to give figures for departmental spending because he said that the situation was too uncertain. The new Government has set a comprehensive spending review date of 20 October. We had a similar debate back in 2007, when there was a period of five weeks between the publication of the comprehensive spending review and the publication of the Scottish Government’s draft budget. Looking back, we see that the timescale was longer for previous spending reviews. In 2004, the gap was 14 weeks; in 2002, it was 15 weeks; in 2000, it was nine weeks. Therefore, the Scottish Government’s proposition that the period for 2010 should be four or five weeks is not unreasonable. That is why the part of the Labour amendment that talks about producing a draft budget before the comprehensive spending review is one of the biggest pieces of nonsense that we have ever heard from the Labour Party on the budget—and that takes some doing.
Does Mr Brownlee agree that previous comprehensive spending reviews were looking at an increase in the budget, whereas, this time around, for the first time, we are looking at a cut in the budget and that it is therefore incumbent on the cabinet secretary to produce the information as quickly as possible so that the Parliament can scrutinise it?
We should have a process that can cope with adjustments up or down. There is a problem with the Public Finance and Accountability (Scotland) Act 2000 and the fallback position if a budget is voted down in that no cognisance is given to the possibility that a budget would ever be less than the previous year’s budget. We have built our procedures on the flawed premise that the amount of available money always increases.
We must go back to the committee report, which was a good report for being unanimous. Serious concerns were expressed, which the convener has highlighted, about an apparent lack of preparation for inevitable spending reductions. Last week, in questions on the Government’s response to the emergency UK budget, I said that I did not think that it was credible to announce a budget before the spending review unless the SNP Government were suddenly capable of inventing a time machine. Nevertheless, it is possible to have a broader debate about some of the decisions that will require to be made, some of which have already been discussed. That was exactly the thinking behind our argument, earlier this year, that there should be an independent budget review. Given that the review will report over the summer recess, it would be reasonable to expect the Government to offer some of its own time, when we return from the summer recess, for a debate on the budget review so that we can discuss the issues.
As the convener said, the committee has sought extra information. David Whitton outlined some of the areas in which we asked for substantive extra information. Some of it was information to accompany the draft budget, but a lot of it was information that we wanted before the draft budget. In paragraph 48 of its report, the committee calls on the Government to articulate its guiding principles for the spending review in Scotland, saying, in paragraph 49, that
“such a response, before final spending decisions are made, would demonstrate real leadership by setting out spending choices in an open and transparent manner.”
We could have the Government’s response to the committee’s report dealing with those issues before the draft budget and, building on the debate on the independent budget review, we could then have a sensible debate in the chamber about the types of challenge that we face, which are significant.
It would not be reasonable to expect the Scottish Government to produce a full draft budget, but that does not mean that we cannot have substantive debates on the issues of pay, the public sector workforce and what would happen to the health service budget. We can also discuss whether the Government has made a decision about consequentials, the consequences of which would be pretty clear. We can have some of the debate in advance of the spending review and the draft budget, but it is not reasonable to expect the Government to produce a full draft budget in advance of the comprehensive spending review.
16:13
I will address the timing issue in the Labour amendment later, in winding up the debate. I begin by focusing on what I think is the essence of the committee’s report—the level of preparedness across the public sector. I include the Parliament in that, as the committee’s conclusion in paragraph 147 is clear:
“The Committee therefore calls on decision makers within all publicly funded bodies, and also the Scottish Government and parliamentary committees, to show far greater leadership by discussing in more open and realistic terms the impact that the budget cuts will have and the options that are available to deal with these cuts.”
I fully endorse that conclusion.
It became apparent during consideration of the report that the level of preparedness was patchy and that insufficient leadership was being provided. That was also highlighted by the Government’s chief economic adviser in the “Outlook for Scottish Government Expenditure”, which, as Mr Whitton noted, was published during the election campaign in April. That stated the Government’s best estimate, which is that devolved expenditure will see a fall of 12.4 per cent to 2014-15.
The Government forecast and the indications from the United Kingdom budget this month have been met, as the convener said, with an inconsistent response across the public sector. When we are considering reductions on a scale of 2.6 per cent per annum, which is the Government’s estimate, we require a strategic response, not just salami-slice reductions across individual public bodies that are trying to manage a tight budget.
