Spending Review 2011 and Draft Budget 2012-13
The next item of business is a debate on motion S4M-01561, in the name of Kenneth Gibson, on behalf of the Finance Committee, on its report on the Scottish spending review 2011 and the draft budget 2012-13.
14:56
It is with pleasure that I open this Finance Committee debate on its consideration of, and report on, the Scottish Government’s draft budget for 2012-13 and the 2011 spending review. This is the committee’s first chamber debate in this session. It is also the final chamber debate this year, so the Parliamentary Bureau has saved the best until last.
I thank my fellow committee members past and present for their contributions and consideration throughout the process; our budget adviser, Professor David Bell, for his informed input; and the committee clerks for their hard work, support and professionalism.
The budget process works to a tight and at times demanding timetable, and things have been no different this year. Our scrutiny began two months before the draft budget document was published. We agreed to take forward the previous committee’s work and consider the extent to which the Scottish Government is encouraging a more preventative approach to public spending and how that is being implemented and shared across key agencies such as community planning partnerships, national health service boards and local authorities. There is now strong recognition that spending to prevent negative social outcomes arising or to eliminate or lessen the impact of such outcomes is a better, more effective and efficient way of spending public money than reacting to the problem.
We are grateful to each organisation that responded to our call for evidence.
The Scottish Government highlights a 12.3 per cent real-terms reduction in the budget to 2014-15, with a 7 per cent fall in this financial year and the remaining 5.3 per cent falling over the next three years. The latter figure may not appear to be as dramatic, but it will be increasingly difficult to find savings as we progress. Difficult spending decisions have been made and will continue to be made, and continuing to produce a balanced budget is a significant challenge. I invite the cabinet secretary to respond to the point on efficiency savings that is made in our report and to say whether the Scottish Government will give an assurance that public bodies will still be required to provide published evidence of their reported efficiencies. He may also wish to indicate whether such efficiencies will be retained by those bodies.
In addition to the resource reduction, the draft budget highlights a 36.7 per cent cut in the capital budget—now 32 per cent because of consequentials. The Scottish Government is responding by transferring £200 million each year from the resource to the capital budget, which will amount to more than £750 million by 2014-15. Such expenditure on capital projects is welcome, but it is unclear how that transfer will be implemented. I ask the cabinet secretary to provide clarity on that.
I also raise the point that has been made in our report and by the Infrastructure and Capital Investment Committee about the provision of detailed information on the resource-to-capital transfer plans. It is clear that it would be beneficial to Parliament if such details are provided as part of the draft budget document in future years to aid the scrutiny process.
The importance of capital project prioritisation was discussed with the David Hume Institute and is mentioned in the report of the independent budget review. We need better cost modelling and forecasting of individual capital project usage to inform long-term cost and need. There is a discussion to be had about that. The committee, and many of those with whom we engaged, would be keen to be involved in it.
The Scottish Futures Trust, the Auditor General for Scotland and others highlighted the importance of maintaining our existing capital assets. We must not lose sight of the need to identify and make better use of the assets that we already have, particularly when that is less expensive than building something new.
We must also keep our capital assets in good repair. Audit Scotland identified the significant cost of removing backlog maintenance in council-owned property to be around £1.4 billion, £376 million of which was described as urgently required. Almost one third of the NHS estate requires major upgrading, and more than £500 million is needed to tackle outstanding maintenance issues. The cost of eliminating all road defects is estimated at £2.25 billion.
The evidence clearly supports a preventative-spend approach. It is encouraging that public bodies recognise not only the clear financial advantages of such an approach but its social, economic, employment, educational and environmental benefits.
A shift is taking place across the public sector. However, concerns were raised as to whether the £500 million in the change funds is new money for new projects or substitute funding for existing projects. The Scottish Council for Voluntary Organisations identified that only £260 million will come from the Scottish Government. We seek more detail about the make-up of the £500 million.
Concerns were also expressed about whether change funding to facilitate a preventative approach was being spent that way or diverted to other services. The Christie commission emphasised that change funding must be monitored and, in the light of the evidence, we re-emphasise that point.
Our preventative spend focus was on implementation. The benefits of the approach are recognised and accepted; the key is how it is implemented and embedded effectively across the public sector and how the Scottish Government delivers that decisive shift.
We discussed four key themes: resource prioritisation, collaborative working, financial challenges and leadership.
The evidence shows voices demanding leadership to assist and encourage a greater move to a preventative approach, particularly in early years. The Scottish Government must provide clarity to key agencies such as councils, NHS boards, community planning partnerships and organisations in the third sector. There must be understanding of what preventative spend is and what it will achieve if done effectively and with commitment.
The change funds will provide welcome financial encouragement. Financial leadership will help to decide where disinvestment can take place to shift money to prevention. The Scottish Government must clarify its strategy and approach. There may not be a one-size-fits-all policy, but consistency is essential in how preventative strategies are rolled out, implemented, monitored and measured.
We heard references to a silo mentality in parts of the public sector. That must be tackled or we will have inefficiencies, with some agencies ignoring preventative policies and strategies and failing to optimise benefits. There is a role for the Scottish Government not only in encouraging those who have not yet embraced a preventative spend approach to do so but in encouraging those who have embraced it and promoting the beneficial work that they do.
Not everything can be a priority. The challenge of how to allocate funding is acute. A number of bodies called for leadership from the Scottish Government on how resources are prioritised. Many decisions are rightly made locally, but there must be a clear national steer on the priorities for NHS boards and local government in particular, as they may compete against each other.
Budgets must achieve the maximum benefit. In some instances, a preventative approach will not achieve benefits for a generation or longer. However, we also heard about many immediate benefits and budget savings that can be secured quickly, easily and with little financial outlay.
Competing requirements are placed on local agencies—the national performance framework, single outcome agreements and health improvement, efficiency, access and treatment targets, for example. The financial priorities of a local authority differ from those of an NHS board. How do those requirements foster a shared vision and approach? We must untangle some of the demands that are placed on local agencies so that they can shift more readily to preventative spend.
There are many examples of successful local projects that demonstrate the sharing of time, money, people and belief to deliver positive outcomes. There was less evidence of collaborative working between councils and NHS boards, which have larger budgets to play with and where there is greater potential for effective preventative spending, budget savings and positive outcomes.
There can be cultural and structural difficulties. Competing statutory demands and expectations can be placed on different agencies, which may also have different budget cycles. Coterminosity may also be an issue. There may also be a lack of a shared vision of what preventative spend is and what it can achieve if the right mechanism and support exist.
We need a national evidence base that can share examples of best practice and roll them out across Scotland. Joint working exists, but not on the scale that we want or need. Highland Council referred to the “tortuous” nature of moving to joint working, while the Dartington Social Research Unit referred to “tribal” elements.
Encouraging and facilitating shared working may be the most difficult challenge for local agencies that move to a more preventative approach but, when it happens, other issues—such as the prioritisation of resources—should be easier to resolve.
We look forward to seeing the actions that the Scottish Government will take to facilitate the cultural and attitudinal change that is needed.
The fourth theme focused on the financial challenges that key local agencies face in moving meaningfully to preventative spend. A number of consistent themes emerged. Short-term budget allocations hindered effective long-term budget planning and project support. Pooling budgets to assist in encouraging a more collaborative approach appeared complex, which occasionally discouraged bodies from even attempting it.
We recognise that there is a role not just for the Scottish Government but for the Parliament and others, such as the Convention of Scottish Local Authorities. Parliamentary committees can monitor performance and the change to preventative spend outwith the annual budget process. A committee could ask the Scottish Government to demonstrate how a bill that it has introduced will support preventative spend.
The completion of our budget scrutiny and the publication of our report are not the end of the committee’s involvement. We recognise that preventative spend will inform our work programme throughout the parliamentary session.
We support the previous Finance Committee’s recommendation that draft budget documents should provide an assessment in each budget portfolio of the progress that is being made in shifting to preventative spend. That was not provided this year, but we are keen to hear from the cabinet secretary how the Scottish Government will deliver that.
We will hold a series of round-table discussions in early 2012 on demographics, inequalities and social deprivation, the provision and funding of universal services and additional funding sources. Those discussions will seek to build on accepted published evidence. We will build on the evidence that we heard from early years proponents such as Graham Allen MP, the Netherlands Youth Institute and the Dartington Social Research Unit. The committee will work with the Scottish Government as it takes forward policies that emerge from or are influenced by our on-going work.
In our report, we drew attention to the national performance framework, which provides a link or common alignment between reporting on policy progress and financial reporting. That message was reinforced through the Scottish Government’s revised economic strategy and programme for government. The Royal Society of Edinburgh wanted more linkage between the NPF, the budget document and the economic strategy, while others said that a joined-up approach between the NPF, SOAs and the NHS HEAT targets was needed.
We found it surprising that the draft budget did not mention the NPF or its five strategic objectives. We note the recent refresh of the national indicators and we will take evidence from the Scottish Government on that next month, but we and others would welcome the clarification that is needed on how the NPF integrates with and informs spending plans and policy priorities.
The potential savings that can be realised from the McClelland review of information and communications technology infrastructure are significant. The review identified savings over the five years from 2012-13 of more than £1 billion through improved tendering, procurement and sharing of ICT resources across the public sector.
It is encouraging that the Scottish Government has moved swiftly to respond to that review and has set out its strategy to achieve the savings, which includes a £4.7 million annual budget to assist in that. The committee asked for an annual progress report on savings that have been achieved, with an explanation when savings have not been achieved. I am sure that any update that the cabinet secretary can give us on recent actions by the Scottish Government will interest the Parliament.
The largest part of the budget is public sector pay, which accounts for roughly 60 per cent of the Parliament’s spend. As our adviser pointed out, control over pay is a key part of the budget. The cabinet secretary announced the continuation of the public sector pay freeze in 2012-13 but said that those who are on less than £21,000 per annum will receive a minimum pay increase of £250. It is important that the Scottish Government will continue its policy of no compulsory redundancies.
We acknowledge the potential for modest increases in public sector pay after 2012-13. The committee will consider the issue in more detail in January when we hear from Will Hutton about his review of fair pay in the public sector.
The committee took oral evidence from the Christie commission. Its report refers to the need to “achieve more with less”, which is a reality and a challenge that must be tackled positively. Much of Christie transfers to the preventative spend agenda and the evidence that we received. We look forward to hearing what specific actions the Scottish Government will take in response to Christie and we seek six-monthly progress reports on that.
