Plenary, 24 Jun 2004

Meeting date: Thursday, June 24, 2004

Official Report 742KB pdf

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Budget Process 2005-06

The next item of business is a debate on motion S2M-1498, in the name of Des McNulty, on behalf of the Finance Committee, on stage 1 of the 2005-06 budget process.

I thank fellow committee members, our clerks and the budget adviser, Professor Arthur Midwinter, who have done a tremendous amount of work in assimilating a huge quantity of information and in assisting us in publishing our report. On behalf of the committee, I also thank the Executive officials, who have been extremely helpful in maintaining a dialogue between the committee and the minister.

As the Parliament evolves through its first few years, we are sharpening up our act on the budget process. We are improving the quality of the information on which judgments can be made and we are tightening up the scrutiny process. Members will see from our report that we believe that we still have a considerable way to go, but we are making progress down that route in a consensual, cross-party way that is in the interests of everybody in Scotland.

If we can improve the way in which Parliament scrutinises the budgetary process, streamline the way in which decisions are made, hold the Executive properly to account, explain to the rest of Scotland how we do that and how the Executive conducts its business and encourage the Executive to make better decisions about the allocation of the available resources, the Parliament will be doing its work. It is in the interests of everybody in Scotland that we do that.

The budget report is largely consensual. Not all our debates in the Finance Committee are consensual, but the vast majority of them are. Members may recall that, during the previous debate on the budget, I referred to the game of Fergus Ewing bingo that we were playing, in which we counted the number of times that Fergus Ewing mentioned Holyrood inappropriately in the context of talking about yet another budgetary scandal. I would like to reveal to the chamber today that, at our most recent committee meeting, Fergus Ewing appeared to have been converted—by the people from the Inverness branch of the Saltire Society, I think. They came down to see the Holyrood building and thought that it was very good indeed, so Fergus Ewing now has a new-found enthusiasm for it. If we can achieve that measure of drift towards consensus, I think that great things can follow.

Having given evidence on the Holyrood project to the Finance Committee on Tuesday and having listened to Fergus Ewing's line of questioning, I know that his main point was that the public gallery at Holyrood would be nowhere near big enough because the gallery here is so overcrowded. I see that there are two people in the public gallery at present.

It must be the prospect of hearing our different contributions that is attracting such multitudes.

In an attempt to be fair to my absent colleague, I should say that I think that Fergus Ewing is slightly delayed and had not anticipated that the Procedures Committee debate would be quite so truncated. I think that Des McNulty would accept that Fergus Ewing's questions on Holyrood were nothing to do with the final outcome of the building but were about the process by which the costs of the building had reached the current figure.

Alasdair Morgan is absolutely right—I was not suggesting anything to the contrary. However, the Holyrood building provides us with an opportunity to move forward, and what we are trying to do with the budget is also geared towards giving us an opportunity to move forward in a consensual and constructive way.

The committee's report contains 16 conclusions and recommendations, all of which are important but some of which merit particular attention. Ever since 1999, the Finance Committee has repeatedly highlighted the need to improve the transparency of budgetary information so that Parliament's scrutiny can achieve its full potential. Although, as I have already highlighted, the Scottish Executive has made progress, two specific issues—block allocations and cross-cutting expenditure—are outstanding, and the committee believes that there needs to be a fundamental review of how the presentation of such information can be improved.

The Health Committee noted what it called the 80:20 rule, whereby Executive budget documents tend to give

"80 per cent of its attention to 20 per cent of the spending."

We believe that the autonomy of local authorities and health boards should be protected, but the Parliament does not have a fully transparent picture of resourcing, delivery and outcomes in some portfolio areas, and that seems to me and to other members of the Finance Committee to be an issue that we need to address.

Analysing cross-cutting expenditure is, by its very nature, complicated, but we share the Executive's commitment to joined-up thinking, and we believe that there is more scope for improved provision of information. We believe that when such additional details are provided, the subject committees will be better able to perform their scrutiny role and we will then be clearer about whether the right decisions are being made. That is something that we need to do.

One of the things that we focused on, not just in the course of this year's budget process but during last year's budget process, was the growth agenda. There is a consensus in the committee that growing Scotland's economy is one of our key collective objectives, and it is identified as the central core agenda of the Scottish Executive. With growing the economy identified as the primary priority, we must ensure that the Executive is making its budgetary arrangements so as to achieve that objective in the most sensible way. However, we received evidence that

"the AER states that the economy is the Executive's top priority but there is no explanation of how this shapes general Executive policy or of how resources are allocated."

That was not a committee conclusion but a statement by John Downie of the Federation of Small Businesses in Scotland.

In our report, we have recommended that those programmes that contribute to economic development in both the short term and the long term, such as those that involve the enterprise agencies and higher and further education, should be assessed for priority in the spending review 2004. We also say that those elements of expenditure that contribute to growth, such as transport and infrastructure, must be identified properly in the course of the economic development process. We will mount a major inquiry into the financing of economic development in the next year. We have already taken steps to put that inquiry in place and have initiated the first stage of it.

When we look at the budget each year, it is important that we push the Executive to ensure that it always keeps the need for economic growth at the forefront of its thinking. Coupled with that is the issue of closing the opportunity gap, because growing the Scottish economy is also associated with ensuring that the gap between rich and poor in Scotland is progressively closed as we take the growth agenda forward. I do not see those aims as incompatible; I see them as fundamentally linked.

Will Des McNulty explain the measures that may be included in future reviews and analysis to allow information in this area to be made transparent? We are all aware of gross domestic product and output figures that can look very good, but it is difficult to see whether the gap between rich and poor is closing or growing. It appears to be growing, but perhaps Des McNulty has evidence to the contrary.

The previous Finance Committee conducted a cross-cutting inquiry into poverty in Scotland and identified trends that pointed in different directions. We argued that the Executive needs to focus more clearly on what will actually deliver change, and it is not just the Executive's spending that is important in that respect; Executive spending needs to be linked to spending from Westminster, because benefits provision is also crucial.

The key aspect of our scrutiny concerns not just the volume of money that is spent on programmes in an area, but whether those programmes deliver the effective change that we want. That is a key issue for us. When we are looking at the budget framework, one indicator of effectiveness is how much money is put into different budget heads, but a better indicator is what outputs or outcomes are delivered for the resource that has been put in. We are looking not only at the global budget heads, but at the efficiency with which resources are used.

I welcome what Des McNulty has said about looking not only at the overall flow of money but at the outcomes. Surely the same logic implies that one should look not only at GDP, which is a measure of the flow of money, but at the social, environmental and economic impacts. He has described the committee moving away from simply analysing one GDP figure. Should the budget process also consider a wider range of trends and indicators?

Mark Ballard is absolutely right. I am sure that Wendy Alexander and Jim Mather will talk further about the need for long-term trend information that will allow us to measure progress over a period of time. It is important to point out, however, that the committee's report says that there are too many targets, and we have identified a number of targets—60 in all—that can actually be deleted. There is no point in the Executive trying to manage the economy by simply having an indicator for everything. We must ensure that the specific indicators that we put in place are the ones that give the best picture of the outputs and outcomes that are being delivered.

I would like to outline briefly two other crucial points. We think that it is important to focus more resources on capital spending and to ensure that the resources that are earmarked for capital spending are actually committed. We are concerned about the amount of slippage in capital expenditure, not just in the water sector but across the Executive's budget, and we believe that at the moment, during a period when significant resources are available, the Executive should be putting resources directly into infrastructure investment. We believe that there is a big consensus in Scotland for such an approach.

The second issue that I will highlight is the call for us to look at housing and regeneration expenditure as a priority—that approach is geared towards growth and towards closing the opportunity gap across Scotland. If we want to change the way in which people live in communities, one way of making a significant difference is to affect their housing circumstances and produce regeneration.

I will close by returning to the transparency agenda. We want a clearer process of identifying expenditure and more efficiency in the way in which resources are used. We want more data and better data to guide decision making; we also want to be more effective in the way in which we scrutinise the Executive. We have made significant progress in the past year in taking that agenda forward, for which I am indebted to fellow committee members, our adviser and the clerks. I am sure that we can progress the agenda further next year, but I think that this is the best budget report that we have had so far in the Parliament—it lays a good foundation for what we want to build.

I move,

That the Parliament notes the 5th Report, 2004 (Session 2) of the Finance Committee, Stage 1 of the 2005-06 Budget Process (SP Paper 182), and refers the recommendations to the Scottish Executive for consideration.

