Public Finance and Accountability (Scotland) Bill

– in the Scottish Parliament at 2:30 pm on 30th September 1999.

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Photo of Lord David Steel Lord David Steel Presiding Officer, Scottish Parliament 2:30 pm, 30th September 1999

We move on to the stage 1 debate on the Public Finance and Accountability (Scotland) Bill. I invite members who wish to speak to register by pressing their buttons.

Photo of Rt Hon Jack McConnell Rt Hon Jack McConnell Labour 3:14 pm, 30th September 1999

This is an important day for the Scottish Parliament and an important debate for all of us who were elected on 6 May 1999 to serve the people of Scotland. It is with great pride that I move this motion to approve the general principles of the Public Finance and Accountability (Scotland) Bill.

I first exercised my right to vote as an 18-year-old in the devolution referendum of 1979. I remember to this day the hours spent before the referendum debating, campaigning and putting up posters around Stirling and elsewhere in Scotland. I remember even more clearly the deep sense of disappointment when it became clear that the Scottish Assembly, as it would have been known, was not to happen.

For 20 years, Scots from all corners of our nation and from all walks of life have campaigned and worked tirelessly to create the Parliament that we sit in today. During those 20 years, we all increasingly dreamt of a new Parliament that embodied a new politics and new style of government for the good of the people of Scotland and for the future of the United Kingdom.

The principles which will underpin that new politics include honesty, transparency and an inclusive approach to consultation and political debate. I wholeheartedly endorse those principles and, as Minister for Finance, I will work tirelessly to ensure that they underpin our financial decision making and our accounting. As Gladstone said:

"Finance is, as it were, the stomach of the country from which all the other organs take their tone."

Members:

Hear, hear.

Photo of Rt Hon Jack McConnell Rt Hon Jack McConnell Labour

I thought that that might appeal to my colleagues in the coalition.

The Public Finance and Accountability (Scotland) Bill is the first bill in the full legislative programme of the new Scottish Executive. Our financial procedures in the Executive and in the Parliament will set the standard for all other decisions that follow, and they will be based on the principles that I mentioned. The reputation of this Parliament and of the Scottish ministers should be our top priority, because, across the world, perceptions of Scotland will be affected by all that we do. Specifically, in the areas of budgeting, of consultations on financial priorities, of auditing and of accountability, we must and we will create a system of which not just I, but all MSPs and all Scotland, can be proud. The people of this nation deserve no less.

The bill faces a tight timetable. It is wide-ranging, and I am grateful to the members of the Audit Committee and the Finance Committee for undertaking to finish their own deliberations in the time available.

The general purpose of the bill is to set out the framework of the financial relationship between the Parliament and the Executive. It sets out the conditions under which the Executive can spend money, how that money must be accounted for, the arrangement for the auditing of our accounts and the accounts of other public bodies, and the accountability of officials.

At its heart lie the recommendations of the financial issues advisory group. FIAG, which is made up of individuals who are drawn from a cross-section of the community, was set up in 1998 and reported early in 1999. It was not until the Executive was elected that we were able to go out to consultation and start the process of working FIAG's recommendations into a bill. Before moving on, I would like to thank the members of FIAG again for doing such a thorough job and for preparing recommendations that we could take forward into legislation.

The general principles of the bill build on those of FIAG itself. They set out five key objectives to ensure that our procedures would: first, ensure probity in the handling of public funds under the Parliament's control; secondly, help to maximise the cost-effectiveness of expenditure; thirdly, provide the information which the Parliament needs to make informed and timely decisions and to judge the probity and wider value of the actions of the Executive; fourthly, provide the Scottish people with understandable, consistent, relevant and timely information; and lastly, contain the overhead and compliance costs of the procedures.

The Executive has every intention of living up to those aspirations. I hope that the Parliament will seize the opportunity that that presents. I hope that members will help the Executive to take the, sometimes hard, funding decisions that will be necessary and to ensure that the money that we spend delivers the results that we all expect.