The strategic response must involve three key areas, on which we need more clarity on the Government’s position. Those are the pay and conditions of devolved staff—the more than half a million public servants in Scotland; capital delivery and priorities in the capital budget; and how local services are delivered and redesigned and who delivers them.
With regard to the third point, I chaired a cross-party meeting on Monday in Galashiels, in my own area of the Borders. It was hosted by Borders College and attended by 40 leaders, including representatives of community planning bodies, small businesses and voluntary sector bodies, as well as councillors. We discussed the public finance picture and the way forward. The meeting also included the Conservative member of Parliament for Tweeddale and the Conservative member of the Scottish Parliament for Roxburgh and Berwickshire.
The presentation by the chief executive of Scottish Borders Council, together with the director of social work and the chief operating officer of NHS Borders, gave a much clearer picture of how services in that region could be better co-ordinated. The aim is not just to deliver the same services, but potentially to achieve better outcomes for people with less spend. Whether we achieve that is a different matter, but it must be our ambition.
Is Jeremy Purvis aware that Aberdeen City Council has taken the same type of approach to discussing the basic choices that are to be made? Is he aware that we could use STV to ensure that all of Scotland is incorporated?
Margo MacDonald pre-empted what I was going to say. The Borders is not unique, of course, and some other areas, such as west central Scotland and the north-east, have been taking such an approach.
Part of the approach that the chief executive of Scottish Borders Council outlined involved moving to a one Borders, one budget approach across the public sector, and—for the first time—mapping all the spend on services in that area. The aim is to deliver the same services for 90 per cent of the money.
With regard to the next steps on that, I would welcome a decision by the cabinet secretary to allow Scottish Government officials to work with the council, the health board and the community planning partners in that ambition as we go forward.
I am interested in and supportive of Jeremy Purvis’s line of argument. I assure him that there is a Scottish Government representative at director level who engages with the community planning partnerships and all the bodies that he mentions. I would be delighted to reinforce that if it would assist the process that Jeremy Purvis describes.
Jeremy Purvis should now close.
I will close.
The cabinet secretary’s offer is very welcome. The process is moving to the next stage, which involves the redesign of local services, and I will address the conclusion of that work in my winding-up speech.
16:18
I will, in the short time that we have today, look ahead—while recognising the current financial situation that faces Scotland—to an extremely important issue for the future: how we truly reform the delivery of our public services to the benefit of all, particularly those who receive them.
I found much of the committee’s deliberations and the evidence that it received interesting and stimulating. I was pleased that those deliberations were, and continue to be, underpinned by joint working with Scotland’s Futures Forum to set the framework for honest discussion and—if I may paraphrase—to recognise that there are no sacred cows.
The evidence that the committee took was mixed, but some witnesses recognised that out of current adversity comes opportunity. I particularly commend those who spoke about the personalisation of services and long-term thinking coupled with preventative resourcing and systems thinking, thereby challenging the status quo, centrally imposed targets and so-called received wisdom.
There are good examples out there. I am pleased that South Lanarkshire Council—which is local to me—has agreed with East Kilbride dementia group that it is in the best interests of the group’s clients to use a direct payments system to allow the necessary services to be provided by its agency of choice. That is innovative thinking.
I was also pleased to learn today from Long Term Conditions Alliance Scotland that the self-management fund, which the Scottish Government funds, already supports 56 projects throughout Scotland, giving individuals ownership of the management of their lives and conditions. That, too, is innovative thinking, and we could do with more of it from the Parliament right through all our public services.
As I said at the start of my speech, I wish to look ahead and deal with the realities that face us in a very difficult financial situation. I had hoped that all speakers would do the same, then I read Labour’s amendment. Mr Whitton wants a draft budget by September. That is impossible. Danny Alexander made a categoric statement at the Finance Committee the other day that if John Swinney asked for figures from Westminster at the beginning of September, they would not be provided. Mr Whitton heard that, because he asked the question.
