Police and Fire Services (Finance) (Scotland) Bill: Stage 1
The next item of business is the stage 1 debate on motion S1M-1992, in the name of Jim Wallace, on the general principles of the Police and Fire Services (Finance) (Scotland) Bill.
I thank the Local Government Committee for its careful consideration of the Police and Fire Services (Finance) (Scotland) Bill and for its report, which provides a considered assessment of the issues that arise from that small, but quite intricate, piece of legislation. I welcome the committee's broad agreement with the general principles of the bill, although I recognise that it has some concerns about the detail. Before dealing with the matters raised by the committee, I would like to give some background about the need for the bill and to set it in context. It would probably be easier if I deal with each service in turn and, if I may, I shall begin with the police.
As I am sure members are aware, the police are funded differently from other local authority services. Each force has a police authority or joint police board, which has responsibility for setting force budgets. The Scottish Executive pays a grant of 51 per cent to cover eligible police expenditure up to a cash limit. Joint police boards then requisition the balance from their constituent local authorities or, in the case of unitary police authorities, from the local authority.
Until 1996, the Scottish Office set a maximum number of police officers for each force, and police grant was paid at 51 per cent of all eligible police costs. Since then, the controls on police officer numbers have been removed, and police grant has been paid up to a cash limit. That change has given chief constables and police authorities more freedom to manage their budgets. However, it has left the police facing something of a quandary. As an emergency service, they have to keep in hand sufficient reserves to enable them to meet unusual demands, but at present they are obliged to return any money unspent at the end of each financial year. That creates a pressure to rush to spend money at the end of the year to avoid its being lost to the force.
In November 1998, the Accounts Commission for Scotland and HM inspectorate of constabulary investigated police funding and published a report called "Credit to the Force". Among other things, it concluded that better value would be obtained if forces could carry forward a working balance from year to year. The report argued that working balances, in conjunction with greater stability in funding, would make the financial planning process more efficient and effective. The report suggested that the amount that could be carried forward should be limited to 3 per cent of a force's annual budget.
Am I right in saying that a 3 per cent limit also applies to the fire service, which has a different financial structure from the police service? There is perhaps a case for the Government, which funds the police service, putting a limit on the carry-forward of underspends, but why is that the case with the fire service, which is not keen on that 3 per cent limit? Why is the same limit applied to both services?
The limit on carry-forward carries with it an element of control. The reason for making similar proposals for the fire service and the police service is a matter that, if Richard Lochhead is willing to wait, I shall come to later in my speech.
As members will know, we have introduced three-year budgets for local authorities, including the police service, giving the stability sought by the "Credit to the Force" report. The ability to manage spends at the end of each year is of even greater significance if forces have to budget for three years at a time, so that underspends in one year can be compensated for in the next. In fact, we have gone beyond the recommendation in "Credit to the Force" and have allowed joint police boards to accumulate balances year on year. I shall return to that point later.
The bill amends the Police (Scotland) Act 1967 to make provision for the carry-forward of working balances. Section 1(1) of the bill deals with the carry-forward of unspent police funds by joint police boards. It does so by amending the 1967 act to require the amalgamation orders that set up the boards to make provision with regard to the payment by the constituent authorities of the amounts that the joint police board estimates will be incurred.
Section 1(2) of the bill amends the 1967 act to ensure that both joint police boards and unitary police authorities can carry forward unspent police grant. At present police grant is paid after an order is laid under section 32 of the 1967 act before the beginning of each financial year. That order is redetermined to show the actual grant paid after the end of the financial year when actual figures are known. The bill ensures that, given the approval of ministers, boards will be able to carry forward police grant.
I mentioned the origin of the proposals in the report "Credit to the Force". As Mr Lochhead correctly pointed out, that report related only to the police. However, it would have been remiss of us not to have regard to the read-across to the fire service. Many of the same considerations apply and we have therefore included provisions in the bill relating to the carry-forward of working balances by joint fire boards. No equivalent to police grant is payable to fire authorities so, to that extent, the provision for joint fire boards is shorter. Apart from that, and some minor adjustments to the existing legislation in respect of administration schemes, the provision for those boards has the same effect as the provision for joint police boards.
Part of the answer to Mr Lochhead's question is that a unitary fire authority with a single local authority would be able to carry forward using the other arrangements for local authorities to carry forward; however, where a joint board is in place, the proposed legislation would be required to allow that carry-forward too. The fire service is, of course, also an emergency service and, although most of the imperative for the legislation came from the police side, it seemed right to mirror arrangements for the fire service.
I hope that members will understand that the bill's intention is to provide for better financial management, to avoid a rush to spend at the end of each year in particular, and to underpin the three-year budgeting cycle that has been introduced. The bill is a sensible amendment to existing legislation and the Local Government Committee's report commends the general principles of the bill. I hope that the report's conclusions will be endorsed by Parliament today.
The committee had some concerns about the constraints in the bill. If the bill becomes law, there will be issues about the building-up of large balances and the impact on local taxation of not returning unspent requisitions to local authorities. Consequently, some safeguards have been built into the bill.
The first safeguard is that balances can be carried forward only with the consent of the constituent authority whose contribution constitutes, or is part of, the money that is intended to be carried forward. Secondly, any proposal to carry forward requisitioned funds or police grant should have the consent of the Scottish ministers. In addition, as discussed earlier, there is a 3 per cent limit on the amount that can be carried forward from individual years, although that carry-forward can be accumulated year on year.
The committee, and many of the witnesses who gave evidence, had some difficulty with the first safeguard. The fear was that if a single authority opted out of carrying forward its share of any underspend, the difficulties caused would undermine the whole principle of the bill. The proposal was introduced to protect the position of individual authorities since, at present, any unspent requisitions are returned to them in full. We have carefully considered the committee's report and the evidence submitted by the witnesses and concluded that the provision could be removed from the bill. We will lodge an amendment to that effect at stage 2, assuming that members approve the motion.