I am conscious that I have covered a lot of issues in the time allowed. Nevertheless, I have not had the time to mention non-domestic rates, climate change targets, equalities, level 4 issues or the Scottish Parliamentary Corporate Body and Audit Scotland budget proposals, all of which the report covered. I could have gone into greater detail on the matters that I raised, but I hope that what I covered demonstrated the thoroughness of the committee’s budget examination. I am sure that colleagues from all parties will cover the other issues.
On the Finance Committee’s behalf, I move,
That the Parliament notes the 3rd Report 2011 (Session 4) of the Finance Committee on the Scottish Spending Review 2011 and Draft Budget 2012-13 (SP Paper 48) including its recommendations to the Scottish Government.
15:09
I thank the Finance Committee for its report and for arranging the debate. I record my appreciation for Mr Gibson’s remarks, and I thank him for hosting with me the committee’s detailed scrutiny session on the budget at its meeting in Largs—unsurprisingly, the meeting was held in the convener’s own parliamentary constituency.
I welcome Ken Macintosh to his position as the shadow spokesperson on finance, employment and sustainable growth, and I look forward to working with him in the course of our parliamentary exchanges on those issues.
I read the Finance Committee’s report with interest, and I welcome its balanced and thorough analysis. It recognises the positive steps that are proposed in our spending plans, but it challenges the Government to do more in certain areas. We will of course consider carefully the points that it has raised.
I will write to the committee responding in detail to its specific comments and observations before the budget bill is introduced in January. I will use this opportunity to reflect on some of the central themes that have emerged in the committee’s consideration.
Our consideration of the budget proceeds in an uncertain and ever-changing economic and financial context. It is clear that there remains a pressing need to solve the debt crisis in Europe. Given Scotland’s close trading and financial links with Europe, it is unlikely that its economy can expect to be immune from pressures. An orderly resolution is required, with a priority on delivering stability and continuity in the euro zone. The financial and market implications are significant for Scotland, because our approach to delivering economic recovery is at the heart of the Government’s budget proposal.
The Government has made clear in its budget document that we will use every resource and lever available to us to strengthen economic recovery in Scotland. We have put on record on several occasions our call to the UK Government to strengthen investment in the economy to stimulate growth, which is a central part of the economic recovery message.
The Government’s message in the budget is very clear. We will focus on making the resources that are available to Scotland work harder than ever to strengthen our economic recovery, and to build the foundations for future success. That is the right position for the Government to adopt, because in a time of acute financial constraint we must require the public pound to achieve more than it has been able to achieve in the recent past.
In that regard, I come to Mr Gibson’s point about the efficiency savings that organisations will be required to make. The central assumption is a 3 per cent efficiency saving. Savings will not be claimed back to the centre: the budget is the budget, and it gives clarity for organisations about the resources with which they have to live.
The Government also sets out to organisations in the budget document some of the tools and instruments that they can use to deliver efficiencies. One of those will be the McClelland review, to which Mr Gibson referred. I warmly thank John McClelland for his report, which is an important opportunity for various public sector organisations to realise greater efficiencies by using resources in a more effective way through the use of ICT.
As I understand it, the outturn report that was previously published will no longer be published. How will efficiency savings be verified—especially publicly—in the future?
I made clear in the budget in November 2010 that organisations would be required to publish an efficiency outturn report of their own volition. The Government will not collate it as we have done before, but there will be public scrutiny of those efficiency savings.
In most cases, budgets are not rising in the forthcoming period, and many of them are under acute pressure. One of the crucial elements of the efficiency agenda is that organisations are having to deliver more with the resources that are available to them. That is the challenge that the budget sets out for us.
Since the spending review was published, we have received Barnett consequentials from the autumn statement amounting to a £432.6 million capital departmental expenditure limit and a £68.6 million revenue DEL to 2014. Some conditions are attached, and we are discussing detailed implications with the Treasury. Those consequentials are welcome, but they should not obscure the fact that we face significant financial challenges in the years to come, with a real-terms reduction in our budget of around 11 per cent by 2014-15.
We have already decided to commit an additional £30 million to support youth employment and £15 million to a college transformation fund, thus responding quickly to help our young people to take their first steps into the workplace.
The budget will tackle barriers to equality of opportunity, support our firms to do better business and invest in infrastructure for the long term. Scotland remains the most competitive place to do business in the UK. We are matching the English business rate poundage, offering a rates deferral scheme for 2012-13, and sustaining our wider rates relief package. The small business bonus scheme is the most generous relief that has been offered to small and medium-sized enterprises in the UK, and it is protecting local jobs.
Has the minister revised his optimistic predictions for business rate income, given the downgrading of the predictions for the growth of the UK economy?
I appreciate that Mr Macintosh has not been round the houses on these finance questions for the past few weeks but, as I said to Parliament last Thursday, the estimates that I made on non-domestic rates followed a warning from the Office for Budget Responsibility in August that the growth expectations that were made in March were unlikely to be realised. My estimates were set against that context.
Also, in 2008-09, despite the fact that almost all tax revenues were reducing in the UK, there was a 0.91 per cent increase in buoyancy in business rates in Scotland in that financial year at the height of the recession. Against that backdrop and against the pattern of business rates in recent years, I believe that the estimates are still sound. However, I will continue to monitor the performance of business rates on an outturn basis. I see that information every quarter and it enables me to form a view of whether our estimates have the correct perspective.
Economic recovery will be central to the budget process, as will the four pillars of public service reform, which focus on preventative spending, local service integration, workforce development and performance innovation. I will say a bit about each of those things in turn.
The preventative spending agenda is one on which I part company slightly with what Mr Gibson said earlier. It is widely endorsed by all public bodies and it is central to the relationship between national and local government through our focus on joint priorities. The preventative spending agenda has been supported enthusiastically by local government and is actively drawing in its participation. Local service integration involves drawing together more closely at local level the work of the health service and local government, and many other bodies, including those in the third sector.
On performance innovation, the national performance framework remains a central part of the Government’s approach to the delivery of its agenda. The budget is set against the realisation of the outcomes that are implicit in the national performance framework. I note that the Finance Committee has acknowledged that the Government has recently updated the national performance framework and we will be happy to give evidence to the committee on that basis.
There is a range of fundamental questions about the operation of public service finances in a time of acute financial constraint. The Government will focus on the achievement of better outcomes for the citizens of Scotland within that acutely challenging financial context. The Government will concentrate its efforts on delivering a balanced budget that meets the expectations of the people of Scotland.
15:19
I thank the finance minister for his earlier good wishes. My friend and colleague Johannn Lamont assured me that, in asking me to take up this post, she was recognising my contribution over recent weeks. Speaking to a half-empty chamber on the final day of the term, I am trying to work out whether it is a reward.
In recent weeks, I have been talking about the importance of emphasising Labour’s positive message and our willingness, where appropriate, to work with the Scottish Government. It is therefore only fitting that I begin on a consensual note. I can say in all honesty that I have a lot of sympathy for the finance minister and the difficult circumstances in which he finds himself.
It is not easy to make budget decisions with a tight funding settlement, particularly when the economy is so fragile. I would go further and suggest that Labour and the Scottish National Party share common ground in our concern about the economic approach of the Conservative Government at Westminster. To cut spending so dramatically and to reduce the public sector, and in particular to lay off public sector workers in the hope that the private sector will somehow make up the difference, strikes me as the triumph of ideology over experience and the pursuit of political dogma rather than an approach that is based on a practical appreciation of what might prove to be effective.
In these difficult times, it is even more important to take decisions that reflect and stem from our principles and values. In Labour’s case, as people struggle with the cost of living or their gas and heating bills or worry about their employment or pension prospects, we would prioritise jobs, growth and education. The Scottish Government’s spending review outlines a similar set of key economic objectives, but it is disappointing that the Government’s actions do not yet match its words.
Finance and infrastructure ministers talk about the importance of capital spending but, last year and this, capital spending has fallen or is planned to fall by more than in the UK under George Osborne. The front page of The Scotsman today reveals that another capital project, the M8 Baillieston interchange project, is to be delayed, for four years. That is hardly the boost to the construction industry and the economy that the Government says it supports.
The cabinet secretary talks about the importance of jobs. We are delighted that the Government has taken up Labour’s suggestion of a dedicated employment minister to reflect that priority. However, unemployment is higher here than it is in the rest of the UK and we are shedding jobs faster. For the first time since devolution, the number of jobs in the health service has begun to decline and more than 13,000 jobs have been lost in local government in the past year alone. The draft budget outlines further cuts, in the civil service and the Crown Office and Procurator Fiscal Service. Each one of those job losses brings anxiety and upset to families across the country, and the net effect economically is to depress consumer spending and demand.
On top of my concern that the Scottish Government simply is not doing what it says it is doing, I make it clear that, overall, the budget does not reflect Labour’s principles and priorities. To give just one example, the education budget is predicated on cutting the number of teachers, reducing their pay through a pay freeze and cuts to the rates that are paid to supply teachers. The budget fails to deliver a national school building programme of any scale and in fact takes capital away from local authorities, which will hinder their ability to deliver their own school building programmes.
Education is just one example, but I make the point to outline our overall approach to the budget and our contrasting priorities. In that context, we are of course willing to engage constructively. On that note, I highlight a number of decisions or proposals that need to be addressed and amended in areas such as housing, further education and local government. If jobs and economic growth are the priorities, as we appear to agree on the surface, why are the very areas that can deliver that growth—housing, further education and local government—bearing the brunt of the cuts?
The Finance Committee has touched on some of those issues, but in the view of my Labour colleagues on the committee, it pulled its punches, which is why they dissented from the report. The lack of transparency that the Government displayed over the annual budget is frustrating. It did not produce the detailed so-called level 4 figures in time to aid scrutiny; it refused to give further information on the supposed centrepiece of its economic policy, the revenue to capital resource transfer; and it decided to stop producing outturn statements on efficiency savings. Rather than add clarity to the process, all those factors and more have hindered Parliament’s ability to hold the Government to account.
I am certainly not trying to pin all the blame for the state of the economy on the Government. I simply want to clarify whether ministers’ actions are helping to reduce unemployment, stimulate businesses or otherwise help create economic growth. I am sure that I have no need to remind members about the First Minister’s enthusiasm to take the credit when things are going well but, as all the evidence in recent weeks and months has demonstrated, things are not going well. Is it not time for everyone in the Government to stand up and be counted for the decisions for which they are responsible?