In the light of that response, Mr Whitton expanded his amendment to say “or budget scenarios”. All of a sudden, he is into scenario planning, so let us consider the best and worst-case scenarios. The best case is that there will be no cuts, money due to Scotland will be delivered, the VAT rise will be rescinded, fiscal autonomy will be introduced and independence will be recognised as good for Scotland.
Will the member give way?
No thank you.
Let us consider the worst case, which is, “I’m afraid to tell you there’s no money left,” confirming the words in Liam Byrne’s letter.
Labour seems content to budget on the basis of no figures or information. No wonder we now have the biggest ever peacetime deficit and Scotland suffered financial mismanagement until May 2007. I trust that the Parliament will reject Labour’s ridiculous amendment, look to the future, read the report that the Finance Committee compiled, follow closely the committee’s future work in this regard and agree the motion in Andrew Welsh’s name.
16:21
Just over three years ago, on the day that he took office, the First Minister told the Parliament:
“The days of Scottish Government imposing its will on the Parliament are behind us”.—[Official Report, 16 May 2007; c 25.]
The amendment invites the Government to live up to those words.
The Scottish Government has told us that it faces the most serious cuts since the second world war. Throughout Scotland, thousands upon thousands of people are worried about their jobs. The Scottish Government’s defence for producing no draft budget until November is that it does not have a final Whitehall figure, but there are three reasons why there is no requirement to wait for Whitehall.
First, if the Calman recommendations are implemented next year, for ever more we will set a budget without a final figure for the cash that will come in through tax receipts, from income tax, stamp duty, aggregates and so on. If we want to take more fiscal responsibility, we should stop hiding behind the uncertainty about the final tax take or the grant.
Secondly, next year’s budget is about much more than the Treasury grant element, to which I will return in a moment. Scotland has a range of choices that should dominate our debate between September and November. Should wages at the top be cut? What happens to bonuses? What about asset sales and efficiency savings? Should the council tax be frozen? Should the health service be protected? What happens to rates? Should we have charges to fund new infrastructure? Every one of those decisions has nothing to do with the Treasury grant and everything to do with us. However, options in an independent budget report are different from plans. A draft budget allows the country to compare and contrast its choices.
I come to the Whitehall grant figure. The crucial point is that it can be forecast, and I would even go so far as to say that we can forecast it with reasonable accuracy. In March, just after the previous budget, Andrew Goudie, the Scottish Government’s chief economic adviser, published three scenarios for next year’s DEL: a central forecast, a slow-recovery scenario and a scenario for protecting front-line services. Given a completely blank sheet, Scotland’s chief economic adviser came up with best and worst-case scenarios for next year that differed by a mere £200 million.
In April, the Scottish Government was willing to predict DEL to within 1 per cent of its budget. If it could predict the Whitehall grant on any option to within 1 per cent in April, the question must be how come we do not have the same forecasting post-June? Of course, the truth is that the Cabinet has seen the work and the only people who have not seen it are in the Parliament. Asking for submissions on an independent report simply does not cut it. The truth is that we can have a draft budget in September. I venture to suggest that the overwhelming majority of Scots, irrespective of their political allegiance, would like there to be a proper debate on the options that I have outlined.
If the Government is to think again over the summer, it is incumbent on the rest of us as a Parliament to invite it to think again in the nation’s interest, because in 10 weeks’ time, after we have had our summer holidays, the rest of the country will be looking for us to participate in a discussion about their spending choices in 10 weeks in September, October and early November. The best possible discussion that we could have would be on a draft budget. That would allow the Parliament to scrutinise, compare and contrast. Every single MSP of whatever party who denies Scotland that choice will have to answer to the people for doing so. The cuts are coming, and we will fail the nation if we dither, delay, disguise or dissemble about the choices.
16:26
The Labour Party’s suggestion that a budget bill should be produced before we have the results of the comprehensive spending review takes political posturing to new levels. Deciding how much money will be spent before knowing how much there is would be foolish at a household-budget level, but setting a budget for a nation on such a whim would be irresponsible to the point that it could be contemplated only by a party that was responsible for the worst Government economic mismanagement in living memory.
Will the member take an intervention?
No. I want to make some progress.