Almost all the members who are on the script have arrived now, so I invite remaining members to press their request-to-speak buttons if they have not already done so.

Members might have been given notice of speaking times of four minutes; we can go to six minutes if members wish the additional time, but it is not compulsory.

The Finance Committee's stage 1 report on the 2005-06 budget process recognises and welcomes the fact that that the new annual evaluation report places a heavier focus on strategy and performance.

It would be churlish of me not to recognise that the Executive has now produced the trend data and time-series data for which we asked. Those developments are entirely appropriate if we are to measure how the Government meets its obligations and its many priorities. Nevertheless, I have reservations: too many of the measurements focus on inputs and outputs and there is not enough focus on genuine outcomes that affect people. The time-series data should not be seen as an end in themselves, but as a baseline against which to measure outcome performance over time. Only then will this Parliament have a basis on which truly to evaluate performance and press for more evidence-led policy development.

The spending plans—and the entire thrust of the AER—crystallise the SNP's concerns about the current governance of Scotland and the Executive's ability to improve the lives of all the people of Scotland. That is especially the case as the spending plans do very little to improve our competitiveness; they will not have competitors shaking in their shoes. The latest developments are the sort of response to competitive threat that Tom Peters describes as "polishing yesterday's apple".

The biggest on-going problem is the Scottish Executive's expenditure-only approach to economic management. That approach does not work. It has not worked in my lifetime, it has not worked for years and it has never worked to a satisfactory level. The reasons for that are obvious: the Scottish Executive has no mechanism by which it can raise a material element of its own revenue, and that omission makes it much more difficult to achieve meaningful efficiencies and a real national sense of economic purpose.

That crucial flaw in any organisation with external funding sources, whether it is a quango or a Government, means that the organisation finds it more difficult to develop internal motivation for savings and can often be forced to make savings for the wrong—non-strategic—reasons. In the case of our nation, the approach leaks wealth, it does not make the truly national part of our economy cake—the gross national product—materially bigger and in the long term it could prove to be disastrous. In other words, in our situation there is little room for a credible speculate-to-accumulate ethos as advanced by most other economies and in some of the recent Allander lectures—for which Wendy Alexander and her team deserve enormous credit as the lectures have stimulated healthy debate.

Let us consider the fact that the Executive seems to be failing to bind Scottish public services as tightly into the national economic strategy as could readily be done—as many of the Allander lecturers pointed out. In such a climate, subsequent Scottish Government-driven efficiencies will always look and feel like cuts. It would be far better if the Executive took up some of the ideas of the speakers in the Allander series, such as Nicholas Crafts. His advice is that we should look to achieve public sector efficiencies in such a way that we involve and motivate public sector staff and make it possible for them to play an even fuller part in meeting national targets—specifically, a national target of increased growth.

We do not have such an environment at present; we have a Government that is indulging in a spending plan that is essentially based on an open-ended act of faith rather than evidence of effectiveness and solid outcomes. My concern is that there is a big difference between evidence-based policy in a real economy and what we can achieve here in a branch economy. In normal economies, Governments can evaluate spending in terms of overall cost-effectiveness. They can monitor what spending produces by way of outcomes, the savings achieved in other budgets and the increased Government revenue that such an approach manages to achieve.

In our case, all that we can hope for is a 100 per cent benefit from the outcomes, because much of the savings and most of the additional revenue will go to the Westminster Treasury. For example, if there is higher growth, reduced social security payments and increased tax take would all benefit Westminster. That is why I argue that budget efficiency is much more difficult to achieve when the spending is disconnected from much of the eventual total benefit of that spending. That is also why we, like most Scots, are left with the feeling that the current expenditure-only regime stifles innovation and perpetuates mistakes.

Does not Jim Mather agree that Scotland has benefited considerably from the highest consistent growth rates in western Europe over the past five years?

I admit that there has been growth, but I contrast it with the growth that could have been achieved if Scotland had been allowed out of its box to compete outwith the confines of being a branch economy, which means that much of our wealth disappears. Analysis of the proportion of gross domestic product that is genuinely owned in Scotland and hits Scottish wallets and Scottish bank accounts produces very poor results.

I suggest that we are creating a climate in our existing public services in which there are virtually no incentives—in fact there are penalties—for anyone who owns up to departmental white elephants and waste. That is why there is an honourable and consistent call from the Finance Committee for much more focus on outcomes rather than on inputs and outputs, which can have little or no effect on improving the lives and living conditions of the people of Scotland.

The recent Allander lectures produced many valuable insights into our situation; I was pleased that several ministers attended those events. Of the lecturers, in my opinion Nicholas Crafts did more than most. He elegantly proved that public services could play an irreplaceable role in the recovery and development of our economy.

On the percentage of GDP that seems to be tied up in the public sector, perhaps the member would like to tell us where he thinks money would be best invested to release the potential—I think that that is a phrase that his party uses now and again—that he has been talking about. Does he believe that we need to invest in infrastructure and so on to release the private sector to create the wealth that will allow us to have public services?

I would like to say a lot on that topic, but time constraints prevent me from doing so. I will say that if we had proper data, it would be much easier to discuss the issue. We are told that the public sector represents 47 per cent—or, in the previous spending round, perhaps even 50 per cent—of our economy, yet a recent Royal Bank of Scotland report tells us that the top 100 companies represent 56 per cent of GDP. Something is not right. Nicholas Crafts tells us that if we were to bring our life expectancy up to the United Kingdom level, we would get an additional 21.3 per cent of GDP. Once we have firm numbers—once we have firm numbers that refer to how much accrues to the pockets of the people of Scotland—I will be in a much stronger position to give an answer to that question.

I detect that my time is up, as the Deputy Presiding Officer gave me six minutes.

Yes, but there is a little bit of flexibility.

In that case, I will say that the key point in managing our economy and in managing our budget is that we need meaningful macro-level targets, not a plethora of small targets. That means that there should be targets for economic growth, population growth and life expectancy. We currently lack those targets. It is shocking that when the committee asked Andy Kerr, the Minister for Finance and Public Services, about the matter, his answer was that as he did not have the levers to control those outcomes, the Scottish Executive would not have those targets. In his words, he does not "control the American economy", which has a bigger effect on Scotland than any levers that he has here.

The key point for the Scottish Executive is that it is jointly and severally liable with Westminster, with which it is tied up to deliver for Scotland. If the Executive on its own cannot deliver macro targets, I suggest that the minister talk with his pals at Westminster to come up with macro targets for Scotland. The current growth figures, which show that 2.5 per cent growth is forecast in Scotland, sit uncomfortably when compared with 3.5 per cent growth for the rest of the UK—probably 4 per cent for London and the south-east—and much more uncomfortably when compared with 6 per cent growth in Ireland. The economic growth that the Executive is delivering is not meaningful growth and results in widening gaps in population and incomes. Surely those are the key drivers that the Executive should take on board.

Like other members of the Finance Committee, I thank our clerks for all their help and hard work and for producing such a cogent report. I also thank our budget adviser—there is nothing bleak about that particular Midwinter—for his steadfast advice and support and I congratulate the convener and committee colleagues on the robust but courteous way in which they have discharged business during the year.

I will come to the committee's report but, given the Presiding Officer's generous time allocations, perhaps I might be allowed a brief but relevant preamble. We are told that Andy Kerr will announce this afternoon that Scots are set to become the richest citizens in Europe. Spending per capita is expected to rise from about £7,000 per head to about £10,000 by the next Holyrood elections. In the next few weeks, Gordon Brown will announce a massive cash injection into the economy. Clearly, elections are looming and Labour is turning on the cash taps.

In the rough-wooing period that leads up to the election, voters will—as ever—be bribed with their own money. It is not so much that Gordon Brown is discarding his Mistress Prudence as that he is swapping her for Lady Bountiful. Why should that concern us here in Scotland? Why should any of us care about that if we are to be turned into a land of silk and money? There is so much cash around that even the Lab-Lib Executive cannot spend it all. If press reports are right, as well as admit that the Executive has failed to spend £600 million of the current year's budget, Andy Kerr will tell us that the Executive will save £1 billion by cutting waste. I imagine that that will mean that there will be even more problems in spending the dough-re-mi.

Conservatives, of course, welcome attempts to cut waste while noting the wonderful irony that a Government that has taxed more, spent more and wasted more than any other in living memory now promises efficiency savings. However, with all that money washing about, why does Scotland still have such a dire national health service performance and such a woeful health record? Why is life expectancy in Glasgow the lowest of that of any city in Europe? Why do our schools continue to lag behind? Why do so many Scots vote with their feet and continue to leave the place?