The bill deals only with the FIAG recommendations that require legislation. The rest are to be implemented in other ways. Some of them have already been implemented. They have been written into the Parliament's standing orders. The procedures for budget bills, for example, are based on FIAG's proposals.

A number of other issues will need written agreements between the Parliament and the Executive so that the rights and obligations of both parties are made clear. Such an approach would be more appropriate than producing legislation, and would be used, for example, for the procedures to be followed by the Executive for agreeing the format of accounts. At stage 2 of the debate on this bill, I plan to submit to the Parliament proposals on how the Finance Committee and the Audit Committee might, on behalf of the Parliament, work with the Executive to decide on accounting formats. I will also submit other proposals for agreement on various procedures at that time.

Finally, there are recommendations on which the Parliament will need to legislate by using budget bills. That is partly because the recommendations are inherent in the purpose of the budget bill—the level of Parliamentary control, for example—and partly because the standing orders mean that certain proposals can be only in budget bills. The proposal, for example, that revisions to budget acts might be made in secondary legislation will have to be in budget bills, unless the standing orders are changed while this bill is still before Parliament.

The bill is in two main parts. The first part sets out procedures for authorising the use of Scottish public resources, and the second concentrates on holding to account those who spend our money. Together, both parts provide the framework for sound management of Scotland's finances.

The first principle is that resources can be used only with the approval of Parliament. In other words, the Executive can spend money only if Parliament so authorises. That fundamental principle is at the heart of the relationship between Parliament and the Executive.

The bill rules that cash cannot be spent without the Parliament's approval and enables the Parliament to set limits on the amount of cash that can be spent. As a further control, the bill establishes a rule that ministers may not draw on the Scottish consolidated fund without the written authority of the Auditor General for Scotland.

Having set out the principle that resources cannot be used without the Parliament's consent, however, the bill goes on to consider situations in which the Executive might need to use resources before the Parliament has agreed them.

The first such situation is in the event of Parliament being unable to approve a budget act before the start of the financial year. The bill provides a system which will enable front-line services to continue to receive limited funding until a budget act is agreed.

The second is to meet urgent unforeseen demand. No matter how good our financial planning is, there will be cases where money will need to be spent quickly. The bill provides ministers with a limited spending capability for such occasions. That will not be a charter for ministers to print money, as the bill requires ministers to report to Parliament as soon as they can. We plan to propose a written understanding to ensure that the Parliament hears of any contingency spending promptly, and hears of it first.

Spending bodies in Scotland currently have a range of borrowing powers. In the past, the borrowing of those bodies has been controlled by ministers without any annual parliamentary control. We agree with FIAG's conclusion that such borrowing may be subject to the control of Parliament. The bill puts that principle into practice.

Finally, this part of the bill has a section on the financial arrangements for the Keeper of the Registers of Scotland, which makes provisions for the Keeper of the Registers to operate on a trading fund basis.

As I have said, the second main part of the bill deals with audit and with holding the spenders of money to account. It puts in place arrangements for the establishment of a unified public audit service staffed by personnel who currently work for the National Audit Office and the Accounts Commission. That organisation, called Audit Scotland, will provide all the functions needed for the Auditor General for Scotland and the Accounts Commission to carry out their statutory duties. While the Auditor General and the Accounts Commission will have policy responsibility for their own areas and will decide who should carry out an audit, Audit Scotland will carry out on their behalf all the actions needed to deliver that audit.

Photo of John Swinney John Swinney Scottish National Party

On the issue of the statutory responsibilities of the Auditor General, does the minister agree that there is a case for examining the audit arrangements for local enterprise companies? As I understand it, those companies will, due to their status, be outwith the scope of the Auditor General's responsibilities. Does he think that this issue should be examined further outwith the scope of the bill and that further legislation should be introduced?

Photo of Rt Hon Jack McConnell Rt Hon Jack McConnell Labour

As we have discussed, it would be inappropriate to do what Mr Swinney suggests in this legislation. It is also right to point out that the bill will allow for the Auditor General to carry out value-for-money studies, even into local enterprise companies. There is a case for continuing to monitor the situation and for Mr Swinney's committee to consider the matter in the months and years ahead.

