Public Finance and Accountability (Scotland) Bill: Stage 3
We now move to the first real stage 3 debate in this chamber. It is on the Public Finance and Accountability (Scotland) Bill.
I would like to take members through what will happen. In the event of the debate concluding before 5 o'clock, it is expected that a member of the Parliamentary Bureau will seek leave to move a motion without notice to bring decision time forward.
As we have just agreed, proceedings on stage 3 are programmed to last up to one hour 30 minutes. The electronic voting system can be used for divisions at any time during that period. Copies of the marshalled list of amendments that are to be considered have been available since this morning, and are available from the clerks at the back of the chamber.
I have decided that all amendments for which notice has been given should be selected for debate. Copies of the groupings list have been placed on members' desks, and amendments have been grouped to allow a single debate to take place on related amendments to avoid undue repetition. I remind members that all amendments must be called in turn from the marshalled list. Amendments will be disposed of in the order in which the provisions to which they relate arise in the bill.
There will be one debate on each of the 12 groups of amendments in the groupings list. At the end of the debate on each grouping I will put the question on the first amendment of the grouping, and Parliament will decide whether to agree to the amendment. I will then call the next amendment in the marshalled list. If that has already been debated, the member who has proposed it will move it, but should not make a speech. There will be no further debate, and I will then put the question.
After all the amendments have been disposed of, we will debate the motion in the name of Jack McConnell that is on the business bulletin, as to whether the bill be passed.
We now begin the debate on stage 3 of the bill. I call Andrew Wilson to move amendment 23.
After section 1—Financial procedures: written agreements
I am grateful for the amendment's being selected.
The principle that is set out in this amendment is one that the Scottish National party hopes will garner cross-party support. The amendment seeks to be constructive, and to improve the standing of the bill and the relationship between the Executive and the legislature. It seeks to enshrine in legislation what is already happening in the budget process this year, and to ensure that written understandings between the Executive and the legislature are required at every stage of proceedings.
Subsection (1) provides that agreements should exist. Subsection (2) provides that those agreements should, in the first instance, be brought by the Executive, as they are at present. Finally, subsection (3) states that Parliament must agree to the written understandings.
That is the same process as we are engaged in at present. The SNP's idea is that it should happen under any Executive and any Minister for Finance. That does not bind the Executive to anything to which it is not already committed. No one can say now that we would have these agreements if a different Administration were elected. The amendment is to ensure that this helpful process of engagement between the Executive and the legislature is set in stone.
Finally, it requires that Parliament be engaged in that process, so that it will be seen as inclusive.
I hope that the amendment can garner cross- party support. I look forward to hearing that during the debate.
I move amendment 23.
Thank you again for the selection of amendments, Presiding Officer.
I will make a few remarks and I will reserve the right to respond to the debate as well. I hope that on the basis of my remarks, Andrew Wilson may be prepared to reconsider.
As a new Parliament, we do not have the benefit of years of experience, or of established conventions that govern the processes of interaction between the Government and the Parliament. Not all the processes can be easily enshrined in legislation—the processes featured in the amendment come into that category—and neither can they all be dealt with adequately in standing orders. None the less, we must make them work. It is for that reason that we suggested that some of the financial issues advisory group's recommendations be given force, not by legislation, but by a series of understandings. In effect, we are attempting to build conventions in a new Parliament.
The advantage of that approach is that understandings bring flexibility, which is absent using the blunt instrument of legislation. The nature of those processes means that the precise requirements will change over time, in the light of events and changing circumstances. That is not to say that such arrangements should not be honoured; of course they should. The Executive is determined to abide by agreed arrangements. If the Executive ever sought to change those, that could happen only following full discussion with the Finance Committee and the Audit Committee, or with the Parliament.
The amendment seeks to do two things. First, it seeks to give the detailed agreements legislative force. Given the nature of the subject matter— which does not easily lend itself to legislation—I do not think that that is appropriate. As I have already said, I view those as serious undertakings, by which we shall abide.
Will Mr McConnell give way?
Mr Wilson will be able to respond later.
Secondly, the amendment seeks to ensure that the terms of any agreements are agreed by resolution of Parliament. That is the key point. It is a matter for the Parliament that does not require legislation. I expect the committees to report to the Parliament on the terms of the proposed agreements, and the Parliament to resolve accordingly. I had always imagined that when the agreements were finalised they would be approved by the Parliament and by the Executive. That is what I understand by agreement. It is not necessary for that requirement to be laid in legislation.
I hope that Mr Wilson will take this important point on board. If the amendment were carried, it would give the power to impose an understanding in the absence of a parliamentary agreement. That was never my intention and I am surprised that that is raised in the amendment—even by accident. The amendment says that if the agreement is not covered by a resolution of the Parliament, the minister's proposed agreement shall be put in place. I do not think that the agreements should be put in place unless they have been agreed by this Parliament and by the Executive. That may not be a deliberate intention of the amendment, but it is clear from subsection (1)(c) that subsection (2) would be in place if an agreement had not been reached by the Parliament.
In all our preparations for and debates on the bill, I have stressed time and again my desire that
we agree to our new, democratic and principled procedures without party divisions or conflict between Parliament and the Executive.
I hope, on the basis of the undertakings that I have given again today, that Mr Wilson will withdraw his amendment at the end of the debate.
I thank the minister for his comments and I compliment him on the way that he has handled the bill and the arrangements with the Finance Committee. The comments that I will make today are designed to draw attention to some limited problems, which have emerged from the way in which those matters have been handled. I want to provide clarity for Parliament regarding the way in which it handles such issues in the future.
