Plenary, 27 Jun 2002

Meeting date: Thursday, June 27, 2002

Official Report 734KB pdf

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Budget Process 2003-04

The next item of business is a debate on motion S1M-3225, in the name of Des McNulty, on the Finance Committee's third report in 2002. Mr McNulty just gave me a severe shock by leaving the chamber, but he has rejoined us. I ask members who wish to speak in the debate to press their request-to-speak buttons now.

I am pleased to speak to the Finance Committee's report on stage 1 of the 2003-04 budget process. I begin by offering my thanks and the thanks of members of the committee to the Finance Committee clerks and to the clerks of the Parliament's subject committees, who have made substantial contributions to a comprehensive stage 1 review process. This year, we tried to work in concert with the subject committees to assist them in reviewing the Executive's budget proposals. The co-ordination between the clerks and the advisers to the various committees has enhanced the process and has made it much better for everyone concerned.

We should pay particular tribute to Professor Arthur Midwinter, who is the Finance Committee's adviser on the budget process. Professor Midwinter has contributed a great deal of expertise and background knowledge to our work and has been the source of many difficult questions about the budget process, which we have asked the Executive. That has assisted the scrutiny process and has made construction and analysis of the budget much more effective.

Since the first budget in 1999, the Finance Committee has become more effective in scrutinising the budget. We have undergone a learning process and have developed our procedures in a way that will allow us further to improve budgetary scrutiny in future. There will be less concentration on documentation and more focus on priorities and improved output information from the Executive. I thank Executive ministers and officials for assisting the committee by providing improved and better-targeted information. We have managed to generate specific spending recommendations from the subject committees, which is a first. In future, we expect to spend more time on cross-cutting issues; the Finance Committee has initiated two cross-cutting reviews, which we hope will report later in the year.

Angus MacKay, the former Minister for Finance and Local Government, and his successor Andy Kerr, the Minister for Finance and Public Services, have helped us by improving the presentation of the budget. Although the budget documentation is much more comprehensible than it was, we are concerned that the Executive was not able to produce all the information that we needed on baseline expenditure for new spending proposals. However, we have received assurances from the Minister for Finance and Public Services that that information will be made available in subsequent annual expenditure review documentation, and will include a summary of outputs and data.

One of the themes of our report is that more work is required on certain areas, such as gender proofing the budget. We want the Executive and the Equal Opportunities Committee to agree a working definition of equality proofing and a mechanism for ensuring that the equality strategy is reflected in budgetary allocations. We need greater consistency in that area, as well as greater clarification and definition.

The committee makes the specific recommendation that, when the draft Scottish budget is published in the autumn, the document should illustrate systematically how additional funding will be spent and what outputs will be provided. We want the draft budget to contain an explanation of how the decisions that have been taken advance the Executive's spending priorities, which is particularly important in the context of the spending review. In the past, documentation has focused on tables and columns of figures.

We want to move towards targeting money at particular kinds of outcome, so that we can see how budgetary allocations match up with delivery; the Executive has in its policies made a great deal of wanting to ensure that delivery takes place. It is important that budgetary decisions and allocations match priorities and that they lead to delivery targets being met. We must make that more explicit.

During the Finance Committee's deliberations, we became aware of the need for clarification on how consequentials from the Chancellor of the Exchequer's budget will be dealt with in the context of health. The Minister for Finance and Public Services has made it clear that all the money will not necessarily go to the national health service budget; rather, consideration of allocations will take place in a broader health context. We believe that that is a positive step in the devolution process—we do not have to mirror exactly the way in which money is spent down south. We are trying to develop a more holistic approach.

Subject committees came up with 12 spending recommendations and the Finance Committee tried to consider them in depth and detail. We also tried to reflect the integrity of the work of the committees. This year, the committees considered the budget process more systematically than perhaps they did in the past. Not all committees were equally successful, but certain committees did an excellent job. As I mentioned to its convener, I would like to highlight the work of the Rural Development Committee, which produced an excellent budget report. However, that was just one among a number of very good reports from the subject committees.

The reports contained concrete recommendations that I hope the committees will pursue, not only in the context of reports to the Finance Committee. The recommendations reflect choices that the committees want to make in their own subject areas. For example, the Transport and the Environment Committee highlighted the need for greater focus on roads maintenance; the Health and Community Care Committee made recommendations on provision of chronic pain services and neurological services and on the need for specialists; the Rural Development Committee focused on the rural development fund and the need for additional resources; and the Education, Culture and Sport Committee focused on school estates. I will not go through them all, but those are the kinds of things that we want committees to do. We want them to consider their remits and the areas where spending is required, to identify where problems lie, and to propose solutions that the Executive can consider.

To be fair to the Executive, it has welcomed the responses from committees and it has considered their proposals. Even in yesterday's statement on end-year flexibility, there were indications that committee proposals were being taken into account. We hope that that will continue in deliberations of year-on-year spending.

In future, we want to move from an input-based budgetary approach to a greater focus on outputs—so that we are clear about what is obtained from spend—and then on towards an outcome-based approach. In the past few weeks, we have been consulting on a major report on outcome budgeting by Norman Flynn. Outcome budgeting is some way off; we will have to build up expertise and understanding. Trying to transform the way in which budgets are put together cannot be done in one, two, three, four or possibly even five years. However, we want to move towards a system that is based on defined outcomes. We want to bring together the different services that can contribute to those outcomes to see how spending priorities and allocations can become less of a barrier to and more of a help in achieving outcomes.

People are interested in whether there will be an effect on them as a result of the way in which the Executive spends its money and the way in which services are delivered. There is sometimes a gap between budgetary allocations and processes and what happens on the ground. The Finance Committee, the Executive and the Scottish Parliament have a strong interest in trying to ensure that the way in which we spend our money delivers the most that it can. We must ensure that departmental or budgetary structures and boundaries between different organisations and areas of the budget do not form barriers. We have a considerable way to go towards delivering barrier-free budgeting, but that is the direction that we should take. The Parliament and the Government of Scotland have an opportunity to lead the way in barrier-free budgeting. Our new Parliament should do things in new and different ways and our efforts to work with and develop the mechanisms that we have point to an exciting future.

We have moved the budgetary process forward significantly in the course of the year and we have worked more closely with the subject committees. The standard of the reports that we received this year was much higher than was previously the case. Credit for that should go to Arthur Midwinter and the various advisers to the committees, as well as to the committee members and the clerks. We have mapped out the direction for scrutiny of the budget, the organisation of the budget and the data that we need in order to reach better decisions. The subject committees have made recommendations that the Executive will consider systematically. We have identified areas in the process in which there are data gaps or where points of focus—such as gender budgeting—have not been given sufficient attention, and we have identified areas where there is need for improvement.

We want to move towards outcome budgeting; the work that we have done this year has taken us a significant step forward. We have been able to take that step forward partly because the resources that we are receiving this year and next year are a significant step up on what was previously available. We have been experiencing budgetary growth, which has allowed us to make positive allocations and priority decisions more freely than we have been able to at various times in the past.

I hope that the Finance Committee has done its job effectively. We hope to continue to do that, not just over the next two stages of the budget, but in dealing with the spending review and the budgetary process in the years to come.

I move,

That the Parliament notes the 3rd Report 2002 of the Finance Committee, Stage 1 of the 2003-04 Budget Process (SP Paper 597) and refers the recommendations to the Scottish Executive for consideration.

I welcome the opportunity to respond on behalf of the Executive to the Finance Committee's report on stage 1 of the budget process. I welcome the constructive approach that has been taken by the whole Finance Committee over the course of the past year. Ministers have useful dialogue with the committee, which helps us to refine our thinking and plans and allows us to move things forward in the spirit that was set out by Des McNulty. I acknowledge that this year there has been wider involvement by other committees of the Parliament. That is to be welcomed and, as Des McNulty said, we expect that involvement to increase and develop as time goes on.

Des McNulty also mentioned Arthur Midwinter. I know him of old—I recognised some of the questions that were put to me—and I gather that he is sitting behind me in the public gallery. The fact that Arthur Midwinter works for the Finance Committee makes ministers extremely nervous, because he is one of the few people who understand public finance. It is said that only three people in the universe understand public finance, but one is mad, one is dead and no one can remember the third. I suggest that the third person might be Arthur Midwinter, who has made a significant contribution to the budget process.

Looking up at the public gallery, I see that some young people have for their end-of-term treat just walked in to listen to the debate—they have my sympathy. This might not be the liveliest debate in the Parliament—[Members: "Shame."]—but it is certainly the worthiest. I look forward to Alasdair Morgan's speech, because he seems to be indicating that it will be as exciting as ever.

As members know, the annual expenditure report kicks off the annual budget round. This year we are focusing on the 2003-2004 budget. The AER sets out the Executive's initial view on the allocation of resources in the 2003-04 budget. As members are aware, this year we have also undertaken a major spending review, which has examined not just the year ahead, but the budgets for the current three-year period. As a consequence of that spending review, we might well bring forward some additions to the 2003-04 budget and, in due course, we might propose some re-structuring. We have spoken to the Finance Committee about the way in which we might handle the additional input that will come at particular points of the year.

Nonetheless, the AER sets out expenditure details of some £22 billion. It is worth repeating that figure—about £22 billion will be spent on Scottish public services in the year 2003-04. The AER document is a worthwhile tool for discussion—[Interruption.]

They are all leaving.

I am not surprised that the young people in the gallery are leaving. Their departure demonstrates the quality of our young people these days and how discerning they are in their appraisal of other people.

However, if the young people had stayed to listen to the debate, they would have heard that the AER document is a worthwhile document for discussion, for information and for dialogue with the Parliament and the people of Scotland. The AER document sets out clearly our spending plans, puts expenditure in a strategic context and attempts to make the budget and the budget process much more accessible to wider groups than has hitherto been the case.

We recently completed four budget roadshows in Hamilton, Galashiels, Stirling and Stornoway. The roadshows allow us to consult people on the budget process, its contents and on our priorities.

I will give the minister a rest—especially as he has lost part of our audience. The minister mentioned the budget roadshows. Were the rules about who had access to the roadshows changed this year? We heard evidence that, when the roadshow went to Dundee last year, it was open only to an invited audience. When interested members of the public turned up, they were refused access on the ground that they had not been invited. Will the minister tell us why that happened?