The committee was also concerned about the need for ministerial consent before a carry-forward could take place. Again, we have carefully considered the committee's report and the evidence submitted; however, we still think that there is a case for involving ministers and I will explain why.
As I mentioned, we have gone beyond the recommendations in "Credit to the Force". The bill as drafted allows authorities to accumulate carried-forward amounts and so build up large balances to meet anticipated financial pressures. The ability to build up reserves may have an impact on local council tax levels and we therefore think that some sort of safeguard is necessary. However, we acknowledge that misuse of the facility is unlikely and we do not wish to get involved in day-to-day police and fire board issues. Some witnesses expressed concerns about the time that it might take to get the ministerial consent that is required. We therefore propose to allow boards blanket consent to carry forward balances without reference to the justice department, except in exceptional circumstances.
The details have yet to be worked out but, for example, automatic consent might be based on the accumulated amount not exceeding, say, 5 per cent of that year's budget. That approach would give the boards the certainty they need, but protect the interests of taxpayers at both national and local level. That is a significant qualification, and I hope that committee members in particular will agree that it is one that goes a long way towards meeting the concerns raised about that provision.
Some people have argued that the provision is not necessary because, at least in the case of police grant, the Executive can react to excessive reserves by simply reducing the amount of police grant available in subsequent years. Fire boards could apply the same approach to any reserves accumulated by brigades. However, I think that most of us would agree that it is better to avoid difficult situations arising rather than to apply sanctions later in the process.
There is another reason why ministerial consent is important, particularly in relation to the police. Given that police grant and local authority requisitions are treated separately, it would be possible for a board to deliberately set a budget above its requirements, draw down police grant and then carry forward police grant, but not requisitions. That would distort the balance between police grant and local authority expenditure. I do not want to suggest for a moment that that kind of devious machination is likely, but safeguards should be put in place to stop it occurring.
The final safeguard is a limit of 3 per cent on the amount that can be carried forward. That limit is based on the recommendation in "Credit to the Force". The limit may prove generous or restrictive in practice, but it can be varied by means of a statutory instrument subject to the negative resolution procedure.
In conclusion, we think that the bill is sensible and that it will help financial management in the police and fire services. I am glad that the Local Government Committee approves the general principles of the bill.
I move,
That the Parliament agrees to the general principles of the Police and Fire Services (Finance) (Scotland) Bill.
I am sure that members wish to welcome to the chamber representatives of the police service in Fife. It is a nice coincidence that they are visiting today when we are discussing the Police and Fire Services (Scotland) Bill. I am certain that they will find the proceedings of great interest, even though the two unitary authorities, Fife and Dumfries and Galloway, are not covered by the legislation insofar as it relates to the carry-forward of unspent requisitions.
The bill is a sensible measure that will allow police and fire authorities to carry forward working balances from one financial year to the next. It offers greater flexibility and more prudent financial planning and, as the minister said, it will stop the rush to spend as the end of the year approaches. The SNP supports the general principles of the bill.
I am pleased that the general principles of the bill command support throughout the public service spectrum. The Convention of Scottish Local Authorities has welcomed the principles of the bill because of the greater financial flexibility it offers; the Association of Chief Police Officers in Scotland has stated that the bill would enhance significantly the efficient use of resources; and the Accounts Commission for Scotland believes that the bill will be helpful in assisting police and fire brigades to deliver better value for money.
As the minister outlined, there are a number of concerns about the bill. I am grateful that the minister has suggested, at an early stage in the debate, that he is willing to consider amendments at stage 2. It is important that during the debate we run through the reasons why many members feel that some parts of the bill need to be examined.
The first concern is about ministerial approval for carrying forward working balances. Local councils do not require ministerial approval to carry forward their working balances and we believe that police and fire boards should have the same flexibility as local councils. We do not believe that additional bureaucracy and control is necessary and we do not understand why it is necessary to exercise ministerial control over the amounts in question, which will be modest. The minister indicated that ministerial approval will be dealt with by informal arrangement. If that is so, most of us are at a loss to understand why that informal arrangement must be enshrined in legislation. That control is unnecessary and it will undermine the modest provisions of the bill.
Of greater concern is the requirement that joint police or fire boards have approval from all the constituent authorities to carry forward the underspent money. I am grateful that the minister has already acknowledged that that will be subject to amendment. Chief Constable Rae of the Association of Chief Police Officers in Scotland highlighted his concerns about what would happen if one constituent authority refused to allow the carry-forward:
"it is difficult for me to say that I will not send as many police officers to an incident because that authority has withheld a proportion of the budget."—[Official Report, Local Government Committee, 4 September 2001; c 2152.]
That perhaps explains why there is concern and why we are grateful that the minister has indicated that that proposal will be amended at stage 2. COSLA believes that the proposal would undermine the basis of the current relationship between joint boards and the constituent members.
It is appropriate to mention the democratic legitimacy of the joint boards. They comprise, after all, elected councillors and have been a standing feature of Scottish local government for many years. They must be free to determine their priorities, not just from the perspective of one authority, but from the strategic perspective of all the areas that they cover.
It would be a matter of regret if amendments were not to be lodged that prevented that legitimacy from being undermined. That might also lead to delay and set council against council to no great purpose. In any event, the local authorities would take action to ensure that any joint police board or fire board that was building up unreasonable reserves would make the necessary adjustments during the normal budgetary procedure. That is how the situation should be.
I confess to having no strong opinion at this point on whether an upper limit of 3 per cent should be placed on the carry-forward. COSLA believes that the joint boards should decide the percentage of carry-forward by a normal consultative process with the joint bodies. Representatives from the Chief and Assistant Chief Fire Officers Association have expressed concern that the figure seems to have been plucked from thin air.
I will now speak on an issue that is not specific to the bill—pensions. The intention behind the bill is laudable. It has found support throughout the public sector. However, the reality is that the benefits of the bill will not be felt for some time, because any underspends are currently used to fund the pensions of the fire service. On that point, Tim Stone of COSLA said:
"A major problem with the increasing cost of fire service and police pensions is forthcoming. Those will increase substantially over the next 10 years and will somehow have to be funded. I suggest that that cannot be dealt with using the reserves with which the bill is concerned."—[Official Report, Local Government Committee, 4 September 2001; c 2141.]