The member commented on underspend. Can he tell members what that underspend is as a percentage of the entire Scottish budget and what the Conservative's target would be as a percentage of the budget?

I will leave percentages to anoraks such as Jeremy Purvis. I am perfectly happy to leave further explanation of those deep financial matters to our financial spokesman, Brian Monteith. What I am trying to talk about today, which I will come on to, is the budget report.

The hard statistics that underline the budget process show that business start-ups in Scotland have decreased by 25 per cent, manufacturing output is down and business and water rates are significantly higher than they are in England, which puts Scotland at a competitive disadvantage.

The Executive keeps telling us that growing the economy is its top priority, but where is the proof of that? This year, we have had an annual evaluation report rather than an annual expenditure report. In my view, the report contains a fair amount of hot air about priorities, but precious little hard evidence about progress towards meeting them.

Ted Brocklebank is right to say that the Executive's top priority is growing the economy. Do the Conservatives agree that the Executive ought to set a target for GDP growth in Scotland and seek to get the levers of power into our own hands to enable us to achieve such a target?

That is a fair point, but one of the great difficulties about setting targets is that the Labour Government down south and the Lab-Lib Executive rarely meet their targets. It is often difficult to know what the targets are.

Last year, the Finance Committee recommended that there should be fewer targets and priorities. As part of Jack McConnell's strategy to do less better, I suppose we should be glad that Andy Kerr has set out only four key challenges under the new AER. They are, the

"need to grow the economy",

which we have heard about; the need to "deliver excellent public services"; the need to "build stronger, safer communities" and, finally, the need to "revitalise our democratic frameworks"—whatever that means.

So we know what the strategy and the priorities are, but the key question is how they will work in practice. The Executive tells us that 90 cent of its targets are on time or have been met, but what does that mean and how tough are the targets? As Professor Midwinter pointed out, the Scottish Executive Finance and Central Services Department's portfolio says that the department is on course to achieve 16 of its 17 targets. However, what we are not told is that most of those targets are about organisational matters, including completing

"an independent review of local government finance."

As Jim Mather said, that tells us nothing about the outputs or outcomes of the largest portfolio budget in the Executive. The AER says that the Executive is committed to economic growth as a top priority, so why has the Executive failed to spell out how that might be done and how performance might be measured against it?

As eminent economists such as Donald MacRae and Peter Wood have consistently pointed out, more than half of the Scottish economy is now in the public sector, which can lead inevitably only to lower growth and poorer standards of living. We do not need the Government to spend taxpayer's money; rather, we need lower taxes so that we can pay more for services ourselves. Why do the Executive and the UK Labour Government not accept successful countries' logic, which is that economies work only when there is a healthy and vibrant private sector? Instead of Gordon Brown and Andy Kerr bribing us with our own money, why not set the people free from punitive taxation, handouts and the nanny state? That would galvanise the economy of this country. That should be the real vision of the annual evaluation report, rather than the Executive's unaccountable, ever-changing and increasingly missable targets.

First, I believe that the Finance Committee's report is robust and will develop the relationship between Parliament and the Executive on budget scrutiny. I echo the comments of other speakers in paying tribute to the committee's clerking staff and all the witnesses from whom we took evidence.

Interestingly, we began our work in the committee focusing on the budget, but today we have a wider debate—rightly so, because the budget is one of Parliament's key aspects. As a new member of the Parliament since last year, I am slightly disappointed that our budget debates attract—as John Home Robertson said—minimal attendance in the public galleries, little press coverage and little debate out in the country. The reverse should be the case. As soon as Des McNulty mentioned Holyrood, there was a plethora of interventions. That issue gets far more column inches in the press than does reporting of the £25 billion budget.

We in the Finance Committee took forward two crucial areas in which I hope our scrutiny role will be effective. The first was to inquire about the economic tools that public bodies have to help them establish the environment for economic growth; that is our cross-cutting review of expenditure. The second is our continuing work—as part of the budget process—on performance, productivity and efficiency. The economist Peter Wood has helped us with our work on scrutinising Executive spending in each area and in detailing primary and secondary economic spend. That has stimulated debate within the committee—on an urban area and a rural area, and a policy portfolio area—about what the direct consequences of Government policy on economic development would be and what the secondary consequences would be.

There is a difference, of course. The Swedish Government states that its number 1 economic policy is to reduce the number of days that are lost to industry through ill health. Other countries and devolved areas state that skills, or primary education or the transport infrastructure are their number 1 economic priorities. Of course, all those have effects on the economy. I hope that our cross-cutting review of expenditure will provide the Scottish Parliament with a similar debate about what the best levers might be.

We are starting to examine that; I hope that we will not do it in isolation from work that is being done by other Scottish Parliament committees, by the UK Government or by the European Commission in its review of regional selective assistance and the impact that structural funds and other state-aid funding have had on economic regeneration.

I agree with Fergus Ewing, who asked last December as part of our deliberations on the budget:

"How effective is the spending in achieving the top priority, which we know is to grow the Scottish economy?"

He went on to say that answering that question

"is the function of the Finance Committee."—[Official Report, Finance Committee, 17 December 2003; c 4349.]

However, when we discussed one of the means by which we will do that in committee—the cross-cutting economic expenditure review—he said that that would not be fruitful use of the Finance Committee's time.

I must say that I am disappointed that the SNP is not willing to be a partner in the inquiry. I say "SNP", but I am not certain what will be the view of Jim Mather—who is not in the chamber at the moment—on the cross-cutting review of expenditure. He has not sided with his friend, Mr Ewing, in trying to prevent the review from taking place.

The review will be broad. The fact that the committee has developed a better understanding of capital investment and public sector pay rates through our work on the budget process means that we will also understand better the effects of using our spend for economic development. We will find out where such spend is effective, which are the best levers at each level of government and where in government we can be most effective in addressing underlying issues in the Scottish economy, such as planning, health, transport and skills.

We know that population is one of the long-term issues. Again, that is an area in which the Scottish National Party displays a disappointing lack of consistency. I think that I just about understand its philosophy that, with independence, male virility will increase and the population will begin to grow, although, in a parliamentary debate on skills, Fiona Hyslop was right to reprimand me. She said:

"As somebody who knows these things, I have to tell Jeremy Purvis that the size of a population is determined by the number of women, not the number of men."—[Official Report, 20 May 2004; c 8599.]

Quite so. It is obvious that, with independence, the SNP's economic philosophy will mean an immediate increase in the number of women in Scotland, too.

I will give way to Jim Mather.

We have a forecast from the Registrar General for Scotland that says that, in the next 23 years, there will be a huge drop in the economically active population of Scotland from 3.15 million people to 2.88 million people. That amounts to a loss of 270,000 economically active people. The member's constituency and the area that I represent will suffer disproportionately in that respect. What credible steps will the Executive take to turn round that position?

As this is a Finance Committee debate, I am looking forward to putting forward my proposals in our cross-cutting review of expenditure. I hope that Mr Mather will persuade his colleague to take an active role in that inquiry.

We have become used to Mr Mather, John Swinney and others quoting the Registrar General's figures. I am very interested that Mr Mather has done so in today's debate, given that the latest figures from the Registrar General demonstrate growth in 2002-03 and show that, in that year, the number of people coming to Scotland from overseas exceeded the number of emigrants by 700 and that 2,400 fewer people left Scotland to go to the rest of the United Kingdom. In the skills debate that I have mentioned, I asked how Jim Mather would explain those figures. His response was:

"I question all the data that come from the Scottish Executive."—[Official Report, 20 May 2004; c 8630.]

The other important area of the committee's work over the coming year will be to identify where we can obtain transparency in performance, effectiveness and efficiency. I am pleased that this afternoon we will hear from the Minister for Finance and Public Services about the Executive's proposals for achieving greater efficiencies at all levels of government. We have begun our work on scrutinising the effectiveness of government, which I hope will take us into the heart of government decision making.

During one of the Finance Committee's evidence sessions last year, our budget adviser highlighted the fact that a very large proportion of the annual budgets are already committed to long-term projects or public sector pay. We do not need to go into detail on how the Government reports progress on targets.

I have a question on Government targets and announcements. Is the Finance Committee satisfied that it has managed to curtail the Executive's practice of making announcements without providing a clear indication of where the money to pay for those announcements will come from?