Let us examine the history of the written agreements to which the minister has referred. The first draft was issued to the Finance Committee on Friday 22 October for it to debate on Tuesday 26 October. I say that not to make pedantic points of detail, but to raise the point that at the outset of the process concern was expressed by members of the Finance Committee about the amount of time that was available for consideration of those written understandings.
In column 45 of the Official Report of the Finance Committee meeting on 26 October those comments were made, not by me, but by Keith Raffan—a member of the Finance Committee.
Once the Finance Committee had provided its views on those issues, the minister issued revised drafts on, I think, 24 November, which was last Wednesday. Those amended drafts have not been considered or agreed by the Finance Committee. Throughout consideration of the bill, the minister has invited us to accept that substantial aspects of financial procedures, in which this Parliament should engage, should not be included in the bill but should be left to written understandings. We are at the stage 3 debate, being asked to agree the contents of the bill, when the Finance Committee and its convener cannot come to Parliament and say that they are content with the contents of the written understandings. That suggests to me that we are being asked to give commitments today when we have not seen all the documents that should have been seen and scrutinised by the Finance Committee. Therefore, a serious parliamentary issue is at the heart of the amendment that we have lodged.
Amendment 23 asks the Executive to agree to nothing more than what it has agreed to already, with one additional point—simply to record in the bill that there is a requirement for such written understandings to exist. I accept without reservation all that the minister said about the need for us to have flexibility in our financial procedures and not to set those procedures in stone. However, I want to put an obligation on the Executive, on its successors and on its successors' successors, to strike an agreement with the Finance Committee and the Parliament about the way in which we conduct our procedural consideration of these matters.
All we ask of the minister is that he formalises a process to which the Executive has consented, and that he inserts the agreement in principle on that point into the bill. I hope that the purpose of the amendment finds favour with many members of the Executive parties who, I know, strongly support the Parliament's committee system. The amendment's purpose is to protect the position of the Finance Committee and its ability to execute properly the functions that it has been given in the first written understanding—functions that we do not want to be eroded in any way in future.
I took part in a debate last night in Dundee, with Mr McAllion, Mr Raffan, Mr Gallie, Mr Harper and various other people, during which Mr Raffan made the point that Parliament would today consider a world-class finance bill. He was absolutely right—the bill is a tremendous step forward. Before arriving at this stage we have given the Executive clear support throughout the Finance Committee's consideration of the bill. However, there is an important issue on financial procedures that we are being asked to consent to, in principle, without there being enough protection for Parliament in the bill—the one point on which we seek the Executive's agreement.
The minister said that the amendment would give the written agreements legislative force—it would not. The SNP wants to give the agreements a status in legislation that will bind the Executive and Parliament to certain obligations. He said that the terms of the agreements had to be agreed by Parliament—that is absolutely right—and that he plans to bring the agreements to Parliament for agreement. His final remark was on the ability of the Executive to impose an agreement. However, that is in no way covered by subsection (2) of our amendment. Subsection (3) adequately covers the need for us to secure agreement between the Executive and Parliament on the issue.
There is nothing in what the minister has said so far that, in my view, questions the validity in principle of our amendment. As I said earlier, the written understandings that we are considering have not been agreed by—or signed off by—the Finance Committee. However, members are being asked to sign off a bill without the consideration that is part of the process being completed.
I therefore suggest that the Minister for Finance consider the opportunity that is available to him under rule 9.8.5 of the standing orders. As the member proposing the bill, he can adjourn stage 3
consideration of the bill—in order to give proper weight to the views of Parliament—if he agrees in principle with an amendment that has been brought forward, but is not absolutely satisfied by the details of the amendment. I make that helpful suggestion to address the way in which the minister could wind up this afternoon's debate.
I remind members that we have 12 groups of amendments to go through. I am anxious to ensure that we have time for debates on the other groups. If we have not had time for debates, the amendments will be put to the chamber without discussion. I am making an appeal for brief speeches.
I rise on behalf of the Liberal Democrats to oppose the amendment and support the minister. Much of what the minister said, I would have said. My problem with the amendment is that it is unnecessary. What is more, it reduces flexibility. I take the point that we have not yet debated the amended draft agreements, but their last paragraph makes quite clear that they are agreements between the Finance Committee and the minister.
The minister has co-operated well with the committee—indeed, we got the papers on 22 October, four days before we debated them, which I believed is a record for a minister. I wish that the others would do the same, although I am aware of the pressures that ministers are under.
The agreements are important and the guarantee that the minister has given that they will be debated in this chamber is important. I also think that it is important that we retain flexibility. Mr Swinney was right to say that I said that we have established a world-class budgetary process. That is a tribute to the financial issues advisory group and their excellent report to the minister and to the Executive.
I do not want to make what would be the equivalent of a third-reading speech now, but I must say that we have a world-class system in place. We have a framework that will have to be altered in the light of the experience that we will go through in stages 1, 2 and 3 of a budget bill when we get into a full financial year. I would not want to tie the hands of the Finance Committee or of the minister by enshrining this in legislation at this point. I would rather that the committee and the minister retained a flexibility that allowed us to alter those agreements and understandings in the light of experience. That is common sense.
I oppose the amendment because I believe that it is crucial that we retain flexibility.
Much of what the previous speakers have said relates to the honesty with which this Parliament is approaching what could be a very good bill for Scotland.
