“Strategic Budget Scrutiny”
The next item of business is a debate on motion S3M-4526, in the name of Andrew Welsh, on behalf of the Finance Committee, on the committee's inquiry into strategic budget scrutiny.
I commend the Finance Committee's report "Strategic Budget Scrutiny" to the Parliament. Because 2009-10 is not a formal spending review year, we would normally expect this year's budget to remain broadly similar to the 2007 spending review plans. The Finance Committee decided to undertake strategic scrutiny of future budgets because a number of factors make the draft budget for 2010-11 substantially different from the original plans and are likely also to influence future years.
Because those changes put considerable pressure on the Scottish Government's budget for 2010-11, the committee considered the impact of the recession on public sector budgets in Scotland in the immediate future and in later years: that is, the expected pressures and demands on the Scottish Government's 2010-11 budget, and the likely implications for the Scottish Government's budget in the longer term. The committee sought to inform and assist the scrutiny that we, the subject committees and Parliament will undertake in the autumn. Our report findings cover fundamental issues and key decisions that we will need to make in the years to come.
No one should be in any doubt about the position. Evidence that we received shows that the current year is likely to be the peak year for public spending for some years to come. I acknowledge that there are political differences about the way in which capital acceleration should be presented when figures from different years are compared, but although there is an increase in the total departmental expenditure limit between this year and next year, we all agree that the sum that will be available to the Scottish Government in 2010-11 will be lower than was envisaged in the 2007 spending review.
The budget process for 2010-11 takes the Scottish Government and Parliament into new and potentially very challenging territory. We are now in a different environment for spending and must face up to budget constraints that have never been witnessed in the lifetime of the Parliament. For the Scottish Government and individual public bodies, that raises short-term issues of budgetary planning for 2010-11, but this is just the first of some challenging budget years. Although it is difficult to make predictions because no formal spending allocations are yet available for the years beyond 2010-11, the trend is none the less clear.
This year's United Kingdom budget estimates a current budget deficit of £137 billion next year and a net borrowing requirement at the historically high levels of £175 billion this year and £173 billion next year. Those borrowing levels radically affect assumptions about public spending as the UK Treasury tries to balance support for recovery from recession with a return to fiscal balance in the longer term. The debt position will have a significant effect on public spending because future management of public finances will also have to make good the shortfall in tax revenues that the recession has brought about. Indeed, many economists predict that UK public spending will continue to be under severe pressure in the medium to long term, perhaps even as far ahead as the late 2020s or early 2030s.
The Chancellor of the Exchequer's 2009 budget speech, in which he outlined public spending projections to 2013-14, estimated average real-terms growth in current public spending of 0.7 per cent between 2011-12 and 2013-14. However, the Cabinet Secretary for Finance and Sustainable Growth's analysis of the 2009 budget suggested that when that current spending growth is combined with capital spending reductions, it means a real-terms reduction of 0.1 per cent in total public spending over the same period. We simply do not yet know how Scotland will fare in that overall picture. This summer has brought increased spending on unemployment benefits and significantly reduced tax revenues, which means that even those pessimistic United Kingdom spring budget predictions might prove to be optimistic.
There is no doubt that there are several difficult years ahead of us, so significant challenges and strategic choices must be addressed for the 2010-11 budget with explicit recognition, where possible, of their effect in future years. As we have seen both at national level and in individual public bodies—which are facing reduced income streams at the same time as demand on services is increasing—the effects of recession on public finances are very variable and their future course unpredictable. The longer those effects persist, the less sustainable it is for public bodies to absorb them through efficiency measures or the use of reserves. We suggest specifically that subject committees scrutinise whether robust analysis and contingency strategies are in place in their portfolios to address that issue.
Aside from the effects of recession, the fact is that when budgets are tight, fixed-cost commitments impact increasingly on room for manoeuvre. The Finance Committee considered the overall effect of some fixed costs such as multi-year pay deals, pension costs and unitary charges for private finance initiative and public-private partnership projects. However, subject committees should also scrutinise the effects of various fixed-cost pressures on budgets in their individual portfolios. Certain policy commitments such as free personal care, concessionary travel and so on will have particular impacts on the room for flexibility in the rest of the budget. The current context demands a very clear understanding of the future cost trajectories for various commitments and policy streams and their effects on other budgetary choices.
The committee did not undertake an overall assessment of the total projected costs of different policy priorities. We recommend that subject committees seek robust detail on expected budgetary trends in areas of particular importance, that they specifically request longer-term projections, and that they examine the extent to which spending departments can demonstrate evidence of longer-term thinking.
The committee took evidence on how the Scottish Government and Scottish public bodies should react and found that there is a finely balanced debate over what further savings can be achieved through across-the-board efficiency targets and the implications of such an approach for service delivery. The committee has a continuing interest in delivery of the efficiency programme and suggests that subject committees examine carefully any assumptions that are made about potential across-the-board savings in their portfolios.
Witnesses highlighted some broad areas in which a more targeted approach to achieving savings might be pursued, and they made some limited suggestions on areas that might be targeted through further shared-services initiatives, changes to overhead costs and different approaches to reforming public service delivery. Subject committees should examine in more detail the options within their portfolios, the timescales and up-front costs of pursuing those options, their connection to the Government's priorities and their impact on service delivery.
The extent to which funds for particular purposes should be protected is a key issue, so we suggest that committees consider carefully any claims to protect certain spending lines, how those lines relate to Government targets, and the effects of protecting them on other portfolios. In other words, they should consider the proposal and its consequences.
The allocation of Barnett consequential funds for 2009-10 has already supported some priorities. In considering their budget portfolios, subject committees may wish to examine how the additional consequential funds have been allocated and how the distribution fits into and supports longer-term strategic choices. If difficult decisions on prioritisation of funds are to be made on a rational basis, significant further development of the concept of outcome budgeting will be essential, along with improved evaluation of individual programmes and greater connection between policy priorities and budgetary choices.
Connections must be made between budget priorities, growing the economy and how the budget is deployed to combat the effects of recession. Subject committees might wish to seek evidence that the Scottish Government has considered how it can make speedy progress on further improving the information and performance management systems that are essential to support decision making.
Evidence to the committee suggested that there is a need for a more robust challenge function in Government to provide critical appraisal of all spending and to act as a Treasury equivalent. There are different views about whether that requires reorganisation of Government and ministerial responsibilities, but whatever approach is adopted, it is critical that the Scottish Government demonstrate how it has achieved that strong challenge function and that it provide assurances that public spending will be effective. Those process issues are central to managing public spending in order to achieve medium-term and longer-term sustainability.
I commend the Finance Committee for grappling ably with a formidable amount of information. We successfully examined the big picture while considering issues in enough detail to establish effective groundwork for scrutiny of the forthcoming draft budget for 2010-11. On behalf of the committee, I thank all the witnesses, the committee's adviser, Professor David Bell, the research staff in the Scottish Parliament information centre, and the committee clerks for all their hard work in producing the report and throughout the inquiry.
The reality of the debate affects every man, woman and child in Scotland, as well as every local authority and business and all the public services that we take for granted. The subject is complex and there is no quick fix or single solution—there is only a quest to create more from less in the funding and delivery of publicly funded services. The solutions must come from innovation, new ways of working and co-operation across organisational boundaries, as well as from a constant search for efficiency, effectiveness and maximum value for money, using honesty in appraisal and wisdom in investment for the sustainable benefit of the people whom we all serve.
The Finance Committee has produced a sound, balanced and positive report. I commend its recommendations to Parliament.
I welcome the opportunity to debate the Finance Committee's important report, which comes shortly before the publication of the draft budget for 2010-11. The report is titled "Strategic Budget Scrutiny"—we should take our lead from that title. The report provides a helpful commentary on the financial challenges that we face next year and in the years to follow, in common with Administrations in all parts of the United Kingdom.
The background to the discussion is the current UK fiscal position and the outlook for public finances. HM Treasury's figures show that public sector borrowing is approaching more than 12 per cent of gross domestic product, a level that has not been seen for 70 years and which is the highest in the G20 countries. By the time the economy has recovered, UK Government debt will be approaching 80 per cent of GDP, which will be double the level in 2007-08.
Those are shared challenges—they are shared between the Government, Parliament, the wider public sector and the people of Scotland. Shared challenges mean shared responsibility. The Government is responsible for providing leadership during a time of economic and financial constraint and for making effective proposals for dealing with the difficult choices that we face. We will do that when we publish the budget for 2010-11. There is no doubt that Scotland faces significant economic and financial challenges now and during the coming years. I therefore welcome the committee's report because it highlights key issues that should be a focus of Parliament's scrutiny of the draft budget in the coming months, and of our collective consideration of the challenges that are posed by the medium-term financial outlook.
The Finance Committee's report is absolutely right to identify that the Scottish Government and Parliament must prepare now to enter new and challenging territory. Following the unprecedented growth in public spending between 2000 and 2007, when the Scottish Government budget grew on average by more than 6 per cent a year in real terms, there has been a marked slow-down in UK public spending. The most recent UK spending review, which covered the three years to March 2011, identified growth in public spending of 2.1 per cent a year. Scotland was particularly hard hit, with public spending expected to grow by just 1.4 per cent a year on average over the period, which was the lowest financial settlement from the Treasury since devolution. On top of that, as members know, we have to live with the consequences of the chancellor's decision, announced in April, to take a further £500 million from the Scottish budget in 2010-11, just as we are looking to recover from recession.
For the record, can I check whether the cabinet secretary's position now differs from his position on 25 June 2009, when he spoke in Parliament about end-year flexibility recovery of national health service capital moneys? He said then:
"On current form, the Government will have sufficient resources on deposit at the Treasury to make good that shortfall".—[Official Report, 25 June 2009; c 18948.]
Does that agreement still exist in relation to the £129 million in NHS capital moneys?
There is no change in that position. My point to Mr Kerr is that the budget will be £500 million less than we expected when it was set during the spending review. Mr Kerr quoted me correctly from the debate in June when I explained how our EYF balance can be deployed to compensate for the reduction in the Department of Health capital line. It is clear that we could use that money for alternative purposes if we were not using it to cope with a £500 million budget reduction from the chancellor.