The evidence to the Finance Committee certainly seems to back up that view. Professor David Bell and Professors Armstrong and Peat raised doubts over the Scottish Government’s approach to supporting economic recovery. Professor Peat’s comments in particular focused on the lack of evidence for that.
We need action now to reinstate the future jobs fund and to expand it to include the private sector. We must do more with local and national Government procurement to boost the economy. We must stop delaying capital investment projects and bring them forward now.
The Scottish Government could do worse than look to Glasgow City Council and the new graduate employment scheme that it unveiled last month, which uses pension funds to invest in local job-creating companies.
Our worry is not simply that the Scottish Government makes the wrong choices in the budget but that it has failed to link the budget to its own economic priorities. The Finance Committee’s report goes some way to identifying those weaknesses, but what matters most is the response that the finance minister makes.
15:25
Like the cabinet secretary, I begin by welcoming Ken Macintosh to his post as Labour’s finance spokesperson. I, too, look forward to working with him in the months and years ahead.
Like our convener, I thank our adviser and all the committee clerks for their work on an excellent report, and I commend Kenneth Gibson on the statesmanlike manner of his speech, which suits him far more than bombast. His career will be in tatters following that remark.
I want to pick up on two points that have been made thus far, the first of which is about efficiency savings. The decision to abolish the outturn report that the Government has hitherto produced is a backward step that will make it more difficult for the public and, indeed, parliamentarians to understand what is happening on efficiency savings. The cabinet secretary responded by saying that organisations would be encouraged to publish on an individual basis, but that the Government would no longer collate the information.
There are two problems with that, the first of which relates to consistency. Will we get publications that are consistent? Secondly, the process of gathering information will become more difficult. The public and, indeed, parliamentarians will have to contact all 32 councils to find out about their outturn reports. Every health board and every public body will have to be contacted to find out what they are doing on efficiency savings, so it will be more difficult to get a national picture.
I refer Mr Brown to section 32 of the Public Services Reform (Scotland) Act 2010, for which, if my memory does not deceive me, he voted. It places a statutory duty on the public bodies that are listed in schedule 8 to the act to publish an annual efficiency statement. That statutory requirement should address some of the concerns that he has raised.
I am not sure that it does. It may help with consistency, but it does not deal with the point about someone having to contact every public sector organisation to track their performance on efficiency, instead of getting the information directly from central Government.
On the subject of memory, before he came into government, Mr Swinney said:
“we are being asked to accept performance on efficiency savings simply because that is what the minister asks us to do. In my view, that is not the substantial authentication that the Parliament should require.”—[Official Report, 21 December 2005; c 22006.]
He was very keen on Audit Scotland verifying efficiency savings when he was in opposition, but he seems a little less keen on Audit Scotland doing that now that he is in government.
The second issue that I want to pick up on relates to non-domestic rates income, which Mr Macintosh asked about. The cabinet secretary said that it was a matter on which we had been round the houses. That is very true, but I am not sure that we are any closer to the light, despite our having gone round the houses over the past few weeks and months.
When the initial assumptions were made, the growth predictions for the United Kingdom and Scottish economies were far higher than they are now, following the OBR’s publication of its report. Although I am sure that there will be some form of buoyancy upturn, as the cabinet secretary suggests, it just does not stand the credibility test to say that significant growth downgrades will have no impact whatever on the amount that we collect in non-domestic rates.
Perhaps I can help Mr Brown by providing a comparison. In England, between 2011-12 and 2012-13, non-domestic rates income is projected to increase by 21.5 per cent. That is the figure that his colleagues in England have come up with. I would not sign up to such an assumption, but does it not demonstrate buoyancy in the business rates system?
As I said earlier, there will no doubt be a degree of buoyancy, but what I find hard to accept is that the significant growth downgrades of several weeks ago will have no impact on the amount that the Scottish Government and councils collect. I just do not think that that is credible.
I note that the cabinet secretary said that he sees this information on a quarterly basis. Does he think that the Parliament and the Finance Committee should see the very same figures on a quarterly basis? That is a direct recommendation of the committee—it came also from the Local Government and Regeneration Committee. Will he respond to that recommendation and publish those figures quarterly, so that we can see and track how those rates are coming across? I note that his colleague Mr Mackay signed up to the report in full—I am sure that Mr Mackay will agree that those figures ought to be published so that the Finance Committee and others can see them in future.
There are a number of other issues. I continue to be deeply sceptical about the movement from revenue to capital that we continue to hear about, but I will close on a consensual point. I acknowledge the efforts that the cabinet secretary has made in relation to preventative spend. Like others on the committee, I welcome the Scottish Government’s emphasis on that; it is absolutely the correct direction of travel.
I ask the cabinet secretary to refer to one specific point, perhaps not today but in future. In its evidence, the SCVO suggested that only 18 per cent of the change fund last year went to preventative spend. I ask the cabinet secretary to investigate that claim and respond to it. If the figure is only 18 per cent, we will be disappointed in a couple of years’ time.
We move to the open debate. As we are very tight for time, I would be grateful if members could please stick to six minutes.
15:31
I welcome the report as the new boy on the committee, although I am soon to be joined by other new members, so I will not be the newest member for long. It is not necessarily fair for me to comment on the process behind the production of the report, other than to remark that the fairly comprehensive list of witnesses and evidence sessions at annex A indicates that the committee undertook a great deal of scrutiny during the course of producing the report.
Paragraphs 5 and 6 of the report make it clear that this is a challenging economic climate and that the Government is facing a challenging settlement. Paragraph 5 states that the budget will decrease by 12.3 per cent in real terms over the course of the spending review, with a 7 per cent reduction coming in this year alone. That makes this financial year extremely challenging. Even those who are wedded to a particular political ideology or a particular direction of political travel would accept the financial challenges that the Scottish Government is facing.
It is clear that, in these challenging times and within that difficult settlement, there need to be clear statements of priority from the Government. I welcome the fact that three clear priorities are being set: the acceleration of economic recovery and the creation of jobs through the low-carbon economy; public sector reform, with a dramatic shift to preventative spend; and the introduction of a social wage.
I will focus my remarks on the preventative spend agenda. The agenda that the Scottish Government is pursuing represents one of the biggest changes—if not the biggest—in the mindsets and agendas of Governments in my lifetime, which I realise has not been very long. In my time in politics, as a local councillor or working within the political system, I have always been frustrated by the short-termism that often dominates the political agenda and ignores the longer-term picture. The cabinet secretary has recognised that point in his shift towards preventative spend, which takes a longer-term view of the situation.
It is important to recognise the need to involve third sector partners in the shift to preventative spend, given their role in the agenda. The recommendations in paragraph 135 of the report are welcome in that regard, because they recognise the need to set the third sector in its rightful place as a key partner in the move to preventative spend.
Some concerns were raised during the course of the evidence sessions about the amount of money being directed towards preventative spend over the course of the spending review. In that regard, I will make three observations. First, given that we have a fixed budget that is under increasing pressure from outside influences that this Parliament cannot control, I do not think that £500 million over the period is an insignificant sum to direct towards a preventative spend agenda and a change in focus.
Secondly, that £500 million is the direct allocation from central Government. Other budgets are controlled at local level by local authorities, NHS boards and other public bodies and it is up to them to prioritise within their own budget settlement how they want the preventative spend agenda to operate locally. It will be interesting to see how that develops and I am sure that the cabinet secretary and his colleague, the newly appointed Minister for Local Government and Planning, will have key discussions with those bodies, particularly local government partners, on how they deliver this agenda in their areas. In fact, there has been something of a transition to preventative spend in some places. For example, Aberdeen City Council has made efforts to redesign services and remodel them into a more preventative and early intervention approach. That mindset would be welcomed in other local authority areas; indeed, I am sure that members across the chamber will be able to highlight examples from their own areas.
Thirdly, I contend that the preventative spend agenda is just as much about the mindset as it is about the money. The redirection of resources and redesign of services can unlock significant savings and deliver real benefits to the public. If every pound spent on intervention can save many tens of pounds in other areas, that is simply a no-brainer to me. It unlocks potential resources not necessarily in the first year but in future years for reinvestment in and allocation to other areas.
I find it unfortunate that the Labour Party rejected the entire report in committee and I hope that its members will pause for thought and vote in favour of the motion tonight. It is the time of year when individuals can be visited by three spirits that attempt to show them the error of their ways. I know that the Labour Party had its Christmas party last night; I have no idea whether Mr Macintosh was visited by three spirits but I hope that he will consider changing his party’s stance on this report to a more constructive one.
This robust report scrutinises in considerable detail the Scottish Government’s budget. I welcome its conclusions and await the cabinet secretary’s considered response.
15:37
I feel a “Ho, ho, ho” coming on—all in good spirit, I am sure.
Having been a member of the Economy, Energy and Tourism Committee since the start of the session, I am particularly interested in speaking in this debate. I am sure that all my committee colleagues will agree that we have gained a vast amount from the informative submissions that we received on the Scottish Government’s draft budget—and at this point I must thank our previous convener, Gavin Brown.
I am blushing.
Absolutely.
The foreword to the draft budget sets out the Scottish Government’s commitment to use its powers, its energy and its abilities to maximise the value and impact of public spending for Scotland. However, a number of expert witnesses have told the Economy, Energy and Tourism Committee that the Scottish Government is not using its full powers to maximise the value of public spending in Scotland, particularly with regard to fuel poverty.
Fuel poverty in Scotland has grown at an alarming rate. Energy Action Scotland’s alarming estimate that 40 per cent of Scottish households will be fuel poor by the end of this year has already been mentioned in debates in the chamber and I am sure that all members agree that the figure is shameful and fairly disturbing.
The households experiencing fuel poverty include some of society’s most vulnerable individuals: the elderly, people with long-term illnesses and disabilities and those with young children. Under the proposals in the Welfare Reform Bill, households in fuel poverty stand to lose many of their current entitlements; indeed, the bill’s policy memorandum states that local authorities and third sector organisations will be required to fill those gaps, placing in jeopardy their ability to offset the effects of fuel poverty at a local level.
Will the member give way?
Yes, since it is Christmas.
Ho, ho, ho.
The member is talking about fuel poverty. Clearly, concerns about that are shared across the chamber. Given that rising energy costs are a key driver of fuel poverty, what actions does she think the Parliament could take to tackle rising energy costs? Or does she recognise that there is not much that we can do?