The UK budget has given estimated DEL figures for the coming years, but they are not broken down by department, and a small change at Westminster could have big ramifications for the Scottish budget. As the cabinet secretary and other members have stated, the UK chancellor has confirmed that the comprehensive spending review will be published on 20 October. The Scottish Government will present spending plans for the budget shortly after that. It would be irresponsible to bring forward a budget bill prior to receiving the actual numbers, although we know that those numbers will result in an unprecedented squeeze on the Parliament’s spending power.
It is crucial that we prepare for the challenges ahead, which is exactly what the Scottish Government is doing. Setting up the independent budget review in February to take matters forward was part of the process. That panel is due to report in the coming weeks. It has engaged civic Scotland, business organisations, representative groups and other stakeholders in a constructive debate on the budgetary challenges that we face. The Finance Committee took evidence from it as part of our inquiry. That is the correct approach to take. I hope that all the parties will recognise the independence of the report and will add to the debate in a constructive fashion in the best interests of the people of Scotland.
However, there are cuts that we should be hearing about right here, right now. Andy Kerr stated that he wanted to cut £320 million from Scotland’s budgets this year. He has the figures, but Labour members have been silent about where the Labour axe would have fallen if we had been unfortunate enough to have a Labour Government in Scotland today. Councils throughout Scotland will be echoing the words of the Glasgow councillor and shouting out, “God bless the SNP,” and thanking their lucky stars that they do not have to make those Kerr cuts right now to budgets that were already squeezed by Alistair Darling’s £500 million cut last year.
Labour is keen to keep letting us know where it would like to spend extra money. It promises another spending commitment every other day. However, that will not wash with the people of Scotland. Every Labour spending announcement implies deeper and more savage cuts somewhere else. The party that presided over the economic meltdown and saddled Scots with billions of pounds of debts under the buy-one-pay-for-eight-later private finance initiative scandal has a brass neck in criticising the Scottish Government’s approach to budgets.
Labour’s approach reminds me of a spoiled child in the supermarket, stamping their feet and crying because they cannot get any more sweeties. It is time for the Labour Party to put up or shut up. I advise its members to take on board the cabinet secretary’s comments and use the recess to reflect on their approach to the challenges that Scotland faces. The people deserve better from their elected officials.
16:30
Like Linda Fabiani, I would like to spend a bit of time dealing with some of the interesting and relevant evidence that was given to the committee, but I must start by disagreeing with her fundamental point that Labour’s amendment is not consistent with the report. The report’s central theme was to ask the Government to get specific about what it proposes. Other members have quoted some of the report’s recommendations. It recommended that consideration be given to the impact of keeping universal benefits; that the Government should set out the impact of protecting health and the principles that will inform its approach to developing spending proposals; and that the options should be discussed in an open and realistic way. In addition, to quote the CPPR:
“The Scottish Government needs to start to outline where it envisages making upcoming cuts across services over the summer”.
The main thrust of the committee’s report was to say to the Government that we cannot wait until November and that some proposals must be produced now.
Although Linda Fabiani should reflect on that aspect of the report, I agree with what she said. In the short time that is available, we do not have time to look at all the evidence that we received, but it will be worth our while considering much of it as we debate the issues over the summer.
I will pick out two examples. Alan Sinclair and others gave extremely strong evidence on the importance of investment in the early years, which is an area that might be vulnerable. He pointed out that early years support was the
“most efficient and effective use of public money”.—[Official Report, Finance Committee, 13 April 2010; c 2019.]
We should reflect on that evidence because, in my view, we must be extremely careful to protect that area.
For me, the most interesting aspect of the committee’s report was the perhaps unlikely coalition in favour of systems thinking, which embraced Professor John Seddon—who, at one level, seemed to be quite extreme, although he was interesting—and Unison. We must take on board the idea of systems thinking, which involves looking at the interdependencies within Government expenditure. If we do not do that, savings in one area will just impact somewhere else in the budget. The other key aspect of systems thinking is ensuring that we involve the workforce at the sharp end in finding solutions. Much of the committee’s evidence points to how best to deal with budget strategy.