I would never refuse anyone access to such meetings. Members might find it hard to believe, but we even allow Conservatives into the meetings. Indeed, a Conservative candidate attended one of the meetings in the south of Scotland. At the end of the meeting, he congratulated the Executive on how well the meeting had been conducted, how open it was, how forthright and frank we were in our appraisal of situations and how much we had revealed of our intentions. We welcome Conservatives to those meetings and we welcome their positive contribution and comments on the way in which the Executive conducts such consultation.

Will the member give way?

I will happily do so, but I will thereafter have to make some progress.

We do not wish to miss any of the minister's pearls of wisdom, but will he tell the chamber what changed in the budget as a result of the public consultations that took place this year?

As Des McNulty said, in the end-year flexibility that was announced yesterday, the Executive told the Parliament that it had reflected on the views that we picked up in the public meetings. Members—including Des McNulty—told us about the need to improve the way in which we treat local roads expenditure, and that we should try to give councils the capacity to deal with some of the immediate problems that people face, such as problems with litter, graffiti and poor environments. I must say to Brian Adam—I said this at the public meetings, too—that we try to reflect on what people tell us. Some of the thinking behind yesterday's announcement reflected the feedback that we received at those public meetings.

As each year passes, we cover more and more of Scotland with such meetings, at which we explain the budget process, set out our priorities, increase understanding of the budget, encourage engagement in the process and listen to people's concerns, as I have just outlined. As the budget evolves over the course of the year, I suspect that members will see further evidence of that being reflected in our future thinking.

The meetings are useful strategy sessions in which a range of local and national issues can be highlighted. The meetings have broadly confirmed that our priorities match those of the public, which are to tackle health, education, jobs, crime and transport. People are very pleased with the progress that we have made on investing in our schools, teachers, hospitals, nurses and doctors. They are also pleased that we have reduced crime rates, increased detection rates and that we have put in place record numbers of police.

People are in tune with what we are trying to do on all those issues. However, although people are pleased with the progress that we have made, they would like us to do more on a range of fronts, some of which were picked up by the Finance Committee.

As I said, we showed yesterday that not only do we listen, but we act on what we hear. As we announced yesterday, we are making substantial new resources available to local government to take us even further toward meeting people's concerns and ambitions, many of which were expressed at the public meetings.

I want to pick up on some of the improvements that the Finance Committee and the Executive wanted to make to the AER document. As Des McNulty said, the AER document is much more than a list of numbers. We have given some sense of the purpose that we attach to the numbers and of how the spending is allocated. It is the Executive's third AER and, with the Finance Committee's assistance, we have made the report much better; I am glad to say that the committee acknowledged that in its report. As we did last year, we have published two documents: a summary and a much bigger and more detailed document for those who wish to examine the matter in such depth.

The AER is a pre-spending review document and, as we have largely sorted out the presentation of the numbers, our focus is now much more on targets and objectives. As members are probably aware, many of the changes that we have made reflect what we agreed with the Finance Committee. For example, in order to ensure greater scrutiny, we have reintroduced two tables into the document—tables 0.6 and 0.7—that set out the private sector's capital spend and estimated payments under the private finance initiative contracts that flow from that. Furthermore, in table 0.12, we have started to bring together all the different funding sources. As requested, we have included a separate chapter on the modernising government fund, created hyperlinks to local authorities and health boards and made other improvements.

We have also asked for a much more robust approach to targets and disaggregation of information to allow people more scrutiny of our plans, and we have begun to link policy development to expenditure in the way that Des McNulty suggested in his speech. Finally, we have changed the way we think about the AER by attempting to refocus it to provide a gateway to consultation instead of simply providing information about numbers. I know that the Finance Committee has welcomed all those steps.

Although the Executive's priorities are health, education, transport, jobs and crime, we are also addressing a range of cross-cutting issues that relate to closing the opportunity gap and to sustainable development. In one form or another, those priorities have been central to the Executive's programme since we came to power. We have been criticised for the absence of social justice from the list of priorities that I mentioned; however, that absence is more apparent than real. Our focus on closing the opportunity gap ranges across all our programmes; indeed, it is at the crux of achieving the social justice that we desire. The impact that the Executive seeks to make on health does not include only making available and allocating resources and our other work through the health department; it also includes our work through the social justice programme, housing, transport, jobs, education and so on. All those aspects impact on people's health.

Does the minister share my concern that, although we are making progress on openness, accountability and transparency in the NHS, we are making very little progress on local government's accountability in delivering care in the community? Given that free personal care will be introduced on 1 July, will he do something to help the Health and Community Care Committee hold local councils to account for the huge amount of care that they will deliver?

Mary Scanlon has raised a matter that is a major and continuing concern not just in Scotland and the UK, but around the globe. There is an inevitable tension between local government and central Government both about matching autonomy and democratic accountability at national and local levels, and about meeting national priorities locally. We are trying to achieve much firmer outcome agreements with local authorities on the promises that the Parliament has committed to keep, but which must be delivered through the local authorities. Although local authorities recognise increasingly the importance of such matters, they also want the local freedom to allow them to fine-tune and adjust their programmes to suit immediate local circumstances. The debate will continue.

Presiding Officer, I am aware that time is moving on—

As we have a little bit of time in hand, I can compensate you for the interventions.

I am glad that you will be indulgent. In that case, I will relax. However, I am very surprised to hear what you said—I thought that we would be under pressure from members wishing to speak.

Turning to the committee's most recent set of recommendations, I want to begin by welcoming the committee's view that although the budget process is not perfect—I doubt that any budget process ever will be—it offers a sound basis for proper scrutiny of financial decisions. The Finance Committee's recommendations fall into two types; those that relate to points of principle and those that are financial.

As some of the recommendations on matters of principle are quite detailed, I want to consult Executive colleagues, consider the recommendations in detail and respond to the committee in due course. However, I am happy immediately to endorse other recommendations. For example, the Executive shares the committee's desire to move the public expenditure debate from inputs to outputs and—more important—to the outcomes that we receive from that expenditure. As Des McNulty quite properly pointed out, what matters to people is what happens to them locally and how their immediate circumstances improve. We need to get a much better handle on that, rather than simply specify inputs.

Such an approach is essential if we are to develop dialogue on the budget fully. It is not just the quantum of money that matters, but what that money buys for the people whom we serve; addressing that issue will require mature dialogue within a fixed budget.

No Government in history has all the resources that would be required to meet all its ambitions. Priorities have to be set—that is the nature and business of government. An outcomes focus will naturally take us away from the much simpler past focus on the amount of money in any specific spending line.

We live in a world where our greatest needs require action in many fields. Achieving better health for our people requires effort not just in the health department, but in education, enterprise, culture, leisure and sport. That emphasises another of the Finance Committee's recommendations on new health funding and the wider definition of what constitutes health spending. It marks a move in the right direction, and it marks recognition of the greater complexities in public expenditure and the need to move from a silo mentality in public service delivery. It recognises that improving health is not just a responsibility of the health service per se.

The Finance Committee further recommends that we agree a working definition of equality proofing for budgets. Des McNulty drew specific attention to that and I want to make it clear that we want to make progress on that. I met the Equal Opportunities Committee recently to discuss the matter. We have established an equality proofing budget advisory group, and key individuals who are expert in such matters are helping us. We have undertaken research and sought expertise from other parts of the world in that work and I am happy to continue to pursue a way forward. None of us should underestimate the challenge or expect instant solutions, but I am confident that we can make progress if we focus on tangible, practical and achievable objectives. The key to equality proofing is ultimately to focus on how the Executive equality proofs policy development, because financial consequences will flow from that. In a sense, to tackle the budget as the means of securing equality proofing is to act too late in the process, although that has a part to play. We must have a clearer definition of how we want to develop that process, and the Executive is committed to that work.

The committee also recommends that the Executive address the cost of national insurance contribution increases that arise from the UK budget. We are addressing that issue in the spending review alongside the many other pressures that we face. There are many financial recommendations that will require more detailed scrutiny by the Executive over the coming weeks and months. There are recommendations on such varied matters as chronic pain services, neurological services, housing debt treatment, housing improvement, integrated transport funds, diversion from prosecution, the application of the Arbuthnott formula, lifelong learning, transport, education and justice. Des McNulty also drew attention to recommendations on special educational needs and roads. We made provision for some of those areas in yesterday's budget revision statement, but we will consider all those matters as we move through the budget process and the spending review.

The budget for 2003-04 is £22 billion for Scottish public services. That is a lot of money by any standards and represents a significant increase in resources over this year. It is delivered through the fair, stable and transparent Barnett formula, which delivers a good deal for Scotland's public finances. The increases will help us to deliver our major objective of making a difference to the lives of people throughout Scotland. Our AER sets out the framework for how we want to spend that money. The work of the Finance Committee during stage 1 of the budget process will influence the budget and coming budgets. The work of the committee is a major and important part of the scrutiny of the Executive's plans. I look forward to the remainder of today's debate and the speeches from members that will help to inform our thinking. I also look forward to continuing to work with the Finance Committee as we move through stages 2 and 3 of the budget in the coming months.

I associate the SNP with the Finance Committee convener's remarks about all those who helped to produce the report. In particular, I thank all those members of the public and representatives of organisations who engaged with the Parliament's committees, particularly the Finance Committee, and who attended the roadshows. I hope that they feel that their contributions have not been in vain, as such events give politicians the opportunity to engage with the public on how the priorities for Scotland can be delivered.

We hold today's debate against the background of a low growth rate in the Scottish economy, an international corporate financial scandal in the order of billions of dollars, the reputation of commercial auditors in tatters, stock markets in free fall and pension schemes in serious disarray. In all those areas, there are consequences for ordinary Scots—there will be knock-on effects on their daily lives and they will be looking to politicians for answers. In particular, they will expect their jobs and pensions to be protected, and there is little, if anything, that Mr Peacock and his colleagues can or will do about that. Not only do they lack the will to do anything about it; they and the Parliament lack the powers to do anything about it.

The budget process in Scotland is tortuous largely because the principal components are out of our hands. The total spend is determined elsewhere through the Barnett formula, which determines Scotland's share of UK spending, with adjustments made through the autumn statement and comprehensive spending review increases, to which the minister has referred. What he and his colleagues have done is rearrange the deckchairs regarding end-year finances, of which we heard a little yesterday. Mr Kerr said yesterday that the budget announcements on the reallocation of the end-year flexibility were influenced by advice from, among others, the Parliament's committees, including the Finance Committee. I hope that Mr Peacock will identify a little more specifically than he did in response to my earlier question exactly what changes have come about as a consequence of that advice. It is important that specific changes are identified to give people confidence in the process.