May I answer that question throughout the rest of my speech, please?
Yes, I suppose so.
If I have not answered it, I am sure that Jamie Hepburn will tell me at the end.
The target date for the elimination of fuel poverty is 2016. It is therefore imperative that any draft budget that is brought forward contains clear and detailed clarifications of how Scotland will achieve that goal.
I admit that the fuel poverty budget for 2012-13 shows a rise in funds to about £65 million, but we must put that in the context of the swingeing cut of about £14.3 million made to the fuel poverty budget for 2011-12. That is despite estimates that, by the end of this year, fuel poverty will have increased to approximately 40 per cent. In addition, the amount that has been earmarked for each year between now and 2015 fails to reach the figure of more than £70 million that was provided for 2010-11. That is just the tip of the iceberg. The Economy, Energy and Tourism Committee also heard that funding committed to the universal home insulation scheme and the energy assistance package this year is £54.5 million, which represents a reduction of almost a third from the 2010-11 budget.
In its submission to the Economy, Energy and Tourism Committee, Energy Action Scotland said that £200 million a year is needed to fight fuel poverty and that the Scottish Government should provide at least £100 million a year. The Existing Homes Alliance echoed that call.
When it reviewed the draft budget, the Economy, Energy and Tourism Committee heard that not all of the £18.7 million for domestic energy efficiency is going to fight fuel poverty. The Cabinet Secretary for Infrastructure and Capital Investment stated:
“I would not like to put a precise figure on it.”—[Official Report, Economy, Energy and Tourism Committee, 2 November 2011; c 510.]
We must ask where the money will go and how much of it will go to combating fuel poverty.
In the light of those details, I believe that the cabinet secretary owes the chamber some answers. There is no room for fuel poverty in the 21st century. It is time that the Scottish Government backed up its fine words with actions.
15:43
I, too, welcome the Finance Committee’s comprehensive and robust report. I am not a member of that committee, but I am on the Education and Culture Committee and the Equal Opportunities Committee.
It is welcome that the Finance Committee’s report notes the fact that the convener of the Equal Opportunities Committee has asked all committees to detail how they will include equality issues in the conduct of their business. Mr Gibson referred to the HEAT targets in his speech. As we move towards more collaborative working, it is vital that HEAT targets and equality issues are mainstreamed into the restructuring of our services. That is nowhere more important than in collaborative working between the NHS and social work services in elderly care.
We have talked about some of the priorities. One of those is growing the economy and getting benefit from the opportunities that we have in Scotland. We have also talked a little bit about leadership. I will talk about some of the leadership that the cabinet secretary has provided on culture and reflect on some of the things that are being delivered in the context of the budget.
Scotland is a creative nation. We are rich in heritage and in contributions to the world and we are preparing to be an independent nation. In establishing our nation’s identity, it is our creativity, culture and innovation that defines us as Scots. In the face of the deep cuts in public spending that the UK Government in Westminster imposed, the Cabinet Secretary for Culture and External Affairs and the Scottish Government have managed to minimise the impact on Scotland’s cultural heritage and have tried to protect front-line services in the area.
The economic benefits of our creativity and the opportunities for cultural and genealogical tourism should be maximised. We have great assets, such as the National Library of Scotland and the National Records of Scotland, that offer a wealth of resources for education, leisure and research. As we move forward to our second year of homecoming in 2014 and the Glasgow Commonwealth games, it is vital that we make the most of our resources and ensure that our economy and tourism grow in Scotland.
The Scottish Government has continued revenue funding for the National Galleries of Scotland and National Museums Scotland, protected our world-class performing companies, delivered capital investment for the Theatre Royal in Glasgow, improving its front-of-house and disabled access, and committed to the extension of the Glasgow Royal Concert Hall in support of the Royal Scottish National Orchestra.
Our great commitment to early intervention, the commitment to 25,000 apprenticeships in every year of Government and the strategy for 16 to 19-year-olds are policies that will transform opportunities for people in our nation. I am delighted that we have also been able to protect the youth music initiative, which supports more than 300 projects across Scotland, ensuring that Scotland’s talented youngsters get the support and opportunity that they deserve to fulfil their potential.
The cabinet secretary has also committed an additional £5 million to the young Scots fund to invest in a national centre for our youth companies in Glasgow. The centre will ensure accessible rehearsal space, production facilities and an administrative base for the organisation. We are also continuing to fund the Edinburgh festivals expo fund, which showcases our young Scottish talent to the world. Within the 25,000 modern apprenticeships, we have apprenticeships in the creative industries and in the area of conservation, ensuring that traditional building and the maintenance of our heritage is secured for the future.
I welcome the fact that the Finance Committee has not only recognised equality issues in its report, but committed to continue to review and scrutinise some of the major developments in the area.
I will say a little bit about accident prevention in our local authority areas in the context of preventative spend. I am passionate about the issue, not least because I am vice-chair of the home safety committee of the Scottish Accident Prevention Council. It is vital that as we move to support elderly people in their own homes we continue to ensure that advice is given about trips and falls before people end up in the NHS and the care system. We could do a lot more education about such issues in local authority areas. I note that there is a commitment to look at statutory duties, but home accidents are not within the remit of statutory duties, even though more people are injured and killed in their own homes than on the roads. We could perhaps investigate that.
There have been a lot of jokes about Christmas today. I am afraid that I will lower the tone a little bit, because when we look at the finance settlement and the budget as a whole we cannot ignore the Grinch who stole Christmas. Unfortunately, we have had to take difficult decisions after inheriting a situation in which gold reserves were sold at a record low, our pension pots were raided, the 10p tax rate was abolished and there was a debt crisis of £19.9 billion. That is the context in which the difficult decisions have been made and we cannot ignore it.
15:50
I may have to tune in to Finance Committee debates and meetings from now on—it has been a revelation. Kenny Gibson, the soft man of Scottish politics. I might not tune in, so do not be disappointed if I do not, but it was a great contribution; it was a great, measured start.
I have had a good read through the Finance Committee’s report, which is a very thorough job that looks at all the details of the Government’s plans. However, I was surprised by the report, too, because there has been some quite strong criticism in some areas and, considering that the committee is dominated by friendly faces and that it has taken some time for the plans to come together, I am surprised at the extent of the criticism. Thankfully, the UK Government has provided an additional £500 million since the autumn statement, so perhaps some of those issues can be addressed by the time that the Government publishes its full, detailed report and response.
I will start with the colleges and the Education and Culture Committee’s contribution to the report. The committee provided a valuable contribution and helped the campaign that is trying to secure the additional funds to reverse the cuts. A £15 million additional pot has been provided by the Cabinet Secretary for Education and Lifelong Learning, but it is just not enough. The finance secretary is probably bored of me saying this, but it is important that we reverse the cuts. The £67 million is there and we should take the opportunity now—I want to press the finance secretary again today on whether he will reverse those cuts.
Does Mr Rennie accept that his efforts might also be worth while in persuading his colleague, Danny Alexander, to reverse his cuts to this Government’s budget?
I think that Mark McDonald knows, as many have accepted, that this is a very difficult financial period. Everybody knows that it is difficult and we have to prioritise within the finances that are available. We cannot just wish money. However, the cabinet secretary has got money; he said that the colleges are important, but he is still withholding the money. The money could go to the colleges and remove the fear from students and staff about their futures. He should take the opportunity today to do that.
The member accepts that we are in a difficult funding settlement; does he not accept that that is a consequence of his Administration in London cutting the budget?
It is a consequence of the environment that we are in. It is a consequence of the economic recession that many countries in Europe and the world are facing. To pretend that Scotland is somehow isolated from that is to remove oneself from reality. The member has to face up to the challenges that we face.
The next issue is capital investment. It is important that we hear from the finance secretary about which projects could be accelerated with the additional capital that has been received since he made his initial statement on the budget. We have had some contribution, in terms of the £430 million from the UK Government, but we also have the prospect of the Scotland Bill offering £2 billion in additional borrowing and the pre-payment facility that has again been offered by the UK Government.
We have not heard from the finance secretary which particular projects will be accelerated and it would be beneficial for members to hear about that, and to hear whether he is recommending to his back-bench colleagues that the bill be vetoed. That is the prospect; that is what the Scotland Bill Committee, as Linda Fabiani knows, is threatening. We need to hear whether that is a reality and whether Scottish National Party members are prepared to live with the consequences, which are that that capital borrowing—that extra £2 billion—would disappear.
Projects such as the A9, the A96 and electrification of the railways could be accelerated. We heard from Alex Neil that if he had £6 billion in the Scotland Bill—that is the SNP’s desire, ultimately—he could prioritise the A9 and A96, so obviously work has been done on which projects are the most important. However, it would be good to hear which projects would go if the Scotland Bill were to be vetoed and that £2 billion borrowing power no longer existed.
I want to move on to preventative spending, because the committees have significant concerns about being able to identify where the money is and whether there is double-counting. As David Bell says,
“there is a danger of double counting.”
We need some clarity about whether the money is being prioritised for preventative spending and whether the £250 million saving from the Forth bridge contract will be spent on early intervention. It is important that we hear about those things; if we do not, we will not have clarity and confidence that, when the Government says that these are its priorities, they actually are its priorities.
The Finance Committee’s report makes it clear that there is now no excuse for not stopping the cuts to Scottish colleges; that the Government should withdraw its threat to veto the borrowing powers in the Scotland Bill, which will speed up investment in transport; and that the Government needs to get its act together and sort out the answers to allow it to bring forward the truly transformational early intervention revolution that we support, which will set Scotland on a sustainable path for the future.
15:55
As a member of the Finance Committee, I am disappointed that consensus was not achieved in the report. I had believed—as witnesses were led to believe, time and again—that all the committee’s members were signed up to the prevention agenda and the messages regarding its implementation. It was, therefore, something of a disappointment that the report that we produced—which was a challenging one for the Government and one that I commend to the chamber—was rejected in full. I am afraid that, unfortunately, partisan politics kicked in and our Labour colleagues decided to dissent from the report in its entirety despite being provided with opportunities by the convener to dissent only from the sections that they were uncomfortable with.
The minority annex that was proposed by my Labour colleagues bore little resemblance to the evidence that was presented to the committee. Indeed, paragraph 2 of the minority annex was particularly partisan, ignoring the fact that there is a new Government economic strategy that clearly sets out the Government’s priorities for investment. When John Swinney, the cabinet secretary, attended our evidence session in Largs, little attempt was made to raise any concerns with him about the issues that subsequently appeared in the minority annex. I am afraid, therefore, that I must begin on a negative note by saying that I am disappointed at what transpired in signing off the report.