That is part of our work on all the budget documents. Mr Sheridan would be most welcome to attend the Finance Committee meetings at which we take evidence on that. I am confident that, when we scrutinise budget documents—whether annual budget documents, revisions or AER reports—we obtain a far clearer idea of the linkage between Government announcements on policies and funding.

It is crucial for Parliament and the committee that we ensure proper scrutiny and monitoring of performance. We received evidence from Andrew Goudie of the Office of the Permanent Secretary about monitoring performance and ensuring delivery. The real question is about how we move away from a reactive approach to monitoring performance to a proactive and disciplined approach that involves continual review of the effectiveness of Government policies after they have been announced. It is natural that the Executive operates on a four-year policy cycle but that cuts across spending periods slightly, so there is a need for a transparent system of budgeting to implement the policies of the partnership parties and, as Des McNulty said, for constant review of outputs and outcomes.

As a committee and as a Parliament, we must be careful about our language. We need to talk about best-value reviews, efficiency in the management and leadership of the Government and the effectiveness of getting qualitative outcomes rather than quantitative outputs, as Jim Mather rightly said.

We face a challenge in our scrutiny that represents a wider issue for the whole Parliament. During the committee's scrutiny of the AER report in May, I said that it raised wider issues for all the Parliament's committees, not just the Finance Committee. I said that the Finance Committee

"should be involved in discussions on whether the £7 billion health budget is accountable, whether there should be non-executive elements on boards and whether there is local accountability. The situation is similar, but not the same, with local authorities.

Over the coming years, Parliament will have increasingly to consider the relationship between national priority setting, and local delivery and local circumstances. At the moment, the process of scrutiny is problematic and the problem goes wider than this budget process."—[Official Report, Finance Committee, 25 May 2004; c 1457-8.]

I hope that the Finance Committee's cross-cutting review of economic spending and our continuing work on efficiency and effectiveness in government—a process that we are beginning in today's stage 1 debate—will mean that by the time we rehearse some of the arguments in next year's debate, we will have moved forward significantly on those two crucial areas.

We move to the open debate, which will consist of six-minute speeches. I will also extend the length of closing speeches—which had been allocated four minutes—to six minutes.

I thank the Finance Committee for giving us the opportunity to comment on the budget process. As I said during the last budget, we are fortunate in the level of scrutiny that is open to Parliament. Professor Heald, who is a special adviser to the Treasury Select Committee at Westminster, made that point recently during evidence to the Finance Committee. However, it is a shame that things have gone downhill in one area in the past year: it appears that our scrutiny of the commitment to sustainable development, which is on the front page of the partnership agreement, has weakened rather than strengthened.

Last year, a Finance Committee report was critical of the fact that there was insufficient information to assess progress on the cross-cutting theme of sustainable development. I echoed that sentiment. Earlier this year, during the stage 1 and stage 3 debates on the Budget (Scotland) Bill, we pointed out that spending commitments in several areas were undermining the Executive's sustainability pledges. We felt that each time we asked a minister for an explanation, our question was dodged. It seems that rather than improve the scrutiny of decisions that are vital to Scotland, the Executive would rather abandon that in favour of four key challenges. Although sustainability is, supposedly, a trend that runs through all four themes, we are no closer to being able to scrutinise the Executive's progress on its sustainability pledges.

What are the four key challenges? Three of them state the obvious, so we might as well prioritise motherhood and apple pie. The fourth priority is the sacred cow of economic growth, which has become a graven image—a false god. Such a blinkered and one-dimensional attitude to our economy does us no favours. When will we learn that it is not how big a thing is, but what we do with it that really matters?

We are covering interesting terrain. Does the Green party actually believe in economic growth? If not, does it believe in economic contraction?

What matters is that we examine what the outcomes are and how we can benefit society, the wider economy and the environment. To take GDP and the amount of money flowing through the economy as the only measure of such outcomes or of how well our economy is doing is to reduce an holistic vision of society to a fairly arbitrary measure. The problem with Fergus Ewing's argument is that it is not valid to measure how well our economy and our society are doing by assessing our progress against the single measure of GDP and the amount of money that is flowing through the economy.

We have alternatives: organisations such as the New Economics Foundation have pioneered alternatives that represent genuine progress in a wider sphere of social and economic measures. Why not use those measures? My fear is that we do not use the wider measures of how well we are doing because they would show that we are going backwards in many key areas. They would show that we are falling behind where we were 20 or 30 years ago.

The points that the Green party raised and the question that we asked last December and in January and February of this year remain unanswered. Jack McConnell cannot be allowed to kick into the long grass action on the environment and clarity on progress towards the Executive's sustainable development targets.

It does not have to be this way. The Finance Committee has a choice. I hope that it will demand that the Executive spell out how the budget will impact on the sustainability indicators and on the trends that are set out in "Building a Better Scotland: Spending Proposals 2003-2006: What the money buys". I hope that it will look at the cross-cutting issues. I want to hear less about vague trends: the Executive should make fewer fleeting mentions of sustainability and say more about how the budget process will help or hinder sustainable development.

We need a wider holistic vision of how our society and economy is doing. I hope that, instead of continually focusing on economic growth as the single measure of how we are doing as a country, the Finance Committee will improve its scrutiny of the budget process by using sustainable development as one of the key measures of how our society and economy are doing.

I remember spending—as a member of the Rural Development Committee in the first session of Parliament—a lot of time trying to make sense of the Executive's budget figures. Five years on, we are slightly further forward. I welcome the Finance Committee's report and have attempted to read it—all 290 pages of it. Our committee reports are not always the most accessible and easy-to-understand publications that we produce for the people of Scotland. I am sure that many members in the chamber spent a great deal of time going through all 290 pages.

Of course, simplification is the key not only to how the budget is distributed but to the determination of who gets what size of slice of the cake. In the past, Parliament has spent too much time debating how the cake is to be divvied up. We can change Scotland through legislation, but because Parliament does not have that much legislative power over the issues that relate to the budget, we spend a lot of time just talking about how the cake could be divvied up.

The people of Scotland want to see a cut in waste. Although people see the Parliament's massive budget of £20 billion, they do not see a huge amount of change in their communities. People wonder why on earth the huge increases, about which they see and read announcements on television and in the newspapers, do not seem to make much difference on the ground. I agree with the theme that says that we must consider cutting waste and that we should not simply spend more and more money.

For Mr Brocklebank's benefit, I have just put my anorak back on. Does the SNP have a target for the underspend in the Scottish budget?

If we were in charge of the Scottish Executive, we would try to spend our budget and avoid a massive underspend.

One of the report's recommendations is for more capital expenditure on housing. Although I support that recommendation, because I accept that we do not spend enough money on housing, we must treat the issue carefully. Affordable housing is a big issue in Parliament, but I mention it only briefly because other members want to speak on the subject. If we keep throwing more money at affordable housing, particularly in rural Scotland, all that will happen is that landowners will be made richer. In rural Scotland, affordable housing is all about the supply of land, so the value of land would increase and the people who own the land would become a bit richer. We have to examine other ways in which to address affordable housing; we must not think that all we have to do is to throw more money at it.

On affordable housing, I have visited people who have produced affordable housing cost-effectively at lower rents than the market rent in any other social sector. Richard Lochhead ought to visit Andrew Bradford for a start.

I visited Andrew Bradford back in 2000, which I am sure was long before David Davidson visited him.

Landowners want to retain ownership of housing, so the way in which to address the issue of affordable housing is quite often to allow people to buy affordable housing and not simply to make available rented accommodation.

I want to raise another issue that will impact on the Scottish budget, which is the future of regional funding. Just for a second, I will wear the hat of convener of the European and External Relations Committee. Last week, we published a devastating and fantastic report on the subject. At the moment, the UK Government in London is proposing to take back control of regional funding from Brussels. I do not believe that there is a great deal of support for that elsewhere in Europe; it is unlikely that it will happen in any case. Under the UK Government's proposals, Whitehall would take the cash back and would give a financial guarantee to Scotland to match any cash that Brussels would have given out. There is a lot of opposition in Scotland to the proposal because no UK Government can give that financial guarantee. It was unfortunate and regrettable that my committee was unable to get more information out of the Government in London, which refused to speak to us.

Does the member accept that Scotland has an effective track record in using European structural funds and European regional development fund money? The money that has been made available has been used well. Given that that is true in the West of Scotland, I suspect that it may also be true in other parts of Scotland. Indeed, as Richard Lochhead and I are aware, so effective is our track record that people in other parts of Europe want to learn from us.