We support, in principle, what Andrew Wilson is trying to achieve with his amendment. Nothing in the bill cannot be dealt with through the amendment. What the amendment does not do is specify what the written agreements are. It provides a framework to which the Parliament, the Finance Committee, the minister and other committees can refer as a method of deliberation and as a means to update the bill when it becomes law.
We need flexibility but we also need to have building blocks in the bill that satisfy the requirements that have been stated on a cross- party basis in the Finance Committee. It is refreshing that people do not divide on party lines in that committee, which has approached the issue positively and sensibly. All members of the committee have made contributions. The wording of the amendment might not be perfect, but I am happy to let the minister use the powers given to him by the standing orders to change the wording to make it more suitable. However, the amendment satisfies the general desire of the members of the Finance Committee.
I see that I am being frowned at by Liberal Democrat members, but we have had a good discussion in the committee. We have demonstrated trust, in that the Finance Committee does not have the written agreements in a discussed form. The amendment would ensure that, whatever discussions take place, either with this Executive or a future one—which might be of a different persuasion—there is an opportunity for this Parliament to deal with the process. In saying so, we support the amendment.
I recommend to members that we wind up debate on this amendment, as we are a quarter of the way through our time and we have dealt with only the first amendment, important though it is.
I am grateful for the comments that we have heard so far on this amendment. I hope that they have been made in a spirit of improvement. I say to Mr Raffan that his argument against setting in stone the form of the written agreements does not stand. All that we want to set in stone is the existence of written agreements. The form that those written agreements take can be amended as we choose; there is nothing binding on that. Therefore, his justification for opposing the amendment does not stand.
I hope that the minister will give thought to the opportunity at his disposal to improve the wording.
I am not precious about that. I would be delighted if he agreed to the amendment in principle and took the opportunity to amend it, as both Mr Swinney and Mr Davidson have suggested. I invite all members to support the principle of the amendment.
I apologise. I should have allowed Mr McConnell to speak first.
I address the specific point that I made, that this amendment would give more power to the ministers than has ever been envisaged by our drafting of the bill.
I do not have strong views on whether the procedure for agreeing written agreements should be in legislation, although I think that it is better that it is not. If the amendment had addressed that point, we could perhaps have gone ahead today. I do not think that it is necessary to break up the debate and adjourn, to revisit this amendment. I have said very clearly on the record today that these written agreements will be agreed. It will be up to the Parliamentary Bureau to decide how the Parliament agrees them. However, it will be for this Parliament as well as for the Executive to agree them.
I wonder whether the minister will agree with me on two points.
First, because of the inflexibility of this amendment, it may not include some items that we may want to include later. For example, subsection (1)(b) mentions changes only to expenditure allocations. If we wanted to change income allocations during the year, that would not be allowed. There is already that inflexibility.
Secondly, it is always open to the Finance Committee to introduce this in legislation through the Finance Committee at a later date, if we feel that the terms that have been promised today are not being appropriately met.
I think that those are good points that are well made. Flexibility may be an important issue. We may want to have more agreements, in the future, than are listed here.
I hope that Mr Swinney will listen to this point. The amendment says:
"Scottish ministers shall ensure that . . . administrative arrangements" will conform to
"an agreement established under subsection (3) or, if no such agreement has been established, proposed agreements under subsection (2)."
That means that, if this Parliament has not passed the written agreement that is referred to in subsection (3) by resolution, our proposed agreement, without amendment by the Finance
Committee or discussion in the Parliament, will become the written agreement that is put in place.
What I have said again clearly today is that I want written agreements to be agreed here—not just proposed by ministers—by Parliament and the Executive.
The agreement of this amendment would lead to a situation in which the ministers would have more authority than they would have had otherwise. Much as I might enjoy that, we have sought all the way through to avoid that situation. I ask once again that this amendment be withdrawn. If it is not, I am prepared to recommend that the Parliament vote against it.
I thank the minister for allowing me to intervene. This subject is not an unfamiliar one in debate between the two of us, as we have discussed it many times in the Finance Committee. I refer him to the Official Report of the Finance Committee from 2 October, when I raised exactly the same issue. At stage 2 of the bill, we were encouraged not to amend the contents of the bill, as the written understandings would be in a condition and a position before we completed the process of the bill. We do not have Finance Committee agreement on the contents of those written understandings, yet we are being asked to sign off the process today.
I ask the minister, who, in the process of his speech, has not objected in principle to there being reference in legislation to the written understandings, to accept the offer that I have made to him today and to consider this issue, bearing in mind that the Finance Committee's rights have been compromised by the fact that we have not had the opportunity to sign off those written understandings.
It is unfortunate that, when we have been trying to build a consensus around this bill, and when the revised arrangements are based on the comments of the Finance Committee and the Audit Committee that were circulated last week and are in the public domain, we are facing what I regard as an attempt by Mr Swinney to point-score about the timing of the arrangements. I do not think that that is appropriate.
Today a firm undertaking has again been given that these understandings will not be put in place without the agreement of this Parliament, which is exactly what this amendment is meant to be about. Because such an undertaking has been given, the amendment is unnecessary. It would give additional powers to ministers that my version of the understandings would not give and, as Dr Simpson has correctly pointed out, would put in place an inflexible list of arrangements that could
not be added to. That would be wrong, because we may want to have more understandings in the future. Those are the points that have been made, and I hope that they inform the judgment that members make.
I thank the minister for giving way.
I did not give way; I had finished.