We have made it clear for some time that we consider the chancellor's actions to be incorrect: they fly in the face of our situation at this point in the economic cycle. The chancellor even admitted in his speech on Tuesday that
"To cut spending now would kill off the recovery".
There is an inherent contradiction in the chancellor's position.
Will the minister give way?
I ask Mr Kerr to allow me to make a little more progress before he has another go at it.
In assessing the financial challenge that lies ahead, there is a noticeable change in the debate at United Kingdom level, which has moved away from a question of Labour investment versus Tory cuts, to a position in which both those parties now argue that public spending will be cut. That change in the debate highlights the sharp degree by which the public expenditure position in the United Kingdom has deteriorated. There will be clear implications of that inevitable scenario on public spending in Scotland. I will give way to Mr Kerr now.
Why has the cabinet secretary failed to address the measures that were taken to deal with the difficult situation that was faced by our banks and our economy in Scotland—more than £50 billion of UK investment in the Scottish economy? Why, as we learned from a secret note that was leaked from officials, have the cabinet secretary's officials been planning a 5 per cent cut in the Scottish budget since April this year?
I say to Mr Kerr that of course I acknowledge the investment by the United Kingdom Government in the financial recovery packages, but he has to accept that the economic and financial circumstances in which we find ourselves happened on the watch of the self-same Government that took those measures. That is hardly an advert for fabulous financial stewardship.
On the contents of the 2010-11 budget, Mr Kerr will appreciate from having been a minister that that information will be properly shared with Parliament when I publish the 2010-11 budget.
Next year's financial position will put immediate pressure on the Scottish Government budget. Looking ahead, it is clear that the future public spending climate in Scotland is going to be tight for many years to come. As the committee puts it:
"The Scottish Parliament is now in a very different environment for spending."
The United Kingdom Government announced in the budget in April that total public spending will fall by an average 0.1 per cent a year in real terms between 2011-12 and 2013-14. Furthermore, spending on social benefits and debt interest are expected to grow significantly as a result of the recession, which means that budgets for our vital public services will be under even greater financial pressure.
The Institute for Fiscal Studies estimates, based on the figures in the budget, that departmental public spending across the United Kingdom will have to fall by 2.3 per cent per annum in real terms to meet the Treasury's spending forecasts. Using those figures, the centre for public policy for regions, which is linked to the University of Glasgow, has estimated that by 2013-14 the Scottish budget will be between £2.1 billion and £3.8 billion lower in real terms than it is this year. In that context, we have to deal with major challenges in public expenditure and in relation to economic recovery.
The Government has set out for a considerable time its approach to economic recovery. Our most recent update of the economic recovery plan was published in June and focused on supporting jobs in our communities, strengthening education and skills and investing in innovation and the industries of the future. We will ensure that Parliament is updated on those areas in the period to come.
The new spending climate for Scotland requires government at national and local level to think again about how best we can deliver the services that the public expect and deserve. This Government came to office with a commitment to focus our resources on the front line, which I am determined to continue to do. In the years ahead, that must mean that less is spent on delivery of services, so that we can maximise the money that we invest in the service itself.
For the national Government, our challenge is to remove even more of the overlap and to further streamline the network of public bodies and agencies. That will mean greater focus on the experience of the citizen, so that government removes the artificial barriers that exist on our side of the delivery equation but which are meaningless to those who are in receipt of services.
For local government, in my view the solution is not further reorganisation to cut the number of councils. Rather, the challenge is in considering where can services be shared, when they can be delivered together across boundaries and how they can be delivered in partnership with other public sector agencies. The focus of this Administration on collaborative and co-operative working among public organisations at local level is designed to deliver that agenda of public service reform in order to ensure that we configure services to meet the needs of the individual citizen. That will underpin the approach that we take to the significant pressures that exist on public expenditure in Scotland.
The Finance Committee has given us a productive and useful insight into many of the challenges that we face. Parliament will, of course, have to scrutinise many of the decisions that the Government takes in connection with the budget. However, a budget can clearly be agreed only with the consent of Parliament. I look forward to discussing with the other political parties and all members of Parliament how we can secure a budget bill that meets the economic and financial challenges that we face, but which also delivers the expectations that people have of the public services upon which we all depend.
I commend the report to Parliament and I thank our clerks, our adviser and all those who gave evidence to the Finance Committee. We certainly had some interesting evidence sessions.
The report states on page 1:
"significant challenges and difficult strategic choices will require to be addressed for the 2010-11 budget and for the future course of public spending in Scotland."
At paragraph 27 it states:
"the budget process for 2010-11, therefore, takes the Scottish Government and Parliament into new and potentially challenging territory".
Quite.
However, it is not as if all that has come as a surprise. In the spending review of 2007, it was always envisaged that the years 2010-11 would have the lowest year-on-year increase—note the use of the word "increase"—of the three years that were covered by that spending period.
Mr Whitton should go away and have another look at his numbers, because he will find that the position is exactly the reverse of what he has just told Parliament. The increases in the budget were slow at the beginning of the spending review period and larger at the end.
I am sure that I will take some lessons from Mr Swinney on sums—after all, he was an auditor and I was not. If I am wrong, I will come back to him.
I am also grateful to Scotland on Sunday for revealing details of a meeting of mandarins—a group otherwise known as the Scottish Government's senior team—that took place on 27 April. At that meeting, the permanent secretary told his colleagues that a squeeze in public expenditure had been anticipated and that planning for it had been taking place for a number of years. So—no surprises for Mr Swinney when he took office.
However, in fairness to Mr Swinney—he knows that I am always fair to him—he could not have anticipated the global economic crisis, the collapse of two of our biggest banks and the recovery measures that the Chancellor of the Exchequer has had to take.
The leaked report of the meeting makes interesting reading and has a direct bearing on the Finance Committee's report. Under an item on tackling the budget challenge of 2010-11 and beyond, Stella Manzie, the Government's director of finance, who gave evidence to the committee, is reported as stating:
"In tackling the budget challenge we need to be careful in our use of language."
The following day—28 April—Mrs Manzie appeared before the Finance Committee and was so careful in her use of language that she had to be called back again later in order to clarify her position.
We spent too much time arguing the difference between a lower-than-expected increase and what constitutes a cut. I am sure that members will be pleased to hear that I am not going to go over that again today. I will not do that in order that I avoid embarrassing a civil servant, but I simply highlight that, if we in Parliament, who serve the people, are to propose policies to steer us through difficult economic times, it does not help when evidence to the committee is presented straight from the Sir Humphrey phrasebook—although Mrs Manzie may have been doing her political master's bidding.
In her first evidence session, Mrs Manzie also commented on the Government's efficiency drive. She said that £1.7 billion had been saved in the three years to 2008 and that the Government's target was 2 per cent year on year, reaching 6 per cent in 2010-11. She was confident that it would achieve that target, as it had exceeded the one that was previously set. I also asked her whether the Government would also reach 5 per cent if that was the target that was set and she rightly replied that
"It would be for ministers to decide whether that was an option."—[Official Report, Finance Committee, 28 April 2009; c 1141.]
Have they decided? We are entitled to ask the question, as we now read from the same leaked report that the Scottish Government is planning a 5 per cent cut across all departments. Did Mr Swinney order that? If so, it amounts to almost £2 billion-worth of cuts, which is four times the amount about which the Scottish National Party constantly complains.
The minutes of the management meeting on 27 April show a clear direction of travel. According to Angiolina Foster, the director of strategy and ministerial support,
"The exercise to identify 5 per cent cuts across portfolios will only be part of the solution."
The Finance Committee was made aware of none of this, despite its close questioning of Mrs Manzie and the minister himself. Little wonder, as the minutes also record Ms Foster as stating that the current model of spending in Scotland's public sector is "not sustainable". So much for the historic concordat with local government.
In another astonishing line, the director of strategy and ministerial support said that they are attempting to
"meet the criteria of preparing Scotland to be a sustainable independent country."
I confess that I had to read that a number of times to satisfy myself that it had not been written by the First Minister, although the minutes record that the management team is working to his instructions, as he outlined at First Minister's questions today.
You will probably disagree with me, Presiding Officer, but I am prepared to work with the cabinet secretary in helping Scotland to weather—
I have no views when sitting in the chair, as you should know, Mr Whitton.
I apologise, Presiding Officer.
Resign.
That is a terrible thing to ask the Presiding Officer to do.
I am prepared to work with the cabinet secretary in helping him to weather the current economic storm, but one thing I will definitely not do is help to prepare Scotland to be independent. Down that road lies disaster.
Since the committee's report was published, we have had a reply from the cabinet secretary to its contents. He wrote to us on 30 July but, according to the leaked report, the management team was due to meet again in June with further suggestions on how to conceptualise Scotland's future. Perhaps, in his closing speech, Mr Swinney will tell us what bright ideas the team has come up with. Indeed, perhaps he could publish the minutes of the meeting and save Scotland on Sunday the trouble.
Will he also shed light on other newspaper leaks that he is considering a 0 per cent pay increase throughout the public sector instead of the 1 per cent that was previously announced? Will he confirm or deny that the Scottish Government now looks to introduce an across-the-board decrease of 5 per cent in all departmental budgets?
The cabinet secretary wants us all to assist him with his budget deliberations. We can do that only if we have an open and honest exchange of information. He should not be coy about his spending plans.
The Finance Committee's report was our contribution to the current debate, and I commend it to the Parliament.
I, too, thank the witnesses who gave evidence to the wide-ranging inquiry.
The report is all the stronger for being consensual. Finance Committee reports are often debated in a relatively low-key manner and rarely reach the pages of the press. Since Parliament's return after the recess, we have debated many seemingly more controversial subjects, from the release of the Lockerbie bomber to the Government's proposed referendum. However, the subject that we debate today—Scotland's public finances and the longer-term trends that will shape them—is actually more important. It is the dominant issue not only of this week or this session but probably of the coming decade.