On preventative spending, I will not cover all the territory that the convener has covered in depth. Suffice it to say that witness after witness emphasised the importance of shifting resources to prevention and of spending now to save later, rather than spending more and picking up the pieces arising from acute health, social, educational and economic challenges. We heard especially passionate and compelling evidence from John Carnochan regarding the impact of early years intervention. Jo Armstrong stated in response to my questioning:
“As I said, any politician who is prepared right now to fund initiatives, the outcomes of which will not be seen for 10 or 15 years, if not generations, is making a brave decision.”
I agree that it is a difficult context in which to make preventative spending; however, as my colleague, Mark McDonald, said, we are seeing a decisive shift. Professor Armstrong went on to say:
“Given the significant demand issue that we know we are going to have to face, the preventative spending approach is definitely a sensible move.”—[Official Report, Finance Committee, 26 October 2011; c 188.]
We have support from outside the Parliament for what we are doing.
The Scottish Government has shown considerable leadership in making what it has termed—and which, in the context of declining funding, I agree constitutes—a decisive shift. Professor Jeremy Peat, from the Royal Society of Edinburgh, also backed that decision, highlighting the challenge of delivering such change against a backdrop of budget cuts. In paragraphs 100 to 111 of the report, the committee goes into some depth on the issue of leadership. Of course, providing leadership is not an issue just for the Scottish Government or for the Parliament as a whole; crucially, COSLA must also provide leadership. Challenging and, in many respects, politically courageous decisions will be required in the medium to long term at a local level as well as at a national level.
Before Mr Wheelhouse moves off the issue of preventative spending, will he tell us whether he thinks that the £74 million cut from colleges will affect the preventative spending agenda from working?
I will come to that and will give Mr Macintosh the opportunity to intervene again if he is not happy with what I say on college funding.
The provision of leadership is an issue not just for the Government and the Parliament, but for COSLA. That view was supported by John Downie, of the Scottish Council for Voluntary Organisations, who stressed that
“COSLA probably needs to get its act together and show a bit more commitment.”—[Official Report, Finance Committee, 2 November 2011; c 246.]
Recently, we heard compelling evidence that, in the Netherlands, the equivalent organisation to COSLA plays a vital role in providing leadership on early years interventions.
There are implications for public sector workforce development. Graham Allen, among others, acknowledged in his evidence at the round-table discussions that there is a need for training and workforce development to be aligned to deliver the culture change that is required at the coalface and to generate buy-in to the prevention agenda.
This is a crucial time considering the budgets that are under pressure, and there is bound to be a degree of protectionism in the face of possible disinvestment in some areas, perhaps including acute services, as the benefits of preventative spend begin to deliver—reducing demand for acute services while we are trying to increase prevention. It is clear that a cultural shift will be required to deliver the benefits sought under preventative spending.
In my remaining time, I will touch on college funding to deal with Mr Macintosh’s point. Willie Rennie referred to funding for further and higher education, and we have had much heat and, on occasions, insufficient light on the issue in the Parliament. The Centre for Public Policy for Regions at least acknowledged in its contribution to the committee’s evidence session:
“What happens down south clearly does have a direct impact up here through Barnett consequentials”.
As I have stated before, the cutbacks to the college sector in England are far worse than they are in Scotland, despite the fact that the education maintenance allowance is being protected here while it is being cut in England. Professor Jeremy Peat, from the Royal Society of Edinburgh, was prepared to concede in his evidence:
“There was a much better than expected settlement for HE”.—[Official Report, Finance Committee, 26 October 2011; c 179, 177.]
Does the member support the cuts to Scottish colleges?
Cuts to the college sector are regrettable at any time, but in evidence external witnesses said that they recognised that the Barnett consequentials had a consequence for Scotland. A substantial cut to funding for higher and further education in England has a consequence for Scotland. Nobody wants cuts, but we have had to bear the brunt of cuts from Westminster.
Will the member give way?
Will the member give way?
I am sorry, but I need to conclude.
In the evidence that has been presented to the committee, there is considerable support for the preventative spending agenda and for leadership at both national and local levels, and there is recognition that consequentials have had a dramatic impact on important areas of spending.
The member needs to conclude.
I will do so. Thank you for your forbearance, Presiding Officer.
16:02
I will touch on matters related to the rural affairs, climate change and environment portfolio, which my committee scrutinised. My fellow clansman, the convener of the Finance Committee, remarked that he had not dealt with those issues in his speech, so I will make up for that. Considering the question of preventative spend, a culture and attitudinal change is obviously needed from all committees and the Government on the matters that I am about to touch on.
I am glad that the Finance Committee agreed
“with the RACCE Committee that there is a need for all subject committees to consider climate change issues as part of their budget scrutiny and the need for a clear read-across between relevant documents to ensure effective scrutiny.”
We came back to that issue several times.
The Finance Committee also agreed
“that for this scrutiny to be effective there is a need for a clear read across between the Scottish Government’s Report on Proposals and Policies in meeting its emissions reductions targets and the draft budget.”
That point leads me to ask the question: if we are going to be involved in dealing with climate change, can that be seen in terms of preventative spend? I was very disappointed that the budget adviser to the Finance Committee dismissed the whole subject of climate change in about five lines in his briefing paper. When we consider the potential ways of dealing with climate change, we can see means in various parts of the investment that we will make.
I will quote from Professor David Bell’s words:
“In the budget document, spending on climate change is taken as an exemplar of preventative spend.”
He mentions the reduction in the need for fire services as an example—which is strange—and then states:
“It would also be useful to have some evidence of the costs, as well as the benefits of climate change interventions.”
That is precisely why we need the read-across between all the committees that have taken the time to work out how their activities will act as preventative spending and reduce our need to spend on other aspects. I ask the cabinet secretary, and the Finance Committee, to take seriously the strictures of my committee.
The second aspect that is interesting in terms of getting a read-across is the question of the sustainability agenda, which the Rural Affairs, Climate Change and Environment Committee discussed. The Finance Committee also discussed that issue and took evidence from the Carnegie United Kingdom Trust, which referred to the loss of the Scottish sustainable development indicator set. The way in which that could be developed could be helpful to us.
I recognise that we are at an early stage of working out how best to create the indicators. It is important to acknowledge that, although we have made a start and are leading the rest of the world, we must improve on what we have just now.
In my committee’s report to the Finance Committee, we said,
“At times, the Committee found the process of scrutinising the Scottish Government’s spending on climate change mitigation to be frustrating due to the cross-cutting nature of climate change mitigation policy. To fully scrutinise the spending, the Committee would have had to have conducted a cross-cutting inquiry over a range of portfolios, which is not practical in the time available.”
I would add that that would also not be within our committee’s remit. The report continued:
“Therefore, in advance of future budget scrutiny, the Committee intends to consider how best all the relevant committees, including the Finance Committee, can better scrutinise spending on climate change mitigation and adaptation policies across the Scottish Government’s responsibilities.”
My committee will initiate a dialogue with other committees on that issue and will try to help with the process.
Some small, good things have been done that will improve the way in which land use is monitored in this regard. For example, the farming for a better climate scheme, which has been maintained, recognises that it is not only the Government but other public bodies, private firms and individuals that will spend to mitigate climate change and will all have a part to play. The approach does not ask for a bucketload more of Government spending; it is about everyone addressing the priorities in a serious way.
We discussed the intention to focus on projects such as the support for anaerobic digestion facilities. That is the kind of thing that allows economic development in the countryside to move forward from the pilot projects that are in place at the moment.
There are many things that could be said about the issues in the report, but the six minutes that are available to me do not allow me to say them. However, the carbon assessment of the budget is a clear matter of considerable importance to us all. My committee accepts that the process of providing a carbon assessment of the budget, using the carbon assessment tool, and of carbon accounting, is still developing. However, we note that the progress of developing the Scottish Government’s carbon accounting needs to be improved, ideally before the next budget. Therefore, we recommend that the Scottish Government examine options for securing further funding to assist that development to ensure that a more effective carbon assessment of the budget can be undertaken in future.
I am afraid that you will have to close now, Mr Gibson.
I hope that those suggestions will be taken in the spirit in which they have been made. The issue is preventative spend and a major cultural change in the way in which we think about finance.
I ask members to stick to their six minutes. We are very tight for time.
16:08
I am grateful for the opportunity to speak in this debate on the budget report, after serving on the Finance Committee for the past seven months. That was my first experience of a parliamentary committee, and I found the range of speakers and witnesses whom we have met in recent weeks and months to be genuinely interesting and deeply knowledgeable.
Members of the committee and the Parliament know that I do not agree with the report in its entirety, but I think that much of the committee’s work has been extremely valuable, especially the on-going work on preventative spending.
The preventative spending agenda is not nearly as new as we might think that it is. There are many other countries in Europe that have mainstreamed prevention and early intervention for some time, and there are many examples of early intervention action in Scotland and the UK. The agenda is not new, but I do not think that it has ever been given this much attention in a budget or by a committee. We must now ensure that the strength of the Scottish Government’s efforts matches the scale of its ambitions.
The Government has been asked to provide more information on how preventative spending will be delivered. We need assurances that the £500 million that has been set aside for that purpose will not be used to replace existing expenditure. I hope that the Government is in a position to confirm that those moneys will be used to support genuine preventative measures and real innovation in early intervention.
Progress on prevention is welcome, but there are other areas in which we are not seeing very much progress. I have real concerns about the draft budget and the spending review. I do not expect that every one of my colleagues on the Finance Committee will share those concerns, but I hope that they will at least understand the right of Labour members to dissent when we are asked to agree a budget report.
Will the member take an intervention?
I have a tight six minutes, and in the spirit of Christmas, I am not taking any interventions.
For clarity, I would like to explain to members where I feel there are shortcomings in the budget that should have been referenced and reflected in the report. According to guidance on budget scrutiny from the financial issues advisory group that the Parliament adopted in 1999,
“Successful scrutiny depends on the quality of the Budget information and access to it.”