I totally agree, which is why it is so important that the money must continue to flow to Scotland. We are talking about funding that is worth £1 billion to Scotland between 2000 and 2006. Over the next year or two, hundreds of millions of pounds will be at risk unless we get our act together as a Parliament and ensure that we have control over those budgets.

How the money is spent in Scotland is as important as how much is spent. At present, the Government uses many indicators for the public funding formulae, but those indicators do not always take account of need, which is important. Over the past five years, we have seen on-going reviews of the indicators that are used to distribute funding in our rural communities and that are used to distribute money in the health service under the Arbuthnott formula and so on. The funding formulae do not take account of need and so discriminate against many areas of Scotland.

There is also the continuing issue of identifying need in our rural areas. At the moment, the funding formulae that are used throughout Scotland consider massive averages across large areas, which means that pockets of deprivation in our cities and rural areas tend to get missed. The Executive has to address that issue; I hope that the minister will address the point later in the debate.

The final point that I want to make is that the biggest challenge that faces the Scottish Parliament is population decline in Scotland. It is the issue that will have the biggest impact on future budgets. If we do not address the issue, we will have a higher age profile in our rural areas and our local government will go bankrupt. We must address that: we have to get more people to move to Scotland and we have to ensure that the people who were born in Scotland stay in Scotland.

I apologise to Des McNulty and the Presiding Officer for being slightly late in coming to the debate. Like other members, I did not realise that the Procedures Committee debate would terminate as quickly as it did. Despite the fact that I am wearing high heels, I seem able to run faster than Fergus Ewing.

I want to take this opportunity to expand on the committee's recommendations on targets. I say to the minister that I intend my remarks to be constructive. There are times when committee members from Executive parties have to play the role of critical friend, and I see that as my role today.

The committee recognised that there has to be some way of measuring progress towards Government objectives. We received evidence from organisations such as the Confederation of British Industry and the Federation of Small Businesses in Scotland that was generally supportive of the principle of setting targets. Although those organisations support targets, they know that targets alone are inadequate for assessing efficiency and effectiveness and that any individual target can be influenced by a number of policy levers.

The subject committees noted problems with the targets that are set in several areas of the AER. One of the difficulties that we have is relating the Executive's targets to its priorities. The Executive says what its top-line portfolio objectives are, but it is not clear how each minister selected the 12 or 15 targets for their portfolio. There is neither a clear relationship between the targets and the objectives, nor between the budgetary inputs and the targets. That makes it difficult to assess how the Executive's priorities are being supported financially.

For example, we do not necessarily have to spend a lot of money on trying to make people more physically active in order to have a good effect on the nation's health, but at the same time, we might have to spend an awful lot of money to reduce waiting lists, which may not hugely improve the nation's health. However, it is important to spend that money for the people who are on the waiting lists, who are ill or in pain. I am not arguing that there is a simplistic relationship, but we expect the Executive, wherever possible, to put its resources towards those programmes that contribute most to the key priorities.

Peter Wood, who was mentioned earlier, said in written evidence:

"The targets are not necessarily or clearly related to activities which represent the major elements of spending or even the elements of spending which are being increased."

The committee's report concluded:

"some of the performance targets do not best reflect departmental objectives (or those of the Executive) and appear to have been chosen because they are readily measurable or easily achievable rather than because they are the most appropriate measurement of how … objectives are being met".

That is an important criticism of how the targets are selected.

As members have mentioned, the committee found that the targets are variable in type, both within and between portfolios. As Des McNulty said, 63 of the targets are either statements of policy or of practice or both. We suggest that those targets should be removed from the annual evaluation report. We are not saying that we do not need targets on policy and practice—they have their place—but that they should be used for management rather than budgetary purposes. Removing those targets would assist the Executive in achieving its aim of reducing the number of targets from 162 to below 100.

Some of the targets are difficult to measure. For example, the third target in justice is to reduce the fear of crime. How do we measure whether the fear of crime has reduced? The fifth target in education refers, among other things, to the presentation of school meals, but I do not know how the Executive will measure how school meals are presented. Some of the targets are not desperately realistic.

I readily recognise that a number of the targets could be disposed of, as the committee recommends, but does the member agree that we need to have a target for growth in the economy, given that that is the Executive's top priority? Does she agree that we also need targets on health, where we have significant problems? We have no target for the provision of dental services in the national health service, although I am sure that the member receives similar complaints to those that I receive on that issue.

The committee argued that we need a better way of measuring economic growth, but because an awful lot of things contribute towards growth—such as infrastructure—it is not easy to have a single measure of growth. A number of measures are used, but I would like a better explanation of how the targets contribute to the top priorities.

As members have said, some targets will primarily be met by other agencies. The Minister for Finance and Public Services said that there is no point in his setting targets for things over which he has no control. Many of the targets on health and education will be met by other agencies or by local authorities and health boards, which are funded by the Executive. The Executive decides the top-line budgets, but the decisions about how those budgets are spent are made by people in the agencies, not by the Executive. The progress towards achieving the targets is made by somebody else, but there is no way for that to be fed back. For example, there is no detail in the AER on how local authorities spend the £3.3 billion of funding for education, nor on the 80 per cent of the health budget that health boards spend. It may be that, in the words of many a written answer from the Executive, that information is not held centrally.

It is difficult to achieve transparency and to find out how targets are met and how that is financed. The committee would like further discussion between the Parliament and the Executive about how transparency can be increased in future annual evaluation reports.

In a masochistic way, serving on the Finance Committee has been a pleasant experience. We are subjected to targets left, right and centre and we talk about finance, much of which goes right over the top of my head. I think that it goes over most of the members' heads, but they disguise it better than I do. By and large, we are well supported by the backroom staff, Des McNulty leads us well and we are guided along the traditional lines. However, we will not get far, because something is radically wrong with a system in which we spend a large amount of money but have only a small amount of control over it.

A senior diplomat from the Foreign and Commonwealth Office appeared on television recently in a discussion with someone from Iraq about the new puppet Government that is being set up there. He said that a country that cannot levy its own taxation can never be termed a country in its own right. Until fiscal powers are devolved from Westminster to Scotland, we will largely be wasting our time in the committees. Fiscal autonomy must come sooner rather than later because, without control over our finances, 50 per cent of the 1.25 million pensioners will continue to live below the Government's poverty level. The bottom 25 per cent of those pensioners are well cared for because their council tax and rent are paid for them. However, the next 25 per cent are living against the collar, trying to keep their heads above water, but no one seems to care—I nearly said that no one gives a damn. That is wrong.

We have a Government in Scotland that we should be able to use for the benefit of all. We have a demographic time bomb that will explode in 20 years' time. Reference has been made to the aging population and the smaller number of people who will have to provide for those who are below or over working age. Unless we do something radical by getting control of our financial affairs, we will be unable to cope with the demographic time bomb. Gordon Brown does not care about the aging population in Scotland. If all the other parties stood aside and allowed my party to stand against Gordon Brown in the next election, he would be whitewashed, especially if he stood on his record of what he has done for pensioners. When a person reaches 80, they get a 25p increase in their pension. A few years ago, Mr Gordon Brown gave a 75p increase to pensioners. That is absolutely—

Mr Swinburne, I am sorry to interrupt, but we are discussing a report on the budget process. Will you perhaps discuss that report?

I am sorry if my point hurts your Labour tendencies, Presiding Officer. I will finish it off and get on with my speech.

Mr Swinburne, you will withdraw that remark.

I withdraw the remark.

Thank you. You are nearly four minutes into your speech and you have not talked about the report—it would be helpful if you did so.

In the 290 or so pages of the report, I can see no reference to fiscal autonomy, which means, therefore, that it is rather hollow.

The Finance Committee does a lot of good work, which I appreciate. It scrutinises countless bills and the members spend a lot of time ploughing their way through all the information. Most of my weekends are spent reading the literature, which is illuminating, but it is not awfully beneficial to those of my generation, which is why I am here. That is why I have concentrated on one or two issues that relate to my generation. I am grateful for the experience of serving on the Finance Committee, which has broadened my outlook to a degree, but I am afraid that the Parliament has an awful lot to do before it can deliver for all the community. The Finance Committee is a key factor in that delivery, which I suppose will eventually come to pass.

It has been interesting to hear the various speeches, some of which have been a little more challenging than others. Mr Purvis has challenged the Scottish National Party on several occasions to give its version of the budget and he has expressed concerns that the debate is not attracting much interest outside the Parliament. Perhaps the real reason for that lack of interest is that it is only one side of a budget. The fiscal autonomy of which John Swinburne spoke, perhaps as a stepping stone to independence, would give us both sides of the budget, which would mean that we would be fully accountable. The public might take an interest when the budget starts to affect them rather more directly and tangibly than the present budget process, which is rather restricted.