Although the bill will have a modest effect on underspends in the future, the reality is that it is terribly academic in the medium term until such time as police and fire pensions are dealt with. I urge ministers to address that matter with some urgency. All the representations that I have received indicate a belief that there is a time bomb under the pension schemes for the police and fire services in Scotland. I urge the minister to go away, think about that and find out whether we can put in place a better system.
The principles of the bill are welcome. A number of issues should be addressed by amendments at stage 2. However, we need sufficient funding and resources for pensions in the first place. I congratulate the minister on the bill. It is modest, but it will make a real difference to the police and fire services in Scotland. The SNP welcomes the general principles of the bill.
I congratulate Tricia Marwick on speaking for a full seven minutes. She has said practically everything that I was going to say, so I will find it difficult to keep going for five minutes.
Mr Harding does not have to speak for five minutes.
Oh but I must, just to deprive Mr Rumbles of the time.
The Conservatives, like the majority of the witnesses who gave evidence to the Local Government Committee, broadly welcome and support the bill. However, we do have some reservations, which the minister has gone some way to addressing. We feel that the proposal that ministerial approval be sought to carry forward working balances is unnecessary, particularly as there is no similar requirement for local authorities' budgets. We welcome the minister's announcement today and his movement on the issue.
Although the figure of 3 per cent for the upper limit on the carry-forward is reasonable and workable, we are concerned by some comments about the fire service pensions deficit. Tricia Marwick has already highlighted the problem, but it is worth repeating. We were told that any savings achieved would be used to address the pension deficit and that no reserves could be built up. Although the matter is not within the scope of this bill, I hope that the minister will acknowledge the great problem of the fire service pension deficit and consider the issue separately.
Mr Harding and I have both served on police boards in our time. Does he agree that the pension problem is potentially so big that it might not be best to tackle it through revenue funding or by carrying forward balances? Would it not be more sensible to move towards a managed pension fund for police and fire services? I know that it would take a lot of money to set up such a fund, but it might be the best approach to take.
There is no doubt that that is a possible solution. That is why I have asked the minister to consider the issue separately and open up the debate. As Tricia Marwick said, the problem is a time bomb which will explode in the next few years.
Another concern is the proposal that joint boards will be required to seek the approval of constituent authorities to carry forward unspent budgets. As Tricia Marwick has already pointed out, the chief constable of Strathclyde expressed concerns in his evidence to the Local Government Committee about the prospect of having to determine who would pay for what. Boards should not have to consult budgets before they address issues.
Furthermore, in its written evidence to the Local Government Committee, the Chief and Assistant Chief Fire Officers Association said:
"If one authority did not agree"
to the build-up of reserves
"the proposed requirement could affect the ability of firemasters to respond to incidents, and could in certain cases, lead to decisions on the level of response to specific incidents being influenced by a particular Council's decision on the carry-forward proposal."
In these days of restricted council budgets and with many local authorities experiencing current overspends, there will always be a temptation to claw back underspends from the joint boards. The boards should have the ultimate decision on the roll-over of unspent moneys without requiring the approval of the constituent authorities. We welcome the minister's announcement today that he will introduce the proposal as a stage 2 amendment.
When the minister sums up, perhaps he can explain why joint valuation boards were not included in the proposal and whether they will be taken into account in future. That said, we welcome the bill and the added budget flexibility that it gives, and support its general principles.
The bill's primary purpose is to allow fire and police authorities to carry forward any underspends in their budgets to the following financial year. The measure is long overdue and I commend the Executive for introducing such sensible financial proposals so early in the life of the Parliament.
Currently, the Scottish Executive pays 51 per cent of the funds of the fire and police authorities to cover their expenditure up to a predetermined level, with the remaining funds coming from local government. If the police authority overspends, the money has to be made up; if it underspends, the remaining funds are repaid to local government and the Scottish Executive. In 1998, before devolution, the Accounts Commission's report "Credit to the Force: Funding and Financial Delegation in the Police Service" recommended that police forces should indeed be allowed to carry forward their working balances into the following financial year. The report says:
"On the one hand, as an emergency service, they have to keep in hand sufficient reserves to enable them to meet unusual demands. However, forces tend to want to ensure that budgets are spent as wisely as possible and do not wish to rush to spend money at the end of the year."
That position is perfectly reasonable, and I imagine that many members in the chamber—although I should point out that the chamber is hardly packed—who have worked in the public sector have at some time been told that they have funds that must be spent in a matter of days before the end of the financial year. We all know that that is a ludicrous way in which to budget, but that has been going on in many parts of the public sector for years. We must get away from the bad practice of use-it-or-lose-it funding and I am glad that the bill directly addresses that issue.
The bill will undoubtedly foster good financial management. Its measures will be subject to the two checks that have already been mentioned. First, the balances that can be carried forward will be limited to 3 per cent of the budget, which is a very sensible measure.
Secondly, balances are to be carried forward with the consent of the constituent authorities and Scottish ministers. On ministerial approval, it is important to note the evidence given by the Association of Chief Police Officers in Scotland to the Local Government Committee. An ACPOS representative said:
"Councils do not require ministerial approval to carry forward their unspent balances; joint police boards require the same flexibility."—[Official Report, Local Government Committee, 4 September 2001; c 2147.]
Councillor Joseph Shaw of COSLA said:
"All that troubles me is the fact that the process might be held up. People must realise that the fire department is an emergency service. We had to deal with fires in Arran, which cost us roughly £50,000. If I had had to wait for ministerial approval, the cost could have been £250,000. It is lucky that we put out the fires in time. Waiting for ministerial approval might have meant that we lost Arran."—[Official Report, Local Government Committee, 4 September 2001; c 2143-44.]
Those are fair points. I am pleased that the minister is to lodge amendments to address some of the issues at stage 2 and that the Executive has listened to the Local Government Committee. In its report, the committee says:
"The Committee notes the Deputy Minister's response. However, it is not persuaded that the need for ministerial approval for proposed carry-overs has been demonstrated."