Mr Kerr said that the Government's investment is focused on the five key priorities of health, education, crime, transport and jobs. He went on to say that he has identified three areas for action: investment for results, Scotland's children—clearly, that is education—and our local environment. I do not know whether those are consistent with what seem to be the Government's priorities. It is not obvious how they fit together. Nevertheless, I would like to address a constituency transport issue. I note that the end-year flexibility allocation gives more to transport—something in the order of £16 million. The minister might care to tell us whether, as part of that allocation, any further progress will be made on the modern transport system for the north-east—in particular, the western peripheral route around Aberdeen.

We recognise that the object of the budget process is to allow the Government the opportunity to explain what it has done, what it proposes to do and what outcomes it expects. We have heard much about outcomes in the debate and I suspect that we will hear a lot more. Parliament, its committees and, importantly, civic Scotland are given the opportunity to scrutinise the outcomes and the Government's plans and to suggest changes.

We are still in the early stages of allowing our new Parliament—as well as our third finance minister—to settle in. Early criticisms of the budget process included the lack of transparency; insufficient detail at the level of individual programmes; what appeared to be cosmetic consultation; and few proposals for alternatives.

Successive ministers promised improvements to address those weaknesses and changes have been made. I am happy to acknowledge that that is the case. This stage 1 report on the Scottish budget acknowledges that progress has been made, especially in relation to the detailed concerns that were raised by the Parliament's subject committees. I will leave most of those concerns to be dealt with by my colleagues later in the debate. It remains to be seen whether the minister and his colleagues will acknowledge those concerns or, more important, act on them. This year, the committees have taken a much keener interest in the budget process. I welcome that and I look forward to their more detailed recommendations on alternatives.

Successive ministers have offered Government help in costing proposals, which is a useful advance. This year, the Finance Committee took evidence from representatives of civic Scotland, which was another significant advance in the process. Their evidence helped to form our views at stage 1 and I hope that we can build on that in the future. The Finance Committee also took evidence outwith Edinburgh. We heard some interesting views from Orkney about the impact of the Scottish budget in general as well as about the way in which it impacts specifically on one of our many diverse communities.

The committee's findings and recommendations have our broad support. I shall focus on those that deal with health. Immediately following the Chancellor of the Exchequer's budget announcement in the spring, the First Minister told us that the increase in Scotland's Barnett share of the budget would be spent on health. Mr Kerr clarified that for the Finance Committee when it met in Orkney. He assured members that the extra money would go to health spending in general, but not necessarily directly to the health budget, as I think Mr Peacock acknowledged today.

The committee acknowledged that that was a sensitive decision and I look forward to having the details of those variations spelt out so that we can see which health outcomes are targeted for improvement as a result of the budget changes and how the Minister for Finance and Public Services will adjust the budget heads to achieve those outcomes.

As a result of the chancellor's budget, there will be increased costs across public services as the rise in national insurance contributions from employers kicks in. Those increased costs will be particularly evident in health, where service delivery is labour intensive. Hence, significant new costs will fall on health authorities—the chancellor giveth and the chancellor taketh away. Those costs must be funded from allocations made to public bodies and not just through efficiency gains, as has been the previous practice. Will the minister reassure members on those matters?

When the committee was in Orkney, members asked the minister about the application of the Arbuthnott formula to general medical services. In the past, concerns have been expressed about how the McCrone settlement will impact on individual authorities. Some authorities appear to have been allocated more money than they require for McCrone, whereas other authorities have less than they require.

The impact of the funding formulae on individual local authorities must be worked through in more detail. Orkney NHS Board and the Finance Committee expressed the concern to the minister that we must be careful about how we apply the Arbuthnott formula to general medical services, as service delivery in a lot of communities might be significantly affected. I commend to the minister the Health and Community Care Committee's recommendation on that issue.

Finally, if the Deputy Minister for Finance and Public Services wishes to enhance his reputation—and no doubt he does—and that of the Parliament, he must prove that the public consultations, the evidence from witnesses to committees, including the Finance Committee, and scrutiny by MSPs will lead to changes in the budget. Nine of the 12 specific recommendations from the committees are in line with the Government's priorities, so the minister should not find it too hard to accept them.

The minister will be measured by the outcomes and unless he can, at the close of the budget process, demonstrate the specific changes that have been made to the budget as a result of the process, the consultations will have been cosmetic and the scrutiny will have been in vain. I commend the Finance Committee's report to the Parliament on behalf of the Scottish National Party.

This is the third time since the Parliament began that I have been at such a debate. I thought that we might have had a third minister, but we have Peter Peacock trotting out again as he has done in the past.

We have reached an interesting time. The committee has had three years of considering and focusing on the budget process. I can understand why we had to do that in the first two years. In the first year, the Executive, the committees of the Parliament and the general public were all struggling to understand what the budget process was all about. We concentrated on the process and we did not concentrate on what was coming out of the budget, how the money was being spent and where it came from.

Now that we have reached this stage, I am beginning to be concerned. We still seem to be concentrating on the process, even though it is more refined. Although we are engaging with the committees of the Parliament, I am not convinced that the time that we are spending and the load that we are putting on the committees are producing the results that we should be looking for at this stage in the Parliament's life.

I believe that the time that the committees are spending on consideration of the budget might be better spent on considering other things. The committees do not seem to be able to use the opportunity that they have to be radical and to reprioritise within the budget or to discuss the structural and process changes that are required to implement spending programmes and to convert them into action on the ground. I will refer to some of the committees' recommendations but, as I know from all the members who have sat in on other committees in the role of reporter, members do their best, but they struggle. The problem is not that they have not been given advice; it is that they would rather spend time discussing other issues. That is another matter that we will have to revisit.

My colleague Mary Scanlon intervened with a point about structure, which is the point that I am making. It is pointless throwing money about like confetti and scattering it in dribs and drabs if there is no strategic focus. The minister cannot answer every query by simply throwing a small amount of money at it when enough fuss is made. If we are to get value for money in Scotland and if we are to justify the amount of money that we take from people's pockets—which includes money from families and money from businesses, in the form of the increased business rate—we have to be seen to be turning that money into something that produces added value.

The Local Government Committee made no suggestions, yet the one debate that the Parliament has ducked out of since the beginning is the debate on what local government should be responsible for. We raise the question every year. There is uncertainty. Some councils interpret their freedoms in a way that allows them to do certain things and it is right that they should be free to do things that are appropriate locally. However, there is no clarity, which, in terms of the budget, makes it difficult to focus on whether Government policy is being implemented. Once it has been decided what local government should be responsible for, local authorities should be given clear tasks, which they should be left to get on with and for which they should be held accountable. Once we have done that, we can provide a properly guided funding package.

I accept that some of the committees may not have been as radical as David Davidson would like, but everybody has a responsibility to examine the spending choices that are available. In that context, does David Davidson accept two points that came out of the evidence? First, a number of witnesses, including the Confederation of British Industry Scotland, said that reducing the amount of income tax that is collected would be inappropriate. Secondly, we heard evidence that business rates—an issue that his party has highlighted—make little difference to businesses in Scotland, given the cost element that they represent.

The convener of the Finance Committee has not been in touch with business lately, particularly small businesses, which are the engine house of the Scottish economy. We get complaint after complaint asking why businesses are put at an unfair disadvantage by a different poundage rate. Why do we have such an odd system of reliefs, which militate against some of the very businesses that we are trying to maintain, particularly those in rural areas and certain areas of towns? The convener of the Finance Committee is missing the point.

If we have all this spare money at the end of the year and we are fiddling around looking to do something with it, I believe that flattening out business rates so that we are competitive would give a clear signal to small business, because the business rate is a straight tax on employment, a tax on the economy and a tax on investment for the future. If we want a full employment system in Scotland with highly qualified people, we should invest the money in doing that.

I recall that, after the announcement of last year's underspend, David McLetchie suggested that the money should be used to reduce income tax. This year, Mr Davidson is suggesting that it should be used to reduce business rates. Is that a change in policy?

Not at all. We have said all along that artificially adjusting business rates upwards was not a clever thing to do, just as we do not believe that student loans should be introduced. We need to ask whether that policy will be helpful to our future, given that we need highly trained people to come through the system.

I have talked about structure, which this debate seems to be about, but another issue is the clarity of documentation. We have all talked about output information, because the purpose of spending money is to get an output. To examine the outcomes of last year's funding, the Finance Committee has to have accurate output figures. I go further and remind the minister that a previous incumbent of his ministerial post promised to give in-year figures for the roll-out of some of the Executive's programmes.

Cross cutting is an essential part of outcome budgeting. Everybody knows that Scotland is a complex society and that many governmental bodies and agencies have a finger in many pies. However, there is no clarity in the budget process on that and I am sure that much more needs to be done in review work. Not only should the Audit Committee do its piece, but the Finance Committee should go back and see what outputs the moneys that were put through the system achieved. There should be clarity.

Brian Adam referred to Jack McConnell's wonderful statement about money going to health. The Minister for Finance and Public Services refined that statement and said that the money would go to things that might benefit health. The matter is still unclear. It would be helpful if we were told where the money is going. The broad and sweeping statement made for a nice press release and was shown on television. However, I noticed that what Andy Kerr said in Orkney was not terribly well reported. Today, the deputy minister has an opportunity in front of the television cameras and in the chamber to give us the truth about what is going on.

Throwing money at the health service is not a solution. Unless there is reform and aims are clear, there is no point in simply throwing money at it. That is not to say that we do not want health spending. However, we want that spending to produce better health and better access to health care so that the current inequality no longer exists. The Arbuthnott formula and general medical services were mentioned. The Arbuthnott formula causes inequalities. On the same issue, will the minister tell us what will be done to deal with postcode irregularities in access to health care throughout Scotland?

The increases in national insurance contributions arising from Gordon Brown's budget were mentioned. The minister said that the matter will be dealt with under the spending review. Is that a total commitment to cover all aspects of the increases in all the public services, many of which have heavy staff costs? Will the minister be clear about that today so that, when we return at the end of the summer recess and get into the next round of the budget process, we can identify what will be built into the changes?

Alex Neil is indicating that he would like to intervene.

The member is over time, but I will allow a final intervention.

I will keep my question short. The other big budget increase in Chancellor Brown's budget was the introduction of the windfall tax on oil. Will the member tell us whether scrapping that tax is Tory policy, or do the Tories want to keep the revenue and earmark some of it for spend in Scotland?