I hope that Brian Adam is aware that I am happy to take part in that debate. The first step towards stimulating it would be for the SNP to publish an alternative budget for how it would spend the current money.

For once.

Exactly, for once.

Mr Purvis and the previous Liberal Democrat members of the committee have regularly issued that challenge and I have regularly responded by suggesting that the mechanism that has been established devalues the debate by insisting on a zero sum budget. The Conservatives might be happy to pluck numbers out of the air for how they will make cuts in services, but I will not honour Mr Purvis with that kind of response.

Mr Purvis raised a specific point about how to deal with the deficit. I suggest that, if we were looking at a budget in the round, we could have considered it in a cycle, could have had planned expenditure and could have chosen to have specific spending pledges on capital investments.

In response to the point that Ted Brocklebank made, not all public expenditure is directly spent on public services, because most public service capital expenditure is delivered by the private sector and, without the public spend, there would be no private sector. Is Ted Brocklebank seriously suggesting to us that we should have private roads, that we should have only private hospitals and that we should have private railways, which unfortunately are so far not under the control of this august body?

Is Brian Adam saying that there is no real private enterprise in Scotland and that private enterprise is totally dependent on the public sector?

That is a total misrepresentation of what I said. I am saying that a significant part of the private sector in Scotland requires public sector spending to sustain it and that, if we are to be able to deliver growth in our economy, we will need to provide the infrastructure to make it happen, which relies on public sector spending.

The Finance Committee and its advisers have probed the Minister for Finance and Public Services on setting growth targets for the economy; indeed, the Enterprise and Culture Committee probed the Minister for Enterprise and Lifelong Learning on the same point. There is some movement on that now, because the Executive takes advice from economists as to how its various measures might impact on the economy. Perhaps, by the time that we come to this point next year, we will have got to the point of setting growth targets.

The kind of growth targets that the SNP would like are to do with our competing with similar small independent nations throughout Europe, which are infinitely more successful than Scotland. They are going up the ladder and we are going down it; even within the United Kingdom, we continue to go down. We need full-scale control of our economy for growth to happen. The measure of growth in the country is not only GDP, because that is a rather abstract figure, but our population, our health and our individual wealth or poverty.

I will talk briefly about some of the recommendations in the report. I commend the report's requirement for housing and regeneration strategies. Unless we make specific commitments to increase significantly investment in our housing stock, not only will the quality of our housing suffer, but the many people who are waiting to get into the affordable rented sector will be disappointed and we will not get out of the vicious cycle that we are in.

I also point out that many members have had many representations over the past year or two on dental services in the health service and it is disappointing that we have no target for the provision of NHS dentistry. That should be considered by the Health Committee, the Finance Committee and, most important, by the Minister for Finance and Public Services.

The Finance Committee in the previous parliamentary session carried out a review of the financial scrutiny arrangements of the Scottish Parliament's budget process and made a number of recommendations, one of which was designed to cut through the culture of spin, which leads to a lack of transparency in Scottish Executive spending announcements. That committee analysed 20 separate Executive financial announcements on various policy areas. Of those 20 announcements, only four explicitly stated where the money was coming from and, in another three, the committee was able to trace the announcement back to a particular budget head, but in 13 Scottish Executive announcements there was no sourcing of the money.

Although that report makes reference to the need to make that practice a thing of the past, when the Convention of Scottish Local Authorities gave evidence on local government budgets for 2005-06 to the Local Government and Transport Committee on Tuesday, it stated that there were some Executive announcements—to the tune of £367 million—in which the money was still not sourced. There is clearly still a major problem with transparency. The Scottish Executive cannot get away with sending out all sorts of press releases and new announcements willy-nilly and making itself look good, while being unable to show where the money is coming from. The Finance Committee must work harder on that.

A number of members have referred to the evidence on the targets that the Chartered Institute of Housing in Scotland gave to the Communities Committee, which is worth reading. I am glad that the Finance Committee report that we are discussing makes the point that more capital investment is needed in housing, but the question is: who will ensure that that investment is made? The Chartered Institute of Housing gave evidence that clearly stated that the target of 18,000 new homes by 2006 is woefully inadequate when we consider the fact that, for the 2,000 new homes that were built in 2002-03, 18,000 homes in the social rented sector were sold. That is a net loss of 16,000 homes in one year, but we have a Scottish Executive target of 18,000 for three years. The report points to the need for more capital investment in housing, but is the committee confident that it has the teeth to make significant changes in the Scottish Executive's targets? When the committee exposes the woeful inadequacy of targets, as it has done on housing, it must be able to act on that.

My final point concerns outcomes. The previous committee made the point that definite, declared outcomes that could be measured had to be a priority. Unfortunately, so far—I hope that Des McNulty does not mind if I make the point—we do not have the capacity to measure the outcomes on closing the wealth gap and the inequality gap in all Scotland, which is obscene. The Finance Committee must work harder to hold the Executive to account, so that we do not just spend more money, but actually deliver a redistribution of wealth and resources in Scotland, so that we can tackle some of the things that John Swinburne discussed.

According to a report from just two weeks ago, seven out of the 10 poorest areas of Britain—not just Scotland—are in Glasgow. There was a report from earlier this week that showed that one in three children in Glasgow still live in poverty. After five years of this Parliament, that is not good enough, and the Finance Committee must have the tools to tell the Executive quite clearly that that is not good enough. It must be able to hold the Executive to account for such failures.

We now come to the winding-up speeches. I call Wendy Alexander. You have four minutes, Ms Alexander.

Oh dear—how will I get it all in in four minutes? I will stick to one substantive point and, hopefully, the chamber will indulge me in that.

Like Elaine Murray, I want to speak as a critical friend of the Executive. Like the Finance Committee, I applaud the work that has been done in moving us towards a greater evaluation of expenditure. Because this is nearly the end of term, because we are five years into the life of the Parliament and because we are about to move to our new building, we should perhaps pause and reflect on where we are.

The good news is that the Scottish Parliament has the largest discretionary spend of any home-rule Parliament in the whole of Europe. That said, if we were to go out on to Princes Street and ask the Princes Street punter questions about budgets, they would probably ask what we were spending money on and what we were getting for that money. In view of the time that I have, I will focus my remarks on the first question, on what we are spending the money on. It is that question of how money is being spent differently as a result of devolution that should concentrate our minds, not least because there is no official source to which we can turn.

I will quote what the Federation of Small Businesses told the committee in its submission:

"A crucial fault with the existing AER is the lack of historical data … In earlier years it was traditional to give 10 year runs of the data … in both nominal and constant prices. Currently the figures cover only 3 years, with no historical back run at all … Without these historical runs it is impossible to tell which Budgets are doing relatively well and which relatively badly in comparison to the Scottish average spending changes. This lack of transparency is very damaging".

I drew that to the attention of the Deputy Minister for Finance and Public Services in September, and he promised to consider it. Many discussions and much correspondence followed. During the January budget debate, I raised the matter directly with the Minister for Finance and Public Services. I was convinced that we had cracked it. Andy Kerr said:

"we have come a long way with regard to the financial information that we provide, but we can and will do better … work has begun and we will deliver on our commitment. We have employed hired hands, as Wendy Alexander suggested, in addition to our current staff to ensure that we reach our goal. I, too, want to see the time-series data".—[Official Report, 29 January 2004; c 5411.]

I and the committee were delighted. We thought that we had cracked it. Then, a mere three weeks later, came a letter. Many obfuscatory passages into the letter, it said:

"our intention is to provide a time series table each year in the Draft Budget document. The first opportunity for this would be the Draft Budget 2005-06 in the Autumn by which time we should be able to provide data … from 2002-03 to 2007-08."

Instead of a 10-year run, we are getting a one-year run. We are to have the data from last year, not 10 years ago. It appears that, unless that letter from the minister is revisited and the promise that Andy Kerr made is kept, we will never—I repeat, never—have like-for-like data about how spending has changed in the first five years of devolution. That is a lunatic situation. It is commonplace throughout the countries of the Organisation for Economic Co-operation and Development to have 10-year back runs of data.

If we were to go out and use the Princes Street punter test and ask the Princes Street punter if they would like to know whether devolution had made a difference and if they would like to be able to look back five or 10 years, like people in every other country in the western world can, I suspect that they would say yes. The truth is that we could do that every year prior to devolution. In Scotland, we apparently cannot do that now, even though the rest of the UK can manage it, despite their having to deal with the complexities of foreign affairs, defence, budget contributions to the European Union and so on.