The bill will transfer some of the Accounts Commission's responsibilities to the Auditor General and Audit Scotland. However, the commission will retain its critical role in ensuring that public money is properly spent.

The Accounts Commission will retain control of local authority audit to help ensure that the unique status of local authorities is respected. The same cannot be said of health bodies, currently audited by the commission.

Photo of Keith Raffan Keith Raffan Liberal Democrat

I am sorry to interrupt the minister in full flow, but local government expenditure is an important issue. I accept that the Accounts Commission will still perform local authority audits, although the organisation may subcontract that responsibility to Audit Scotland. However, if we accept that local authorities have their own mandate, what opportunity will the Parliament have to examine the overall global expenditure of local government?

Photo of Rt Hon Jack McConnell Rt Hon Jack McConnell Labour

Overall expenditure totals will remain a matter for this Parliament. However, it is only right and proper for the individual auditing of individual councils to remain the responsibility of the Accounts Commission. Health bodies have no democratic mandate and for this reason, we propose that in future, their audit will be a matter for the Auditor General.

I would like to stress the independence of the Auditor General for Scotland. The Executive has absolutely no control or influence over his activities. As the Scotland Act 1998 specifies, the Auditor General for Scotland is also independent of the Parliament. I highlight this point because the bill provides for a Scottish commission for public audit. That body will be required to scrutinise the expenditure proposals for Audit Scotland and arrange for its audit, but the commission will not oversee the work of either the Auditor General or Audit Scotland.

In some ways, I see the final principles of the bill as the most important in that they govern the way in which the Parliament will be able to hold the Scottish Administration and other bodies to account. The bill provides for a system of accountable officers. The system is designed to ensure that ministers and office holders such as the Auditor General for Scotland and the Scottish Parliamentary Corporate Body are accountable for the way in which they use the resources which they are authorised by the Parliament to spend.

In particular, the system places a duty on certain nominated senior officials to seek written instructions from the relevant minister or office holder if they feel that they are being asked to do something which is improper, irregular or which would represent poor value for money. They must then report those instructions to the Auditor General. A similar system exists in Westminster, but there, the idea that officials should take this kind of action exists only as a convention. We propose that that requirement is placed firmly in statute, thus giving it a robust and secure foundation.

The bill makes provision for audit and for value-for-money investigations. It grants the Auditor General and those working on his behalf statutory rights of access when carrying out audits or VFM studies. It also rationalises the audit arrangements for all those spending bodies that are within the competence of the Parliament.

I hope that we will have unanimous support in this chamber for the principle of our Public Finance and Accountability (Scotland) Bill. With that endorsement of our basic principles, the Audit Committee, the Finance Committee and other committees must then ensure that the detail meets the ideals that we have set out to achieve. I hope that their scrutiny will be vigorous; it will come from members of all parties represented here, and will produce an act before Christmas that will allow us to progress with a budget that is based on our own procedures, agreed here in Edinburgh, and on which our people can rely.

We must all remember, as I can assure members that I do, that the money which we as elected politicians spend comes from the hard-working families and businesses of Scotland. We must remember, every year in our budget decisions and every day as we spend the money that is allocated to the people's priorities, that it is their money. We hold it for them, we spend it on their priorities, and we must explain clearly and openly where it has gone. That is the fundamental duty of elected politicians and public officials the world over. Here in Scotland, I want a first-class system to assure those whom we represent that they will always come first.

I move,

That the Parliament agrees to the general principles of the Public Finance and Accountability (Scotland) Bill.

Photo of Andrew Wilson Andrew Wilson Scottish National Party 3:28 pm, 30th September 1999

The purpose of a stage 1 debate in this new system is, as Mr McConnell has pointed out, to debate the general principles of a bill. In that light, I congratulate Mr McConnell and his excellent advisers in the finance divisions of the Scottish Executive for bringing the bill to Parliament in what I can only describe as jig time.

Before Mr McConnell gets too flushed with success, I join him in thanking the financial issues advisory group of the consultative steering group.