Mr Neil will know that I am on record, as people down south are, as saying that the tax is iniquitous, badly thought out and ill- considered and that it will do nothing but damage, particularly to the economy of the north-east, the area that I have the privilege to represent. It was foolish to implement the tax in such a way. I have said that consistently and I said it in the chamber when the Parliament met in Aberdeen. Perhaps Mr Neil was not there.

I will touch briefly on the committees' comments. The Transport and the Environment Committee made some pertinent comments and I hope that the minister will refer to its report more directly at some point. For example, will he assure us that the committee's proposals for road maintenance will be dealt with properly? There is a 30 per cent revenue expenditure shortfall on what is required to maintain and replace the existing network. The list of proposals goes on.

The deputy minister rattled through all the committees and got their names in, but he did not say anything about what they had put in their reports. He is supposed to address such issues today. All the information is in a wonderfully large document, which I am sure will nicely keep his office door open on a warm day. He needs to look at the print that has come in from the committees—that was the purpose of their activity. If they do the work but the minister does not respond, I suggest to him that the process is failing.

Some members will be aware that I am only a recently appointed member of the Finance Committee, so I do not bring the depth of knowledge to the debate that David Davidson does. The convener thanked all those who have helped us and I associate myself with his remarks. In particular, I pay tribute to the clerks of the Finance Committee and the other subject committees and to our adviser, Arthur Midwinter.

As no member has yet done so, let me give credit where it is due and thank Des McNulty, who convened the committee fairly and thoughtfully. That is one reason why we have worked as well as we have done. It is also why Brian Adam warmly supported the committee's recommendations, although he did so against a rather glum backdrop, referring to the falling stock market and accountancy firms going bust. He began to sound a little like Marvin the paranoid android; he was not his normal sunny self. David Davidson, in his contribution, was interesting.

Was he really?

No—I am so sorry, of course he was not. However, he made an artful trip-up. The CBI was asked about the cost consequence of raising income tax by a penny. The answer was that the cost consequence would be many millions of pounds, as the pay-as-you-earn system would have to be rejigged, there would be an impact on the information technology system and so on. Des McNulty then asked a trick question, which was whether those costs would apply if income tax were reduced by a penny. The CBI answered with an emphatic yes, which brought the sound of David McLetchie, off-stage, tearing up the Conservatives' policy. It is important to bear that in mind.

The level of scrutiny that the Finance Committee and other committees have given to the budget process was much higher than the level of scrutiny that pertained in the days of Westminster. However, the improvement is not only to do with MSPs scrutinising the budget; it also relates to the close relationship that we have built up with the minister and the deputy minister. I thank them and the other members of the Executive for their reasonable and courteous approach at all times. If a question could not be answered at the time, an answer was always forthcoming later. That is a successful way of running the budget process.

In the bad old days when Peter Peacock and I were councillors, when councillors tried to communicate with the Government to ask what the settlement would be or where the money would go and why, they were up against a brick wall and, no matter how hard they tried, it was impossible to get to the answer. Occasionally, a minister would visit a local authority and listen politely, which might give some satisfaction, but the mechanism was not at all clear.

We should not be mean spirited when the minister talks about the budget roadshow and the associated consultation, which has been genuinely open and successful. I have seen evidence with my own eyes that input from ordinary people is going right to the heart of Government decision making. That is right and proper. The process is not only about co-ordinating with MSPs, but about working closely with local authorities and the people of Scotland. Even in the three years of the Scottish Parliament, the system has improved and has become more efficient.

The minister, Des McNulty and every other speaker have referred to outputs. Forgive me for being parochial, but I want to talk about roads, a subject that has been touched on. In the Highlands, non-trunk roads are deteriorating. The problem is major and is made even greater by the fact that, in the remote and far-flung parts of the Highlands, we rely totally on the road network, as we have no railways or airports. If a minor road in Sutherland or Argyllshire starts to deteriorate, that has a marked effect on the local communities.

When we talk about outputs, we are always careful to say that we do not want to ring fence funds. However, in our heart of hearts, we are not all convinced that money that is allocated to local government or local health services goes where it should. I have suggested that at some point—perhaps a year or six months—after an allocation of funding, such as the recent EYF money that has gone to local government, we should examine whether the money is hitting the targets that we want it to. More work has to be done in that regard and, having spoken to the minister, I know that he is receptive to the notion.

We have heard about barrier-free budgeting and cross-cutting, which I am involved with as a member of the Finance Committee.

I am sure that Mr Stone receives the same mail that I do about the roads in the Highlands. Given that bringing the roads and bridges up to normal standard will cost £180 million—and I point out that Highland Council says that it can afford to resurface roads only once every 180 years—how is the council to maintain the critical road network on £6 million a year?

The answer is, "With difficulty".

As Peter Peacock and I recall, those figures were put together by Philip Shimmin, a splendid official who has retired from the council and who was adept at suggesting that there would be century-long periods before the roads would be done up. To be honest, the Executive should check those figures. Mary Scanlon is no more convinced by them than I am.

I have spoken for quite long enough. [Laughter.]

Jamie Stone felt the vibes.

Presiding Officer, you can tell when it is the end of term. This is just like being in a classroom. As a former teacher, you will recall trying to amuse pupils with games or by drawing pictures on the blackboard.

I thank my fellow committee members, the clerks and the adviser, who is sitting in the public gallery. I am thoroughly enjoying my time on the Finance Committee or whatever it is called.

Alex Neil and I might recall Mr Stone's performance the last time we had a meeting of the Parliament on the day before recess. I would be grateful if Mr Stone would simply do colouring-in for the rest of the morning.

Given the level of attendance in the chamber, perhaps some members are already away to Skibo Castle for the golf. Who could blame them?

I congratulate the Finance Committee on another excellent report and on a job well done. I begin by making a couple of process points and then I will try to deal with some issues of substance.

The process points relate to table 4.1 on page 15 of "The Scottish Budget 2003-04", with which I know the minister will be familiar, and to the projected funding for the careers guidance service. Anyone from outside who looks at that table would take from it that we were to spend nothing on careers guidance in subsequent years, although the careers guidance budget is going to be incorporated into the budgets of Scottish Enterprise and Highlands and Islands Enterprise.

I make a plea: in future budget tables, at every stage, we should still highlight the amount spent on careers guidance, albeit as a subsection of the Scottish Enterprise budget. The Enterprise and Lifelong Learning Committee made a major recommendation that the budget allocated to the careers guidance service should continue to be transparent for the obvious reason that that would allow us to measure the budget and to ensure that appropriate investment continues to be made in that service.

My other process point is about the same table and the spend on investment assistance. As the minister knows, the regional selective assistance programme is undergoing a major re-engineering exercise. As part of that work, a venture capital fund has been established with moneys specially laid aside from the RSA budget. The Executive must consider how to present that information, as we must be able to examine the input to the RSA budget and, separately, the input to the venture capital fund and the outputs. That will allow us to see the additional benefits—such as jobs and successful businesses—that are being produced from levering funds in from the venture capital fund. I know that the minister may not be able to give specific answers today, but I would appreciate it if he would consider those process issues, as they are quite important for parliamentary monitoring.

I also draw his attention to the other recommendations in the Enterprise and Lifelong Learning Committee's report on the budget process. In particular, I draw his attention to the need for further investment in both enterprise and lifelong learning. Everyone always pleads for more money, but one can see from the state of our 46 further education colleges that about two thirds of them face major problems with structural deficits.

Those problems did not arise over the past year or two. They have been building up since the colleges were decoupled from the local authority system. Some of our traditionally well-endowed universities are also facing financial difficulty. We have major problems in that regard. If we are to maintain progress, for example, in increasing the percentage of people who go to university from school, then we are reaching the stage where many of the financial issues will have to be resolved in the next few years.

Having made those specific points, I want to move on to points of substance that are about the context in which the Executive's budget is decided. First, of course, the Executive does not decide the overall amount that is available to it. As members will know, the chancellor in London decides that amount.

God bless him.

That is a lone voice.

Well, if God blesses the chancellor, he might be the only one who blesses him.

I have several further points. I am not going to labour the first point, which I think is obvious, but I believe that this Parliament should decide the overall level of funding and should have greater responsibility. An additional £7 billion will be extracted from the Scottish economy by the Treasury in London between now and 2010 as a result of the introduction of the windfall tax on oil. I believe that at least some, if not all, of that money should be earmarked for reinvestment in Scotland.

Does Alex Neil agree that it would be interesting to get an on-the-record answer from the Conservatives to the question that he posed to David Davidson?

I agree with Jamie Stone that that would be interesting, but it would also be highly unusual. Given that, within our lifetime, the Conservatives are unlikely to be in a position, here or in London, to do anything about those matters, I will treat the issue as purely academic and theoretical, if Mr Stone does not mind.

The other important point is that the minister reiterated, rightly, the five priorities for Scotland. However, if one compares outputs with each of those priorities, the outputs are wholly unsatisfactory. One of the priorities, clearly, is health. We see what is happening in the health service in terms of waiting times and waiting lists. Another priority is education, but the announcement of the new investment programme for schools represents only one third of the total investment requirement for schools. The outputs for further and higher education, again, are lower instead of higher or better.

Key measurements, such as those for child poverty, show that the situation is getting worse, if anything; it certainly is not getting significantly better. On pensioner poverty, we still have the same proportion of pensioners in Scotland living in poverty as we had five years ago when the Labour Government was elected. There has been a welcome reduction in unemployment during the past five years, but unemployment in Scotland has risen by 25,000 in the past year. Of course, the consequences have still to feed through from the events of this week.

On the transport system, the railways are in one of the worst situations in living memory and we have made no substantial progress in road transport. The A77 upgrade has still not been started and, as Brian Adam said, the Aberdeen western peripheral has not been given the timetable for going ahead. The Borders railway is still a dream, and many other projects besides. The figures show that congestion and traffic pollution are worse today than they were four or five years ago.

Crime is another of the five priorities. We will perhaps hear later today the outcome of the crisis meetings yesterday between the Lib Dems and the Executive in relation to youth crime and youth courts. I believe that the crisis has been partly resolved by the Lib Dems backing down as usual. No matter which of the five priorities one picks, the outcomes are getting worse and not better.

Instead of encouraging the chancellor to pursue a policy of reducing the overall percentage of gross domestic product that is allocated to public investment and spending, we should increase that percentage further. In the key areas, such as wealth creation, in which I am primarily interested, research and development—

Wind up, please.

I am coming to a close, Presiding Officer.