I know that the minister talked about stage 2 amendments; I still hope that the Scottish Executive will loosen up a little on its control over funding, for which there is no need. Having highlighted those concerns, which I hope will be dealt with at stages 2 and 3, I can say that the Liberal Democrats definitely recommend that the Parliament should approve the general principles of the bill.
The Local Government Committee's discussion of the Police and Fire Services (Finance) (Scotland) Bill was interesting and raised some important issues. However, as Keith Harding said, it is becoming more difficult to speak in the debate as more speeches are made, because consensus has been reached. I was pleased to note that the minister has given way on many of the committee's recommendations, although there is still much to discuss about ministerial approval.
I want to talk about an issue that was well aired at the evidence-taking stage. It is not directly affected by the bill but is linked to it: the problem of fire service pensions. I am delighted that representatives of the fire service are attending today. Firemaster Williams stated:
"the pensions problem with which we are faced means that any savings that we make will have to go into the pensions part of the budget. The issues are linked."—[Official Report, Local Government Committee, 4 September 2001; c 2133.]
I agree with Tricia Marwick and Keith Harding that fire service pensions must be addressed fairly rapidly, but the issue is not directly related—[Interruption.]
Do not conduct conversations in between the speaker and the chair, please, Mr Gibson.
As fire service pensions are not directly related to the bill, I will deal with the issue that remains largely outstanding: ministerial approval. The evidence provided by Chief Constable William Rae and his ACPOS colleagues crystallised what I regard as the main issue: more effective financial planning—in other words, financial planning with the flexibility that is currently available to local authorities. As Chief Constable Rae said, the requirement for ministerial approval as well as constituent authority approval will
"not create the facility that the bill is intended to create of allowing us to break away from the annual budget cycle."—[Official Report, Local Government Committee, 4 September 2001; c 2146.]
The chief constable felt that the ministers currently have adequate controls to prevent large balances building up, including the proposed 3 per cent limit; the fact that ministers determine the total grant-aided expenditure levels for both the whole service and individual forces, against which the police-specific grant is paid; and the controls over capital allocations and any discretionary funds that are allocated. It was strongly argued that there is no possibility of the grant being used for non-police purposes and that balances cannot be held for the sake of it. ACPOS felt
"The proposal for Ministerial approval would introduce uncertainty and unnecessary bureaucracy to the financial planning process".
Chief Constable Andrew Cameron argued that a system of ministerial approval and constituent authority approval
"would hinder our confidence in following the principle of three-year budgetary planning",
although I accept that the issue of constituent authority approval has now been dealt with. Chief Constable Cameron also argued that local unit commanders needed to have increased confidence
"at inspector level to prioritise their local community needs."—[Official Report, Local Government Committee, 4 September 2001, c 2151.]
More devolved financial management would allow that to happen. Local needs could be prioritised and dealt with in an on-going and effective manner.
Other witnesses argued that sufficient structures are in place at police and fire board level to make ministerial approval unnecessary. Indeed, it was felt that a requirement for ministerial approval goes against the spirit of the bill, which is to give the police and fire services more freedom to manage their budgets flexibly and effectively. In response to my question about when ministerial approval would be required, Iain Gray implied that the system would be so informal as to be non-existent. If so, there seems no reason for requiring ministerial approval. Tricia Marwick made the same point earlier.
The sentiments that I have expressed wholly reflect the feeling of the Local Government Committee. There are still issues to discuss, but all members of the committee are agreed on the general principles of the bill and on the need to move forward with it.
Consensus is rife in the chamber today. That is always welcome during stage 1 consideration of a bill. Amendments can be made at stages 2 and 3.
This bill contains three contentious provisions. The first is the 3 per cent limit, the second is the requirement for consent by the constituent authority and the third is the requirement for ministerial consent.
The minister has said that the Executive will lodge an amendment at stage 2 to deal with the issue of constituent authority consent, and I welcome that. I have been a member of the Local Government Committee for only two weeks, but I know that it had considered the relevant documentation and debated the issues before I joined. The committee was happy that the minister had committed himself to lodging an amendment to the bill. I was even happier than other members, because I was concerned by what Iain Gray said in his letter to the committee of 11 September. In the final paragraph of that letter, he stated:
"a local authority would have to have made a conscious decision that it was willing to suffer a lower standard of policing or fire services than that enjoyed in neighbouring areas and to have spent the money thus saved elsewhere. Ultimately it would have been up to the electorate to decide whether they agreed with that order of priorities".
I now do not have to write to Mr Gray to ask him to explain what he meant. He may say more about the matter in summing up, because I was confused by the suggestion that politics should come into the police and fire services.
The issue of ministerial consent is more problematic. Mike Rumbles has already pointed out that we might have lost the isle of Arran if we had had to wait for ministerial consent. I did not want to raise that issue, because I thought that it might frighten people to death. Instead I will quote Councillor Hinds, whose comments are short and to the point. He said:
"The difficulty is the bureaucracy of the system."
That is right. The councillor continued:
"If the Scottish Parliament is about nothing else it is about trust and devolving power and resources. That is the principle of the matter."—[Official Report, Local Government Committee, 4 September 2001, c 2144.]
I hope that the minister will reconsider that issue. I am sure that the Local Government Committee will do so.
The other issue that I mentioned was the 3 per cent limit. After being questioned by the committee, representatives of COSLA and the fire and police boards appeared to agree that they would accept the 3 per cent limit if that was the only of ensuring that the bill was passed. However, they felt that the same limit was not imposed on councils and that it amounted to a form of capping. Others have also raised the issue of the 3 per cent limit. Along with ministerial consent, that is the only contentious matter remaining in the bill.
The bill is sensible and I am happy to support it at stage 1. We know that a variety of amendments will be lodged at stage 2, but, on the whole, it is a sensible bill. It was crazy that police or fire services could have been prevented from carrying out their duties simply because a council would not give them money. I welcome the bill at stage 1 and I welcome the amendments that the minister is to lodge at stage 2.