He will agree that it is through FIAG's endeavours that the bill has been able to go through the Finance Committee and Audit Committee with such speed. There are many issues of detail to be raised, but the broad thrust of the bill and what it drives at is largely non-contentious and is to be welcomed.

I want at this stage to raise some points of principle. Others will be raised by my colleagues during this debate and, perhaps more important, in later stages of the bill's passage.

From the SNP's perspective, the key theme is what the bill misses out, rather than what it includes. The bill's principles do not seem to include the capacity for a reserve. I am concerned at the implications that that has for the prudent management of budgeting and for the prevention of what we have all become used to with public sector budgets—the rushed year-end spending. If the bill does not allow for the capacity for a reserve, the whole process could be undermined. We need that reserve not just for the emergency reasons that the Minister for Finance outlined, but to allow a much more sustainable approach to resource allocation.

We know from bitter experience that there is often a rush to spend budgets at the end of the year. That encourages, rather than discourages, waste and institutionalises a public sector culture where departments, authorities and agencies look solely for short-term spending projects. With more substantial capital projects, there is always scope for underspend, when money can be put aside. However, that structure encourages the search for short-termism, which is to be regretted. The Minister for Finance's response to that is resource account budgeting, but I am yet to be convinced that that provides all the answers.

On audit, on which many of my colleagues will focus today, I would like the minister to give an assurance that the bill will accommodate the need for cross-departmental and cross-agency auditing by policy area, rather than by delivery area. That would allow us to assess the extent to which the different operatives within Government chase the same objectives and duplicate cost and effort.

Every agency, department and authority that spends public money should be subject to potential scrutiny by Audit Scotland and the Parliament's Finance Committee and Audit Committee. As my colleague, John Swinney, said, there are numerous examples in enterprise of projects receiving public funds from a variety of sources using the same measure—jobs created—to justify each separate amount. The Parliament should take an interest in that. However, that point and many others will be raised during the passage of the bill, when we will be able to remedy the structural weaknesses.

The most important structural weakness is our situation within the settlement. It is to be regretted that the Scottish Executive is no more than a conduit for finance—the grateful recipient of a hand-down from the Secretary of State for Scotland. If the Executive had more of the normal powers of responsibility enjoyed by any Government, or for that matter, any local authority—the power to build up reserves, to borrow prudently, to focus on the longer term and to exercise effective control over the flow of revenue—rather than having to accept what is fed to it from external sources, the impact on expenditure would be much more healthy and would ensure better quality and more strategically focused spending decisions.

Photo of Richard Simpson Richard Simpson Labour

Will the member join me in welcoming the three-year expenditure plans that the Government has developed, which allow the sort of forward planning that he talks about?

Photo of Andrew Wilson Andrew Wilson Scottish National Party

The plans are a step forward in terms of the broad structure of budget lines. However, as I said, in terms of building up reserves, I have yet to be convinced that the plans are enough. I hope that that will come out during the debate. At the moment, I want to focus on accountability. The fact that the Executive is not responsible for raising the money that it spends is bad for democracy and for accountability. It is not good for prudence in the longer term.

One of the most substantial points for debate in our financial matters is the remarkable fact that the entire Scottish budget, as determined by the Barnett formula, comes in the first instance not to Mr McConnell and to this Parliament, but to Dr John Reid at the Scotland Office. It is up to Dr Reid to decide what amount he keeps back for his own activity.

It is constitutionally and politically unsustainable for that to continue. Things are fine at the moment because the First Minister and the Secretary of State for Scotland enjoy such a close, warm and harmonious relationship. They therefore know how to box clever with the nation's finances. However, the settlement has remarkable potential for dispute. Imagine if the secretary of state were Michael Forsyth or—God forbid—Brian Wilson. The scope that the present settlement gives them is worrying. I suspect that the gloves may come off.

In the absence of a change to the Scotland Act 1998, little can be done. However, it is imperative that the Executive makes approaches to the Scotland Office to ensure that the Parliament can set a precedent for positive dialogue with the secretary of state and the Scotland Office about the basis of his decision to hold back as much as he is from the Scottish budget.