I will pick only one of my 10 examples. Consider research and development in Scotland. The rate of spend on research and development is half the UK average, and the UK average is half the European average. In Scotland, we would have to quadruple our investment in research and development to get up to the European average. That is only one of the prerequisites to building a smart, successful Scotland.

The minister should measure the outcomes, but he should not only do that. He should also do something about them and improve them dramatically.

Presiding Officer, I thought for one delightful moment that you might let Alex Neil go on for so long that you might not have time for my speech. I noticed that, at the start of the debate, you asked for those members who wished to take part in the debate to press their request-to-speak buttons. You did not say what those of us who have been pressed upon to participate should do. Nonetheless, I pressed my button and I am pleased to contribute to the debate. I will do so as convener of the Rural Development Committee, whose report has already elicited some praise from the convener of the Finance Committee.

The Rural Development Committee acknowledged strongly the clearer presentation of the budget proposals this year. Despite the continuing complexity of the proposals, that presentation has undoubtedly made it easier for the Rural Development Committee to scrutinise them at stage 1. We have pressed for clearer presentation for the past two years. I am sure that that has been significant in allowing us to produce the excellent report that Des McNulty acknowledged. I had always wondered what it would take to bring out the true Des McNulty—the emotion behind the cool exterior. Obviously, it is a well-worded stage 1 committee report on the budget. How sad.

Nevertheless, an awful lot still needs to be done to identify outcomes and review cross-cutting expenditure in rural areas. The Rural Development Committee supports the Minister for Environment and Rural Development in his concern about the relatively poor evidence base that affects his ability to pursue those matters. We also highlighted the overall expenditure in rural areas as being ripe for cross-cutting review by the Finance Committee.

The rural development budget is interdependent with European policy. The Rural Development Committee was able to examine it in the context of continuing debate on the possible mid-term reform of the common agricultural policy. We were anxious to identify and consider areas in which national discretion could allow the use of European moneys to be tailored in support of Scottish strategic priorities for agriculture.

With that background, the Rural Development Committee drew five main conclusions for the Finance Committee's consideration. First, we sought clarification on the implications for Scotland should the Curry commission's proposals on increasing modulation be implemented in England. A debate is needed on whether the devolved Administrations can implement such a policy differently from the Department for Environment, Food and Rural Affairs.

Secondly, the committee invited the minister to assess the costs and impacts of introducing enhanced rates of modulation in Scotland, with progressive and discriminatory rates of modulation and with the proceeds matched by UK funds and applied as part of a revised rural development plan through land management contracts or whole farm support and development schemes as envisaged in "A Forward Strategy for Scottish Agriculture".

Thirdly, the committee sought clarification from The minister on his objectives in allocating additional funds to the less-favoured areas support scheme rather than to other rural development measures. The reason is that the figures suggest that the minister has allocated more money to the LFASS than is strictly required by European match funding rules. He therefore appears to have made a policy decision to put extra money into that scheme.

Fourthly, the committee welcomes the minister's commitment to review the crofters grants and loans scheme and has asked to be kept informed of the progress on that matter. In evidence, issues arose about whether the levels of grant available were suitable to secure adequate provision of housing in remote rural areas. We were keen that that issue should be addressed.

Lastly, the committee seeks clarification of the minister's priorities for the expenditure of the Scottish Executive environment and rural affairs department on the agricultural and biological research group programme. Evidence suggested that only 2 per cent of SEERAD expenditure on the programme is devoted to socioeconomic research pertaining to rural economies and communities.

The committee also identified one or two options for the use of increased funding, should that become available following the comprehensive spending review. As Des McNulty indicated, we suggested that the rural partnership fund might be prioritised for enhanced funding. As I hinted earlier, we also suggested that funding an improved evidence base for rural communities and development would be another suitable priority.

We recommended that the minister give serious consideration to three proposals that the Scottish Fishermen's Federation has made. The federation proposes, first, that the Executive should make adequate budgetary provision to attract the proposed European centre for fisheries research and management to Scotland. Secondly, it argues that a continuation of the programme of research cruises jointly managed by fishermen and scientists would be extremely beneficial and would provide work for underemployed vessels. Lastly, it proposes the establishment of an executive body such as a specialist enterprise company to manage inshore fisheries and related marine resources—to manage and oversee the contribution of the inshore fisheries industry to the general health of the coastal community and economy.

I was very pleased by the way in which the Finance Committee received our report. I record formally my thanks both to the clerks and to Professor Mark Shucksmith, our adviser, who guided us ably through the intricacies and complexities of the budget process. This is a good report and has been acknowledged as such. However, as Alex Neil said, the report will be no use unless it is acted on. I hope that in his summing-up the minister will assure us that that will happen.

As some people know, my engagement with finance is on the fruit level—apples and apples, apples and pears. However, I understand more since Professor Brian Main appeared before a joint meeting of the Justice 1 Committee and the Justice 2 Committee to give us serious and much-needed advice on the shadowy business of considering the budget report.

The report from the Justice 1 Committee and the Justice 2 Committee is covered in paragraphs 10 to 20 of the budget report. It was sometimes difficult to understand where money was being applied. We want budget headings to be revised to be more consistent with programme-based activities so we can find out what happens to the money.

We want to better understand what is meant by "Miscellaneous Categories". We were allocated a miscellaneous category in 2001-02 with approximately £13.5 million of spending. In 2003-04 the category was split in two: "Miscellaneous Projects" and "Support Programmes". What does that mean? I am no clearer about the matter. We require subject committees to state how much money has been spent and on what the money was spent. I understand that there will be changes in the way information will be presented. When spending crosses several parliamentary briefs—for example, in the care and treatment of offenders—the collective sum of money could be co-ordinated to inform us how much was spent where by various departments.

Members will be glad to know that my contribution will be brief. I do not need 10 minutes. The substance of the budget concerns us, given that crime is one of the Executive's five key priorities. The amount of money spent on justice is decreasing. Managed expenditure is increasing by 3.1 per cent in 2002-03 and 2003-04. However, in the justice department, spending is set to fall by 1.7 per cent in real terms. In order to stay at the same level, we would need an extra £18.5 million for justice. In order to keep in line with the rise in managed expenditure, justice would need an extra £36 million. I do not see how cutting the justice budget balances with the fact that justice, and reducing youth crime in particular, is a key priority.

I say to David Davidson that the Justice 1 Committee made and costed specific recommendations. I will give examples of three of them. We asked for an increase in the diversion from prosecution budget from £1.5 million to £4 million. We asked for an increase in the budget for time-out centres, such as the centre in Glasgow for women offenders, from £0.6 million to £1.2 million. Those are examples of how we could keep people out of prisons, save money, stop people reoffending and get people back into structured lives. It is money well spent at the front end to stop spending excess money at the other end. Finally, we asked for the budget for voluntary through-care provision to be almost doubled, from £3.5 million to £6 million, because that hits recidivism on the head, as we know. Something like 70 to 80 per cent of offenders are back in prison within two years. Money spent on that in the budget would cut the amount of money that is spent elsewhere.

We think that, overall, the justice budget—I should not be doing this; Jim Wallace should do it for himself and I am sure that he does—should be increased. Within that, priorities should have more money spent on them to save money at the end of the sequence of events that happen in people's lives. I draw those priorities to the minister's attention and I hope that he will respond.

I thank my many colleagues in the chamber for giving me room for a speech of about half an hour. I note the enthusiasm of some members for that prospect.

It is not essential, Mr Stevenson.

Thank you, Presiding Officer.

We have heard that the underspend is £643 million, which follows the more than £700 million underspend of last year. It is interesting that over the past four years—I move straightaway to one of my obsessions, and one of the obsessions of members of the SNP—there has been an increase of £250 million in private finance initiative payments. We do not need to worry about underspend, because in a few years' time we will be heading rapidly towards overspend. There will be no end-year flexibility if we continue to adopt the high-cost finance policies that are associated with a PFI approach to funding public projects.

There is another way. I note from today's edition of Business a.m. that a not-for-profit company is taking over the rail network. The SNP has been advocating that policy in relation to capital projects for some time. If we are to keep our finances in good order and if we are to remain within our budget, one of the things that should be high on the list of the Executive's priorities is to reconsider how we fund our capital projects. I commend to the minister and the Executive the approach of having not-for-profit trusts that we have been advocating for some years. I would welcome the minister's response as to whether that is under consideration.

I mention that in the light of the fact that Grant Thornton—an accountancy company that gave evidence on the prison estates review to the Justice 1 Committee—indicated that that was a practical way forward that would undoubtedly save money. However, we have to be slightly cautious when we are talking about accountants. Once again, they are not getting a good press. There is a great debate in business as to whether accountants or computer people are the more boring. As a computer person I have my views on that and I need not pursue them further. I will talk more about accountants later.

Business a.m. is the only paper that I read in the morning. We see today that WorldCom is being charged with fraud after that well-known and once highly respected company, Andersen, moved WorldCom's accounts in a way that concealed £2.6 billion of costs.

I watched the minister thumbing through the budget documents anxiously, but he cannot find a listing for WorldCom in the Scottish budget.

If the minister were to examine parliamentary answer S1W-22582—I provide the reference number merely to use up a little more time—he might find that Arthur Andersen was a happy recipient of £381,000 from the 2001 budget. My question is whether the fingerprints of accountants on our accounts have led to such successfully inflated outcomes as the outcome that the shareholders of WorldCom have been subjected to.

No less a luminary than Sir David Tweedie, who was lately the chair of the Institute of Chartered Accountants in England, posed a question about whether there is a difference between an accountant and a supermarket trolley, to which he gave the answer, "Yes, the trolley has a mind of its own." Accountants have demonstrated considerable imagination in recent times. I am glad to note that the minister enjoyed the joke. The partners in Arthur Andersen are probably not enjoying it.

Are our figures contaminated? Let us look at some of the possible sources of contamination. The Justice 2 Committee discovered that impairment costs were associated with the Scottish Prison Service's costs. What are impairment costs? In business, we would otherwise describe them as depreciation. Business companies properly include such items in their accounts to offset the taxation that they pay. The existence of such items in the Scottish Executive's accounts does not mean that the Executive is spending the money in question or that it is offsetting taxation. The presence of such items is simply confusing.

The problem does not affect only the justice area. Table 8.1 in the annual expenditure report contains a footnote to the entry on motorways and trunk roads:

"Includes capital and depreciation charges for the existing trunk road and motorway network".