One of the Parliament's strengths can be found in the fact that we are able to find time to introduce short bills that tidy up some of the issues that seem to interested parties to have been hanging about to be dealt with for a long time. Many areas of Scottish legislation are known to require remedial action, but finding the time to deal with them was previously a problem. The Police and Fire Services (Finance) (Scotland) Bill comes into that category. It is simple enough to amend the Police (Scotland) Act 1967 and the Fire Services Act 1947 to allow working balances to be carried forward. The clear value inherent in such short bills leaves one wondering why they could not have been dealt with earlier.
This good bill has the sensible intention of bringing into force the suggestions that were made in the joint report of HM inspectorate of constabulary and the Accounts Commission for Scotland, "Credit to the Force". Fulfilling the bill's intention will allow police and fire boards to take greater value from their resources and to have greater stability in funding and enhanced efficiency and effectiveness in future financial planning. It is hardly surprising that the intentions of the bill found support from everyone who took part in the consultation process.
Another strength of the Parliament is that we are able quickly to pick up problems that have been identified by those who are affected by a bill. The progress of the Police and Fire Services (Finance) (Scotland) Bill through the scrutiny process, via the Local Government Committee, raised a number of issues that the committee was required to cover in its report.
As previous speakers noted, three main issues arose during the consultation process. Colleagues on the committee have addressed those points already. I will focus on the issue that gave me the most cause for concern: the impact of the proposal to allow constituent authorities to withhold consent for the carry-forward of unspent moneys. Both ACPOS and CACFOA raised that issue and both provided the committee with disturbing scenarios of the potential consequences if an authority withheld its consent.
Chief Constable Rae of Strathclyde police said:
"once one of the partners takes away its share of the cake, it is difficult for me to say that I will not send as many police officers to an incident because that authority has withheld a proportion of the budget."—[Official Report, Local Government Committee, 4 September 2001; c 2152.]
Those words were echoed by the CACFOA representatives. Their concerns were so strong that it would have been wrong if the committee had not taken cognisance of them. I am glad that the minister, like the committee, also recognised those concerns.
Once the committee had recognised the concerns that had been raised, members had no alternative but to conclude that the proposal on opt-outs in the bill was unacceptable. I am in no doubt that an authority's decision to withhold moneys could have led to a reduction in the level of provision within that authority at any given time. Therefore, I am pleased that the minister reconsidered that proposal and will lodge amendments. Surely it is right that the total underspend is either carried forward or withheld in its entirety. That is the only way in which the dangerous possibilities that were outlined by the police and fire officers could be averted. My committee colleagues and I felt so strongly about that matter that we would have found it inconceivable for the bill to remain in its present form after stage 2.
I repeat: this is a good bill, with good motives. I was concerned that, as drafted, it could have unwittingly introduced inequalities in the provision of the emergency services. That would not have been the bill's intention, but the potential consequences would have been unacceptable. The minister is to be congratulated on his intention to lodge amendments to the bill at stage 2 to prevent those potential consequences.
When I heard the minister use the term "devious machination", I wondered what he was intending to bring into play. I was certainly disturbed from my afternoon torpor and he made me wonder why he was seeking to stretch out such an anodyne debate. I presume that members are unlikely to be in the park until 5 o'clock.
The subject matter of the bill is fairly straightforward and there is likely to be agreement about the bill without division—at stage 1, at least. However, the bill could cause a number of situations to arise.
Those of us who have been involved in local government well remember the problems of unspent moneys. Indeed, I always had a diary note for the second weekend in February to walk the streets of my council ward to look for potholes and other matters to report, in the certain knowledge that, with money to be spent, the jobs would be done. That was neither good budgeting nor good local government; it was simply the way of the system. Therefore, anything that allows the police and fire services to avoid such problems is to be welcomed.
The fire service pensions deficit is the one serious point that has been flagged up in the debate. Clearly, there is a problem, which, in view of the financial difficulties that are being experienced and will continue to be experienced over the next year, is likely to increase. Jamie Stone's suggestion was made in an entirely positive manner, but I am not satisfied that it would deal with the matter. However, it is worthy of exploration and I have no doubt that that will be done in due course.
Bearing in mind the politics of the issue, we have a serious concern about the way in which the overspends must be agreed unanimously by the components of any joint police board. It is not beyond the bounds of possibility—indeed, it is a probability—that not all members of police boards will agree. In time, different local authorities may come under the control of politicians of differing political complexions, so that there will inevitably be differing political expenditure priorities. It seems not unlikely that situations will arise in which there is no unanimity of purpose or action. At that stage, there will be a real problem. The chief constable of Strathclyde police was quite correct to flag up that potential difficulty.
We are relieved that the minister, in uncharacteristically consensual mode, has said that he is prepared to look again at certain aspects of the bill. We had been concerned that ministerial approval would have been necessary for any carry-forward of working balances, because we recognise that the Executive seeks to a quite unprecedented extent to restrict local government's freedom of movement. Therefore, it was with some relief that we heard that the matter is likely to be reconsidered at stage 2. We seem to be demonstrating a degree of success in the matter.
The police and fire services are an extremely important part of Scottish life. If those services are not functioning to their maximum, lives are put at risk. Given the substantial amount of the Scottish block that those organisations use, budgeting for them is highly important and anything that will ease that process is welcome. As Mr Harding has said, the Conservatives will vote to approve the bill at stage 1. We look forward to the minister's amendments at stage 2.
Today will not be the first time that the minister has accepted much of what is in a stage 1 report that has been produced by the Local Government Committee. Whatever the committee is doing, we must be doing it very well.
Today, we have had a useful and worthwhile debate on a bill that is of considerable importance to the police and fire service boards. Its implementation will enable both services to be maintained on a high level of operational efficiency.
The committee believes that the Scottish Executive has carried out genuine consultation on the bill. Michael McMahon made an important point about the need to be able to carry forward overspends as well as underspends. I hope that the minister and his officials will take Michael McMahon's valuable comments on board at stage 2.