The cleanest and simplest approach would be to secure a more responsible and modern settlement, where the Parliament is responsible for raising the revenue that it spends and for ensuring that it is spent wisely. That would make us more democratically accountable to the people who elected us. We could then subvent funds to London for centrally provided services. There need be no debate about who subsidises whom and the system would have the advantage of making the value for money of those services more apparent. I must point out that no best value test is applied to UK central departments.

The approach already carries the support of four parties in this chamber. It should carry the support of the Liberal Democrats, if they still believe in more progressive federalism. I have no doubt that it would also find some support among those former members of Scottish Labour Action who sit on the Executive benches and among some of the Labour party's back benchers. In passing, I also point out that it is also the editorial position of Scotland on Sunday and The Scotsman, which means that it must be right.

It is critical that we do not lose sight of the bigger picture of the structural reforms within the settlement that would allow us a better financial settlement for Scotland. As far as the rearrangement of the deckchairs goes, this bill has done a job well and quickly within the constraints that have been laid down. I hope that we will improve it as it goes through the process. I plead with all members of the Parliament to think laterally about how the Parliament should grow, how we can improve the settlement and how we can improve the strength of the Parliament to deliver the best for the people.

Photo of Annabel Goldie Annabel Goldie Conservative 3:35 pm, 30th September 1999

I endorse much of what Mr Wilson said. This party also welcomes the bill and the general principles that are set out in it. In terms of content, it may be riveting to the point of being dangerously exciting, but none the less it deals with some serious matters. Like Mr Wilson, we congratulate the minister, his team and others who have assisted in producing a very complex bill in a very short time.

We may express slight concern about the budget amendments. I think that it is now accepted that the budget will be set out through primary legislation. As a member of the Audit Committee, I am concerned, as is the Conservative group, that amendments should also be made through primary legislation. In his opening remarks, the minister mentioned honesty and transparency and we all applaud that. However, there is a need to ensure that that is effected in reality and that it does not become just a verbal shibboleth.

In the interest of flexibility, we accept the concept of ministerial direction on the format of accounts. However, we hope that the courtesy of allowing the Finance Committee to comment on format will be observed. That would be a proper demonstration of transparency.

My colleague, Mr Davidson, who is in his sick bed and cannot be with us today, serves on the Finance Committee and has asked me to raise one or two points on his behalf. He had a slight concern that the bill makes no mention of the role of the Finance Committee. I accept that the minister considers that that role will evolve and that he may not wish to make any prescriptive mention of it now. However, it might give some comfort to the chamber if he were to expand a little on how he sees the role of the committee unfolding, because there is no doubt that it is an important committee and one that is singularly relevant to the matters under discussion today.

I have been asked to point out—although I do not wish to be polemical—that when the bill was put out for consultation, it went into the public arena before the Finance Committee had an opportunity to view it. In the interests of a more harmonious relationship between the Executive and the committee, perhaps the minister will have regard to that sort of omission in future.

There is also a feeling that the budget bill, whenever it appears, ought to be in the province of the Finance Committee and, unless I have failed to read the bill correctly, there does not seem to be any specific provision for that. For example, does the minister intend to allow the Finance Committee to see the draft budget for some predetermination of how matters look, or is it simply to be landed straight into the parliamentary chamber?

Mr Wilson alludes to his concerns about audit functions, which I will come to in a moment. However, I have a concern—I have already placed it on record in the Audit Committee—about the position of local authorities. While I understand the constitutional precedent that allows the Accounts Commission to audit local authorities, I think that it is necessary for me to put the following comments on record in the chamber, for the public information of the electorate.

We, as a Parliament, are attempting to deal responsibly with the expenditure of very large sums of public money, as the minister said. It seems anomalous that the bill does not provide for the slice of expenditure that goes to local authorities, which currently spend approximately £6.4 billion, to be examined in more detail. I accept the minister's response that the Parliament would have access to the overall figure. However, an overall figure of that magnitude in isolation is not very meaningful. There are serious concerns that—when we talk about expenditure of the size and extent currently seconded to local authorities—the creation of this Parliament affects constitutional precedent.