We have spent the money already and we will not spend it again. Has that been done just to inflate the numbers so that they look a little better, or have we used accountants such as Arthur Andersen who are as numerically illiterate as the tribe in Papua New Guinea that has only three numbers—one, two and more? As a mathematician, I have the googolplex, which is the world's largest number.

That is what happens when one is given half an hour and one has written a three-minute speech.

It is absolutely not essential to take half an hour.

On a serious note, I turn to an issue that emerged from the justice budget and which reveals a lack of joined-up thinking. We welcome the introduction of drug treatment and testing orders and the priority that is being given to people in the criminal justice system who need treatment for their drug habit. The difficulty is that that is happening at the expense of people outside the criminal justice system. An increase in expenditure for drug treatment for people within the criminal justice system should be matched by corresponding increases of expenditure elsewhere.

There is a degree of confusion in the budget, particularly in relation to the handling of depreciation. I look forward to hearing how the minister plans to handle that in future years.

Before we move to wind-up speeches, I should say to the whips that we are running about 20 minutes ahead of time, in spite of the efforts of Mr Stevenson. I expect that we will reach the Police Reform Bill shortly after 12 o'clock.

I am slightly concerned to be winding up so early, as the final 20 minutes of the debate is not happening and I usually spend that period preparing my winding-up speech. I will do my best.

I am afraid that, once again, SNP members have breached one of their promises: they promised to liven up the debate, but they have failed to do so. However, earlier on, I did get an interesting image—of mild-mannered Brian Adam, Independence Man, dashing into a telephone box, stripping off and coming out in a single leap to stop the free-fall of the stockmarkets, clean up the international accounting trade and prevent the bankruptcies of Enron and WorldCom; all with the stroke of independence. Then, after breakfast, he would deal with world poverty and global warming.

In reality, however, the SNP did not come up with any alternatives for the budget. It is disappointing that committees have again gone through a budget process without hearing alternative ideas from the Opposition parties. David Davidson spoke about concentrating on the technicalities, but we do not hear the alternatives so that we can judge them.

I am not sure whether Iain Smith was in the chamber when Christine Grahame presented some views that came out of considerations of the justice budget. Those views were constructive and I am sure that Jim Wallace, the Minister for Justice, will want to read them carefully. Once again, we have some SNP ideas to help the Lib Dems on justice issues.

I do not think that Jim Wallace needs any help from the SNP on the justice budget; he is perfectly capable of working on it himself.

There has been a disappointing lack of radical suggestions on the budget, yet it is up to us—the members of the various committees and of the Parliament—to make such suggestions. That is not happening.

I will concentrate primarily on the Local Government Committee's report. David Davidson criticised it, but it addresses some fairly important issues. There is a mismatch between the present budget process—which was set up as an annual process—and the fact that we now have, in effect, annual budgeting every three years through the spending review process.

Local government's budgets for the next three years will be fixed by the spending review in the summer and autumn and not by the budget process that we are currently going through, which deals with the details. The committee was concerned because evidence from the likes of the Convention of Scottish Local Authorities and the Society of Local Authority Chief Executives and Senior Managers was actually more about the spending review than about the budget documents. That made it difficult for us to make a proper judgment on the budget process.

I hope that the Finance Committee will consider how the Parliament engages in the spending review process. At the moment, it is an Executive exercise and not a Parliament exercise. The Parliament has to be involved if it is meaningfully to shape Scottish spending over the next three years and over the rolling three years thereafter.

The way in which the local government budget is considered contains a fundamental problem. That budget represents one third of the Scottish spending block and provides some of the key services to the public—education, social work, community care, transport, roads and the police and fire services. All those things are dealt with through the Scottish block, but the Local Government Committee does not have the opportunity to consider how the funding matches the spending needs of local authorities.

It is not the Local Government Committee's responsibility to consider whether the education budget is delivering the Parliament's priorities on education, or whether the social work budget is meeting needs in community care and other social services. Those matters are the responsibility of individual subject committees which, naturally, tend to address the central services rather than the amount of money that goes to local government. We need to look into that, because we are not answering the question whether local government's spending needs are being properly met by the present budget process.

The Local Government Committee has suggested that an additional budget document may be required, to show the match between the spending on services in local government and the funding that is available through aggregate Exchequer finance, rates and council tax.

I wonder whether, when summing up, the Conservatives will explain how they would fund a cut in business rates. Will they demonstrate that they understand that the reason for the uniform business rate being different in Scotland and in England is that, in England, there has been a revaluation?

We are not now on the same base, as we were when the UBR was introduced. Scotland has not had the same revaluation, so the UBR is different here. We should be examining comparisons of like with like premises, not debating whether the rate poundage is the same north and south of the border.

The Local Government Committee also considered concerns about the capital budget. We all welcome the move towards prudential budgeting, which may help to address those concerns, but some serious issues remain. I am delighted with this week's announcement on education spending through the private finance initiative. That substantial boost in education spending will help to address the long-term backlog in capital spending.

The Local Government Committee also raised the important issue of national insurance contributions. I hope that the Executive will address that in its submissions to the Westminster Government on the comprehensive spending review. We welcome the substantial new funding for health, although the mechanism that Gordon Brown has chosen to deliver it will mean that it will be subsidised by other public services—unless the money is found elsewhere.

Local government estimates that, next year, it will cost £40 million to £50 million to meet the increased national insurance contributions. That money might be going to boost health services, but why should other local services suffer as a result of cuts, or increases in council tax? It is not right that we meet increased spending on health at the expense of other essential public services. I hope that the Executive will address that issue and that it will talk to Gordon Brown about redressing the balance before next year's budget comes into place.

I commend the report of the Finance Committee to the Parliament and I hope that the Executive will consider the individual committee reports carefully.

I pay credit to my fellow members of the Finance Committee, especially the newer ones who have worked hard to get themselves up to speed on such a difficult, technical and time-consuming process. We were aided by the work of Arthur Midwinter, to whom I must pay great credit. I agree with members who have said that, this year, we have heard robust evidence from excellent witnesses. The ministers have also been as open as they can be. I do not expect ministers to know all the numbers—or for all the numbers to add up.

Ministers have been robust and honest where they can. There has been a change in culture that means that senior civil servants are happy to answer sensible questions, as long as there is a minister sitting next to them to take the blame. That is a refreshing development in the process, although, as I am sure Iain Smith will agree, some problems remain.

I want briefly to reply to Christine Grahame. I know that the justice committees made two or three specific costed proposals and that some other committees have taken a similar approach, but I was talking about the principle and whether that is the best way in which to do things. Committees have approached the process in different ways.

The minister opened with the comment that things have changed because we now have three-year budgets that are completely adjusted as the spending review, the Barnett consequentials and other money come through. There is nothing new in that. That is what used to happen before we had the Scottish Parliament: the Secretary of State for Scotland, depending on their quality, would go off and fight the cause and come back with some money. I know that the nationalist party did not like that arrangement either.

The minister referred to the consultation process. I repeat the comments of earlier speakers: there is nothing to show that the evidence from the consultation has turned into a policy line spending direction. The Executive has a role in taking all the evidence and being seen and understood to be delivering on what people are seeking. Members who have commented on EYF should remember that EYF is a one-off payment, not core funding. As I said yesterday, EYF is a sticking plaster. Further to the comments of Jamie Stone, Mary Scanlon and others, I must point out that the small amount of money going into the roads budget results in, literally, a little piece of tar on a road. That money amounts to a few pieces of tar on a few roads. The committee reports called for a fundamental move to tackle the maintenance problems of our roads and the transport network.

Like Brian Adam, I am a great fan of getting something done in the north-east. We must invest in serious projects that will—to pick up on Alex Neil's point—facilitate wealth creation. There is too much talk about putting out social spending, which seems to be on the top of everyone's wish list. We must create wealth and it must be sustainable. People will get health benefits and so on from being in employment; they will have money to spend.

I failed to mention in my earlier speech that the Social Justice Committee's report included a comment about investment in the voluntary sector not being transparent enough. We all meet people from the voluntary sector who do a fantastic job. If a value were put on the collective activities of the voluntary sector in Scotland, the sector would be worth somewhere between £5 billion and £6 billion, which is 25 per cent of the current Scottish block grant. All of that comes down to small amounts of investment that are strategically placed, but the investment has a huge, huge leverage effect.

I am concerned about the voluntary sector. When the health service in Grampian was squeezed for money under the Arbuthnott formula, £18 million was taken out of investment in the voluntary sector. I say to the minister that we need joined-up thinking; we need to examine where the money goes and what we get for it.

The oil and gas tax has been mentioned. I regularly advise the shadow Treasury team. When the tax on the oil industry was introduced, I advised the team and it held on to my original advice. My advice on the subject now is that when the team comes to draw up its budgets after the Conservatives have taken power again, I expect the tax to be abolished. At the moment, that decision is in the hands of the chancellor. The recommendation from the Scottish Conservative party and me to the chancellor is to abolish the tax.

I thank David Davidson for clarifying the advice that he gave the shadow Treasury team, although I have to say that Conservative policy is still not clear. In the meantime, should not the money that is raised from the windfall tax be earmarked for spending in Scotland?

The tax should not be raised in the first place. We have to spend money in Scotland on supporting retraining and investment in new jobs in the sector. That money will have to come directly out of the budget for which the minister is partly responsible.

I notice that, for the third year running, Brian Adam told us the recycled joke about shuffling the deck chairs. It is a shame that the SNP does that. We are not in a straight debate with a minister about what he is going to do with his money. If we are to debate the budget process, we have to talk about shuffling deck chairs, but it is possible to do that effectively. The process is about cake cutting, but above all we need to consider investment. When a Government has something to invest, we need to debate the process. I am not sure how the subject of independence can be brought into that particular argument, but at least Brian Adam is consistent.

Alex Neil mentioned wealth creation and Alex Fergusson mentioned the good report that was produced by the Rural Development Committee. All the committee reports flag up issues for the Government. When we return from the summer recess and we move on to the next stage of the budget debate, I hope that we will debate the substance and not the process. I also hope that the minister will have specific comments to make on all the committee reports and that a full report will result from the massive tome that the committees have produced this year. Such a report should focus clearly on what the Executive has taken from the budget scrutiny process and what it intends to do with the evidence. The three-year budget process gives the Executive an opportunity to discuss three years' movement and not simply to give a knee-jerk reaction for short-term gain in advance of the next election, which is sneaking gently up on us.