However, we cannot forget the context in which we are operating. It would be remiss of us to look only at the situation that Scotland faces. We must never forget the wider context of why we are here. As he always does, Joe FitzPatrick waxed strongly about Labour’s financial mismanagement, but I must remind him that the SNP supported all Labour’s spending commitments until 2008; in fact, I seem to remember it asking for more to be spent. It also supported the action that Labour took to defend the economy against depression from 2008 onwards. For months I have been mystified about where the SNP disagrees with the spending decisions of the Labour Government.
I understand why Conservative and Liberal Democrat members do not want to deal with the wider context. Their view, as expressed by Danny Alexander on Tuesday, is that there is no choice at a UK level, but that is patent nonsense. We should remember that there is no sound economic rationale for making cuts so deeply and so fast. The action that the Tories and the Lib Dems are taking may well be counterproductive not just for growth, but from the point of view of its effect on the markets, which are already getting spooked by the impact on growth of the European deficit reduction programmes.
The distributional effect of the budget is quite calamitous, too. We must bear that in mind in the decisions that we take in Scotland. One of the key principles that we must follow is that we must mitigate the effects of the appalling budget decisions of the UK Government on the most disadvantaged people in Scotland.
The key point is that the debate must start now. We cannot wait until November. The Scottish Government must show some leadership; we cannot wait another day.
16:34
I remind Mr Chisholm that the Cabinet Secretary for Finance and Sustainable Growth said in his statement last week that
“net borrowing”
in the UK
“is forecast to be £149 billion, or 10.1 per cent of gross domestic product. That is the highest rate of borrowing in the G20 ... The Scottish Government agrees that there is a clear need to deliver sustainable public finances and to set out a credible consolidation plan.”—[Official Report, 23 June 2010; c 27563-4.]
The issue is how the Scottish devolved Government will set out its consolidation plan, how that will be shaped and the judgments that the Government will present to the people.
If the Government has formally assessed that reductions are being made too fast now, it must say what percentage of UK GDP it is fair for net borrowing to be in 2014-15. If it does not say that, it will not have much credibility in arguing about the pace of reductions, because we will have nothing to compare with what the Government has said. When I asked the cabinet secretary about that earlier in the debate, he declined to comment.
In April, the Government projected DEL levels for 2023-24, but now it says it cannot give policy conclusions for next year’s budgets. That is inconsistent. I, too, do not think that a detailed draft budget can be prepared before the consequentials are available if we expect Government departmental budget lines to be set at levels 2 and 3, but I do not accept the Government’s statement that it cannot present its policy responses to the independent budget review on the direction of travel, especially on the three key matters to which I have referred before—pay, pensions and the public workforce; the prioritisation of capital expenditure; and the redesign of local services. The urgency of those three key subjects and others is the real issue.
I welcome the cabinet secretary’s commitment that a Government director will be fully engaged in the Borders initiative and I know that other parts of Scotland will do similar pieces of work in the summer. I am pleased that the Scottish Government will be actively involved in that work too, but if the committee received a clear message, it was that, as medium and long-term decisions are made on workforce planning, pensions, the delivery of local services and the potential redesign of local services, a much clearer steer from the Scottish Government is requested now.
The debate cannot be informed simply by the independent budget review group; it must also respond to the Scottish Government’s policy proposals. A three-month gap between the end of the summer recess, when the independent budget review group will report, and the first statement of the Scottish Government’s intentions in November, with a truncated budget process, is not conducive to an environment in which medium and long-term planning decisions can be made throughout the public sector. That was the committee’s ultimate conclusion, which is why I support that component of Labour’s amendment.
16:38
The Finance Committee’s first conclusion, which was unanimously reached, is important. In it, the committee calls on the Scottish Government, parliamentary committees and others
“to show far greater leadership by discussing in more open and realistic terms the impact that the budget cuts will have and the options that are available to deal with these cuts.”
With that in mind, I will focus on a couple of issues.
I am a member of the Economy, Energy and Tourism Committee, which also investigated the position and reported to the Finance Committee. From that investigation, my overriding sense is that various Government departments and governmental bodies are doing nowhere near enough work now to consider the impacts of the cuts; very little discussion other than superficial discussion has taken place about how such bodies might approach their budgets next year, the year after and the year after that.