That was a good try, Mr Davidson, but I think that Mr McConnell had finished. I am sorry, but we must come to a decision.
The question is, that amendment 23 be agreed to. Are we all agreed?
No.
There will be a division.
FOR
Adam, Brian (North-East Scotland) (SNP)
Aitken, Bill (Glasgow) (Con)
Campbell, Colin (West of Scotland) (SNP)
Canavan, Dennis (Falkirk West)
Crawford, Bruce (Mid Scotland and Fife) (SNP)
Cunningham, Roseanna (Perth) (SNP)
Davidson, Mr David (North-East Scotland) (Con)
Douglas-Hamilton, Lord James (Lothians) (Con)
Elder, Dorothy-Grace (Glasgow) (SNP)
Ewing, Fergus (Inverness East, Nairn and Lochaber) (SNP)
Ewing, Mrs Margaret (Moray) (SNP)
Fabiani, Linda (Central Scotland) (SNP)
Fergusson, Alex (South of Scotland) (Con)
Gallie, Phil (South of Scotland) (Con)
Gibson, Mr Kenneth (Glasgow) (SNP)
Goldie, Miss Annabel (West of Scotland) (Con)
Grahame, Christine (South of Scotland) (SNP)
Hamilton, Mr Duncan (Highlands and Islands) (SNP)
Harding, Mr Keith (Mid Scotland and Fife) (Con)
Harper, Robin (Lothians) (Green)
Hyslop, Fiona (Lothians) (SNP)
Ingram, Mr Adam (South of Scotland) (SNP)
Johnston, Mr Nick (Mid Scotland and Fife) (Con)
Johnstone, Alex (North-East Scotland) (Con)
MacAskill, Mr Kenny (Lothians) (SNP)
MacDonald, Ms Margo (Lothians) (SNP)
Marwick, Tricia (Mid Scotland and Fife) (SNP)
Matheson, Michael (Central Scotland) (SNP)
McGrigor, Mr Jamie (Highlands and Islands) (Con)
McLeod, Fiona (West of Scotland) (SNP)
McLetchie, David (Lothians) (Con)
Neil, Alex (Central Scotland) (SNP)
Paterson, Mr Gil (Central Scotland) (SNP)
Quinan, Mr Lloyd (West of Scotland) (SNP)
Reid, Mr George (Mid Scotland and Fife) (SNP)
Scanlon, Mary (Highlands and Islands) (Con)
Swinney, Mr John (North Tayside) (SNP)
Tosh, Mr Murray (South of Scotland) (Con)
Ullrich, Kay (West of Scotland) (SNP)
Wallace, Ben (North-East Scotland) (Con)
Welsh, Mr Andrew (Angus) (SNP)
White, Ms Sandra (Glasgow) (SNP)
Wilson, Andrew (Central Scotland) (SNP)
Young, John (West of Scotland) (Con)
AGAINST
Alexander, Ms Wendy (Paisley North) (Lab)
Baillie, Jackie (Dumbarton) (Lab)
Barrie, Scott (Dunfermline West) (Lab)
Boyack, Sarah (Edinburgh Central) (Lab)
Brankin, Rhona (Midlothian) (Lab)
Brown, Robert (Glasgow) (LD)
Chisholm, Malcolm (Edinburgh North and Leith) (Lab)
Craigie, Cathie (Cumbernauld and Kilsyth) (Lab)
Curran, Ms Margaret (Glasgow Baillieston) (Lab)
Dewar, Donald (Glasgow Anniesland) (Lab)
Eadie, Helen (Dunfermline East) (Lab)
Gillon, Karen (Clydesdale) (Lab)
Godman, Trish (West Renfrewshire) (Lab)
Gorrie, Donald (Central Scotland) (LD)
Grant, Rhoda (Highlands and Islands) (Lab)
Gray, Iain (Edinburgh Pentlands) (Lab)
Home Robertson, Mr John (East Lothian) (Lab)
Hughes, Janis (Glasgow Rutherglen) (Lab)
Jackson, Dr Sylvia (Stirling) (Lab)
Jackson, Gordon (Glasgow Govan) (Lab)
Jamieson, Cathy (Carrick, Cumnock and Doon Valley)
(Lab)
Kerr, Mr Andy (East Kilbride) (Lab)
Lamont, Johann (Glasgow Pollok) (Lab)
Livingstone, Marilyn (Kirkcaldy) (Lab)
Lyon, George (Argyll and Bute) (LD)
Macdonald, Lewis (Aberdeen Central) (Lab)
Macintosh, Mr Kenneth (Eastwood) (Lab)
MacKay, Angus (Edinburgh South) (Lab)
MacLean, Kate (Dundee West) (Lab)
Macmillan, Maureen (Highlands and Islands) (Lab)
Martin, Paul (Glasgow Springburn) (Lab)
McAllion, Mr John (Dundee East) (Lab)
McCabe, Mr Tom (Hamilton South) (Lab)
McConnell, Mr Jack (Motherwell and Wishaw) (Lab)
McMahon, Mr Michael (Hamilton North and Bellshill) (Lab)
McNeil, Mr Duncan (Greenock and Inverclyde) (Lab)
McNulty, Des (Clydebank and Milngavie) (Lab)
Morrison, Mr Alasdair (Western Isles) (Lab)
Muldoon, Bristow (Livingston) (Lab)
Mulligan, Mrs Mary (Linlithgow) (Lab)
Murray, Dr Elaine (Dumfries) (Lab)
Oldfather, Ms Irene (Cunninghame South) (Lab)
Peacock, Peter (Highlands and Islands) (Lab)
Radcliffe, Nora (Gordon) (LD)
Raffan, Mr Keith (Mid Scotland and Fife) (LD)
Robson, Euan (Roxburgh and Berwickshire) (LD)
Scott, Tavish (Shetland) (LD)
Simpson, Dr Richard (Ochil) (Lab)
Smith, Elaine (Coatbridge and Chryston) (Lab)
Smith, Iain (North-East Fife) (LD)
Smith, Margaret (Edinburgh West) (LD)
Thomson, Elaine (Aberdeen North) (Lab)
Welsh, Ian (Ayr) (Lab)
Whitefield, Karen (Airdrie and Shotts) (Lab)
ABSTENTIONS
Watson, Mike (Glasgow Cathcart) (Lab)
The result of the division is as follows: For 44, Against 54, Abstentions 1.