Our collective response to the challenge of the public finances will be the test of the maturity of the Parliament and of the parties within it. I was struck by a change in the First Minister's tone on the subject at First Minister's question time. I hope that that change in tone is permanent. The Scottish Government argument thus far has been that it is against any spending reductions. The Cabinet Secretary for Finance and Sustainable Growth confirmed at the Finance Committee that the Government does not intend to deal with spending pressures by increasing taxes, which by default means that any spending pressures will have to go on to debt.
Given that the national debt is set to increase by perhaps as much as £200 billion—or 400 times the amount that exercises the First Minister so much—there must come a point when the level of debt becomes unsustainable. That is a judgment not only for Government but for investors. There comes a point when even funding debt interest becomes prohibitively expensive. As of next year, the Government expects to pay about £43 billion a year in debt interest. Before we pay back even a penny of debt, we will be spending a sum that is equivalent to about one and a half times the total Scottish Government budget.
We are fortunate that interest rates are relatively low at the moment, but we cannot be certain that they will remain that way. Surely the Scottish Government must know that it is not sustainable simply to add all the pressure on to extra debt. Our current debt level is not sustainable. Suggesting that a spending squeeze can be avoided is simply not credible. That does not mean that we cannot make the political points about why the squeeze is set to be so bad. However, just as the UK Labour Government must take responsibility for its handling of the public finances thus far, it is up to the Scottish Government to take responsibility for its decisions in government.
Whatever Government is in power, the amount that it has to spend on devolved services is impacted by spending not only on debt interest but—as members have said—on major reserved issues such as social security. If we compare the documents that the UK Government issued on the budget this year with those that it issued last year, we see an increase in social security and tax credit costs of about £12.5 billion. In Scotland, we are talking about an increase of more than £1 billion in social security payments. Even as devolved spending in Scotland is being reduced, we are seeing increases in some areas of reserved spending.
A range of options will have to be considered in seeking to reduce devolved spending. We could simply make an across-the-board percentage reduction that takes us down to whatever level of funding is available; we could stop or scale back specific spending programmes; we could develop fundamentally new ways of delivering services; or we could seek a higher level of efficiency savings. The answer will probably be a combination of all of those.
For the sake of clarity, will Mr Brownlee tell us whether the Conservatives are in favour of a 5 per cent decrease across the board?
The Government may have no choice; it depends on the state of the public finances. I am about to address the substantial point of how to tackle the cost.
What we cannot avoid is a reduction in the public sector pay bill. Various figures have been quoted on the scale of that pay bill, ranging from around 50 per cent to as high as two thirds of the revenue budget. Given the real-terms reductions in revenue spending, the current public sector pay bill is unsustainable. That is an uncomfortable reality, but we have to confront it. It is almost certain that a combination of not filling posts, pay freezes and redundancies will be necessary.
The choice for us as politicians is to decide where the impacts will be felt. We have to make the strategic decision on where in the public sector to apply reductions, whether in broad areas such as the health service or more discretely in individual health specialisms. In recognition of the pressure on public spending, my party has taken positions on Scottish Water, prescription charges and the graduate endowment, although we recognise that those decisions are not necessarily popular and that on their own they are insufficient to deal with the scale of the looming squeeze.
Political cycles do not always coincide with fiscal or economic cycles. We could probably muddle through this year without taking too many decisions, but we cannot afford that luxury in future. If we are to minimise the impact of spending reductions on front-line services in future, we will need to start acting now. Reform is not always quick. If we fail to start the process, we make it more likely that straightforward service cuts will result. Far from being the enemy of public services, reform safeguards them.
We should actively consider the long-term sustainability of all spending programmes, understand better the factors that drive costs in the public sector and engage in a structured debate with the public on our spending priorities in a time of austerity. Last year, we suggested that the Scottish Government should set up an independent budget review group, learning the operational lessons of the Howat review. A similar initiative, albeit in rather different circumstances, in the Republic of Ireland has reported and stimulated widespread and informed public debate. Something similar in Scotland would be a welcome contribution to the debate.
If I may, Presiding Officer, I will apologise to colleagues in the chamber through you, because I must leave shortly after my speech to carry out girlguiding duties—odd as that may sound.
The Parliament's role is not only to scrutinise the Government's work but to hold it to account for the assertions that it makes. Indeed, assertions have, regrettably, been the Government's core response to the recession. At the beginning of last year's budget process, we indicated that the budget had to focus, more than it had at any time since devolution, on recession. We were right then, and the focus for next year's budget, which is approaching, and the budget for the following year will again have to be on the recession and, indeed, on how we can ensure recovery to make the economy stronger than it is in other parts of the UK. That surely is a shared priority across the Government. Indeed, when the cabinet secretary came to the Finance Committee in May, he said that the whole budget process was founded on the Government's overarching purpose of economic growth. We agree with that analysis, and we do not disagree with many of Derek Brownlee's points about the difficult situation that the devolved budget is now in.
The cabinet secretary said that we need to think again, and that that applies to local government and the Scottish Government. I agree, but there is no sign of the Government thinking again when it does not wish to engage properly with other parties in the Parliament on shaping a draft budget rather than simply responding to it with regard to some of the difficult choices that we may have to make.
Over the summer, we have seen little action from the Government on the economy. Just before this debate, the Minister for Enterprise, Energy and Tourism repeated that 15,000 jobs were being sustained with the £293 million of accelerated capital expenditure. Of course we welcome the sustaining of those jobs, and of course if reprofiled capital expenditure can be used to do that, we will support it, but the difficulty is that exactly the same assertion, using those figures, was made six months ago. We know from answers to parliamentary questions that no mechanism has been put in place to quantify how much of that capital expenditure has actually been spent or how many jobs have been delivered. If the cabinet secretary has that information, Parliament should be given it.
In advance of the budget, we need to know whether what the cabinet secretary said was the core response in last year's budget will be effective going forward. We simply do not know whether that is the case, which was one of the reasons why, in discussions with the Government in February, the Liberal Democrats, in response to a difficult budget process in the Parliament, argued for a different way of approaching the coming budget. We argued that there could be a cross-party mechanism. We believed that the Government—in good faith—responded to that positively, but there has been only one substantive meeting of the cross-party group, and the Government has not provided any information on the pressures that it will face for the coming year's budget, nor presented any updated information since May.
Will the member take an intervention?
I will do so in a moment.
We are prepared to work with the Government and, indeed, other parties in making the difficult choices that we face. Indeed, the civil service indicated in the April meeting to which David Whitton referred that work would be under way. The difficulty is that the civil service pointed to the process and simply said—Mr FitzPatrick may wish to respond to this—that the joint strategic review would be used to "test the water". It is no good the Government coming to the Parliament saying that it is genuinely interested in achieving consensus on the difficult choices that our nation faces if it is simply using other parties in this place to test the water.
Obviously, communication is always a two-way process. I am interested to hear what suggestions Mr Purvis put to the cabinet secretary on how we might tackle the £500 million cut to Scotland's budget.
If Mr FitzPatrick had been listening to me he would have heard that there has been only one meeting of the group. How on earth can other parties make suggestions when the Government does not even agree on the basis for access to civil servants?
I am making these points in a sincere way. [Interruption.] Other members might disagree. If, as the Finance Committee convener has said, we approach next year's budget in exactly the same way as we have approached every budget since devolution, we will not be any further forward. If we are to address the difficult choices that this country faces, we must scrutinise next year's budget in a different way. I hope that the cabinet secretary agrees with that.
Mr Purvis has given his view of the joint spending review process, which I agreed to, support and am taking forward. He knows about the conclusion that I reached on the meetings that we held earlier this year, as I wrote to him about it—it was that meaningful discussion required a starting point, which is the publication of the Government's budget. I am, of course, duty bound to publish the budget. Thereafter, as Mr Purvis knows full well, I have promised him every opportunity to suggest alternatives, with support from the civil service to cost them. Perhaps, for the completion of his rather negative assessment of where we are, Mr Purvis could reflect on that.
If members or parties in the Parliament are to engage in discussions only after the Government has published its proposals, that will be no different from every other year since the Parliament was established. We thought that the Government was thinking in a different way. In its meeting in April, the civil service gave an interesting view—I am referring to Angiolina Foster's statement. I quote from the notes of the meeting:
"Some work was carried out a few years ago which modelled the spend of Scotland's public sector. It was identified then that the current pattern of spend was not sustainable – it will be worth reviewing that work now."
She went on to mention that it was important to consider public value, saying:
"This is a moment of opportunity … Part of our task is to close the gap between officials' thinking and analysis and ministers' thinking."
Depressingly, the note of the meeting went on to say:
"Politically, 2010-11 will need to be handled in a particular way, but may be more scope for radical thinking in 2011-12".
The Parliament will indeed face a critical budget next year, which is why we thought that the process should be different. It is regrettable that the cabinet secretary thinks that discussions between parties can take place only after the Government of the day publishes its proposals. That is a regrettable way to proceed. If the officials are right that next year's budget has to be
"handled in a particular way",
such that the only scope for radical thinking will come after the next Scottish parliamentary elections, perhaps we should bring those elections on.
I, too, thank everyone involved in what was an interesting and timeous inquiry. The evidence sessions were worth while and informative, as were the discussions among MSP colleagues in private session.
As the report makes clear, there are facts that cannot be disputed and which create the background against which everything else must be painted. It is a background of recession, with difficult times ahead and hard choices to be made. It is clear that the cash that is available to the Scottish Government for 2010-11 is lower than was ever originally envisaged. To quote the committee's report, that
"takes the Scottish Government and Parliament into new and potentially challenging territory."
That will not be a one-off for 2011, of course. Professor Bell's report, which forms a supplement to the committee's report, is valuable in that regard, and it informed much of the discussion that the committee had with those who gave evidence. In his introduction, Professor Bell writes:
"it is unlikely that there will be any real increase in the resources to support Scottish Government spending programmes over the next five years. Indeed, they may fall. This is a marked contrast to the period since 2001 during which the real resources available to the Scottish government grew at an unprecedented rate."
Professor Bell also takes
"as given what is widely accepted by most serious commentators on the British economy, namely, that it will be some time before any effective economic recovery takes place."
Will the member quote further from Professor Bell, on his agreement with Stella Manzie that the budget will grow in real terms in 2010-11 by 1.3 per cent?