Finally, Mr Wilson described the Scottish Executive as a conduit—I pronounce the word slightly differently, but that is a small matter. Mr Wilson was making an articulate and skilful attempt to justify an agenda of independence. Not surprisingly, he will find little support for that from these benches.

Photo of Andrew Wilson Andrew Wilson Scottish National Party

I am grateful to Miss Goldie for allowing an intervention at this stage. Will she agree that many members of her party, including Michael Fry, Peter Snell and Murdo Fraser, published a pamphlet calling for just the fiscal autonomy that I have outlined?

Photo of Annabel Goldie Annabel Goldie Conservative

It happens that none of them is on these benches for which I specifically said that I speak, and where, again as I said, Mr Wilson will find little sympathy for the concept of independence.

Photo of Rt Hon Jack McConnell Rt Hon Jack McConnell Labour

I would be interested to know whether Miss Goldie finds it interesting that there is an agreement between the nationalist party and some of the more extreme members of her own party, with whom I am sure she does not agree.

Photo of Annabel Goldie Annabel Goldie Conservative

I shall refrain from comment. Mr Wilson made an important point about the constitutional arrangement. Now that there is a Parliament in Scotland, we have a distinctly altered relationship with the Secretary of State for Scotland and the United Kingdom Cabinet. As long as we have a strong Secretary of State for Scotland I have some confidence that Scotland will have a strong figure batting for it in the Treasury.

I do not share Mr Wilson's apprehension that a Secretary of State for Scotland would try to cream off significant sums of money because the devolution settlement makes it difficult to see where he would cream them off to. Given Dr Reid's recent comments at the Labour party conference in Bournemouth that he was less than confident about the continuation of the office of secretary of state, will the minister clarify how the budget on which this Parliament depends and which is vital for Scotland will be negotiated and who will be responsible for that negotiation within the United Kingdom Cabinet? Is the minister confident that he will not be left—as Mr Wilson has suggested—a hapless puppet with a hand stretched out, waiting for something to happen?

The Scottish Conservatives endorse the principles of the bill and we are minded to co- operate with its swift passage.

Photo of Patricia Ferguson Patricia Ferguson Labour

At the moment it is possible to allow members five minutes for speeches in the open debate. We will begin with that time limit, but if it becomes necessary we will drop down to four minutes. If members stick to their time limits, we might manage to include everyone.

Photo of Keith Raffan Keith Raffan Liberal Democrat 3:43 pm, 30th September 1999

I was entertained by Miss Goldie's speech, and even more by Mr Wilson's intervention reminding her of the more extreme members of the Scottish Conservative party. May I remind her of what some of the moderate members of her party have said—those that have not left to join the Liberal Democrats, that is?

The current chairman of the Conservative party, Michael Ancram—the Earl of Ancram, to give him his full courtesy title—was the founder chairman of the Thistle group. That group's main policy was a Scottish Parliament with full tax-raising and revenue-raising powers. Those are all things that the Scottish Conservative party has abandoned. It has returned to a prehistoric, Neanderthal age and given up the progressive views of enlightened men such as Alick Buchanan-Smith; it has regressed into a deep, black hole and those are the views that we heard from Miss Goldie today.

I thought that Miss Goldie gave a stage 2 rather than a stage 1 speech. This debate is about the broad principles of this bill, not its details, which we will come to later. It is interesting that, before lunch, the press gallery was full of people—absolutely packed—for the discussion of what is, frankly, a relatively trivial and minor matter. Where are they now? The bill is uncontroversial, but it is very important. It would be a model of financial management for any country, and other countries will be beating a path to our door to learn how we are laying down the framework for budget scrutiny. The difference between Holyrood and Westminster—and I wish that there was more than one sole person in the press gallery to report it—is the fact that we are ensuring that the Parliament rather than the Executive will dominate this process.