Amendment 23 disagreed to.
Section 3—Contingencies
The minister will now
move amendment 1, with which we will debate amendments 18 and 19.
I move amendment 1, which responds to a suggestion that was made by the Finance Committee. It changes the way in which the control of ministerial spending under the contingency arrangements set out in section 3 of the bill is set. The bill originally proposed that the total spend in any one year under those arrangements should be no more than £50 million, and provided that that figure could be uprated by order.
The amendment is intended to remove the need to make such orders by setting a control that is a percentage of the expenditure authorised by the Parliament under the terms of section 1 of the bill—a percentage of the resource expenditure authorised in the annual budget act, which will vary from year to year—and that takes account of increases due to inflation.
The two amendments to section 25 are consequential on amendment 1 and remove references to the process of revising by order the limit on contingency spending.
I am grateful to the minister, because this amendment follows on from an amendment that I proposed on 2 November, which would have replaced the figure of £50 million with a percentage. It is in everybody's interest that we do that, because a figure can be eroded in the short term—let alone the long term—by inflation. A percentage figure is far more sensible.
I presume that the 0.5 per cent proposed amounts to more than £50 million. For our information, perhaps the minister could provide us with the figure.
Amendment 1 agreed to.
Section 8—Borrowing by certain statutorybodies
I call Mr McConnell to move amendment 2, with which we will debate amendments 20 and 21.
I move amendment 2. Amendments 2 and 21 are to enable limits on local authority capital expenditure to be set out in budget acts, as recommended by FIAG. They also apply to bodies such as police and fire boards, which are treated as local authorities for the purposes of section 94 of the Local Government (Scotland) Act 1973. Amendment 20 is a consequential change to the bill's interpretation provisions.
The amendments impose parliamentary control on the Executive's proposals for local authority capital spending, in so far as that counts against the total budget. Without these amendments, ministerial decisions on local authority capital expenditure would not be subject to parliamentary approval. The Executive considers that to be anomalous. Local authority capital expenditure is a mixture of expenditure that counts against the total Scottish budget, and expenditure that is financed from local authorities' own resources. The intention is that the figure that appears in a budget act should relate only to that part of local authorities' expenditure that counts against the total budget. It would be inappropriate for a budget act to specify a figure that included any part of expenditure that was financed directly by local authorities.
We have concluded that it is not possible to define the relevant part of local authority capital expenditure in legislation; instead, the amendments require Scottish ministers to lay before Parliament a report that describes the expenditure to be covered by the limits set out in budget acts. The Executive intends that the expenditure that is described in such reports will be that part of local authorities' and related bodies' expenditure that counts against the total budget.
Amendment 21 says that
"the Scottish Ministers shall seek to ensure that the aggregate amount of relevant expenditure . . . does not exceed the amount specified for that year".
Could the minister explain how? What powers and what monitoring does the Executive propose will be used?
Without these amendments the Executive will be able to establish the annual limits on local authority capital expenditure without reference to Parliament or reference to the budget acts. The phrase "relevant expenditure" means that we will specify in each budget act and in the supporting documentation exactly which element of local authority capital expenditure is subject to parliamentary control each year. In that way, we hope that each year Parliament will have the right to approve that total, rather than that total simply being a matter for the ministers themselves.
I seek clarification on subsection (6) of amendment 21. Is the minister suggesting that he is taking new powers to determine the methodology of annual capital receipts and capital expenditure? I understand the point that he made about bringing to Parliament the whole question of his decisions, but in that subsection is there any new mechanism or new power granted to
ministers to change the methodology?
No. As part of this process we were determined to ensure that while it was important that parliamentary control was possible over minister's decisions on local authority capital expenditure, that did not extend to local authorities' decisions on their own receipts. Therefore, the amendment as proposed puts existing ministerial decisions and controls under the authority of Parliament, but only those ministerial decisions, and would leave local authorities to make their own decisions in relation to their receipts.
Amendment 2 agreed to.
Section 9—Keeper of the Registers of Scotland: financial arrangements
The next series of amendments are technical, so I will be as brief as I can be.
Amendment 3 is a technical amendment. Section 9 of the bill intends that the Keeper of the Registers of Scotland should operate on a trading fund basis. In other words, his expenses are to be funded from his income, without the authority of Parliament. Of course, the keeper will not have a free hand, as section 9 already ensures that he will have to meet the financial objectives that are set by ministers.