I intend to address that point later in my speech. Mr Kerr has been jumping up and down and seems impatient; he will just have to wait.
Professor Bell and witnesses to the committee flagged up the debt issue, which Derek Brownlee mentioned. Even when the corner is turned and we are told that we are no longer technically in recession, the unprecedented level of borrowing that is the result of the UK's management of the economy will have serious consequences for Scotland's public spending profile, well beyond the short term. As Professor Bell concludes:
"the more profound effects on public services will arise due to the ‘overhang' of debt that has to be repaid by the UK government and the negative effect that will have on public spending throughout the UK … over at least the next decade."
Under the current constitutional settlement, if interest rates rise the effect on UK finances will again mean that the Scottish budget is hammered. The Scottish Government will be constrained by the Barnett squeeze, by increasing payments for inherited PFI projects and by the ridiculous situation whereby, unlike Scottish local authorities, the Northern Ireland Executive and even English parish councils, the Scottish Government is unable to borrow.
There has been talk recently about how we must all pull together. Of course we should do so. An important step that the Parliament could take would be to campaign unanimously for borrowing powers for Scotland, which would give us the flexibility prudently to allow Scotland's Parliament to be more responsive to Scotland's needs. Many people support that approach, from Unison and the Scottish Trades Union Congress to the Royal Society of Edinburgh and our churches. We should work together for borrowing powers.
On the subject of political consensus, I will seek consensus with Mr Kerr. We must get beyond the game of ping-pong in which members argue, "It's a cut", "No it's not", "Yes, it is." That is not constructive for anyone. Let us consider the facts. At the beginning of the three-year spending review, a settlement was agreed and publicly funded organisations were given an indication of their spending capacity for the period. Then, £500 million was wheeched away by the chancellor in his 2008 pre-budget report. The budget is now £500 million less than was previously advised. Public bodies will receive £500 million less than was expected. Some MSPs have worked in public services and some of them have probably been budget holders in public service organisations. If they had been promised funding and then had it withdrawn, they would have been in no doubt whatever that there had been a cut. That has to be faced.
The Finance Committee urged subject committees carefully to reflect on its report. Hard times are ahead, and the Parliament and Government must face them together. We should all rise to that challenge.
Like other members of the Finance Committee, I start by thanking the adviser, committee clerks and fellow committee members from all parties, who contributed to our report.
There is no doubt that budgets are a challenge in the current economic circumstances. They are also an opportunity. In that regard, the committee's comprehensive report sets a scene that will inform discussion and help the process on which we will embark when the Government publishes its draft budget next week.
It is important to get the budget process right. The process must be effective. In that regard, the committee made an important point in paragraph 147 of its report about the Scotland performs website. When we are spending vast sums of money, it is important that we can ascertain whether the objectives that we set are achieving the desired outcomes. From that point of view, it is fair to say that there have been some concerns about the Scotland performs website. The site does not currently include all the information. If we really want to demonstrate that we have a greener, fairer or wealthier Scotland, we need a system that not only shows why the money is being spent but displays the outcomes of that spending. More work is needed on that.
For SNP politicians, no debate or discussion or speech about finance or the economy is complete without a reference to the £500 million. That is an attempt to get across to the public the perception that next year's budget will have £500 million less than this year's budget. In reality, next year's departmental expenditure limit will be £600 million greater than this year's DEL. As others have pointed out, Stella Manzie has confirmed that the budget will increase by 1.3 per cent in real terms. If we want a proper debate, we need to be open and transparent about the figures.
Let me complete the quotation of what Stella Manzie said. The committee's report confirms that she stated that
"applying the deflator gives a real terms reduction of 1%."
I will repeat what I said and take Mr Allan through the figures. This year's budget is £29,382 million. That will go up to £29,982 million in next year's budget. That is a £600 million real-terms increase. In addition, the Government has access to end-year flexibility money, which it has still not drawn down, to the value of at least £95 million. Therefore, the Government will in fact have a £700 million increase.
The SNP has wasted some money in the Government's budget. For example, £22.9 million has been spent on the Scottish Futures Trust, which to date has not delivered a single project. The national conversation has cost £700,000. That might keep the SNP bloggers happy, as they sit up all night logging on to the website, but it has done nothing to address the problems that Scotland faces. The infamous leaked memo has revealed that 14 Government teams are working on referendum bill issues. That must involve very high running costs—towards the £1 million mark, I suggest—but it is not addressing the issues in Scotland that need to be addressed.
In addition, the Government has made some poor policy choices. I realise that I am running out of time, so let me mention just one such policy—I see that the Presiding Officer is indicating that I have perhaps a bit more time—which is the pursuit of community service orders and the scrapping of jail sentences of less than six months. I know from my experience as a constituency member that the policy is very unpopular in my constituency, where people want a strong message to be sent out to criminals. Not only is that arguably the wrong policy, it will cost £7.5 million this year alone and it will obviously cost money in future years.
Another issue is the fact that the Government is wedded to the Scottish Futures Trust and to a single funding mechanism, that is, the non-profit-distributing model. That has resulted in the pipeline of capital projects drying up. Compared with 2007, when £1.3 billion of projects was in the pipeline, the two subsequent years have seen a £2 billion decrease. We can see that in the 20,000 construction workers who lost their jobs last year. Those poor policy choices have cost money and jobs in the economy.
Members have already made points about the secret memo that appeared in Sunday on Scotland, but there are other serious concerns. When a committee of the Parliament discusses the strategy for the budget, it is a concern that what civil servants say when they appear before the committee is different from the discussion that is taking place behind closed doors. For example, the committee heard nothing about 5 per cent cuts across the board.
Another serious point that the memo raises relates to the discussion that has obviously been going on about the importance of the general election and the climate post the general election if there is a change in Administration—
Hear, hear.
Let us hope that that does not happen.
The SNP perceives that such a change would provide it with a better opportunity. It would be very serious if civil servants were acting as cheerleaders for a Tory victory at the general election.
To sum up, it is important that we get the process right and that we have transparency and value for money. If we get those right, perhaps we can produce a budget for Scotland that will create jobs and boost the economy.
As a member of two of the subject committees that expect the budgets for the areas for which they are responsible to be squeezed, I want to suggest ways of approaching the present budget round that will allow us to get the better value and innovation that the convener of the Finance Committee mentioned.
We can argue about the figures, but funding has been slashed and our responsibilities are accruing—as a Parliament, we are acquiring more and more responsibilities. That is why we need to have much better management of the money that we have. If we are to reduce the pressures, we ought to consider ways in which the UK Government can help us. It will not help us with the block grant, which is what has been discussed so far, but it can help us in a number of other ways.
Will the member give way?
No, not at the moment—although I would welcome a response from Mr Kerr to the point that I am about to make about the fossil fuel levy, on which I would like his support. The fact that that fund, which currently stands at £164 million, remains unspent in the bank account of the Office of Gas and Electricity Markets has been the subject of continuous correspondence from the Scottish ministers to the Treasury, but the Treasury keeps saying that, as a department, it cannot release that money and that Scotland, as a department, cannot have that money as extra money. We can spend it if we like, but if we do it will cut our block grant.
Given that that is the case, we are looking to our friends in the Opposition, who have a hotline to ministers in London, to get access to that money so that it can be used for recovery purposes, by which I mean the development of renewable energy. That would be a job creator and would provide various ways of increasing the number of apprentices, which would be a good little start.
The Department of Energy and Climate Change could perform a number of roles for us. The Secretary of State for Scotland, Jim Murphy, is to visit the far north on 1 October, when he is set to address the regeneration partnership. On his visit, will he announce real financial incentives for renewables developers in the far north? Will such incentives be provided through the return of the fossil fuel levy to us?
There is a need to look again at the problems of providing access to the grid for the renewable energy that is to be developed. Ofgem has held up the process by charging Scots 10 times more than people in parts of the south-east of England. We know that Ofgem has tried to offload responsibility for creating a new grid access regime on to the Department of Energy and Climate Change. Will Mr Murphy tell us whether he has achieved that by convincing one of his colleagues down south to help us out? Jim Mather pointed out in a response to the Economy, Energy and Tourism Committee that DECC's approach will be vital for developing appropriate and equitable grid network development and transmission access reform in Scotland. We can get help from the Opposition on those two matters to improve things in Scotland. That would command support from across the parties.
The third issue that I want to raise is the small funds from many places that are required to keep the economy going, particularly on the social side of things. Of course, the Big Lottery Fund has focused on the major events that will take place in London in 2012, but I suppose that it is possible that we could ask it to ring fence some funds for us to get back for particular purposes to help sustain our economy. I hope that the Opposition will support the Scottish Government to get some of that money focused on areas that require particular activities at the moment.
The Press and Journal tells us today that, according to the chancellor, the
"Worst may be over on recession".
It says:
"Scottish housebuilder Miller Group said stuttering market conditions had stabilised, with an 8% rise in housing volumes for the six months to June 30 and a 45% surge in reservations in July and August compared with last year."
In considering budgets, it is important to think about the future. Will we allow house builders to continue to build houses that create problems for climate change mitigation? Should we try to ensure that they build houses that will not cause problems for future budgets? Jeremy Purvis's comments about thinking innovatively and knock-on effects were interesting. It is important that we seek ways to improve the quality of such things. The UK Government has considered zero carbon emissions from all new houses by 2016. The Climate Change (Scotland) Act 2009 is also to the fore. It is up to us to ensure that we do not ladle problems on to ourselves year on year as a result of decisions that are taken now.
If we are to see any kind of recovery, it must include many more things than what the chancellor has told us about. We need the Labour Opposition's help to get a hotline to London. If it does not help, we will know which side it is on.
Will whoever has their mobile phone or BlackBerry on please turn it off; it is disturbing the sound system.
The Finance Committee has produced an insightful report that will, if the various players in the Parliament pay attention to it, prove a useful guide as we try to navigate our way through what will undoubtedly be stormy waters ahead. It is also useful for maturing our processes. Ten years after the establishment of the Parliament, it can play an important part in honestly assessing what could be improved in both parliamentary and Government terms.