I will illustrate the point by referring to bodies that the Economy, Energy and Tourism Committee examined. Scottish Enterprise’s grant-in-aid budget this year is £277 million. In its evidence to our committee, Scottish Enterprise said that it is working towards a budget next year of £285 million—albeit that that is obviously unconfirmed—and that its budget for the year after that is also £285 million. The grant in aid for Highlands and Islands Enterprise this year is £54.6 million. It is working towards exactly the same amount next year and, again, in 2012-13. VisitScotland, which is the other body that falls under the remit of our committee, has £43.6 million grant in aid this year and is working towards £43.2 million next year.
Those are just three of the bodies that the Economy, Energy and Tourism Committee looks at, but it was apparent to all committee members that no body or agency had done anywhere near enough work on how to tackle the difficulties that clearly will be thrown at them. Of course they do not yet know the exact extent of those difficulties and cuts, but from reading various sources it is pretty apparent that cuts will come and the committee was disappointed to find that they had done so little work thus far. We appreciate that those bodies and agencies do not have precise figures on which to focus, but they can focus on principles. They can also consider the things that they ought to be doing less of and look at what their core work is. Also, given the likelihood of cuts to come, they should focus on what ought not to be core. We felt that far more work ought to be being done now, in advance of September, October and November.
My party has consistently called for the work that the cabinet secretary’s directorate does on potential in-year revisions to be published. When I have put that point to the cabinet secretary he has said that the Government has decided not to have in-year revisions. If his directorate has done that work and papers have been produced, it would form a useful addition to the debate. If that work has been done, why will he not publish it? That would be in the interests of openness and transparency.
In the interests of transparency, the chief economic adviser published a very helpful report on the impact on Scotland of the March budget. Does the member think that it would be helpful for the chief economic adviser to publish a comparable report on the June budget, now that we have it?
Anything that contributes to the debate and makes it as open and transparent as possible ought to be considered and implemented. I take issue with Wendy Alexander and her colleagues where they try to force a Government to produce a full draft budget by September. That is not achievable; it is just not realistic. I think that the entire Finance Committee, including the Labour members, accepted that point. In its conclusions, the committee said that it knew that no draft budget would be made available until November. The amendment is a departure from what Labour members said in committee.
16:43
A national newspaper reported today on a marathon Cabinet meeting. Much of the debate today centres on what was discussed at that meeting. Members around the chamber have appealed for further information and an examination of the discussions. The HM Treasury figures are available to us, as are the CPPR forecasts and those from other organisations. We also have the Goudie reports that now form a central part of the discussion. In response to David Whitton, the cabinet secretary spoke of those reports, but the reports to which he referred are pre-budget and pre-election; we are now post-budget and post-election. The accuracy and definition of those reports could be made much more effective. As Wendy Alexander noted, the margin for error in the previous forecasts is 1 per cent.
I return to the question that Wendy Alexander put to Gavin Brown. There was previously no shyness or embarrassment on behalf of the Government about publishing Mr Goudie’s reports as a commentary on the March budget. In fact, the paper became a central element of discussion around Scotland. Now, the Government has had a sudden dose of shyness and embarrassment. For some reason, the information that is comparable to the information that we had previously is just not being made available to us. I am surprised by that. It runs contrary to the feelings of the Parliament in relation to the need for local authorities, the NHS and all other organisations in Scotland that rely on decisions that the Government and the Parliament make to have greater access to information.
Happy before, not happy any more; one senses that party-political advantage and protection are being put before the real need of body Scotland to challenge and take on the decisions that the Government is going to make.
Will the member take an intervention?
Mr FitzPatrick—let us have some more fantasy from him.
Does the member understand the difference between comment and information and a budget bill being produced?
“Can the member read?” I am tempted to put back to the member. Our amendment says:
“including a draft budget by September 2010 or budget scenarios that make clear where savings will be made”.
Let us not get hung up on the language. There was a marathon Scottish Cabinet meeting and the information is available, but the Government is refusing to share it, not just with the Parliament but with public sector partners throughout Scotland.