Similarly, I agree wholeheartedly with what Tricia Marwick, Sylvia Jackson and Sandra White said about the inappropriateness of the requirement for ministerial approval for the carry-forward of working balances. The minister has not yet convinced me or the committee of the need for that approval. Councils are not constrained by such bureaucratic regulations, so why impose them on the police and fire boards? If we are serious about the principles of devolution and subsidiarity, the requirement for ministerial approval should be ditched.
I note the minister's comment that the joint boards will not now be required to seek the approval of all the constituent authorities to carry forward unspent moneys. The committee believed that that requirement was entirely unnecessary. Every authority has representatives on those boards. Are those people not to be trusted? Are they to be overruled by their authorities if those authorities say, "We want some of our money back, so go and fight that case at the board"? In the interests of democratic accountability and the autonomy of board members, let us put some trust in their mature and sensible decision making. If they cannot argue their case on the board and back in the council, the question that arises is whether they should be on the board.
The Deputy Minister for Finance and Local Government claims that the proposals in the bill are a reasonable halfway house as far as the constituent authorities are concerned. I have some scepticism about ministerial halfway houses; in this case, I would put my trust in the board.
Other members have commented on the importance of the fire service pension scheme and of insurance cover for firefighters. Those issues were outside the scope of the bill. However, when issues arise in evidence that are outside the scope of a bill but are obviously extremely important, it is incumbent on the committee that hears that evidence to take those issues up. With the committee's agreement, I have written to the minister about the its concerns over the pension entitlement of our firefighters, which must be protected. The committee and I will continue to pursue that issue and I will wait to hear what the minister has to say. We seek ministerial assurance. Although it was not part of our remit, we must not let that critical issue fade away.
This bill is good, but it will require amendment along the lines that have been proposed by my colleagues on the committee. I thank the committee members for their support in producing the report and for turning up today and making this debate last as long as it has done. I also thank all the other MSPs who have turned up to make it last a bit longer.
I urge members to support the general principles of the bill.
As a consensus politician—which I clearly am—I found myself in a rising panic at the prospect of talking about the bill. Every speaker chipped away more and more of the fairly puny speech that I had prepared. I hope that I can do as well as Bill Aitken did in speaking from the heart.
Both Bill Aitken and Trish Godman made excellent speeches and—as I did not give her the credit that she believes she deserves for her contributions to the voluntary sector—I will mention the good work that Tricia Marwick has done on this issue.
We have arrived at a consensus on the bill. Trish Godman highlighted issues that still have to be resolved, but I think that we are heading in the right direction, especially on whether the minister will or will not intervene. I am pleased that the minister has decided to amend the bill on the issue that appears, according to the report, to have caused the most irritation to local authorities—that of all constituent authorities having to consent to allow moneys to be carried forward.
During the evidence gathering on the bill, Michael McMahon put his finger on a number of important points when interrogating Firemaster Williams—although "questioning" is perhaps a better word than "interrogating". Michael McMahon expressed concern over how fire brigades would be able to fund themselves in the long term if there were more call-outs than the budget allowed for. The fact that he focused on that point will be significant in ensuring that resources are made available to address that issue. None of us wants there to be too many phone calls and not enough fire engines, or for firemasters to be concerned about moving a fire engine from one local authority area to another because of a restriction on budgets. I am therefore pleased that the minister has addressed that issue.
Some members have expressed concerns about the pension fund. In the Local Government Committee, it was said:
"There is a difference of about £22 million between the amount that the Scottish fire service needs this year and the amount that it needs in 2005 to cover pensions. The service's total annual budget is just over £200 million."
Clearly, that issue will have to be addressed. As Trish Godman said, we were told that
"there is no equivalent ministerial control over the general fund for councils or their housing revenue account."—[Official Report, Local Government Committee, 4 September 2001; c 2135-37.]
I thought that it was brave of her to throw a hand grenade at the minister on that issue.
As Michael McMahon pointed out, one of the great things about devolution is the fact that the Parliament can introduce bills that are very specific—although I am sure that independence will enable us to do that to a greater extent and over a wider range of subjects. The bill could not have been introduced at Westminster and the fact that it has been introduced now is a great testament to the system in which we work. I realise that the issue that the bill deals with may not be of much interest to the massed ranks in the press gallery or the hordes of people in the public gallery. I also realise that this debate may not be as thrilling as some that we have had. Nevertheless, it is essential and I look forward to participating—perhaps in a more involved way—in such debates in the future.
Consensus has a soporific quality, so I shall try to inject a little controversy into the debate to liven up proceedings. In the proper manner of winding up, I pay tribute to all those who have spoken. The minister has given us a full and frank account of where he is coming from and the Liberal Democrats support the bill, especially the changes that were made to address issues of concern.
I pay tribute to Tricia Marwick for her speech. I am glad that the subject of pensions has been flagged up. I am tempted to say, "Hands up anyone who has been on a police or fire board." However, let us not get into that. I have a feeling of déjà vu. There was a time when Mr Peacock, as convener of Highland Council, used to say to me, as a member of the Northern Joint Police Board, "Go in there and sort them out." Here is the first controversial point. Accounting—or the way in which the money is managed—in police forces and police boards is not always as transparent as it might be. I have had personal experience of going to a meeting of the joint police board and asking, "Why, chief constable or chairman, is money being spent in that way?" I did not always get a satisfactory answer.
I became known to that police board as a paid-up member of the awkward squad. There is obviously no connection, but I was done for speeding on the way back from a particularly difficult meeting. That happened again over the next two months, until I was driving on nine points. Of course, that was not the police getting their revenge on me—although I wondered about it. The chairman of the police board told colleagues that I was a troublemaker and that, by way of revenge, he would have the sergeant demonstrate the new truncheon on me.