The amendment is necessary to ensure that section 9 operates as intended. Without it, all the controls that are set out in part 1 of the bill would apply to the keeper, and a trading fund style of operation would not be possible. The amendment rectifies the situation by specifying that the only section of part 1 that applies to the keeper is section 6. Section 6 covers procedures for repaying money that has been paid into the Scottish consolidated fund in error, as it is possible that the keeper might erroneously pay money into the SCF. The application of this provision to the keeper is appropriate. I hope that members support this amendment.
I move amendment 3.
Amendment 3 agreed to.
Section 11—Audit Scotland: financial provisions
I move amendment 24. I will also speak to amendments 25 and 26.
The main amendment is amendment 26. It is largely technical, and has the purpose of ensuring that there is adequate provision to allow the preparation of consolidated accounts. In particular, it would enable Scottish ministers to obtain financial information from bodies outwith the Scottish Administration. Although there is no immediate intention to produce consolidated accounts incorporating bodies outwith what is known in accounting as the departmental boundary, and because any such intention would require a considerable planning cycle, it is felt prudent to make adequate provision now.
Amendment 24 prohibits Audit Scotland from charging the Scottish Administration for work undertaken in connection with any consolidated public accounts. That is in accordance with other arrangements set out in the bill that already ensure that Audit Scotland is not able to charge the Scottish Administration for any work that it undertakes, as funding for that type of work will be arranged through budget acts.
Amendment 25 is consequential on amendment 26 and removes the reference to consolidated accounts in section 18, as amendment 26 removes the requirement for that.
Amendment 24 agreed to.
I move amendment 4, which is a very minor and technical amendment. As drafted, section 11 would restrict Audit Scotland's application of resources to fund expenditure to the amounts authorised in budget acts. Section 7 of the bill now provides for the possibility of authorising the application of resources in legislation other than budget acts for everybody else and section 11 requires similar amending. Furthermore, the amendment adds more flexibility to the provisions as it now caters for the possibility that future enactments may authorise the application of receipts by Audit Scotland.
Many amendments that we will hear today appear to be drafting improvements on amendments that the minister has previously lodged. It would have been nice if he had shown the same flexibility to the SNP's draft amendment, given that we do not have the resources of the civil service behind us.
Amendment 4 agreed to.
Section 13—Auditor General for Scotland
I call Mr McConnell to move amendment 5, with which we are debating amendment 22.
I will resist the temptation to respond to Andrew Wilson's previous remarks. Amendment 5 deals with tasks such as audits and value-for-money studies that the Auditor General, under the provisions of this bill, authorises others to do on his behalf. The provision is necessary to enable the staff of Audit Scotland to exercise the Auditor General's functions, if he so authorises, as if they were his own staff. The amendment merely ensures that he remains ultimately responsible for any such work.
Amendment 22 does exactly the same, where the Accounts Commission authorises others— Audit Scotland staff, for example—to exercise its functions.
I move amendment 5.
Amendment 5 agreed to.
Section 17A—Audit Scotland: accountable officer
I move amendment 6, which is very straightforward. My notes call it "trivial", but I prefer straightforward. The bill establishes the position of accountable officer for various bodies and office holders. There is an erroneous reference to
"the accountable officer of Audit Scotland"
and for the sake of consistency, the amendment replaces "of" with "for".
Amendment 6 agreed to.
Amendments 25 and 26 moved—[Mr McConnell]—and agreed to.
On a point of order, Presiding Officer. You have just put amendments 25 and 26 to the chamber for a vote. However, unless I have been sleeping, which is always a possibility, amendments 18, 19, 20 and 21 earlier in the grouping have not been put to the vote. Can you clarify that?
We will come on to those, Mr Swinney. We are following the order in the marshalled list.
Section 19—Audit of accounts
The minister will now move amendment 7, with which we will also debate amendment 8.
I move amendment 7, the purpose of which is to remove the provision that specifically allows the Auditor General to appoint a member of the staff of Audit Scotland as an auditor. That provision is unnecessary. A similar result can be achieved by the Auditor General for Scotland making use of the power of delegation in section 13(5).
Amendment 8 is to clarify that the AGS, in making an appointment, must take into account not only the person's professional qualifications and experience, but any other relevant matters. Such matters may include whether the person has the necessary resources to undertake the scale of audit that is being considered. That person must, none the less, still have the minimum qualifications that are set out in the bill; that is, he or she must be eligible to be a company auditor or must be a member of a body of accountants that has been established in the United Kingdom or another European economic area state.
I should make it clear that the term "a body of accountants" is intended to refer to a body exercising a supervisory role in relation to the profession, and not simply to an informal collection of accountants.
I am sure that that is very reassuring.
Amendment 7 agreed to.
Amendment 8 moved—[Mr McConnell]—and agreed to.
Section 21—Economy, efficiency andeffectiveness examinations
I move amendment 9. I will speak to amendments 10 to 17 as well. Those amendments respond directly to concerns that were expressed in this chamber, as well as in committees, about the scope of the bill and the need to give further powers to the Auditor General for Scotland. They all concern arrangements for value-for-money examinations. The Executive expects that the majority of value-for-money studies will be conducted under arrangements that are provided for in the bill.
Amendment 9, however, provides the additional option of value-for-money examination by agreement. It enables the Auditor General to conduct a value-for-money examination into the use of resources by a body that is not covered by the remaining provisions of section 21, with the agreement of the body concerned. That complements the existing provisions, and provides for the Auditor General to arrange for studies in circumstances that might otherwise be precluded.