Comprehensive scrutiny of the Scottish budget has never enjoyed the success that it has deserved over the 10 years of devolution. Indeed, one might justifiability be accused of having bare-faced cheek if one described the attempts at scrutiny so far as comprehensive. I speak from experience. I have been a member of the Finance Committee, a convener of that committee and the Minister for Finance and Public Service Reform. Believe me when I say that we have barely scratched the surface of meaningful scrutiny. There are several reasons for that, not the least of which is the extremely generous nature of the fiscal settlements that we have enjoyed over the 10 years of devolution. Most informed commentators—and even some politicians—will tell us that those days are now over.
Two things need to change: Parliament's capacity to scrutinise the Government and the organisational arrangements within the Government. I will deal first with parliamentary capacity. It would be an understatement to describe the current arrangements as an uneven contest. So far, we have viewed budget scrutiny largely as a one-off event that takes place during a particular part of the year. In reality, it must be a constant, on-going process that is facilitated by a group of professionals who have unlimited access to Government information and who can monitor trends and examine Government claims over time—professionals who can supply politicians with information on the outcomes of current expenditure patterns, allowing the politicians to judge the worth of those and thereby allowing objective consideration of future proposals. In other words, we need a high-level parliamentary budget office with as much capacity for scrutinising the Government and its actions as the civil service has for covering them up.
Secondly, as the report says, we urgently need a robust system of challenge within the Government. We need a ministerial department—in my view, it should be the finance directorate—that has the capacity to challenge all aspects of Government expenditure and the senior civil servants who pander to the egos of their ministers in order to protect their own empires and, all too often, to disguise their own glaring inefficiencies. The touchy-feely arrangements that were established when devolution began are anathema to the proper role of politicians, particularly ministerial politicians. Our role is to probe and challenge, even if that gets in the way of making best friends with the civil servants who work for us.
There are genuinely difficult financial circumstances ahead of us, and there will be a requirement for the kind of decisions that will test the mettle of every politician in this place. If we are to step up to that challenge and to put the quality and volume of vital public services before vested interests, particularly governmental vested interests at every level, we should pay attention to the report and begin to make changes now in the interests of the people whom we serve.
I echo other members' thanks to the members and staff of the Finance Committee who have produced such a comprehensive report. Any report invites multiple readings, but one point is pretty clear. The report contains evidence that was received about the overall size of Scotland's budget. The much-quoted Stella Manzie, the director general of finance and corporate services in the Scottish Government, stated that
"the net result of the 2008 Pre-Budget Report and the 2009 UK Budget is that the Scottish DEL total for 2010-11 is ‘reduced below original plans by £496 million'."
Before we go any further, let us put the matter to rest. However it is spun or explained away, Scotland is getting £0.5 billion less than everyone—Opposition parties included—expected or was able to plan for. That has consequences for every area of Government plans. Were it not so, why would other parties be telling Scotland to tighten its belt?
Even for a party that is well used to holding two—sometimes three—contradictory positions simultaneously and devoutly, Labour surely stretches credulity in saying that the budget settlement from Westminster is anything other than a cut in what we all expected and planned for. The injunction from Labour for the Scottish Government to live within reduced means also sits ill with any assertion that Scotland is being given a handsome pay rise by Westminster. Then again, it is lacking in credibility for Westminster to tell us that we should tighten our belts while it tells other countries around the world that they cannot cut their way out of a recession. It seems that the belt-tightening advice applies uniquely to Scotland. There is a further inconsistency—very much in evidence today—whereby, perhaps increasingly comfortable on the Opposition benches, Labour members provide lists of planned spending projects that they believe that the Scottish Government should undertake while in no way attempting to relate them to the cuts that the Scottish budget faces.
Nobody denies the severity of the international situation or the difficult choices that all Governments face this year. However, in the words of the report, Scotland's block grant may have "peaked" as the result of political decisions that have been made elsewhere. As the cabinet secretary has just indicated, we can expect a further dip of several billion pounds, in real terms, by 2013. Even before the cut was made, Scotland faced the smallest percentage budget increase in some time. Other members have pointed to that fact. However, when the Scottish Government asks local authorities to make efficiency savings, the councils concerned get to make them. The novel form of efficiency savings that Westminster has introduced in Scotland amounts to a direct cut from our annual budget.
Putting that debate aside, it is abundantly clear, as is recognised by at least some other parties in this chamber, that part of Scotland's unique predicament is its unique inability to borrow. Scotland, as other speakers have observed, is unable to spread the cost of major capital projects over a period of years because of the restrictions in the Scotland Act 1998.
Before the usual suspects complain about that statement, I ask them to say which bit of it is not true. As presently constituted, the Parliament has no borrowing powers. In February, in acknowledgment of the situation, the Liberal Democrats lodged a motion that stated:
"That the Parliament believes that the acquisition of borrowing powers would enhance the autonomy and accountability of the Scottish Parliament and improve the Scottish Government's ability to respond to changing economic circumstances".
At present, Northern Ireland has such a power, but Scotland does not. Clackmannanshire has such as power, but Scotland does not. English parish councils have such a power, but Scotland does not. In fact, it is difficult to find an example of a Parliament anywhere in the world that is constrained in this way—let alone the many other ways in which we are constrained.
Many bad arguments are offered against Scotland taking more control of our own financial affairs, whether that control means borrowing powers, genuine fiscal autonomy or independence. However, the most craven as well as the most logically inconsistent argument is that now is not the time. If this is not the time for Scotland to acquire such powers, when is? When the UK Government is further in debt? It is already the most indebted state in Europe. When we are on the other side of the recession? At that point, the argument will no doubt be offered that, at a time of economic strength, we should not rock a stable boat. For those who oppose such powers, the time has never been right, and never will be. For the rest of us, the time is now.
As members have been thanking the committee staff and secretariat, I would like to thank the SPICe staff, who make it easy for a back bencher such as me to analyse and understand some of the issues that we are dealing with. Clearly, one of the major issues that we are dealing with is the fact that we—along with every part of the UK—are considering public spending budgets against the backdrop of a global economic and financial crisis on a scale that has never been seen before by any person living. Against that background, our rate of growth must reduce. The same is true of countries across Europe, not just the UK and Scotland.
No matter how much the SNP goes on about cuts to the budget, it is a fact that the Government's director general of finance and corporate services confirmed to the Finance Committee that the Scottish budget for 2010-11 is going up in real terms by 1.3 per cent. As we have heard from others, Professor David Bell, adviser to the Finance Committee, and SPICe have also confirmed that there will be a real-terms increase. There might be a lower rate of growth but, as the Scottish Government's most senior finance civil servant has agreed, there will be a real-terms increase in the 2010-11 budget. However, we recognise that it will be necessary for there to be slower growth in public spending in the coming years, which means that the Scottish Government must look for areas in which greater efficiency can be achieved. Cutting costs is the first priority, not cutting services.
I remind John Swinney of his inaugural speech as the leader of the SNP, which he gave on 10 October 2000. He said:
"We must never say anything we cannot deliver and we must prove where the money is coming from to pay for each and every one of our policy commitments.
We must set out our arguments in a persuasive way and our arguments must be based on substance and on evidence."
Mr Swinney also said:
"I don't want us to hide behind the simplicity of demanding that only by spending more money can we deliver better policy."
Disappointingly, the SNP is running away from the tough decisions that need to be made by Governments. We discover now that, instead of setting priorities and making choices, the SNP has drawn up a plan that will cut the budget of every Scottish Government department by 5 per cent. A better Government would have considered its priorities and shifted resources to where they are needed most, rather than take a scythe to every budget and put jobs and services at risk. The across-the-board £2 billion cut that is planned by the SNP's most senior civil servants shows no regard for front-line public services and says nothing about the Scottish Government's priorities. That is in contrast to the UK Government, which was prepared to make tough choices and set priorities to get us out of the global recession, rescue the banks and protect public services.
If the Scottish Government will not listen to the reason of the Labour Party, it should take heed of its most senior civil servants and of the Finance Committee's report, which all warn that the SNP's spending plans are not sustainable. The SNP wants to give everything away for free, but that will come at the cost of front-line services and those who need them the most.
Any experienced politician knows that if you want to make populist rather than hard choices, the money will have to come from somewhere. The largest budget item is the council tax freeze at £420 million—you cannot freeze income when expenditure all around continues to rise. That is nothing but a recipe for disaster.
I read with interest some of the things that Margo MacDonald said in her piece in today's edition of The Scotsman. In particular, I was attracted to her ideas on public involvement and experimenting with American-style town hall meetings. What would such public meetings throw up as the priorities of the people? Would our people choose to have caring services or to freeze income to local authorities? Going face to face with the public requires real effort and commitment, and exposes political parties in a serious way.
Margo MacDonald says:
"We might yet see a contest between the Liberal Democrats, who came clean on cuts a while back, and the Conservatives over who can promise the deepest or widest cuts to public spending."
She is also right when she says that it is not enough for the Tories to admit that, when they are in government, they will cut public spending. She goes on to say that, here in Scotland, we have an even greater need to know where the savings in public spending will be found. That is a profound and essential requirement for voters.
Will the savings be found by following the example that Fife Council has set in closing the Cowdenbeath Hanover court residential home for old people because the SNP refused to subsidise it in the way that Labour did? Will disabled people in the rest of Scotland face huge increases of £300 or more per month for their care charges? Will the big choices be about hurting most of all those who are least able to speak out for themselves and callously exploiting that fact? That is what is happening in Fife, despite the fantasy and denial in which Jim Tolson and Tricia Marwick live. I do not expect any different from them, as they are political bedfellows in the coalition in Fife Council.
All the papers that relate to the Finance Committee's report tell us that we have to look for efficiencies in how we spend public money, so I will give members another example of what happens in Fife that is replicated throughout Scotland. Local councils move the costs for delayed discharges on to the health service. There is a charge of £300 a day for a bed, which over a period of six weeks costs the public purse £12,600. How much money does that represent overall for a council? That could be a real efficiency saving.
I realise that my time is now up; I thank you for my opportunity to contribute to the debate.