The fire services issue is serious. In constituencies such as the one I represent, funding is the problem time and again. For example, we are having problems in getting a fire station in Dunbeath in east Caithness and in Scourie in north-west Sutherland. The flexibility that will result from the bill—the ability to carry forward funds and to amass them—will be helpful. Nevertheless, in contrast to other members, I believe that the role of the minister is important. First, it will provide a kind of protection for local authorities, as there have been fears about what could happen. Tension has repeatedly grown between local authorities and joint police and fire boards. Secondly, fire and police services have an overarching national aspect and the minister's role is to make national decisions about the provision of services.
That concludes my short speech. I shall have difficulty in filling my prescribed time except by telling a few jokes, which I cannot be bothered to do. I therefore leave it at this: I beg the ministers to consider the issue of pensions. I do not know the solution, but I suspect that it will have to involve something along the lines of a managed pension fund. I do not know how else that chunk of money can be secured—there may be other ways, but I do not know of them.
At some future date, the accounting and reporting procedures of some of the boards must be examined, because all too often in my experience board members do not understand fully what is being done and how money is being managed, which is in stark contrast to my experience over a number of years as vice-chairman of finance for my local authority. That is a concern. This morning we talked about being open and accountable. We are giving flexibility to police forces and fire boards, but their elected members, MSPs and ministers must know exactly how the money is being managed. I will be happy only when I can rest my head knowing that that is the case, so I ask ministers to consider that.
On behalf of my party, I welcome the Police and Fire Services (Finance) (Scotland) Bill. Police and fire brigades are essential parts of community protection, which is vital to the well-being of everyone in this country. I am delighted that tidying-up legislation in this area has been introduced.
End-year flexibility is good for police forces. Along with three-year budgets, it will enable stable financial planning, but it will also allow police forces to accumulate funds to be spent on new technology, when it comes along—I know that in many police forces the introduction of new technologies has placed a major strain on budgets. That strain will be relieved for police forces, but I do not think that the same will apply to the fire service, because of the pension problems that have been highlighted today. I encourage those who have spoken today to take part in a future debate on fire service pensions.
Members have highlighted three tensions. The first is whether the 3 per cent limit is reasonable. The second is the issue of consent and constituent authorities, which may cause tensions in joint boards, as has happened in other areas of Scottish public life—area tourist boards, for example. The general thinking behind the bill may have to be applied to other aspects of community life. The third area of tension is the role of ministers. The Conservatives have reservations about that, because the process is tremendously bureaucratic. On behalf of our party, I welcome the offer that the Deputy Minister for Justice made to introduce amendments at stage 2 to take care of some of the difficulties; members from all parties have said that their concerns may be solved by the proposed amendments.
I am concerned about funding difficulties, particularly funding of the fire service. I am reminded of going to a museum in York, which showed examples of plaques that were put on walls to prove that people had paid their subscription to the fire service. If there was no plaque, the fire service would not go there—it was as simple as that. We must never return to that situation in such a vital area of public safety.
In this morning's lengthy and sometimes rowdy debate, comments were made about the lack of rules on end-year flexibility. I am delighted that the way in which ministers have been thinking about the bill shows that a lesson is being learned. We must discuss how we deal with budgeting throughout public life in Scotland.
I am not a member of the Local Government Committee—although I have served my time as a local councillor—but I congratulate it on the amount of work that it has done and the quality of its report. It is obvious that a lot of hard work has been done in a consensual and practical manner. We must closely scrutinise amendments at stage 2. Those amendments should be constructive and should not take away from the principles of the bill, which we are delighted to support today.
I thank Trish Godman and the other members of the Local Government Committee, who have done far more work on the issue than I have—I have been a member of the committee for only two weeks. The report is a good one; it highlights the issues that need to be highlighted. The fact that the minister has acknowledged that amendments must be made is a testament to the committee's work over the past two weeks and, more important, over the past two years.
I also thank those members of the Fife constabulary who have sat through the debate. I am sure that they found it a bit more interesting than we did. We have raised issues of real concern, particularly about pensions. As Trish Godman said, that issue does not relate to the bill, but it is important and it is right and proper that the committee highlights it. We expect ministers to go away and give the matter some serious thought. They must ensure that pensions are secured now and in future and that money is not taken away from the reserve to do that.
I hope that, even though he is not conceding it at the moment, the minister will accept an amendment at stage 2 on ministerial control. I referred to the fact that the bill does not directly affect Fife or Dumfries and Galloway, the two unitary authorities. If the minister is considering an amendment on the need for ministerial control, I hope that he will take into account the unitary authorities' specific needs.
I refer the minister to paragraph 10 of the policy memorandum that accompanies the bill. It says:
"Although unitary police authorities could use their ‘general funds' to carry forward unspent police grant, a re-determination of that grant … would require the repayment of any unspent grant. The intention is that any re-determinations will not require the return of unspent police grant that unitary police authorities wish to carry forward."
It goes on to say:
"Unitary authorities that wish to carry forward working balances will therefore need to have in place administrative mechanisms that show that any carried forward amount is spent only on eligible police expenditure. Such administrative mechanisms will need to have the approval of the Scottish Executive."
If the minister accepts an amendment whereby joint boards are not required to seek ministerial approval for carry-forward, I hope that he will also consider the impact of that on the unitary authorities. I hope that he will not allow unitary authorities to be under a different regime from that governing the joint boards. We have only two unitary authorities in Scotland: Fife Council—my area—and Dumfries and Galloway Council. I hope that the procedures that will be in place will not mean that the two unitary authorities are disadvantaged in comparison to the joint board areas.
I welcome the move forward by the minister today. However, there is work to be done at stage 2. I hope that the minister will look at the amendments and take on board the sincere comments that have been made, particularly about the pension funds. I look forward to stage 2 and a shorter debate at stage 3.
Presiding Officer, the prospect of talking for 15 minutes on this subject daunts me, but I gather that you are going to suspend the meeting as soon as I sit down. That will save everyone from the device that I was going to use, which was to go through a journey of Highlands and Islands police and fire board meetings over the years in which I was associated with them. There are many renowned stories, let me tell you.