Amendments 10 to 17 have been prepared as a result of points that were made by members of the Audit Committee during stage 2 scrutiny of the bill. The intention is to widen significantly the scope of bodies that the Auditor General might examine for value-for-money purposes. The original draft of the bill would have prohibited Scottish ministers from specifying as a suitable subject for value-for-money examination any body that received no more than half of its income from public sources. Amendment 10 reduces that threshold so that Scottish ministers are able to propose any body that receives more than a quarter of its funds from public sources as suitable for value-for-money examination.
Amendment 11 recognises that, on occasion, a body may receive a considerable amount of public funds, but, because of the size of its total annual income, may not be within the scope of the provision. The amendment deals with that possibility by enabling Scottish ministers to
propose that any body that receives more than £500,000 is suitable for value-for-money examination, even if the sum involved is less than a quarter of that body's total annual income.
The remaining amendments in this group are, by and large, consequential on those two earlier provisions, although there are also some changes that have been prepared merely to refine the drafting of the bill.
I commend these amendments.
This group of amendments is very welcome. In particular, I would like to highlight the minister's decision to lower the thresholds for value-for-money studies, in terms of the proportion of an organisation's income that may have come from the public purse and of the absolute sum that may be the subject of inquiry. That is important, because we live in an age in which we must ensure that issues of value for money are implicit in the operations of Government.
The minister will not be surprised to hear me say that, in the past few months and years, many of us have been impressed by the work of the Accounts Commission in driving forward value for money and in examining comparative performance in the delivery of public services, with the objective of improving the management practices involved in the delivery of those services. I hope that that approach will be encouraged under the new arrangements that this bill will provide.
The minister will be aware that, prior to the election, the SNP made considerable input to the debate on value-for-money exercises and what the public purse could achieve if there was a systematic willingness on the part of Government to seek out best value in using those resources. I hope that some of that thinking now underpins the actions of the minister as he exercises his duties.
I would like to draw out the thinking behind the minister's proposal. The Auditor General's powers to initiate investigations on economy, effectiveness and efficiency are crucial to the work of public financial accounting in Scotland. By encouraging best practice and by bringing to light and to public scrutiny poor use of resources, the Auditor General will undoubtedly be able to improve financial awareness and create higher standards of service provision in Scotland.
The work of Audit Scotland is at the heart of good government and resource use within the province of this Parliament. Although I note the reduction of the constraint on the Auditor General from a threshold of 50 per cent to one of 25 per cent, I believe that the amendment still does not go far enough in allowing proper public scrutiny and accountability. I do not believe that there should be any no-go areas for the Auditor General or for Audit Scotland where public money is being spent.
Although allowing access to bodies funded up to 25 per cent by public funds is definitely an improvement, I still ask why any such restriction is being placed on Audit Scotland. That public watchdog should be able to track and to account for public funds. Although the Auditor General may choose not to investigate smaller amounts spent by publicly funded organisations, he or she should have the power, where it is considered appropriate, to go into anywhere where public funds have been allocated, unless there is very good reason not to do so.
I am also wary of the new catch-all amendment, which will work only if the organisation involved voluntarily agrees to its own scrutiny. I am concerned that situations may arise in which scrutiny would be desirable but the organisation that needs to be scrutinised will not co-operate. I ask the minister to explain the caveat of volunteering an examination. Why is the Auditor General not given full powers to follow public money wherever it goes? I hope that the minister can explain more fully the reasoning behind those exceptions to the normal rules of scrutiny.
I welcome the changes to the threshold; the quarter figure is much more acceptable than the half. I note what Mr Welsh, the convener of the Audit Committee, has said. However, having asked some parliamentary questions about this matter in an attempt to find out which organisations might be concerned, I know that it is difficult to get an understanding of precisely which bodies might be involved below the quarter threshold.
The quarter threshold is a good starting point. It was also sensible to include the £500,000 figure; that is an important development. I welcome the flexibility of the minister's approach to the matter. The amendments, if they are agreed to, will improve the bill considerably.
I, too, welcome the minister's flexible approach. I lodged the original amendment for a threshold of 15 per cent. As members of the Audit Committee realise, 50 per cent is an arbitrary figure, as are 25 per cent and 15 per cent, and we have to come to some compromise.
I welcome the new threshold, but I do not welcome the fact that the minister has missed out an important concession that he offered verbally to the committee—that, in exceptional circumstances, the Auditor General would be able to go into any organisation where public funds were involved. Why, at this late stage, did he feel
that he should leave that out of the bill?
I welcome the proposed amendments, which are skilfully drafted. Despite the concerns of Andrew Welsh and Nick Johnston, the threshold that has been adjudged is reasonable because, if the figures are too small, we run the risk of totally overwhelming our administration. Both the Audit Committee and the Finance Committee will have to keep that under review.
When considering this matter, it is important to differentiate clearly between access to financial and other information and value-for-money studies. The amendment is primarily about value-for-money studies, for which it was entirely appropriate—in the light of the discussions that we had—to review the threshold and to bring it down from 50 per cent to 25 per cent.
Will the minister give way?
It may be helpful for Mr Adam to listen to my point; afterwards, I will bring him in.
If we were to go below 25 per cent, a wide range of organisations that receive a very small proportion of their money from public funds would be included on a compulsory basis. They may then hold back from applying for public funds because of the possibility of a value-for-money exercise.
The amendment does not restrict the Auditor General's power to get access to information for any of the audits that he is carrying out. Section 22 gives the Auditor General wide-ranging powers to gain access not only—as part of one of his audits of another body—to information from bodies that have received public funds, but to documentation that relevant persons might have that could affect that audit or the use of public funds. That wide- ranging provision gives the Auditor General for Scotland the power to look after the public pound as far as he or—perhaps in the future—she will ever have to.