I begin by echoing the comments of other members—particularly those on the Finance Committee—in thanking the Finance Committee clerks and the SPICe researchers for their work on the report on strategic budget scrutiny, which was, as always, carried out with diligence.
The Finance Committee compiled the report against a background of firsts for the Scottish Parliament. A budget had been voted down by the Opposition for the first time; we were in the midst of the first recession in a devolved Scotland; and for the first time, we were facing £500 million of proposed cuts to the Scottish budget. That made the process an interesting one. It became clear early in our evidence taking that we were entering a new and more challenging financial climate in which Governments would have to make some difficult choices about funding public bodies in future budgets.
In his paper "The UK Budget Position and Strategic Implications for Public Services in Scotland", Professor David Bell describes the situation that will face the public sector over the next decade as
"an unprecedented period of austerity".
I record my thanks to Professor Bell for his efforts to pull together some complex economic and financial analysis and distil it in a way that was useful to me and, I am sure, other members of the Finance Committee and back benchers.
During the inquiry, I began to appreciate the significance that those events and others would have on future Scottish budgets. With no long-term budget allocations available to us, much of our evidence was based on predictions. Given that position, and without the aid of a crystal ball, it is not surprising that some of those who gave evidence came to very different conclusions about the impact on public sector spending, but there was universal agreement that, at best, the future will be challenging.
The process of producing the report also highlighted the fact that the Scottish block grant is a blunt object with which to combat a recession. Economies that have a full range of fiscal powers at their disposal are struggling to cope. Scotland must face the challenges that lie ahead with the constraints that the current constitutional framework places on us. With that in mind, I was pleased to see in the Scottish Government's programme last week a referendum bill that will seek to give people the choice to have the same powers over their economy as any normal country. I look forward to the passage of that bill in the Parliament and the continuing work of the national conversation.
I am sure that Mr FitzPatrick appreciated the £50 billion from Westminster that helped to prop up Scotland's two biggest banks, thus saving many thousands of jobs.
Of course, the £50 billion is not Government money but borrowed money and it pales into insignificance in relation to the input that Scottish banks made to the UK Exchequer during the past decade. It would be particularly useful to Scotland if the £8 million that Jim Murphy siphons off for the Scotland Office were added to the Scottish block grant. That money is creamed off in order that Jim Murphy can run a Labour Party, anti-SNP operation from the Scotland Office. That is a disgrace. The money should be pumped back into the Scottish budget so that John Swinney and Alex Salmond can use it to benefit the people of Scotland, rather than its being used to benefit the Labour Party.
As we have heard, there appears to be a note of disagreement over the forthcoming reduction in the Scottish block grant. However, outside the chamber, most members seem to accept that we have to address the coming cuts and their impact on Scotland's public sector. I take this opportunity to welcome the approach of the members of the Finance Committee, who have, on the whole, set party politics aside to ensure that we get the best possible outcome for the people of Scotland. I hope that that will continue. There is a difference of opinion about whether it will be a cut or a reduction, but let us be honest. Next year, we will receive £500 million less than we expected. I would call that a cut; if others want to call it a reduction, I do not think that that is worth arguing about. There are other, far more important matters to discuss.
The member suggested in his answer about the banks that, if the money was borrowed by Government, it could not be classed as Government money. Does he support greater borrowing powers for the Scottish Government?
I certainly support the Scottish Government's having the same range of powers as any other, normal Government. That would include the power to borrow and also the ability to save up in the good years and have access to that money later, like any normal country does, rather than having to go to London with a begging bowl to ask for some of our money back—money that is already ours. Rob Gibson mentioned some of Scotland's money that is locked away by the Westminster Government. I hope that the front bench of the Labour Party will take Mr Gibson's message and send it down to their colleagues in London. We should get that money unlocked so that it can be put to use here in Scotland when we need it most.
I am not suggesting that we will agree on everything, because we will not. The role of the Opposition is to challenge the Government and my Finance Committee colleagues from all three Opposition parties are good at doing that. However, it is good that they manage to have that political debate while remembering the importance of what we have to achieve. We have managed to achieve consensus when it might have appeared impossible, and I hope that we continue to do so because, after all, we are here for our constituents and it is in their interests that we try to reach a compromise.
The Parliament must address the reduction in the budget and think about how to handle future budgets. In that respect, Tom McCabe's comments were very helpful. I know that the cabinet secretary will continue to take a consensual approach to this year's negotiations and ensure that channels of communication are open to all parties. I hope that the other parties will take that opportunity and play their part in what has to be a two-way conversation. I understand that the cabinet secretary will put his cards on the table first but I hope that, when he does so, the Opposition parties will make their own suggestions about how we can minimise the impact of £500 million of cuts on front-line services and the people of Scotland.
This is certainly the most important debate that we have had for some time, because the Finance Committee's report is on the key issue that we will have to address not only in the coming parliamentary session but in the coming decade. When I read the report yesterday, I was certainly impressed by the way that it cut through conflicting analyses of the financial situation to arrive at a very balanced view. It also made the important recommendation that a challenge function should be established in the Scottish Government. Even when we were in government, I found it unsatisfactory that a finance minister should have such a large portfolio.
The various conflicting analyses have been aired again this afternoon. Perhaps Labour and the SNP can come to an informal deal on this issue with the acceptance that there has been a significant reduction in the amount of money that was previously announced. We can continue to debate whether the reduction is £500 million or £380 million, but the fact is that the money is less. Equally, however, there will still be real-terms growth in next year's Scottish budget. It is nonsense to say that capital expenditure that has been brought forward somehow represents a cut. We must accept the reality of the situation, which is that, as the Scottish Government's director of finance said, there will be real-terms growth of 1.3 per cent. After that, we will, of course, have political arguments about the amount of money that we will receive, but the Parliament needs to concentrate on the more important question of how we make best use of it.
First, I want to consider the political context of this issue. The SNP keeps going on about what it calls cuts from the Westminster Government, but it absolutely supported the fiscal stimulus that that Government introduced. From today's reports and from figures that have been issued over the past week or two, we can see that that policy has been very successful. Given that the SNP accepted it, it has to accept its consequences, particularly the repayment of debt.
The Conservatives are in a different position, because they did not support the stimulus. However, if we had followed their advice, we would be in a far worse economic and financial situation. They also go on about overall levels of debt but, as I have said before in the chamber, debt as a percentage of GDP was less in every year between 1998 and 2008 than it was in 1997 when Labour came to power. Debt has increased only as a result of the fiscal stimulus and the effects of recession over the past few months.
In that case, why is it that between 1997 and 2008, before there was any sign of a recession and before the banks got into trouble, national debt doubled?
I think that I already answered that question when I said that debt was less in every one of those Labour years than it was in 1997 when the Conservatives gave up government.
That political argument goes on. However, in this Parliament, we must focus on how to make best use of the money that we have. We know for definite only about next year's budget and that thereafter any increase will not be as large as 1.3 per cent. Things will get more difficult, but some of that will depend on whether there is a Labour or Conservative Government at Westminster in 2010.
We clearly need an honest and clear view of the various options that confront the Parliament. We will probably have to think some thoughts that we have never had to think over the past 10 years; and we must take another look at the council tax freeze, certain universal benefits such as free prescription charges and many other aspects. I realise that, every time such an example is brought up, it produces great antibodies both in us and in the general population, but the fact is that we will have to look at options that have not been on the table before. That is the challenge to which we must rise in the next year.
Let us remember that, next year, there will still be a real-terms increase in the budget. If the SNP will remember that, I am prepared to accept that of course there is less money than was originally announced.
The debate has been useful. I congratulate Andrew Welsh and the Finance Committee on addressing what is an important subject. It is clear from the speeches that, although members have a wide variety of opinions, everyone has benefited from the Finance Committee's work. The report sets out a range of presentations from experts on the state of the economy and the impact on Scotland. It then moves to the specific issue of the impact on the budget that is about to come. The committee has highlighted difficulties and explained issues on which Parliament as a whole can have an influence.
Naturally and understandably, a range of views has been expressed on the state of the economy. I was interested in Derek Brownlee's point that, in tackling debt, we are talking about matters of timing. Like Mr Brownlee, I am interested in the First Minister's apparent initial suggestion that none of the debt could be attributed to Scotland and it therefore did not need to be repaid. I am grateful for the clarification of that and the slightly more realistic position, which Liberal Democrats welcome.
I move to the issue that we are getting closer to having to deal with, which is how the economic situation impacts on the budget. Malcolm Chisholm was open and honest about the fact that there will be cash differences, but he pointed out exactly what the chief finance officials said—that real-terms growth is still occurring. Malcolm Chisholm's exposition was clear, so I hope that we will not go on tediously trying to find differences in that statement.
On the approach to the budget, I return to my colleague Jeremy Purvis's point about our genuine hope and expectation during last year's budget process that we would try to take a different approach this year. Even last year, we all understood that we would have a difficult situation this year. I am sorry that we now have a disagreement on what we sought to do. Jeremy Purvis summed up well our point that there ought to be a process—it might be new and difficult—through which we might assist in shaping the budget, rather than simply responding to it. I reiterate our disappointment that, after an introductory meeting in that process and only one further meeting, a proposed meeting in June was cancelled. A letter from the cabinet secretary in August indicated that we would revert to the status quo ante. That is a disappointment to us.
Looking at where we have to go, the report refers to the effects of scrutiny. I agree with almost everything that Tom McCabe had to say on that. I, too, as a minister benefited, as all ministers do, from access to finance officers, and I therefore had additional material. When, for eight years as a minister, I appeared before committees I was deeply conscious that it was extraordinarily difficult for committees to get up to speed and to effect good and proper scrutiny over the budget. The fact that we have not made much progress on that is a collective failure at parliamentary and Executive levels.
Liberal Democrats have expressed the view, which Tom McCabe repeated, that we need some kind of budget office that is separate from other ministerial offices. This is not a personal criticism of Mr Swinney, but there is a conflict of interest. The Liberal Democrats warmly support the recommendation in paragraph 155 for a greater challenge capacity, to which Tom McCabe also referred. Those are extremely important matters if we are to have the appropriate scrutiny.