My colleague on the committee and I do not think that there is enough information in the report to allow successful budget scrutiny. As we said in our own critique of the budget and the report, too much of the document focuses on process rather than incisive analysis of the budget allocations that have been made. There is no in-depth consideration of the implications of spending allocations for the NHS and local government although, together, their budgets account for 67 per cent of spending and 93 per cent of public sector staff. Furthermore, we are concerned that the budget does not convincingly promote economic growth and that important evidence that was brought before the committee and which supports that contention was either not included in the report or not given the weight that it deserves.
There has been no shortage of publications from the Scottish Government concerning the economy, with the economic strategy and the infrastructure investment plan being launched just recently. However, we have to ensure that the promised growth and investment are supported by the budget. The committee’s budget adviser, Professor David Bell, has pointed out that questions of that nature were asked last year and growth has continued to disappoint. A fundamental reappraisal of how the budget supports growth is surely long overdue.
Professor Jo Armstrong has made the same point and called for more detail on the tangible effects of the budget on growth, and Professor Jeremy Peat has said that there is not enough of a strategic linkage between the budget, the economic strategy and the national performance framework. He went on to say that we need to know more about those links to make it
“easier to understand why particular proposals were made without risking the perception that politics were the driver rather than the welfare of Scotland.”—[Official Report, Finance Committee, 26 October 2011; c 182.]
Those are not my words; they are the words of an independent expert who gave evidence to the committee. Three separate experts have come to the same conclusion about the budget. We need more detailed figures, more comprehensive information and more rigorous analysis.
There are also issues to do with capital spending. The resource to capital transfer in the budget is less than that last year, but the Government’s made in Scotland private finance initiative or NPD—non-profit-distributing—programme, as it is more commonly known, does not initiate major spending until the next year. There is a gap this year, which gives rise to concerns about the stimulus effect of the budget. I draw members’ attention to pages 5, 6 and 7 of the report, which deal with that very point.
Like the rest of the committee, I welcome the Government’s announcement that it will transfer up to £750 million to capital expenditure by 2014-15, but both our budget adviser and the financial scrutiny unit have pointed out that we do not know how that will be implemented. I would go even further than the Finance Committee and ask the cabinet secretary to give a clear indication as to which budget lines that cash will be drawn from. That is a reasonable request; indeed, if I am not mistaken, it was also made by the Infrastructure and Capital Investment Committee. That is not fully explained in the report.
I hope that the Scottish Government will take those points on board and that it will work with members from all parties to deliver a better and more transparent budget, whether we choose to endorse the report or not to do so.
16:15
As a member who contributed to the report via the Economy, Energy and Tourism Committee, I am pleased to speak in its support. It is a challenging report because it rightly raises questions about, and provides a penetrating focus on, the overall strategy, tactics and policies that will support the Government’s budget and spending review objectives, albeit in difficult times.
The main objective is to secure the basis for economic recovery and growth. The budget should be, is and will be the foundation of significant reforms in the public services. It should and will promote a seismic shift in the direction of preventative spending and a measurable return on investment. It will be a strategy that can leverage capital and infrastructure spend. It should and will aid and abet the motivation to provide the means for major changes in our approach to the environment, the climate and energy provision.
The Finance Committee requested inputs on and asked questions about those fundamentals. That was timely and critical, and I am sure that the Cabinet Secretary for Finance, Employment and Sustainable Growth will respond positively.
We all know that the objectives were set, and that the report was produced, against the backdrop of global economic uncertainty—it is no longer necessary for me to rehearse that argument. As the committee asserted in some of its views, we now need flexibility, continuity, sustainability, consistency and a constructive debate on a range of issues that affect our national financial performance. We owe no less to our people, over whom the global economic sword of Damocles now hangs. Many of them are exposed daily and nightly to the anxieties and worries that those global pressures create. That is why I contend that the fear element must drive us. I say that in light of the new stewardship of the Opposition parties. Collectively, we must demonstrate the positivity about which Mr Macintosh talked—increased competence in reasoned argument and debate—while still expounding our different views on priorities without rancour or tribalism so that we afford every one of our fellow citizens the dignity—
Will Chic Brodie give way?
No, I am not taking any interventions. I am sorry.
We must afford every one of our fellow citizens the dignity of positive analysis and set debate on the financial matters that affect them. The fear that the people of our nation feel is the elephant in the room.
In that context, I will address two issues in particular. The first concerns assets. On capital spend, it is right—particularly for jobs—that we focus on risk-based investment. We must examine the management of our asset base through the various funding mechanisms and funds that are available to us. I welcome the committee’s challenge on economic growth parameters and the role that capital funds such as the national renewables infrastructure fund will have on renewables and port facilities—and, therefore, exports, which will underpin measurable growth.
Investment in, and flexible capital expenditure on, assets that will contribute to efficiency and reduced future spend are critical to future economic recovery and jobs, as is the maintenance of those assets. The same is true of the disposal of underused assets that are irreconcilable with our future economic strategy but which still suck in maintenance costs. That could provide a real revenue opportunity for local and national Government. The Finance Committee’s questions on the impact of capital spend are well drawn.
As the report says, pay policy is key to the overall budget strategy. The pay policy that the cabinet secretary has inspired and defined plays a particularly key role in employment and security of employment in the current economic circumstances. However, I ask that, when the Finance Committee meets in January to discuss the Hutton report, it pays particular attention to chapter 4, which requires that we address the contractual position and earnings of the high-salary and bonus earners in the public sector. If, once the pay freeze is lifted, we allow the income of those on the higher rungs of the earnings ladder to rise unfairly, we are more likely to create unfulfilled expectations among those on the lower rungs.
I welcome the declaration in the committee’s report on the decisive shift to preventative spend in the public sector, to which Mr McDonald referred. As Inverclyde alliance CPP said adroitly in its evidence, local authorities must make a change in culture and attitude. That means no protectionism, but an acceptance of better and wider sharing of good practice across all public sector agencies, and no barriers to the forces of the third sector, the voluntary sector and social enterprises. By harnessing their potential and releasing their energies, we can secure innovation that will play a key role in delivering preventative spend.
I spoke earlier about fear. It was Franklin Delano Roosevelt who famously said:
“the only thing we have to fear is fear itself”.
This is no time for our proud nation to be filled with anxiety or fear. It is a time to be bold, to harness our constrained financial resources and to adopt the adage that, when the going gets tough, the tough get going. On that basis alone, the committee’s questions and assertions are just and welcome. I commend the report to the Parliament.
I call Jamie Hepburn, who has a strict six minutes.
16:21
Thank you, Presiding Officer—I shall do my best to fulfil your expectation.
I welcome the debate. My only minor criticism is that it is unfortunate to speak so late in the day, when all the good Christmas gags have been used. However, I thank Kenny Gibson for securing a finance debate in our last afternoon session before the Christmas recess, and I particularly thank the Parliamentary Bureau for scheduling the debate the day after the night before, when the SNP office Christmas party took place. I am delighted to speak in that context.
I congratulate the Finance Committee on its report. I agree with Mark McDonald that it has undertaken comprehensive work.
Ken Macintosh made a mixed speech. I welcome him to the post that he has secured—I know that it is not the one that he sought, but I am sure that he will do well in it. I could not fault or disagree with much in his speech, but the comment that the committee “pulled its punches” is more than a little unfair, because it suggests that it was a report by the committee’s SNP members.
I note that the Labour Party dissented from the report, but I still cannot quite work out why it did so—that is not quite clear. I cannot help but notice that Mr Brown, who is a member of the committee and is not renowned for pulling his punches, agreed with the report, so it is unfair to suggest that the committee pulled its punches. Kenny Gibson continued his new statesmanlike style by adding no prefix to his sedentary intervention of “Rubbish” when Mr Macintosh made his suggestion.
It is clear from the report that the committee has done a good job. We heard a number of questions from the committee’s convener to the cabinet secretary. That belies the suggestion that the report was a whitewash, which is wrong.
I am glad that the committee is maintaining the focus on the preventative spend agenda.
Page 50 of the report says:
“The council tax freeze will continue to benefit those”
on middle incomes
“and make little difference to poorer or richer households.”
There is probably a consensus on that across parties and across the Parliament. Is it now time for all of us in the Parliament to address that vital issue collectively?
I am hearing that that quote was from an annex and not from the main report. The council tax freeze has been widely welcomed across the board. Continuing the council tax freeze was in the manifesto on which Mr Findlay stood, so it is a little interesting to hear a new position now.
Preventative spend has been of on-going interest to the Finance Committee. We held a debate on the issue in the previous session of Parliament, which was brought to the chamber by our former colleague Andrew Welsh. I will not say much more about the preventative spend agenda—a number of members have set out why it is so important, and I welcome the fact that the issue is still a focus for the Finance Committee.
A number of members have addressed issues that have arisen in their committees’ consideration of the budget, and I will do the same in the little time that I have left. As the deputy convener of the Infrastructure and Capital Investment Committee, I want to focus a little attention on that area as it relates to today’s debate.
We have heard quite clear views on the draconian cut to capital expenditure from Westminster and the effect that it is having on the Scottish Government’s ability to bring forward capital investment. However, even in the context of that severe cut—and I do not think that we can argue that it is anything other than severe—the Scottish Government is doing a very good job. It is bringing forward a significant portfolio of capital investment projects.
Will the member give way?
I will let in Mr Macintosh in a minute.
I am afraid that the member is in his last minute.
Then I will not let Mr Macintosh in, for which I apologise.
Surely now is the right time to bring forward a programme of capital investment. As Paul Wheelhouse has explored in committee, we can actually get more for our money at present because construction costs are lower, so it is right to focus on capital investment. I would have liked to focus on it a little more, but time is going to get the better of me.
I conclude—in time; I do not think that it will take me 28 seconds to do so—by commending the Finance Committee for its detailed work. Today’s debate has been very interesting, and I look forward to hearing what the deputy convener has to say in his closing remarks.
16:27
There has been a degree of seasonal good will in the chamber today. I think that members know that I am not religious myself, but these ancient pagan festivals are culturally very important, so I am happy to wish everyone a happy solstice today.
The good will begins with the Finance Committee, which I thank for its work. In particular, I thank it for some of the early context-setting paragraphs in its report that discuss the national performance framework and its potential relationship to the agenda set out in the Carnegie UK Trust’s report “More Than GDP: Measuring What Matters”, which the committee discussed with the trust. I think that that issue will become increasingly important in the years to come.