The provision is important and must be compared with the 25 per cent figure for value-for-money studies. The latter provision, combined with the provision for a specific agreed value-for-money audit to be carried out by the Auditor General for Scotland for bodies that receive less than 25 per cent of their income from public funds, covers the exceptional circumstances that have been mentioned. Mr Johnston may disagree about the interpretation, but I hope that he will agree that the combination of those two provisions gives the Auditor General sufficient powers to look after public funds in Scotland.
Like others, I welcome the concession that the minister has made. However, not everybody is used to reading legalistic documents. I therefore ask the minister to clarify two technical points and respond to the detailed point made by Mr Johnston about what I had understood was the agreement to reduce the threshold to 0 per cent in exceptional circumstances. Will the minister clarify whether amendment 9 allows the Auditor General free access to any organisation that expends public money, as Andrew Welsh and Nick Johnston would like?
My second point is perhaps even more technical. Amendment 12 would delete the words "the condition in" from section 21(3)(b), which refers to whether,
"in the case of a class of body or office-holder, the condition in paragraph (a) is satisfied in relation to at least half of those in the class."
I am not sure whether
"half of those in the class"
is another area where the threshold should be 25 per cent rather than 50 per cent. Indeed, I am not sure what exactly is meant by those words. How will the minister honour his pledge to allow full access to information from any organisation that spends public moneys in exceptional circumstances?
The words
"half of those in the class"
refer to the class of body or office-holder, which is mentioned in the line above.
On access to information in exceptional circumstances, section 22 of the bill gives the Auditor General the power to seek the information to which Mr Adam, Mr Welsh and Mr Johnston refer. That is different from conducting a value-for-money exercise. I suspect that if a body in Scotland that received less than 25 per cent of its income from public funds—and that was subject to parliamentary scrutiny or debate because of the way in which that money was spent—refused to agree to a value-for-money study that the Parliament felt was reasonable, the Parliament would not agree to that body getting the 10 or 15 per cent of its income that it got from public moneys in the following year. That is the control that we would have and why the bill will work by agreement, without an audit being imposed.
We need to set some priorities for the Auditor General for Scotland, which is what the amendment seeks to do. The amendment follows the public pound and ensures that proper value- for-money exercises can be carried out, but it does so in a way that prioritises the elements of public finance that are substantial and whose scrutiny is therefore in the public interest.
Amendment 9 agreed to.
Amendments 10 to 16 moved—[Mr McConnell]—and agreed to.
Amendment 27 concerns value- for-money examinations of the water and sewerage authorities. The Water Industry Act 1999 creates the new office of Water Industry Commissioner for Scotland, which is a major step forward in the regulation of the water industry in Scotland. We are concerned that, as both the commissioner and the Auditor General for Scotland have a remit to ensure that the water and sewerage authorities act with economy, efficiency and effectiveness, there is a potential for overlap. I am sure that the Auditor General and the commissioner will liaise to ensure that their activities are complementary and do not duplicate each other. Amendment 27 merely gives such an arrangement statutory force. I hope that members will agree to it.
I move amendment 27.
To clarify that point, will the minister say whether he has in mind a pecking order in terms of who initiates what? There is some ambiguity—I hope that the minister will pardon me, but I am not sure about the way in which he has drafted the provision. Is it the Auditor General who will ask the Water Industry Commissioner to get involved in a value-for-money study, or will the commissioner do that automatically and then report to the Auditor General? Alternatively, will they have two separate, independent functions? From the Parliament's point of view, would the Auditor General kick-start the study?
The bill refers specifically to the powers of the Auditor General and to the role of Audit Scotland. It would therefore not be appropriate for it to determine how the Water Industry Commissioner would carry out his or her duties. The bill is about what the Auditor General will do; as amendment 27 says, the Auditor General would have to consult the Water Industry Commissioner for Scotland before he chose to carry out a value-for-money study.
The commissioner and the Auditor General could, in theory, still carry out two studies at the same time, but one would hope that the Auditor General would not institute a value-for-money study in an area that was already being dealt with by the commissioner. That is what the amendment seeks to achieve.
Can I ask the minister for further clarification?
No, Mr Davidson.
Amendment 27 agreed to.
Amendments 17 to 21 moved—[Mr McConnell]—and agreed to.
Schedule 1
BORROWING BY CERTAIN STATUTORY BODIES
Given the shortage of time, I will shorten my remarks on amendments 28 and 29, both of which are technical. Their intention is simply to maintain existing arrangements in relation to water authorities' working capital flexibility.
The bill, as drafted, would apply parliamentary control to all borrowing by the new water and sewerage authorities. The controls would extend to borrowing by means of bank overdraft to meet a day-to-day excess of expenditure over income. The controls could severely limit the authorities in managing their expenditure efficiently, because they would have to ensure that, at the year end, they had not exceeded the borrowing limit set by Parliament. That might require them to reduce their investment on capital projects so as to be certain that they would not be exceeding their borrowing authority. Presently, administrative arrangements allow the authorities to operate an overdraft facility that does not count against the Parliament's budget. The bill, as drafted, would remove that flexibility; the amendments are intended to reinstate it. I hope that members will agree to them.
I move amendment 28.
Amendment 28 agreed to.
Amendments 29 and 22 moved—[Mr McConnell]—and agreed to.