I do not expect the minister to answer that point today—it is far too serious. I do ask him, however, to look again, over the summer, and with due reflection, at what Andy Kerr said in good faith at the budget debate in January and make it a reality. That is the starting point for serious budget consideration in Scotland.

Once more I step into the breach in a finance debate. It is like old times, except that today's debate has been a bit better than such debates have been in the past. It has not been bogged down by moans and groans from committee members about procedures, reporting performance and so on. We have heard some more concise speeches today.

I will not start by commenting on what the first member who spoke had to say; I will start with what Wendy Alexander has just said. She has summated in a very few words what the Finance Committee in the previous session said for four years. It was staringly obvious, yet we were obstructed and rebutted at every opportunity by ministers who, quite frankly, were not on top of their job. The Executive has been in place for five years now and ministers have served their apprenticeship. They must start to liaise with the Finance Committee.

As Tommy Sheridan and others have asked, why is there no transparency? We must have that transparency. Nobody in the chamber seems to know where we have been, where we are going, what the comparisons are, what a good story is or what a bad story is, and that is beginning to damage the Parliament.

Would that not better characterise 18 years of Conservative rule?

Actually, no. Labour members do not want to go back to having 10-year data because that would take us back into our period in power and to the performance that we delivered on behalf of the public.

There are high public expectations given the huge amounts of money that are coming in. I say to John Swinburne that it is almost academic whether or not we are raising the tax here. Given that we have that money to spend, the question is what has happened to it over the past five years and why we have not seen changes. I also say to Mr Swinburne that the easiest way to sort that out is to change the Government—but that is another thing.

The Conservative party spokesman said that the Conservatives believe in a low-tax Scottish economy. Which of the Parliament's current tax-varying powers would the Conservative use to cut taxes?

We have stated pretty clearly that we would cut business rates. There has been a 25 per cent reduction in the number of business start-ups since the Lib-Lab coalition came into power, which is because of the costs that are laid down by Government on running a business. Government should be taxing the success of a business, but businesses must be released so that they can make that success and create employment. People in employment will pay their share of taxation, too. I am quite clear about that.

By the way, in response to the anorak question that Jeremy Purvis asked earlier when he intervened on Ted Brocklebank, the answer is 2.35 per cent.

Is that returns?

No—that is the figure that the member was asking about.

When I was Conservative finance spokesman, I said that we need a reserve. Every prudent Government has a reserve. I believe that a good chunk of end-year flexibility money is in fact treated as a reserve, although the minister does not have the courage to say that.

The Finance Committee's debate on the budget was extended, with lots of little points going back and forward. The truth is that the committee works hard, often with its hands tied behind its back. The advisers to the committee have always been very good. I would like the committee to move forward from here, and it has come out with a couple of good recommendations. I will mention two of those. Paragraph 53 of the committee's report was about investment in infrastructure being vital for the growth of the economy. If growth is one of the Executive's targets, then businesses must be able to access good transport and communications networks in order to create jobs and to get goods to market.

The other recommendation that I will mention is in paragraph 49. Funding must be targeted to areas in which the Executive can most effectively contribute to economic development. The committee realises that, but I hope that the Executive gets the message.

I welcome the committee's conclusion about the need to reduce the number of targets in the budget. When members have some spare time, they should look at the list of rubbish targets that the committee identified in appendix 2, which Elaine Murray mentioned.

At some stage over the past few years, there was obviously a desire on the part of the Executive for a document that could prove that the Executive was delivering, but the problem is that people rushed out and developed a huge list of tick boxes, most of which are irrelevant to many of the Government's key priorities and do not really measure anything at all. For example, the Enterprise and Culture Committee's report to the Finance Committee noted that many enterprise targets were shown as being on target, but examination showed that that meant that the Executive was on target in respect of setting up ways of collecting data, or was on target in deciding what the data would be that it was going to measure. In other words, the Executive did not know whether the targets were being met because it had not even started to measure them, which is clearly a nonsense.

I want to talk about Ted Brocklebank's contribution, which ended up in a free-market rant that went from a case that is certainly arguable—although I do not necessarily agree with it—that the public sector is too big in Scotland, to what seemed to be a plea for the abolition of the public sector altogether. There was the usual mantra about freedom of choice and a Scotland free from handouts. Leaving aside the derogatory language and what was implicit in what he said, does he really want to abolish all sources of government assistance for all individuals or firms? Where does freedom of choice apply? Freedom of choice is a nonsense if we consider the health service in rural areas—it is a dogmatic myth that is designed for an audience that is largely absent from Scotland.

I wonder whether the member agrees that perhaps we should begin with the royal family when we discuss freedom from handouts.

That is an interesting point, but perhaps Tommy Sheridan should ask the Scottish National Party's potential leadership contenders about it.

Jim Mather made the reasonable point that growth targets and other targets are needed, particularly against the background of the widening gap between Scotland and other countries. The Enterprise and Culture Committee made that point in its recommendations. We said that, given the Executive's priorities, it is reasonable that growth should be a significant priority, but we also noted that there is

"scope for the Executive to make clearer the economic assumptions upon which it is basing its spend"

with which it says that it is promoting growth, and that it should have

"clear and more relevant targets"

in that area. It does not seem to be good enough that whenever Andy Kerr is asked about growth, he refers to transport and education, but cannot really say anything that is more detailed.

Last night, I listened to a House of Lords committee meeting at which Digby Jones was giving evidence—as I listen to such meetings at 10 o'clock at night, my evenings must be about as sad as John Swinburne's weekends in which he reads Finance Committee minutes. Digby Jones's conclusion was that it is clear that transport and skills training are important to economic growth. I thought that that conclusion chimed well with the committee's recommendations.

Finally, I want to concentrate on another recommendation in respect of the IRIS unit, which has not been mentioned so far—for members who do not know what the IRIS unit is, it is the improving regulation in Scotland unit. Given the concerns of business in Scotland—whether those concerns are real or imagined—about the amount of regulation, it is curious to say the least that the IRIS unit does not even have a separate budget line in the documents that we are considering. It certainly does not have any targets. I would have thought that any Government that is keen on economic growth would give that unit concrete targets.

The debate has been thoughtful and interesting and there have been many varied speeches. I take the points that have been made by our critical friends and in the slightly more bizarre contributions from other quarters. On the whole, members have been thoughtful about the process. Perhaps David Davidson should attend meetings a little more often because improvement in the process is perhaps a reflection on the Finance Committee members who now grace that particular corridor.

Is the minister excluding Des McNulty from what he says? He suffered with me in the first four years.

I agree that Des McNulty suffered with David Davidson. I thank Des McNulty and all his colleagues, past and present, for their current work and their work in the process. I also thank the committee clerks, their advisers and my officials in the Finance and Central Services Department. I assure Des McNulty and his colleagues that one of the highlights of a ministerial weekend is knowing that we will appear in front of the Finance Committee on the Tuesday of the following week. I thank the baggage handlers at Sumburgh airport in particular for the amount of paper that they carry on and off the Saab-340 every Friday and Monday prior to such occasions.

Other colleagues have mentioned—and it is appropriate to recall—that Scotland has one of the most open and transparent budget processes. Last night, I read the quote on the UK budget from Professor Heald that was given in the committee's report. He said:

"one can learn far more about what will be in the budget by reading what has been leaked to the Financial Times than one can from any consultation process."—[Official Report, Finance Committee, 4 May 2004; c 1344.]

That was an interesting observation about the differences and the strong manner in which we progress issues.

Much has been said today about the transparency of the process. We will approach the committee's recommendations on improving transparency with the determination that we will continue to make improvements where we can. I was glad to see that the committee agrees that the changes to the AER that were introduced this year are helpful in that regard.

Sometimes we forget how unusual our budget process is. After all, the basic premise is that the Parliament and its committees should not only hold the Executive to account for how it uses the budget but play an active part in decisions about how the budget should be spent.

The committees' work on stage 1 this year represents a real breakthrough. We have clear recommendations on which areas the Executive should be treating as priorities for additional spending. Some areas are different and some are clearly in line with our own thinking. More will be said about that when my colleague Andy Kerr makes his statement to the Parliament this afternoon.

I am glad to see the Parliament and the committees taking up the challenge of playing a fuller role in budget setting. We will take all such recommendations into account in the spending review that is now under way. We have promised a detailed account of how any such spending recommendations have been reflected when we publish the draft budget in the autumn.