As members know, the Highlands and Islands boards occasionally used to hold their meetings in Orkney and Shetland—they take their meetings all round the place. A chairman of one of the boards could not fly, which is a bit of a disadvantage if one is going to Shetland. He had to set off several days in advance and return several days later—given what happened in Shetland, it was often useful to have several days to recover on the journey back. I see John Farquhar Munro nodding vigorously; he was one of the members who used to attend those meetings. All the December meetings of the Highlands and Islands fire and police boards were held in Inverness to allow people from the islands to do their Christmas shopping. I am glad to say that members will be saved from any more such stories.
Before I go into the substance of the bill, I will pick up two points that members raised but that do not relate to the bill. Members talked about the difficulties that arose for many years in funding fully in any given year the pension costs that fall on an authority, whether it is a fire or police board, although police boards now have more flexibility in such matters. That burden can fall on fire boards in a way that is not well profiled; the number of retirals in a year can also make a major impact on the budget.
I assure members that although that is not a matter for the Executive—pension law is reserved and the pension funds are a UK matter—the Home Office is considering it. It realises that serious issues must be addressed. We will be an active participant in the discussions that take place to try to find long-term solutions to the problems.
I will press the minister on one issue. He will recall that, when the Tory party conference went to Inverness, the local police board's budget went pear-shaped and the police were left with a problem. Will the bill help to address such an issue? I would accept an answer in writing later.
On the general question of flexibility, the bill should help. The Deputy First Minister answered a question at last week's question time about the costs that are associated with the extra policing for the Parliament. Such costs are being considered more generally.
I will respond to the question on why the bill does not cover joint valuation boards. Our view was that, in dealing with police and fire boards, we were addressing the major problem and large amounts of public expenditure. The sums involved with joint valuation boards are much smaller. However, although we did not feel it appropriate to proceed with that issue in the bill, we could deal with it if it were ever felt to be a pressing need—we have not ruled that out.
Like Iain Gray and others, I welcome the Local Government Committee's work on the bill and its support for the bill's general principles. I also welcome the response from the whole chamber to Iain Gray's suggestion that the Executive is prepared to give ground on several matters that concerned the committee. I am glad that we have gone what seems a long way towards satisfying committee members on those points.
I am sure that, with good will, we will be able to lodge amendments at stage 2 that will completely satisfy the committee. I would be more than happy to have further discussions through the usual channels to fine-tune our proposals even before stage 2, to ensure that we can find the proper way to proceed.
As members know, the bill allows authorities to accumulate carry-forward amounts and so build up significant balances to meet expected financial pressures. The ability to build up reserves may have an impact on local council tax levels, so some checks will remain necessary. Several safeguards have been put in place, essentially to prevent the accumulation of unnecessarily large reserves.
Members have raised points about ministers' powers over such accumulations. The intention is not for ministers or their officials to intervene inappropriately or bureaucratically. We genuinely want the procedure to be simple and to allow matters to progress with ease in each year when a reserve could be carried forward.
However, part of the funding for joint police boards comes from local authorities. If joint police board balances build up significantly and local authorities face pressures on their budgets or increase council tax significantly, we will have to recognise that an anomaly has been created. In such circumstances—which we do not expect to occur often, if at all—we want to have the powers to allow the normal dialogue in any grant distribution system between police authorities, local authorities and the Executive to take place and to give ministers some discretion in the situation. That is a reserve power, which would be triggered only in extremis. Ministers would not constantly be brought into the situation.
I will consider Tricia Marwick's interesting point about unitary authorities. The accounting procedures are different in a unitary authority, where the police board is—as in the case of Fife Council and Dumfries and Galloway Council—part of the local authority. That is because the respective boundaries are coterminous; the board and the authority are part of the same structure, so the flexibilities may already exist. I am not clear that unitary authorities will be disadvantaged, but we will examine that.
I refer back to ministerial control. If the minister is saying that that control is going to be informal, I am at a loss to understand why it must be enshrined in legislation.
The reason is the one that I have given the chamber. With an informal set of procedures, accumulated balances could build and build. We do not want that to happen. We accept the need for balances to be carried forward for the purposes that we have set out in the bill, but we do not want them to become excessive. Ministers will have the power to authorise—or not authorise—further transfers into the accumulated reserve only when the balances threaten to become excessive. It would be extremely anomalous if a police board or fire board that was funded by the local authorities in large part—or in total in the case of the fire boards—were to build up very large balances at the same time as local taxation was rising. The power is included to guard against such situations. I assure members that we do not think that the situation will arise often. In practice, we think it unlikely that large balances will build up. The consents regime will be designed to pick up exceptional cases and will avoid undue interference by the department and ministers.
We can return to the detail at stage 2, but I am sure that we will be able to consider positively the automatic approval of a class of consents, which will make requirement of ministerial consent an exceptional occurrence. As Iain Gray indicated, an accumulated amount of 5 per cent of budget would perhaps be the appropriate figure. We would be happy to have discussions through the usual channels to fine-tune that proposal.
As members know, the bill provides for the carry-forward of working balances by police and fire authorities at the end of each financial year. It limits that carry-forward to 3 per cent of a force's or brigade's budget in any one year. It allows the 3 per cent limit to be changed by order, if that limit proves inappropriate. That picks up on a point that Richard Lochhead made. The bill allows balances to accumulate over time and requires ministerial consent for any carry-forward proposal with an assurance that, as I have indicated, ministers will not be involved unnecessarily.
The bill, as drafted, also makes provision for the consent of individual authorities to carry forward their share of any underspend. As Iain Gray indicated, we have agreed to introduce an amendment to delete that provision from the bill in response to the Local Government Committee's concerns.
The intention of the bill is to provide for the better financial management of police and fire services, to avoid a rush to spend at the end of a financial year in the way that, as Bill Aitken outlined, used to happen in local authorities, and to underpin the three-year budgeting cycle that was introduced by the Scottish Executive.
The bill is sensible. It will help financial management in the police and fire services. We accept that it can be improved by the measures that we have set out today and I look forward to the Parliament's endorsement of our proposals. I commend the motion to the Parliament.