The convener of the Finance Committee alluded to the report's references to the committee structure. The report contains 10 recommendations—if I have counted them correctly—that ask committees to do very sensible things. However, I do not have a clue how on earth any of the committees will be able to do almost any of them, because the budget timetable makes it almost impossible for committees to devote the time that is required to do them. I am not making a criticism and I have been open about the fact that the problem is one that has always been with us, but the scrutiny process becomes very difficult for committees.
Although there was much in the cabinet secretary's speech that was of interest, it was disappointing that he made almost no reference to the request in the report that the Government should indicate how it might facilitate and assist in the scrutiny process. I hope that the cabinet secretary will address the issue either in his closing remarks or at a later date, because even at this late stage we must consider how committees and therefore the Parliament as a whole can contribute constructively to the scrutiny of the budget—the scrutiny that is laid out in the report that we are commending today and which needs to be taken seriously.
We must move on as we are now about to receive the budget. I reiterate our disappointment that we were not able to assist in an earlier process but, if we are about to embark on the scrutiny process, let us not close our minds to the many sensible recommendations in the report and let us hope that the Government can assist with the allocation of time that will make the job to be performed by committees, which feed into the Finance Committee's report, a much more meaningful process and one which achieves many of the objectives set out in this excellent committee report.
The Finance Committee has yet again produced a very good report, so credit is due to its convener, the committee members, the clerks and SPICe. The debate, too, has been pretty good. At times it has been thought provoking and it has looked at the broader and deeper issues that we will face, not only in this year's budget but in shaping public spending in Scotland for the rest of the decade.
I am still not entirely clear where the Scottish Government stands on the cuts that we will inevitably face in this budget and, if commentators are correct in their analysis, in budgets in the years ahead. The Government stated in the letter that it wrote to the committee as a formal response to the report that it thought that the report was good and that it had a contribution to make, but the letter did not address the specific conclusions that the committee reached.
The cabinet secretary made a strong speech today with a very good analysis of where things are, but there was no detail about the strategic decisions that the Government intends to make. We have heard many times in the chamber from the First Minister—probably every week—about the £500 million of cuts and most members have referred to that today. That has gone on for months, but we have not heard the Government say what it intends to do about it and how it will shape future budgets. It is time that the Government does that.
After reading the report, I know more about Glasgow City Council's priorities than I do about the Scottish Government's priorities. Glasgow City Council is clear that it does not believe in what it calls salami slicing—it is not going for cuts across the board but is looking at targeted cuts. Glasgow City Council probably has less information on its budget next year than the Scottish Government has on its budget next year. I did not expect a raft of figures from the cabinet secretary—especially if the budget will be published soon—but I think that the time has come for the Government to be clear about where it thinks the cuts will fall. Is the Government, as was suggested in a newspaper article, going for a 5 per cent cut across the board? One does not believe everything one reads in the press, but it is incumbent on the cabinet secretary to put his position in relation to that report on the record. Is the report untrue, or is it an option that is being actively considered? Is the Government going for a more targeted approach and are there areas that it deems to be absolutely protected? I did not expect to get a glut of figures, but the Scottish Government's strategic approach is important and ought to be put in front of the Parliament.
The public finances are of course critical. I read in the newspapers, as others will, that the Treasury believes that its tax receipts are about 20 per cent down on what they were a year ago. Regardless of whether that figure is entirely accurate, it is at least a hint of where we think the public finances are south of the border. I take on board entirely the point that the Parliament and the Government are funded largely by the block grant so it is more difficult to say what the figures are, but in the areas where the Government has responsibility and can tell us the figures, there ought to be an obligation on it to do so. How are we doing with the collection of council tax throughout Scotland compared with where we thought we would be? Are we collecting as much as we thought we would?
What about non-domestic rates? Given the number of businesses that have been going bust, are we collecting the rates that we thought, and hoped, we would collect, or are we down there, too? Although council tax and non-domestic rates account for only a proportion of the Scottish budget, when we combine them we are talking about £4 billion, which is not an insubstantial sum of money. How are we doing with that?
How are we doing with revenues in other Government or quasi-governmental departments? We read constantly that planning departments are making far less money than they did. Other Government departments or agencies such as VisitScotland and Historic Scotland have commercial activities built into their budget plans, so their business plan does not add up if they do not have the amount of commercial activity that they expected.
What about councils, Scottish Enterprise and Highlands and Islands Enterprise, which rely to a substantial degree on asset sales for their business plans to work? The Government could be a lot more candid about telling the Parliament how we are doing in comparison with how we thought we would be doing. We are now coming up to halfway through the financial year. The Government must have some idea—I hope that it does—about how it is getting on.
Other members have referred to a newspaper article; some have read out various quotations. I want to pick up two points that were made in the article that have not been dwelt on as much. It is important that the Government and the Parliament face up to the difficulties that we face in the short, medium and long term. However, any decisions that the Government and the Parliament make must be based on sound economics. The timing of the decisions must be based on what is best for the country, as opposed to what is good politically. I have concerns when I read reports in a newspaper that say:
"Tough decisions on spending may be politically more acceptable after a Tory Govt. elected".
Another statement that I read was:
"There may be opportunities in the political timeline that allow us to take tough decisions. Have a think about when these might be?"
The reports might not be true and the quotations might not be correct, but it is important not only that we make correct economic decisions for the good of the country but that we are seen to be doing so. I would be very interested to hear the cabinet secretary's response to those statements. Economic decisions must be taken in the broad national interest.
I echo everyone's congratulations to the Finance Committee on its very good report, which the convener introduced effectively. The report lays out some of the challenges that we in the Parliament and, in particular, the cabinet secretary and the Government face and the choices that have to be made in relation to the impact of the recession, the balance of tax and revenue and debt reduction.
Much has been made of the forecasting abilities of others, but I remind colleagues that budgetary forecasts are notoriously wrong, as Robert Reich reminds us. The CPPR forecasts have no firm basis beyond the 2010-11 budget but are nonetheless being taken as read by many. I sound a note of caution about that.
I was happy to hear what the cabinet secretary said about NHS capital and EYF compensation for it. The long-term effect of that is an almost nil impact on the Scottish budget, because the resource, which I absolutely agree is taken in a Barnett consequential from the NHS at the rest of the UK level, which impacts on Scotland, will be able to be managed through EYF handling.
I echo the point that Gavin Brown made in his speech regarding cuts of 5 per cent. There was no response to that.
Many other speakers have commented on the handling of the recession. It has become Brown's recession or Labour's recession—Derek Brownlee tries to take that line regularly—but we all know that that is not the case, because it is a worldwide recession. In response to those comments, I welcome the Confederation of British Industry's praise last week for Alistair Darling's response to the recession and the comments by the International Monetary Fund, which said:
"The UK government response to the global financial crisis has been ‘bold and wide-ranging'".
Paul Krugman, whom we have discussed before, says:
"What we do know, however, is that Mr. Brown and Alistair Darling, the chancellor of the Exchequer … have defined the character of the worldwide rescue effort, with other wealthy nations playing catch-up."
The UK Government responded appropriately to the crisis, which was not caused by the Labour Government or Westminster but is international.
That brings me to the so-called £500 million cuts and the reduction in growth in the Scottish budget. I think that most Scots understand the effect that it may have on the Scottish Government budget if the UK Government decides to intervene in the Scottish economy with in excess of £50 billion to save not the banks per se but the financial fabric of the country and the jobs that relied on those institutions. The reduction in growth is the effect of that action. The Government—and, indeed, every other part of the public sector—is able to handle that reduction and deal with the fact that, as we all know, the budgets are still increasing in real terms. Hearing so much from other members about the £500 million without a recognition of the substantial resources that were put into the Scottish economy to resolve the current financial crisis gets a bit tiresome. That intervention has worked and we will have to pay for it in future years.
As a Labour member, I have difficulty in making sense of a debate in which we all say that we need to work together but we know that a search on "£500 million cuts" and "SNP member" in our parliamentary systems would surely bounce out hundreds if not thousands of results. It is the mantra that we hear in the media and on the television, but there is no recognition that the figure is a reduction in growth that allows a resetting and repayment of the UK debt in order to have an impact on our banks, jobs and economy in measures such as the VAT reduction and support to pensioners, which not only the Scottish Government but many others welcomed.
I do not quote Gordon Brewer much in the Parliament—in fact, I do not think that I have ever done so—but I remember him being on television with Mr Swinney. He said:
"The SNP don't play with a straight bat. The Treasury agreed to your request to bring forward capital spending, you then put it into this economic strategy you announced with a big fanfare and claimed this extra money was for saving jobs and creating jobs in Scotland, yet when it comes to paying for it, which clearly if you bring forward money that means there is less money the following year, you try to claim that the very Treasury which allowed and encouraged you to do that is somehow responsible for slashing"—
that word was used by one of the members today—
"your budget."
That is an inappropriate way to handle the serious budget situation and the involvement of other parties in the process.
Many members have raised that issue. James Kelly raised the need to improve the Scotland performs website. Tom McCabe mentioned the Parliament's capacity. As a committee convener in a previous life and as a former minister, I share his concern. Helen Eadie gave us the classic John Swinney quotation about ensuring that the SNP costs every one of its commitments. The Scottish Government has many underfunded commitments and is trying to share responsibility with others on that.
I share the concerns that Jeremy Purvis expressed about the strategic budget review committee's role. I was extremely disappointed to read what I read in the Scottish Government senior management team minutes of 27 April, but none of that information has been shared with us at the review committee. That undermines the group's working and I am concerned about the group itself undermining the Parliament's Finance Committee. I look forward to discussion with all colleagues on that issue. I close on that note of some concern and with a heavy heart on that issue.
This has been a fascinating debate, in which members have covered new ground in taking an innovative and different approach. Today, we appear to have departed from the usual situation of civil servants writing my speech to one in which they wrote the speeches of every other member. Mr Whitton must have thought that all his Christmases had come early. I imagine him waking on Sunday morning and saying, "Somebody has written my speech for Thursday." Mr Whitton had absolutely nothing to say for himself today; he did nothing apart from read out the infamous civil service minutes. I am glad that, on this occasion, the civil service of Scotland has broken new ground in embracing the whole concept of consensus politics by helping out Mr Whitton by writing his speech for him.