The committee has also correctly identified the need to reconsider the annual budget cycle if we are to make the process work. It is clear that the spending review is central to that financial process. However, the spending review happens only every other year and it therefore makes sense for our parliamentary budget process to take account of the difference between years with a review and years without a review, and, indeed, of the Parliament's four-year election cycle. I am happy to work further with the Finance Committee to decide how best to do that. Like all ministers, I am aware of the burden that the budget process places on all the committees and would therefore be happy to see a more limited process in non-spending review years, as the Finance Committee's report suggests.

The committee has made some trenchant comments about the Executive's use of targets in the budget process, which have been referred to at considerable length this morning. As I said when I discussed that matter with the committee, we accept that there is a long way to go in that respect. However, I am not convinced that there is a wholly workable alternative. Members of the public, as well as the Parliament, have a right to know not only how we will spend their money, but what we will deliver for them. The Parliament and the public need to be able to judge whether we have delivered on our commitments and there needs to be some sort of target framework.

When I met the committee, I expressed my disappointment that its research had suggested that there were no obvious models in other countries from which we could learn. However, that is not to say that we cannot do better. For example, I accept that we must do more to show how our targets link to budget allocations, which is a point that was made by Elaine Murray, among others. I agree with the committee that we should aim to reduce the number of the highest-level targets that are set out in the forthcoming spending review publication.

We are looking again at all our targets as part of the current spending review. As we are setting spending plans for a further two years, we also need to set targets for what we will deliver with that spending. I hope that those new targets will go further to meet the objectives that are set out by the committee, but that will not be the end of the process.

I am pleased about what the minister has said about targets, which makes enormous sense. However, when we have a response from Andy Kerr on the record that macro targets are out of the question because ministers do not have the necessary levers, it strikes me that it would be seemly for the minister to get together with his Westminster colleagues and set macro targets for Scotland on, for example, growth, population and life expectancy.

Mr Mather will appreciate the fact that we already have contacts, relationships and regular discussions on a range of issues relating to the relationship between the devolved Government and the United Kingdom Government. That will continue and those issues will be considered in due course.

Members will note that, during the course of my speech, this is the third time that I have been keen to suggest that we have considered what the Finance Committee has said and that we will respond positively to that. I promise that we will undertake further work with the committee.

I will briefly address some of the other issues that the Finance Committee raised in its stage 2 report last December. One of those was an assessment of past performance against targets. Such an assessment is now given in the annual evaluation report at the end of March. We said that we would work with the committee to produce more detailed information on the capital/resource split of our budget, and that can be found in the stage 1 report that we are discussing today. We also said that we would work with the committee on time-series data, and I take the points that Wendy Alexander made on that issue.

I turn to what has been said this morning in relation to capital spending. We hope to be able to produce the detail of that in the autumn, as Des McNulty has asked us to do, and to produce the full statement that the committee has been looking for.

In the context of transparency, Elaine Murray raised a serious issue about money that is spent by local authorities and health boards. I believe that that is a genuinely difficult issue. Elaine Murray rightly raised the issue of whether central government should impose a series of what would be seen as restrictions on the spending or reporting of that money on that tier of government, which sees its job as making local decisions for local service delivery. That is a subject that we wrestle with constantly.

Mark Ballard raised the issue of sustainable development. I do not accept his contention that we have in any way downgraded sustainable development; rather, we have mainstreamed sustainable development. That is exactly the kind of holistic approach for which he argued when Fergus Ewing asked him about growth, and I believe that that is the best approach to take.

Mr Sheridan raised the interesting idea of the Scottish Socialist Party attaching a financial tag to all its policy announcements. That would be a policy with which I could only heartily agree.

Mr Mather raised several issues, most of which arose from the central tenet of the constitutional question. Although I understand the intellectual argument that was behind his approach, I fundamentally disagree with it. I disagree particularly with his suggestion that there is no speculate-to-accumulate approach in the Scottish economy. I ask him to look at the Scottish financial sector, where that is clearly not the case.

Mr Brocklebank, who opened the debate for the Conservatives, argued—in what he called a preamble although, as Mr Morgan noted, it became more of a canter around the free-market echelons of Conservative right-wing thinking—that we should abolish targets. He then said that the targets were not tough enough and that he wanted different ones. He went on to say that the Conservatives wish to cut spending on public services, transport, health and education. He said that we were all thinking of the election—well, some of us cannot wait for the election. If that is the Tory manifesto, bring it on.

I apologise for not being here at the beginning of the debate. I was detained on another matter. I express my regret for any discourtesy to Des McNulty, the convener of the Finance Committee.

I thank Susan Duffy and all the clerks for the excellent back-up and support that they provide to the Finance Committee. I also thank the committee's advisers and all those who have contributed to the committee's report, which is a solid piece of work.

I got the impression that whatever habits Ted Brocklebank has in his evening hours, they have perhaps not included the studying of the budget report. We heard a rather polemic speech from him today. As we read in the newspapers of the celebration of Bob Dylan's achievements, it strikes me that, for Ted, the answer is very much blowing in the wind. We are reminded that the country's experience under the Tory party could be described as redolent of Desolation Row.

As someone who specialises in taking a non-partisan approach to politics, I suggest that there is a galaxy of talent on the Finance Committee. Without naming anybody in particular—they know who they are—I pay tribute to all the committee members for the contribution that they have made. We heard from Wendy Alexander—as a friendly critic or a critical friend, in a role that I am sure we would all seek to play—a specific criticism that I hope that the minister will address, although he did not do so this morning. She pointed out that there has been no response from the Executive on the provision of time-series data. That is a serious point that has been made by other members of the committee.

I listened carefully to what Wendy Alexander said. She did not say that there had been no response. There has been a response. There is still some work to do, but I put on record the fact that there has been a response.

I mean this kindly: it is the adequacy of the response that sometimes concerns us. I am speaking for the committee and not in a party-political role, as members will have gathered by my moderate tone.

Committee members of all parties identified that we are not spending enough on the provision of housing—in particular, affordable housing. How that can be done and the problems relating to it are the subject of debate and have been touched on by many members. I hope that the minister will take that specific budgetary recommendation on board.

On the subject of housing, does the member agree with the Chartered Institute of Housing that simply building more social housing that tenants will have the right to buy will not add to the housing stock? Is it not time to impose severe restrictions on the right to buy in order to build up the social housing stock?

With respect to the member, we need to ensure that we have a modern market economy in which the housebuilders will not be crippled or nationalised or have their businesses confiscated.

Is that the deputy convener's view or an SNP view?

Mr Sheridan asked the question and I have given an answer that he does not like.

The committee also recommended that there should be an increase in capital spending. That was highlighted recently when it was identified that a large volume of capital spending on infrastructure of all types—especially sewerage capacity, roads and housing—is required. I hope that the minister will take that on board.

Much of the committee's report relates to the questions of performance, productivity and efficiency. I imagine that the people who are watching and listening to this debate, as well as people throughout Scotland, will see those as the key areas of failure for this institution in its short life of five years. In paragraphs 72 to 83 of the report, the committee makes specific recommendations on how public money can be used effectively, responsibly and efficiently. The Holyrood building—which, as Jeremy Purvis said, has taken up some of the committee's time—has come to be seen as a symbol of this institution and an example of what has gone wrong. I hope that other members agree that the Finance Committee and the Parliament have a great opportunity for a fresh start when we move to the new building. That fresh start can perhaps be characterised by all of us doing our best and making constructive contributions to the debate, as most members have done this morning.

Some members have touched on the Executive's targets, some of which are rather curious. For example, there is a target of testing the feasibility of linking data sets and a target of holding six open meetings of the Scottish Food Advisory Committee. It is rather surprising to have targets of that nature, many of which are statements of policy or practice or are so vague as to be meaningless. The one target that we do not have is a target setting out what economic growth Scotland should achieve. That was remarked on by the committee as something that should be seriously considered. It is like Inverness Caledonian Thistle Football Club setting targets for acquiring a sufficient number of footballs, for cutting the grass each week and for all its players watching Archie Gemmill's goal in 1974 at least once monthly but not setting a target for winning the league.

It was '78, not ‘74.

Which is the same speed that the records that Frank McAveety writes about go round at.

I thank Des McNulty for taking a co-operative approach with me. I have very much enjoyed working as the committee's deputy convener. Indeed, I have made a particular contribution in the role of deputy—[Laughter.] However, I am aware that no man or woman is indispensable and that there are many other worthy candidates around.