Let us dwell a wee bit further on what Dr Goudie said. On 11 May, he responded to a question from Dave Whitton, who asked whether the document would be updated:
“I imagine that that will almost certainly be the case. We updated it as a result of the March budget, following the piece of work that I initiated and following the PBR in 2009. We will almost certainly do that again.”—[Official Report, Finance Committee, 11 May 2010; c 2238.]
Has that been done? Was it discussed? Will the Government publish it? That is the kernel of the debate. I will ignore all the frivolous comments that other members have made on the economic position; we should focus on that singular point—the information that all of us in the Parliament know to be available and which the Government is refusing to share with us. That runs absolutely contrary to some of the things that have been said.
I will close with some of the words that Mr Welsh used. He spoke about “challenges” and the need for debate. He mentioned the need for arguments “rooted in firm evidence”, a “lack of urgency” and a need to “show far greater leadership”. Actually, all those demands lie at the feet of his Government, and it is refusing to deliver.
16:47
I am always a bit surprised when Mr Kerr uses language such as “Happy before, not happy any more”. I am not sure whether Mr Kerr is ever happy with anything that goes on in here, but I will try my best to cheer him up in the course of my speech.
Mr Kerr quoted Dr Goudie, who said that he will be updating the analysis. I am happy to confirm to the Parliament that Dr Goudie is indeed updating the analysis, and Mr Kerr will not be surprised to know that it will be published.
When?
I think that Mr Whitton muttered, “When?” The budget was last Tuesday, and Dr Goudie is working on the analysis. It is the work of the chief economic adviser, and I do not specify when it will be published. Dr Goudie will publish it, and I cannot imagine that it will take terribly long.
There is an interesting contrast between the assertion of Mr Chisholm, who expressed the committee’s point of view that there has somehow been a lack of leadership in the debate, and the example of the event in the Borders that Mr Purvis described, regarding which I saw some media comment—and I very much welcome the fact that such an event took place. I am not sure whether it was originated by Mr Purvis or by Borders College, but it was clear that public sector partners in the Borders had been working on the agenda for the discussion. That utterly refutes the view that nobody has been working on the matter.
Gavin Brown asked about the preparations that are being made at economic development agencies. This might be a rather harsh comment for me to make, but head count has been reduced in both Scottish Enterprise and Highlands and Islands Enterprise for some considerable time, in the knowledge that we were moving into a fundamentally different financial climate. I might not have let off a fanfare about that, but it has been a matter of configuring organisations for the different period that lies ahead.
Mr Brownlee asked how we might encourage a debate on these propositions. I would be delighted if Parliament had a debate on the independent budget review after the recess; indeed, I would take part in it and set out some of our thinking. The central issues that Mr Purvis has raised—the pay and conditions of devolved staff, the contents of capital programmes and the delivery of local services—are the meat and drink of the choices that we have to make, and we have to make them, as Margo MacDonald has made clear, in consultation and dialogue with members of the public. After all, that is what Parliament is here to do, and ministers will be happy to be part of that approach by facilitating things and setting out our thinking.
Ultimately, ministers have to make choices. Last year, I made choices about particular projects; I know that they did not go down terribly well with Mr Kerr or Mr Whitton, but I did not duck them. The time to make such choices is when we have the financial information that allows us to do so.
I very much agreed with the central part of Wendy Alexander’s interesting speech, which was that we should all be prepared to debate these questions. That is why I would be delighted to come to Parliament or the Finance Committee to discuss the independent budget review and the budget that we will set out and which will become the subject of the budget bill. However, she trivialised the issue a little bit when she said that all of this related to a mere £200 million of a difference in the projections. Ms Alexander knows as well as I do that particular decisions taken by the United Kingdom Government on the allocation of expenditure to particular UK departments have an enormous influence on consequentials for the Scottish Government.
Will the cabinet secretary confirm that there was a mere difference of £200 million—or less than 1 per cent—between the best and worst-case scenarios in his own economic adviser’s forecasts for next year’s DEL? Is that true?