Other members have made good comments. I have to accept, grudgingly, that Iain Smith made some of them. It is not his normal style to agree with anything I say, but he made a good comment today about the mapping of local government finance. That could be part of the process of getting into the debate that the Parliament should have about deciding what local government is responsible for. We heard about those problems in the report from the Local Government Committee, but other committees take responsibility for local government services such as education.

A debate needs to be held about where responsibility for certain aspects of delivery of community care lies. Should delivery of community care be more clearly focused on the primary care trusts to make the service more inclusive or should some delivery continue to be made as part of local government services? We need to have that grown-up debate. We expect COSLA to make the comments it made—it is, after all, a bit like a trade union for the authorities that care to join it—but it is concerned deep down about the future and about the building blocks that are laid with the investment that is made.

At the moment, any investment that we might receive from companies, individuals and so on is hard-earned money. People in Scotland are deprived and there are deprived areas even in Aberdeen. We do not acknowledge that, because the current formulaic approach is based on the attitude that nothing can be wrong if the headline figure for unemployment is at a certain level. People want the Parliament to get inside the budget and to find out how we ensure that everyone in Scotland has fair access to facilities and services. That needs to happen on a sustainable basis, not through some weird and wonderful bid for a capital grant that is not backed up by anything sustainable. I hope that some of the committees will address that issue over the next year.

This has been a fairly good-humoured debate. I know that we are all supposed to be going off on a break of some sort or other. I hope that, when we come back after the summer, we will be sufficiently refreshed to take on board the work that the minister will be carrying out during the recess.

Picking up from where David Davidson finished off, I am very glad to speak at this climactic event in the parliamentary year. I am sorry that no Labour back benchers wish to take part in the debate on their own Government's budget. I suspect that they will give us the same reason that Helen Liddell gave after Labour narrowly held the Hamilton South by-election, which was that Labour voters were so happy that they did not bother to turn out to vote. I take it that the same can be said of Labour back benchers and this budget.

They were all at a party last night.

Ah, well. That explains it.

The convener of the Finance Committee talked about the improved presentation of the AER document that is before us. We welcome that, and indeed notice the year-on-year improvement in the document. One of the consequences is that, besides the experience that the committees are now receiving, we have for the first time been able to make suggestions for changes to the budget. It will be interesting to hear the Executive's response to the committees' concrete suggestions. However, although the budget process is beginning to be meaningful, we should not indulge in an orgy of self-congratulation—we clearly have some way to go.

In his opening speech, David Davidson expressed some disappointment with the committees' recommendations. We have to be a bit realistic, especially at this stage in the Parliament. As all the committees have an Executive majority, there is a limit to the extent to which any committee can overturn the Executive's budget rather than adjust it at the margins. The Finance Committee has already received indications from Professor Arthur Midwinter, who has been lauded by the committee convener and others, that year after year we will adjust many aspects of the budget at the margins.

It is true that the committees are not likely to overturn the Executive's budget, but I refer the member—and perhaps the minister—to pages 254 and 255 of the budget report, which details the Transport and the Environment Committee's response to the budget. That committee has asked some pretty fundamental questions about the links between policy objectives, the financial means of delivery and the ways in which choices about allocation are made. The document demonstrates that the committees are carrying out very serious work and are asking fairly fundamental and challenging questions.

I was not seeking to demean the committees' contributions in any way. In fact, I am going to quote from the Transport and the Environment Committee's budget report.

However, I want first to cover the business of public consultation. Although such consultation has been valuable—indeed, the people in Orkney this year made some valuable contributions—it was obvious from meetings in Orkney and last year in Kirkcudbright that local organisations find it difficult to relate directly to the budget documents. Although they might have perceptions about what is right or wrong with their lives and some general idea of the link between that and Government policy, they find it by no means obvious how to relate such perceptions to some of the budget's specifics.

We have a bit of work to do to improve our consultation on a lot of the detail of the budget. In relation to specific recommendations on the budget, the Justice 1 and Justice 2 Committees made some interesting proposals for changes in expenditure. I am keen to see what comes out of that.

The Transport and the Environment Committee is particularly concerned about the underspend in the transport budgets and worried that the Deputy Minister for Finance and Public Services and his officials were unable to provide any accurate estimate of the underspend at the end of 2001-02. That committee said that it did not find the department's approach helpful in that regard, and that

"the Committee is more than willing to champion the cause of the transport budget—provided the evidence exists—but it is difficult to engage in the process when the Committee is in the dark over one of the key variables in the equation, namely the likely level of underspend."

When a committee feels that it is unable to carry out what it feels is its primary responsibility, we have a duty to examine that and see what can be done to help.

Many members have alluded to the recommendation that road maintenance should be taken up and talked over with the Convention of Scottish Local Authorities. We are all aware of the problem with our non-trunk roads in nearly every region of Scotland. It is a bit rich for the Conservatives to complain about that, given the fact that pressure on local government finance over decades, at the behest of Conservative Governments, got us into the current situation.

Will Mr Morgan give way?

No. I think we have heard enough from Mr Davidson today.

The Rural Development Committee talked about the difficulty it experienced trying to identify what is actually going on in the rural development budget, because most rural development activity is not within the budget of the Scottish Executive environment and rural affairs department. The Rural Development Committee asked that the Finance Committee institute a cross-cutting investigation into rural development. I am sure that that is one suggestion that the Finance Committee—at least those of us who are spared after the next election—will take up. I look forward to participating.

Various members of the Local Government Committee mentioned the need for the Executive to address the implications of the increase in national insurance charges. That is something the Finance Committee picked up on, and to which Peter Peacock responded. At least we have had a year's grace to make the adjustments, but the chancellor in London could have made the changes come in this year and we would have had no grace to adjust our budgets to take account of the extra expenditure that would have been forced on our health boards and local authorities by a decision of the chancellor at Westminster. That highlights the need for us to control taxation here in Scotland, so that we can do the full job of budget scrutiny. That is a point that Alex Neil made eloquently and elegantly in his speech.

Peter Peacock talked about the spending review, but any spending review in Scotland is only a consequence of the comprehensive spending review at Westminster. Whatever decisions we make in Scotland are simply a hand-me-down from the people who have the real power and make the real decisions down in Westminster.

The minister referred to the Barnett formula. The phraseology he used seemed to imply that we should all be grateful for the Barnett formula, but we must be clear about the fact that the Barnett formula simply determines how much of our own money we get back from the Westminster Exchequer. The answer is, of course, less than 100 per cent.

Getting back into consensual mode, I would like to draw the minister's attention to the first two recommendations of the Finance Committee's report. In particular, I ask him to consider how the additional funding will be spent this year and what outputs it will provide, and to explain how those decisions advance the Executive's spending review. That is what we want when the draft budget is published this year.

If we are to do our job properly, it is essential that we know about the additional funding and what specifically it is meant to achieve. That is an essential part of our being able to provide the kind of scrutiny that we are meant to provide. I hope that the minister will respond to that. I commend the report to the Parliament.

Many good points have been made in the debate and I shall try to pick up as many as I can. Several members—Iain Smith, Alasdair Morgan, David Davidson, Alex Fergusson, Christine Grahame and others—have asked for an assurance that we will respond to all the points that are raised in the Finance Committee's report. I give that undertaking. We will look at the report in detail, consider the suggestions and come back over the coming months with responses to all the points that it raises.

Christine Grahame raised a point about the justice budget having declined. It has not declined. One of the technicalities in the budget is the distinction between TME and DEL—totally managed expenditure and departmental expenditure limits. The actual cash spend on justice has risen. I am happy to write to Christine Grahame to explain the detail of that.

Other points were made constructively. Alex Neil made a point about the careers service budget moving to within Scottish Enterprise and about the need to continue to identify that. We will consider that and see whether we can continue to show that in a helpful way. We will also consider the presentation of the venture capital fund. Reference must also be made to Scottish Enterprise's documents and accounts, however. It is not possible to contain every detail in our own budget documents and keep them to a manageable size, but we will do what we can.

I disagree with Alex Neil's point that, despite all the expenditure in the budget, the outcomes are getting worse for Scottish people. That is not and cannot be the case. Waiting times are being reduced, waiting lists are being addressed, crime rates are falling, detection rates are rising, school attainment levels are rising, more jobs are being created and there is less unemployment. Those are exactly the kinds of outcomes that the Scottish people are looking for. Therefore, it is simply hyperbole to suggest that that is not happening.

Jamie Stone made good points about the improvements in the budget process. He said that the process is much more open and consultative than it used to be, that people can get involved and that ministers now engage not just with the local government community but with the public at large. He is right to draw attention to the fact that the process is improving.

Jamie Stone also drew attention to the need to increase investment in roads, bridges and so on, and his comments were echoed by other members. That matter has come up in our recent consultations and it is one of the issues that we will address through the spending review. Nevertheless, we have done a lot on that front already. A couple of years ago, £70 million was added to the local government settlement to increase expenditure on local roads and, at the end of the last financial year, a further £20 million was added to help that process. Yesterday, £95 million of end-year flexibility money was announced for local authorities, in part to address those issues. Those matters are not just being considered; they are being acted on—that is the important thing. Jamie Stone also raised questions about the way in which we monitor that spend and its impact. We are spending time with local authorities, trying to establish outcome agreements so that we can jointly agree what we are seeking for the expenditure and then monitor the progress towards those outcomes.

Brian Adam was positive for fully 30 to 45 seconds in his opening speech before he slipped back into rhetoric about the powers of the Parliament. Instead of focusing on what we can do with the powers that we have and the £22 billion of expenditure that is at our disposal, he chose to focus on what we cannot do. He proceeded to complain that the Parliament does not have control over the world's stock markets. What an extraordinary thing to say. He also said that we are unable to control the effect of the stock markets on international pension funds and that, somehow, international corporate fraud would end if only we had independence. Stewart Stevenson then implied that we are responsible, in some way, for American accountancy standards. It is utterly bizarre to suggest that giving the Scottish Parliament more powers or giving Scotland independence would automatically solve the problems of international fraud, American accountancy standards and the world's stock markets.

Will the minister give way?

How can I resist? It is an enormous thrill to be intervened on by Stewart Stevenson. I can barely contain myself. It is an honour and privilege to be intervened on by one so great, who has had so many life experiences and jobs. For him to intervene on me is beyond expression. I wonder whether, in his intervention, Stewart Stevenson will answer the rumour—one of several that are circulating in the Parliament—that he was the first man on the moon.

I am sure the budget for that would not have been sufficient if the Scottish Executive had been providing it, as with so many other things.