Scrutiny of the budget is never a straightforward, simple process. It is complex, and more difficult given the lack of early access to level 4 figures, so I welcome the committee’s call at paragraph 167 of the report for a clearer timetable for future publication of those figures. Although the process is complex, however, it is probably fair to say that this year it will be a wee bit less unpredictable than it has been for the past four years. As in each of those four years, I will pick out some elements of good in the budget as well as picking out some elements to criticise.
On the positive side is the preventative spending ethos, which has strong cross-party support. If it can be made to work, we may come to find that we regret only that we did not start down that road years ago. I think that we will all be keen to see progress on that.
In general, the Government’s opposition to the UK cuts agenda is an extremely important element of its response to the times in which we find ourselves. Willie Rennie argued that we cannot just wish money into being. In my view, the UK Government’s position would have the slightest shred of credibility only if it was not simultaneously going to Europe and making every effort to argue against a financial transaction tax and against action to shut down the tax havens. Such measures would increase the revenue available to all Governments throughout the United Kingdom—for as long as it exists.
The social wage is another element of the Government’s response to the times that we live in: the idea that providing a range of policies across the board—many of which are intended to reduce the squeeze on household budgets—will recompense people for the real-terms cuts in public sector pay.
The concept of the social wage must develop over time if it is going to be seen as reasonable. I refer members to the evidence given by Stephen Boyd of the Scottish Trades Union Congress to the Economy, Energy and Tourism Committee that the measures that are regarded as part of the social wage are
“unlikely to ‘fill the gap’ for a public sector worker earning £25,000”
who is facing a continued pay freeze. However, if we follow through on the ethos of the social wage, we will be able to come up with a different stance on the economy from that of the UK Government. The Economy, Energy and Tourism Committee welcomed that concept but said that it looks
“forward to more detail on the concept and greater clarity on how the measure will support solidarity and cohesion, and reduce inequality”.
I hope that the Government will respond to that call.
I turn to some criticisms. The vast majority of the cuts are being handed to Scottish public services by the UK. Housing and further education are among the clearest targets, but the decision to target them flies in the face of the Government’s performance framework. How will those cuts impact on the targets that relate to improving the incomes of the poorest people in our society? That is one of the areas in which we are making least progress towards the national performance framework objectives, and we need to be concerned about that.
The budget protects road building, as it always does, year after year. Pouring the concrete is far more important to Government after Government—not just the current one—than are other objectives. There is still no shift towards low-carbon transport spending, which has been called for for years. Transform Scotland’s evidence was that
“The Draft Budget fails miserably to fund the Government’s climate change ambitions for reducing emissions from the transport sector”.
Does Mr Harvie accept that, as we move towards low-carbon transport, it will need roads on which to travel?
A transport policy that is based on ever-rising road traffic levels, whether that traffic is using electric batteries as opposed to the internal combustion engine, will continue to be socially divisive. We need to deal right now with the technologies that we have available right now. We should be investing in public transport, improving the bus fleet and running a properly regulated bus service in Scotland.
There are other areas in which the cuts will be deeply harmful. There will be cuts to the agri-environment scheme—I do not have time to cite RSPB Scotland’s evidence on that. A joined-up approach to funding the measures in the report on policies and proposals on climate change, which we need to take, will also be affected.
There is also some ambiguity about the shift from revenue to capital. If that happens as suggested, it will mean that public sector workers’ wages will be paying for the protection of a road-building programme. Investment in infrastructure is necessary but it must be the right infrastructure, not the heavily polluting, socially divisive infrastructure of the previous century. I refer members to the evidence that we heard from the Poverty Alliance on those issues during the Economy, Energy and Tourism Committee’s consideration of the budget.
16:33
I, too, am pleased to speak in the debate on the Finance Committee’s report on the spending review and the draft budget. I welcome the focus on a shared vision, a national evidence base and the collaborative approach outlined by Kenneth Gibson, our new statesman. I note the balanced and thorough analysis as well as the criticisms in the report.
The 10-year NPF plan that was published some months after the Government’s budget sets out to reflect the lessons that have been learned since 2007. I hope that members will appreciate that I am new to my brief so I look forward to hearing what lessons have been learned since 2007, and what happened to the historic concordat. I trust that the minister will address those points in his summing up.
In paragraph 19 of its report, the committee asks how the NPF “informed the spending review”; whether it will be
“fully integrated into the Scottish Government’s spending plans and how that works in practice;”
and how
“the 15 national outcomes and 45 national indicators have been reviewed to reflect the shift towards preventative spending.”
I highlight those points from the report, because I had assumed that the Finance Committee would have had that information to assist it in its scrutiny.
In paragraph 31, the committee asks for details on the priority that was given
“to maintenance expenditure within the spending review”.
Kenny Gibson also highlighted that point.
Audit Scotland’s “Overview of the NHS in Scotland’s performance 2010/11”, which was published this month, found a backlog of £500 million of required maintenance. In Grampian alone, the total maintenance backlog is £124 million, with 47 per cent of that being high-risk or very high-risk maintenance that is needed to ensure compliance with regulations or to avoid the risk of closing buildings. The Finance Committee was correct to highlight maintenance issues, as we must ensure that the public sector estate is fit for purpose and meets health and safety and infection control standards.
In paragraph 62, and in many others, the committee continues to seek clarification on significant spending decisions, which takes me to the statements that are made on ICT. The procurement and management of ICT contracts in the public sector should be of concern to us all. To take another NHS example, five boards did not achieve the target for electronic management of referrals, a measure that has been in the planning for years.
As a new member of the Public Audit Committee, I was surprised to find that Registers of Scotland wrote off £3.1 million and the Crown Office and Procurator Fiscal Service wrote off £2.3 million for ICT contracts that did not match the organisations’ expectations or needs. The total write-off for those two projects alone in this year is greater than the Scottish Government’s £4.7 million resource allocation for ICT issues over the next three years. The Auditor General for Scotland has stated that those cases
“raise questions about how well public bodies are positioned to get best value from IT services they are commissioning from outside providers.”—[Official Report, Public Audit Committee, 14 December 2011; c 315.]
I welcome Audit Scotland’s commitment to include an audit of outsourced IT contracts in its 2012-13 programme, which I hope will assist in answering the committee’s request in paragraph 69 for
“an explanation where the projected savings in each sector have not been achieved”.
I note the Government’s plans to develop a national public sector ICT strategy and I trust that it will take Audit Scotland’s findings into account.
It is disappointing that the Finance Committee had to seek clarity over the change funds, preventative spending commitments and the integration of services, all of which are measures that the Conservatives support.
As Rob Gibson alluded to, in the current difficult times, “a clear read-across” is needed between committees and the Scottish Government. The issue could not be any better stated than in paragraph 162 of the report, which states:
“It is, therefore, concerning that information which has been requested on a key aspect of the Scottish Government’s economic strategy was not communicated to the two parliamentary committees with the primary responsibility for scrutinising this policy.”
That is not good enough.
Oh!
I expected much more of our highly competent and charming finance secretary.
That is all right, then.
It is Christmas, after all.
With my Scottish Parliamentary Corporate Body hat on, I point out that the recommendation in paragraph 201 to provide information on performance against budget reductions is reasonable. It is only fair that, as we criticise others, we ensure that our own house is in order.
16:39
It is a few years since I had the pleasure of summing up a Finance Committee debate on the last day before the Christmas recess, but I am back again. The current committee convener keeps being referred to as “the new statesman”. I remember a programme of the same name starring Rik Mayall in the lead role, so I very much hope that the comparison does not have any relation to that programme.
I begin by referring to the difference of opinion among Labour members, which has been mentioned by some. I served on the Finance Committee for five years from 2003. At one point, John Swinney was on that committee with me, and we were highly critical of finance ministers; being critical was not confined to Opposition members. When we went to committee meetings, we took our party hats off—that is not a festive reference—and we did not set out to protect our ministers. If we discovered that they were wrongly claiming that efficiency savings had been made, or that they were guilty of double or triple counting, which unfortunately sometimes happened, we ensured that they were criticised for that.
Committees were slightly less critical and scrutinised ministers less in the previous parliamentary session, and I think that there was a good reason for that. With minority government, no one in the party of government wants to be responsible for causing trouble for a minister. Now that there is a one-party majority, I very much hope that the committees will again feel enabled to exercise a high level of scrutiny, which is important.
The issue on which my party feels disappointed is the budget’s contribution to economic growth. In the economic strategy that it published back in 2007, the Scottish Government stated:
“Our Purpose as Scotland’s Government is to increase sustainable economic growth.”
So important was that “purpose” to the Government, that every time it was mentioned it had a somewhat Orwellian capital P. That still seems to be the case, as the Government says in its draft budget:
“Our focus on delivering the Purpose is even more crucial in these tough financial times.”
I would not disagree in any way with the Government’s aspiration, but independent commentators have found evidence for its having such a focus to be somewhat elusive, as Margaret McCulloch and others have pointed out. In evidence to the Finance Committee, both Professor David Bell, the budget adviser, and Professor Jeremy Peat commented on the lack of linkage to the Scotland performs national performance framework. That framework was updated earlier this month, and I had a wee look at it on the internet. I noticed that we are making positive progress on raising the rate of economic growth in Scotland to the same level as the rest of the UK. Unfortunately, that is because we are all doing badly. The difference has fallen to 0.4 per cent.
Another performance indicator was to match by 2017 the growth rate of other small independent countries. Our performance in that area is getting worse: the figure, which was +2.5 per cent in 2004, now stands at -2 per cent, which is the lowest level that that indicator has been at since 2001. There is an issue to do with how, in its budget, the Government should address the fact that it is not meeting one of the performance indicators that are identified on its own website.
I turn to income from non-domestic rates, which Gavin Brown mentioned. I note what the cabinet secretary said about the buoyancy of business rates, but can we be certain that that will continue? If we go into a double-dip recession, if there continue to be considerable problems in the euro zone or if we see increasing unemployment, it will have an effect on businesses and on income from business rates. I hope that the Government will monitor that extremely carefully, because I am not sure that what started to happen two years ago will necessarily continue.
Anne McTaggart made reference to fuel poverty. In addition to the important points that she made, I mention the fact that action on energy efficiency will also help us to meet our climate change targets. That issue was brought to the attention of the Rural Affairs, Climate Change and Environment Committee when I sat on it. The Government may want to look at how unallocated consequentials and income streams such as that from the fossil fuel levy could be invested to accelerate the fuel poverty programme.