I say to the Parliament in general and to Mr Whitton in particular—indeed, to all those who read in the press quotations from documents in which ministers ask for an analysis of 5 per cent cuts in public spending—that this minister has never asked for an analysis of the impact of a 5 per cent cut in public spending. He has never asked for it; he has never considered it; and he will not consider it. That is the clarity that I hope the Parliament requires. Perhaps what I have just said will stop any further attempt to take information and suggest that something else is the case.
I turn to the substantive issue of dialogue with other parties on the strategic spending review. My interpretation of events is genuinely different from that of Mr Purvis. I want to make it clear to Parliament how we took forward the process. In the spring, we had some dialogue amongst the political parties, which was a follow-on to the agreement that I gave Mr Purvis in February, during the budget process, regarding a joint approach to the consideration of public spending. I took from the discussions a sense that it would be better to have a published starting point, because that would allow us to have a more focused discussion on how to consider the budget. More than any minister—or any minister of this Government—has accepted, I have accepted that I must secure agreement across the chamber on the content of the Government budget. I have been on the receiving end of parliamentary endorsement of my budget and parliamentary non-endorsement—if there is such a word. I will consult Mr Finnie; he is very particular on such points.
As I said, I accept the importance of ensuring that we have a process that allows us to arrive at an agreed budget. I suggested to the other political parties—I assure members that I suggested it in good faith—that the Government publish its budget, after which we would have a period of consideration of its contents. We could look at whether it met members' expectations, or whether it did not. We could also look at any changes that members wished to propose.
As I said in my letter to my opposite numbers in the other political parties, in that way we could consider alternative proposals in advance of the submission of the budget bill. I acknowledge that it is paramount to have parliamentary agreement on a budget in any circumstances. In the particular circumstances in which we find ourselves, I want to ensure that we have the maximum possible agreement in the process. I will engage constructively with other parties on the matter. I hope that all other parties will engage constructively with me in accordance with that sentiment.
It would have been most helpful if the cabinet secretary had outlined that at one of the meetings or if he had convened a meeting. Given that he had many discussions with the Convention of Scottish Local Authorities on the shape of the coming budget, it does him no credit that he did not feel it necessary to convene meetings with other parties in the chamber. He had the opportunity to get cross-party consensus to shape his draft budget, but it is regrettable that he reverted to type.
Mr Purvis does himself no favours by saying that. Mr Purvis endlessly finds ways of trying to dissociate himself from the processes that some of us are genuinely taking forward. I will give an example. In the budget process last year, his emissary, Mr Rumbles, came to see me to tell me that unless I was prepared to agree a £700 million cut in income tax, there would be no further discussions with the Liberal Democrats. Members can imagine where that would have got me with the Labour Party or the Conservatives. The Liberal Democrats had no contribution to make until we got further forward. Let us therefore put aside such matters and get on with the process, in which I invite members of other parties in Parliament to engage to ensure that we can take forward the budget process in a consensual fashion.
The contributions to today's debate have been enhanced, as they always are, by the reflections of my experienced predecessor, Mr McCabe. The issues that he raised about a parliamentary budget office are perhaps not for me but for Parliament to consider. However, I have made clear that I give my support, for what it is worth, to the concept of a parliamentary budget office to try, as Mr Finnie said, to level the playing field a little in relation to these questions.
Reference was made to the establishment of a finance function within the Government that would be a challenge function to other policy areas. Believe you me—a lot of challenge goes on in the Scottish Government with regard to financing. However, the deployment of responsibilities in that fashion is a matter not for me but for the First Minister.
I point out to Mr Kelly, who talked about difficulties in the construction sector, that statistics on construction employment show that there has been a rise in such employment. I am not sure whether Mr Kelly has looked around his constituency recently, but the M74 extension is being constructed there, and that development is making good progress. Perhaps he could give credit to the Government for getting on with the project, because his Administration did not get round to doing it.
I hope that, out of this debate, we can focus on how we address a very serious financial situation that will face the country in the forthcoming financial year and beyond. It is beyond dispute—it has not been disputed in the chamber—that we are facing a much tougher political climate. As a consequence, I hope that members in other parties will be prepared to engage with me in the fashion that I have set out. I look forward to that discussion to ensure that we can formulate a budget that reflects the priorities of the people of Scotland, protects the front-line services of Scotland and does everything that it can—as the Government is trying to do—to assist and aid economic recovery in our country.
As others have said, we face a challenging budget settlement; that is the context in which the Finance Committee undertook its inquiry. Like others, I thank our convener, Andrew Welsh, and, indeed, all those who gave evidence to the committee, our advisers and our clerks. They helped members to shape the report, which I believe provides Parliament and its committees with a useful framework against which to consider the Scottish Government's forthcoming spending proposals.
We have seen a period of unprecedented growth in the Scottish budget since 1999. It is without doubt relatively easy in the context of years of plenty to consider what policy priorities we want to take forward. However, we clearly face a much more difficult position now, as we look towards a tightening of our finances across Scotland and, indeed, the UK. Is this therefore a "moment of opportunity", as the permanent secretary told his management team, or will it be a missed opportunity? The answer will undoubtedly be revealed as the budget unfolds.
Derek Brownlee is right that we need a new maturity about the debate as we move forward. The choice offered by the permanent secretary and his team—whether we will be "tucked in behind Whitehall" or whether we will stand out—is intriguing. However, we discover that, as with everything in life, timing is all. Jeremy Purvis and Gavin Brown talked about civil servants—one must assume that it is ministers, too—believing that the opportunity to be radical relates entirely to different scenarios post the UK general election. Members therefore rightly ask whether civil servants and ministers dream—or perhaps it is a nightmare—of the advent of a Conservative Government in order that they can cut deeper and further, and point the finger of blame at the Tories.
Whatever happens, it is important that the Parliament stays focused. When all around is claim and counter-claim, parliamentary committees should follow the money.
The Finance Committee report essentially does four things: it highlights the tightening of public finances in the context of the recession; it suggests the need to determine our priorities better; it discusses aligning funding to priorities and outcomes; and it emphasises the need to measure impact—in other words, how we demonstrate that we get a bigger bang for our buck. That forms the basis of the framework against which I hope the Parliament and its committees will judge the Scottish Government's budget proposals.
Other members have spoken at length about the context, and I do not intend to repeat that—I thought that what Malcolm Chisholm said was spot on. Therefore, in these closing remarks on behalf of the committee, I turn towards the future. There will be much discussion about the forthcoming financial year, and Joe FitzPatrick is right to say that it is the period beyond 2010-11 that is more uncertain. We do not yet know what the budget allocation for Scotland will be. One thing is clear, however: the settlement will remain tight, and committees need to bear that in mind and consider the sustainability of key policies as they look ahead.
The cabinet secretary is clearly not tempted by his civil servants' view that we should have an across-the-board reduction of 5 per cent, and that is very welcome. The committee thought that across-the-board reductions were a crude and blunt instrument. Instead, we need to start talking the language of priorities. Some of our witnesses questioned whether universal entitlement to some services was appropriate—services such as free care for the elderly and free public transport. Perhaps we should even target assistance and resources to those who are least well off instead, in order to maximise the impact of our funds. Indeed, Lord Sutherland has apparently called for the reintroduction of tuition fees, so that money can be reinvested to help students from poorer backgrounds with their living costs. All those issues, and many more besides, should be considered by committees on a portfolio-by-portfolio basis in determining priorities for funding.
James Kelly is right about the Scotland performs website. We need to know whether the policy priorities are making any practical difference. Let me illustrate that. One of the key strategic priorities for the Government has been the cut in business rates. Whether we agree or disagree with that, it is clear that there is very little hard evidence of any impact. Do we know whether it has created one single new job? Perhaps it has, but we do not measure that outcome appropriately, so we do not actually know. In these times, that is just not good enough. We need to know the impact that our money has, who it benefits and the outcomes that we expect it to achieve. If it does not achieve those outcomes, we should be brave enough to change direction.
Will the member give way?
No, I will not.
To deliver the step change that is required, we need a robust central challenge function within the Government. The committee received a very large amount of evidence to support the creation of a budget office, not least because in these changed financial circumstances the machinery of government needed to be reformed and we needed a minister who was largely free of spending responsibilities. We know that Mr Swinney runs at least half the Government. He has responsibility for local government, the economy, the voluntary sector, transport and much, much more. Experts tell us that such a challenge function is potentially the most important office in government, and Mr Swinney needs to be freed up to do that and that alone. Testing times require radical solutions, and I commend that one to Mr Swinney.
Tom McCabe made an insightful speech. Scrutiny is an uneven contest for the Parliament at the moment. We need the capacity to scrutinise the budget in Parliament, and the Finance Committee has asked the Scottish Parliamentary Corporate Body to consider just such a "parliamentary budget office", as he described it. I look forward to that idea being developed quickly.
Order. My apologies, Ms Baillie, but there is too much extraneous conversation.
Thank you, Presiding Officer.
The debate on the budget will dominate the Parliament for the next five months, but its consequences may well be felt for a lot longer. Our responsibility, here in the chamber and in committees, is to scrutinise the Scottish Government's proposals. Are its priorities right? Is the money aligned to deliver on those priorities? Can we measure the impacts properly? How do we ensure that the budget is fair and, as Helen Eadie rightly said, that it protects the most vulnerable people in our society? Let me put down a marker: we need the fullest possible information to do that.
I accept that Mr Swinney has moderated his language, but there is no doubt that some people will still not be able to resist indulging in the blame game, with Mr Swinney cast in the role of a victim—depending on the audience—and pointing the finger at the Treasury. I confess that I find it hard to picture Mr Swinney as a victim, but it is infinitely harder to picture his boss, Alex Salmond, as the Secretary-General of the United Nations. Other people might comment unkindly on Mr Salmond's personal ambition; I will resist the temptation to do any such thing. Rather, I suggest to Mr Swinney that Mr Salmond's departure could represent his first, very welcome strategic budget saving.
I commend the Finance Committee's report to the Parliament.