I have serious questions on two matters that the minister has covered in his speech. Will he assure members that when he says that the justice budget has risen he has taken account of the so-called impairment costs for each of the years to which I referred in my speech? Will the minister also confirm that in employing international accountants—the Executive has employed five companies over the past four years—the Executive and its civil servants took the decision to employ those companies?

As I have said, I am happy to give Christine Grahame an answer to her question about justice and I will copy that to Stewart Stevenson. My answer will take account of his point about impairment, which is one of the reasons for the technical adjustment.

On the point about international firms, to suggest that the Scottish Executive is complicit in a conspiracy about international accountancy firms lowering their standards to mask figures in the Scottish budget is ludicrous and beyond belief. It is complete and utter nonsense. That was the implication of what Stewart Stevenson said. Again, it is ridiculous to suggest that if the Scottish Parliament were independent, it could sort out all those problems.

Will the minister take an intervention?

I will come to Mr Adam in a moment because I am just going to refer to something that he said.

Brian Adam gave a critique of—or rather he moaned about—yesterday's EYF announcement. As always happens with the SNP, good news from this side of the chamber resulted in glum faces on its side of the chamber. However, the SNP's record on EYF is riddled with confusion and contradictions. Yesterday Alasdair Morgan issued a statement that mentioned an underspend. There is no underspend in the way he described. Alasdair Morgan knows that there was no underspend and Brian Adam agreed with the evidence we gave to the Finance Committee on what EYF comprises. There was planned provision for future spending from which Scotland benefits.

Alasdair Morgan's press statement also mentioned the figure of £750 million as being the underspend for last year. He got the figure wrong. I have a cigarette packet here that I am happy to pass to Alasdair Morgan to help him to work out the figures. There is plenty of space on the back of it. The Opposition spokesman should be depending on the right figures, although a fruit basket might be more appropriate in view of what Christine Grahame said about apples and pears helping to sort out the budget.

Not only are those things wrong and in contradiction of the facts, but Andrew Wilson—

Where is Andrew Wilson?

I do not know where Andrew Wilson is and I am no longer clear about whether he is the SNP's finance spokesman. However, in his recent economic paper, Andrew Wilson said:

"The release of finances for re-direction through EYF will be the key to any specific spending commitments."

In others words, while the SNP moans about what we did yesterday to give money to Scottish councils and priority services, and it says that we underspend when we do not, it plans to use EYF more than we have been using it already. The SNP is riddled with contradictions and difficulties.

Will the minister give way?

I will give way to Alasdair Morgan.

The minister should have heard what I said yesterday when I was questioning the Minister for Finance and Public Services. I said that we have no problem with the concept that once there is an underspend, it can be carried forward to the next year and used sensibly. End-year flexibility and underspend are entirely different. End-year flexibility is the way in which the underspend is used. The question is whether the underspend should have been so big.

While we are on the subject, will the minister tell members when an underspend becomes a planned underspend? Is it in April, May, June or December? Does the minister even know when it is happening?

The point that we are consistently making is that EYF is a positive thing because it allows us to plan for peaks in future expenditure by carrying money forward over a year end. If we were simply to spend all that money in a given year, the money would not be there for a peak in expenditure and, in the year that peak expenditure was required, we would have to cut into baseline expenditure. EYF is a sensible and planned use of resources and that is why we use it.

Alex Neil and Alasdair Morgan also referred to Gordon Brown's budget and its paucity, as they would say. However, Andrew Wilson disagrees with them again. In his economic policy and positioning paper released in April this year, he said that the key to any specific spending commitments that the SNP makes will be

"an assessment to the flexibility of new funds that come on stream following this summer's CSR."

So the SNP is just waiting for Gordon Brown's bounty of new cash for Scotland to decide how it wants to spend it. The SNP does not have, as Iain Smith said, any alternative thoughts on the Scottish budget, nor do the Tories.

Apart from the helpful suggestions at the absolute margins of the budget, missing from the debate have been SNP or Tory plans on how they would do things differently. Both parties appeal to this country to be elected on the basis that they would manage Scotland differently and better, yet there is no sign of how they would do things differently or better. What items of expenditure would they increase within the fixed budget? How would they finance those items of expenditure, and what other items of expenditure would they reduce? They imply that the system could be run more efficiently, but there has not been a single illustration of where or how it could be run more efficiently. Most of this is a combination of fantasy and fuzzy maths. That is the truth of the matter.

We now have a situation in which Alasdair Morgan feels compelled to argue against the benefits of the Barnett formula. The Barnett formula is simple, fair and easy to administer. It avoids annual wrangling within the UK between the four home countries, which is exactly what the SNP seeks—to have us wrangling with our neighbours and friends across the border. The formula allows Westminster, Stormont, Cardiff and Edinburgh to get on with what they should be doing, which is governing effectively and delivering good public services and not becoming involved in constant constitutional wrangling. The formula gives us the freedom to make our own choices in distributing funding. It provides the same increase pound for pound per head of population as in England, and it delivers for Scotland spending levels per head that are well above those in England.

Our budget proposals, which are the subject of the debate, provide record levels of spending. That spending will address the priorities of the Scottish people. It will make lives better throughout Scotland, through better education for young people, better health care for all our people, improved and improving transport connections, job opportunities and the dignity that work brings, and communities that are safer from crime. Our budget proposals make provisions for those priorities and much more. I look forward to working with the Parliament during the year to refine and deliver on those budget priorities.

I call Elaine Thomson to wind up for the Finance Committee.

As the Parliament moves into its third budgeting cycle, it increasingly seems like it is summer time, therefore it is the stage 1 budget debate. I dare say that it is a key annual date. I am sure that Jamie Stone has it pencilled in his diary, as he is so enthusiastic.

One of the innovations that were introduced by the Finance Committee two years ago was increased consultation with Scotland outside Edinburgh. One of the benefits that that affords is the opportunity to see different parts of Scotland in the summer, when they look at their best.

This year, the Finance Committee took evidence from a range of organisations in Orkney. A clear message was received by the committee, and no doubt by the Minister for Finance and Public Services, about the issues that affect Orkney. In particular, we heard how transport is becoming ever more important and how the adequacy or otherwise of transport links impacts on almost every aspect of island life. It is vital that the Parliament understands clearly how issues affect communities, in particular when deciding on something as crucial as the Scottish budget. It matters how the budget is constructed and how priorities are made.

For the financial year 2003-04, the Scottish budget has continued to increase in real terms. Over the three-year period 2001-02 to 2003-04, TME has increased in real terms by 6.6 per cent, or £1.3 billion, which gives us a total budget of £22 billion. The Scottish Executive has made clear its priorities for spending—investing to provide effective public services and building an infrastructure in Scotland that is fit for the 21st century.

Significant steps are being taken by subject committees to scrutinise the budget. Advisers are assisting each committee and members of the Finance Committee have acted as reporters on the subject committees to assist them with the budget process. As has been said, increasingly large numbers of witnesses are participating in the budget process, either via the subject committees or this year, for the first time, directly with the Finance Committee. We took evidence from the Scottish Trades Union Congress, the CBI, some economic specialists and the Scottish Civic Forum.

This year, for the first time, we are beginning to move away from presentational issues towards discussing and making recommendations on budget choices. However, a number of issues remain that relate to the timing of the budget process and events that occur subsequent to the publication of the budget documents. Iain Smith raised some of those issues and spoke about how they impact on local government. The budget documents are published and a number of events then happen which, however welcome, have an impact on the information that is available to the Parliament. This year, there were consequentials from the UK budget. Yesterday, extra resources were made available as a result of this year's EYF. Later this summer, there will be the 2002 spending review. All those will affect the stage 2 budget process, as extra resources are added to the Scottish budget. That has led the Finance Committee to make recommendations on having more information about baseline figures. New financial proposals should come forward with more information about outputs.

This year, as a result of the UK budget, some 50 per cent more resources will be available to spend on health. The Scottish Parliament information centre briefing, which was ably prepared by Murray McVicar, makes it clear that that will add a further £224 million in financial year 2003-04 and £858 million in 2004-05, and that that will rise to an extra £3.2 billion in 2007-08. The Finance Committee discussed the proposals for the increased health budget in Orkney and whether health budget consequentials should go into health, but not necessarily straight into the NHS budget. The committee welcomes that approach and accepts that it is a Scottish solution to a Scottish problem and wholly consistent with the principles of devolution.

Increasingly, committees are producing more thoughtful and detailed reports on budget issues. The Health and Community Care Committee, for example, has made it clear that there are still issues to do with the transparency of the health budget and the need for the publication of health board allocations and budgets to aid that transparency. Mary Scanlon raised some of those issues this morning.

The Finance Committee has made further recommendations in respect of health that relate to delaying the implementation of the Arbuthnott formula to general medical services as a result of problems in the rolling out of the McCrone settlement. I look forward to seeing what happens.

Other committees are coming forward with different budgeting options. The Local Government Committee, for example, is concerned about the implications of national insurance increases. This morning, Alex Neil made proposals on the enterprise and lifelong learning budget and Alex Fergusson outlined clear proposals in respect of the rural development budget to support the Scottish fishing industry. Christine Grahame discussed the need for greater funding for the justice portfolio.

The Finance Committee and I welcome the minister's continued willingness to work effectively with the subject committees and the Finance Committee to discuss and understand issues and to help the Parliament to move towards outcome-based budgeting, which members have mentioned. I think that we all agree that we wish to go in that direction.

I also welcome the minister's commitment to continue to work towards equality proofing the budget. The committee is keen on the development of clearer definitions and on the development of a mechanism to ensure that the equality strategy is reflected in budgeting allocations. The committee and I look forward to the outcome of the discussions that the Executive will hold with the Equal Opportunities Committee and the results of the work of the equality proofing advisory group and others who are interested in the area, such as Engender. It is clear that instant solutions in that area, as in many other areas, are not available.

Whatever its faults, the Scottish budgeting process is at the leading edge of budgetary processes that are used by Parliaments. A lot of time and effort is going into the Scottish budget process on the part of many people within and outwith the Parliament. Increasingly, it is building a sound basis for the scrutiny of financial decisions that I am sure will grow and develop. As Jamie Stone and others have mentioned, the level of scrutiny that is possible now is several light years away from what was possible in pre-devolutionary years. As Jamie Stone said, input from ordinary people is vital. That, together with the ability of the budget to deliver for the people of Scotland, will be one of the touchstones for the success of the Scottish Parliament and I commend this year's budget report to the chamber.