A number of members, including Paul Wheelhouse, Margaret McCulloch and Mark McDonald, mentioned preventative spend, towards which—I think—Mark McDonald said that there was a “dramatic” move. I do not think that the provision of £500 million over three years is “dramatic”. Although preventative spend is important, I am slightly surprised that the Finance Committee put so much emphasis on it in a budget report. However, it is an area on which we should keep an eye.
Mary Scanlon mentioned the resource to capital transfer. As has been mentioned, the Infrastructure and Capital Investment Committee had to request the detail of that four times. Eventually, it received a table indicating who would get the money, but I do not think that anyone has yet been told who will lose money. We need to know where the money is coming from as well as where it is going.
I agree with Rob Gibson’s comments on the report on proposals and policies; we did find scrutiny difficult in that regard.
The Equal Opportunities Committee asks other committees to make reports on equal opportunities. Would it be possible for the Rural Affairs, Climate Change and Environment Committee to request that other committees report on how climate change proposals are being enacted and how we are making progress towards the RPP?
I have four seconds left, so I will sit down.
16:45
This has been a pretty jolly afternoon in Parliament. I never thought that I would live to hear myself say that about a debate on a Finance Committee report on the last day before recess, nor did I ever think that I would contemplate putting a quotation from Mary Scanlon in my next election address. I will, of course, have to edit the quotation, but the bit that I liked was about the “highly competent and charming” cabinet secretary. If Mrs Scanlon finds herself cited to support my re-election in Perthshire North, she should not be surprised. I am sure that it would do me a great deal of good in the area.
Margaret McCulloch made the very important point that there has never in a budget settlement been as much focus on preventative spend at any stage in the past. That is an accurate reflection, which Patrick Harvie rather reinforced by saying that we would all wish that we had started on preventative spending earlier. Of course that is the case, but the major challenge—and achievement—of the budget settlement so far is that, in a very tight financial settlement, when we do not have the significant increases in budgets that we had for most of the first decade of this century, this Government has attached the correct level of priority to ensuring that we undertake the shift to preventative expenditure. I am delighted that the Government has been able to do that effectively in the budget settlement.
I want to address a few of the detailed points that were made. Anne McTaggart made a point about fuel poverty; I agree entirely with her sentiments about the unacceptability of fuel poverty. As she fairly accounted, the budget makes provision for £65 million being allocated to fuel poverty and energy efficiency measures, which is a 35 per cent increase on the initial budget in the current year of £48 million. In a difficult financial climate, the Government is recognising the very challenging circumstances that many individuals face during the winter period. Tackling fuel poverty is therefore being taken forward in a sustained way.
Is the minister claiming credit for reversing a year away from now a cut that he introduced himself?
I am saying that the Government is delivering £65 million, compared to an original proposition of £48 million in this financial year. That demonstrates the scale of resources that we are putting into energy efficiency measures.
That is added to by the dialogue that Mr Neil and I have with the energy companies about activating and encouraging their participation in many schemes. There has been a great deal of debate about the revenue to capital transfer. I point out that the Government supplied information to the Scottish Parliament information centre on 11 October on the issue, which we have followed up with further information. In addition to what is clearly set out in the budget document about the transfer, Mr Neil has written to the Infrastructure and Capital Investment Committee.
I can confirm to Parliament that the resource to capital transfers are internal provisions within the portfolio budget. It is not a case of money being taken from, for example, the enterprise agencies and given to the health budget, which I think was the substance of one of Mr Brown’s more fruity front pages in Scotland on Sunday. The transfers are all within portfolio, in recognition that because of the pressure on our capital resources we will take resources from our resource budget and transfer them to the capital budget.
The cabinet secretary used the word “fruity”. Will he explain to members in the chamber how savings from the Forth crossing that go into the Scottish futures fund represent revenue to capital? Surely to goodness that is capital to capital, and not a transfer at all.
In the budget settlement, the Scottish futures fund is funded by transfers from resource to capital. Savings in the capital budget for the Forth replacement crossing allow us to afford other capital projects within the overall budget that has been set out by the Government. The Government is trying to maximise the effectiveness and scale of capital expenditure; I would have thought that maximising of capital expenditure would be welcomed as a contributor to economic growth.
I am delighted that the cabinet secretary has finally produced some information. He will therefore have no difficulty in naming one project—one project only—in the health budget that will lose revenue and become capital.
As the budget settlement makes clear, in the health budget there is a revenue to capital transfer. I cannot say it any more clearly than that. Money in the resource column is being transferred to capital projects. That is happening in the context of a settlement that is giving the territorial health boards real-terms increases in their budgets. It is passing on the Barnett consequentials to the health service, which the Labour Party did not pledge to do in the election campaign.
Will the cabinet secretary take an intervention?
If Mr Macintosh will forgive me, I have to draw my remarks to a close.
There has been a great deal of focus—by Mr Macintosh and others—on the capital issue. The Government’s core capital DEL budget is falling—not because of decisions that were made by this Government, but because of decisions that were made by the United Kingdom Government and the resultant Barnett consequentials. The Government has to adjust to that. As a consequence, we have put in place the revenue to capital transfer and the NPD programme to ensure that Scotland has a strong and credible capital programme to drive economic recovery in our country. That remains a central part of the Government’s budget proposition to the people of Scotland.
16:52
It has been a privilege to serve on the Finance Committee over the months since May, and especially to be the deputy convener. It has been a challenge for all of us to keep up with Kenneth Gibson’s work rate—woe betide anyone who does not turn up to the committee on time. Some people think that he has a particularly robust style, but we have to accept that he has kept us on track and that we have got through a huge amount of evidence. We have ended up with a robust report, which members have before them today. The committee has not shirked dealing with the difficult issues that have come from all sides, and it is interesting to note that many of the issues that have been raised this afternoon by all sides are already in the report.
It has been an interesting time—especially because of the huge emphasis that has been placed on preventative spending. Many members mentioned it this afternoon.
Ken Macintosh said that the report had “pulled its punches”. As Jamie Hepburn said, that is a bizarre notion when we consider the wording of some of the recommendations. I also slightly question Gavin Brown’s assertion that Kenneth Gibson is “statesmanlike”. It was an unusual comment, but there we go. I noted that Willie Rennie said that it was a “very thorough” report.
The report contains little about individual departmental budgets. For example, cuts to further education colleges do not get much coverage. In the spirit of not pulling punches, would Mr Mason comment on whether the committee agrees with the £74 million cut to college budgets?
Mr Macintosh and his party’s members on the committee failed to explain their alternatives. Because of that, I assume that Labour would cut the budget for universities severely in order to give more to the colleges. We stand to be corrected on that, but it seems that we can make that assumption.
In his opening remarks, the convener made various points about how we face a budget in which revenue is being cut by 12 per cent, and capital by 32 per cent. He also mentioned preventative spending, the need to emphasise leadership, prioritisation, collaborative working and financial challenges. It is encouraging to note that that will inform the committee’s programme through to 2016. Mark McDonald gave some good examples of preventative spending.
I was encouraged by many of the cabinet secretary’s comments. He said that the committee’s report was a “balanced and thorough analysis” and that it “challenges the Government”. We welcome the fact that he will write to the committee by January to give a bit more detail.
He repeated the call for the UK Government to stimulate the economy. As Paul Wheelhouse said, there is a huge emphasis throughout both the budget and the committee’s report on economic recovery. I find it strange that Margaret McCulloch said that the budget does not emphasise economic recovery. After the initial chapter in the “Scottish Spending Review 2011 and Draft Budget 2012-13” on the strategic context, chapter 2 is entitled, “Accelerating Economic Recovery”. That is clearly central to the budget and to all that we are thinking about.
Gavin Brown talked about the outcome report, which is noted in paragraph 76 of the Finance Committee’s report.
In relation to John Swinney’s comments on preventative spending, we are all enthusiastic about it. The question that the committee has asked is how it will be turned into practice. Patrick Harvie made that point when he said,
“If it can be made to work”.
Ken Macintosh accepted that there has been a tight financial settlement and that we have to prioritise jobs, growth and education; I think that we all agree with that. He also mentioned capital spending, which the committee deals with in paragraphs 31 and 32. I felt that at times Mr Macintosh was getting a bit away from what the report says, but that is fair enough.
Will John Mason give way?
I have taken an intervention already and I am tight for time.
Gavin Brown mentioned the previous experience of preventative spending. That experience is why there are so many recommendations on it in the report, which focuses on the issue from paragraph 83 through to paragraph 149.
Anne McTaggart talked about fuel poverty and the cabinet secretary also mentioned it.
We must take all the committee reports along with the main budget and the Finance Committee report, because clearly we could not repeat all the statements that are made in the reports, although we agree with many of them.
Some speeches, such as Clare Adamson’s, were useful in widening out the issue and showing that even culture, tourism, equalities issues and accident prevention are to do with preventative spending and have long-term benefit.
Rob Gibson made an extremely good speech. He talked about rural affairs, climate change and the environment. We could never spend enough time talking about those issues but, as he said, climate change is certainly a preventative spending exemplar.
Neil Findlay referred to the council tax freeze, in an intervention. My understanding is that many of my constituents and many people throughout Scotland, especially pensioners, welcome it.
I agree with Patrick Harvie’s comments that housing and further education must continue to be huge priorities.
I will move on to other subjects that were raised. Non-domestic rates have been a huge issue, which came up in a number of speeches. The projection is that there will be a 13.5 per cent real-terms increase in non-domestic rates by 2014-15. Ken Macintosh asked whether the forecasts are a bit optimistic, Gavin Brown made a similar comment and Elaine Murray asked, “can we be certain”? Frankly, there is nothing in the future of which we can be completely certain, but we need to challenge all those things. The committee says that in its report, particularly in paragraphs 44 and 45, which emphasise that the Scottish Government should come back to the Finance Committee on those issues.
I do not have time to touch on the challenge function. Capital spending has been mentioned a fair bit in the debate and the committee makes strong recommendations on the issue in paragraphs 162 and 163.
Chic Brodie talked about the importance of assets and their maintenance. That valid point was also made by Mary Scanlon, not least in relation to information and communications technology, although I think that the big problems with ICT have been south of the border, rather than in Scotland.
The committee welcomes the fact that there will be no compulsory redundancies and hopes that there could be pay increases in the public sector in the future.
In many ways preventative spending has been the theme of the debate. I would love to spend more time on it, but clearly I cannot. I therefore conclude by commending the Finance Committee report to Parliament. May I wish you, Presiding Officer, and all colleagues a very happy Christmas.