Dr Goudie was able to set out that information, but there is a fundamental difference between that kind of trend projection and the composition of a Government budget, which is the creation of decisions that the UK Government quite rightly and properly takes under the current Barnett formula arrangements. The Chief Secretary to the Treasury, the Chancellor of the Exchequer and the Prime Minister have made it clear to the Scottish Government that we will have input into the comprehensive spending review. On Tuesday, Mr Alexander told the Finance Committee that I would not be getting “a running commentary”; I am happy to cheer him up by telling him that I was not expecting to get one. However, having an input into discussions on the balance of decisions that affect our settlement is fundamental to our reaching conclusions about our own budget.
I will submit to the Finance Committee a response that, I am sure, will set out the Government’s guiding principles on the spending review. Following that, I will be delighted to take part in parliamentary debates on the conclusions of the independent budget review and to engage widely in discussions with members of the public in a way that most helps us to reach conclusions on how we protect economic recovery and the services on which the public depend and take the necessary action to fulfil our climate change obligations.
16:53
The timing of the committee’s inquiry could justifiably be described as apposite, given that we are facing unprecedented and—certainly within this parliamentary session—unthinkable reductions in the Scottish budget. Indeed, speakers in today’s debate have echoed many of the concerns that our report highlighted.
It would have been reassuring had we been able to report to Parliament that public sector organisations were facing up to the realities and planning accordingly. I am sad to say that it has not been possible for us to do so. The cabinet secretary seems to have indicated that he has some difficulty with that conclusion, but I remind him that the committee reached that view on the basis of the evidence that it took.
Equally, it would have been reassuring had we been able to report that the Scottish Government was adopting a Churchillian, Government-of-national-unity approach to a fiscal situation that could have catastrophic effects for some of the most vulnerable people in our society. I am sad to say, however, that political rhetoric and an impending election seem to be getting in the way of that.
The report makes the point that clarity, leadership and straight talking are required to respond to this situation. That is indeed the case.
The point has already been made about the chief economic adviser’s impact analysis of the June budget. I am glad to hear the cabinet secretary confirm that that information will be published; it would be a good start to the debate to have it published.
Does Mr McCabe acknowledge that the way in which the Government has set the independent budget review in a place for open debate with the country and all parties is perhaps an appropriate approach, given the Churchillian mantra that he set out for us today?
I gently remind the cabinet secretary that the independent budget review is due to report sometime in July. By his timetable, he is due to come to Parliament sometime in November. In between lies a very large gap for people in Scotland to be extremely concerned about.
One witness to our committee forecast a loss of 6,500 public sector jobs next year. That was before the emergency budget of 22 June and the comprehensive spending review that is heading our way. There is every indication that the Scottish departmental expenditure limit could drop by around 20 per cent, yet the Scottish Government claims that it will protect health spending, apply consequentials direct to the health budget and maintain universal benefits. Those are bold statements, to say the least. There is no shortage of informed commentators on the Scottish economy who view them with extreme scepticism. The Scottish Government needs to lead the debate on this sooner rather than later. The idea that we can wait until November is untenable. The Scottish Government needs to explain to those who will suffer the most what the consequential effects of such promises will be on other services.
Similarly, as has been mentioned, the recent Fraser of Allander institute report has indicated the possibility of up to 90,000 job losses in the Scottish public sector over the next five years. The Scottish Government needs to confirm its view of that prediction and it needs to be honest and reassuring about how it believes that that can happen without the need for compulsory redundancies.
The committee took evidence from a wide range of public bodies in Scotland and it became clear that they require leadership and direction from the Scottish Government. It also became clear that few had any confidence that tinkering or platitudes would have any impact on the magnitude of the budget reductions. Few, if any, will take the radical action required without a firm lead and direction from the Scottish Government. That is why we need to debate and shed light on the full consequences of what lies ahead for the Scottish budget. We need to start that process now and we need to dispense with the notion that we can continue to put off discussion of uncomfortable realities.
The Finance Committee did not find a great state of readiness among the Scottish public sector for what is to come. We believe that the Scottish Government needs to be smarter and faster in outlining its proposed response, especially given that its own independent budget review group will report during our summer recess. That in itself gives ample time for the Scottish Government to lay out some of the impending consequences, long before we reach November.