Photo of Keith Raffan Keith Raffan Liberal Democrat

I will gladly give way to Miss Goldie in a moment. I know that her mental processes are rather slow—no doubt she wants to come back to some of the points that I made earlier.

The crucial point is that the Scottish Parliament is superior to Westminster in terms of the process of budget scrutiny that we are setting out. In view of Mr Salmond's question to the First Minister today, I hope that when the First Minister next meets the Chancellor of the Exchequer he will bring this model of budget scrutiny to his attention.

Photo of Annabel Goldie Annabel Goldie Conservative

I wish merely to observe that perhaps the reason why there is only one member of the press in the gallery is that the rest had some prescience that Mr Raffan was going to speak.

Photo of Keith Raffan Keith Raffan Liberal Democrat

Miss Goldie must do better than that. She spoke immediately before me and I am afraid that the press evacuated the gallery just before that. They might return if they realise that somebody else—anybody but Miss Goldie with the Neanderthal views that she expresses on behalf her prehistoric party—is speaking.

Photo of Keith Raffan Keith Raffan Liberal Democrat

I have given way once. I should not really get involved in this political divorce—it is very disturbing, Presiding Officer, to watch.

Photo of Patricia Ferguson Patricia Ferguson Labour

It would help if you were to get to the point, Mr Raffan.

Photo of Keith Raffan Keith Raffan Liberal Democrat

We ought to get Relate involved in the marriage guidance process between the Scottish Conservatives and the Scottish National party, as their unholy alliance seems to have broken today.

Let me make some important points about the bill and the budgetary process. What is crucial is that—as the minister said—the bill goes to the heart of the relationship between the Parliament and the Executive.

I pay tribute to the FIAG report and to all those who worked on it. It has set out the framework for the parliamentary scrutiny of the allocation of public money so that we can secure best value from our financial resources.

The minister has said that the Executive wants a world-class financial management system, that it wants the Parliament to be constructive and that the Executive wants its decisions to be open and transparent. I can almost hear Louis Armstrong sing, "Oh what a wonderful world".

Seriously, however, those are desirable objectives. Of course there will, more often than not, be tensions between Parliament—mainly through the Finance Committee and the Audit Committee—and the Executive. There will be differences and conflicts but—crucially—those can be worked out within the framework that has been laid down.

I would like to raise two points of detail. The first point has been raised by members of the Finance Committee and the Audit Committee. Making the process work will depend on members having access to very detailed information. Mr Swinney admirably made that point in the Finance Committee. We must have access to the detailed information—in its most accessible form—that underpins "Serving Scotland's Needs" if we are to scrutinise the budget effectively.

My second point relates to the written understandings, for which we are waiting, between the Executive and the Parliament. I believe that a draft of those will be available to the Parliament prior to the stage 2 debate of this bill. They may affect stages 1 and 2 of the budgetary process. Stage 1 will happen in the spring when strategic priorities will be discussed. Detailed discussion of the draft budget will happen during stage 2 in the autumn.

The onus is on the Finance Committee, as the lead committee, to oversee the process. We must set up an appropriate and effective system to ensure that the subject committees can give detailed input to stage 1 of the budgetary process. That is crucial and we have not yet looked at how we are going to achieve it.

We are having, for obvious reasons, a curtailed process this year. We came into existence only in May and took over our powers at the beginning of July. However, we must set out the detailed process by which the Finance Committee and the subject committees can consult in that important preliminary, spring phase, during which we will discuss the strategic priorities of future budgets.

Photo of Karen Whitefield Karen Whitefield Labour 3:49 pm, 30th September 1999

The Public Finance and Accountability (Scotland) Bill provides the statutory framework that the Scottish Parliament needs to function effectively, efficiently and—if necessary—swiftly. It provides clear measures to ensure transparency and public accountability at all times.

I believe that this bill complements and enhances other initiatives to increase public awareness of the functioning of the Parliament—initiatives such as the Scottish Parliament and Scottish Executive websites, the ability to have direct access to MSPs through e-mail and the partner libraries.

The bill recognises the need to use plain English and standard accountancy terms, so that everyone will be able to understand the Parliament's spending. It provides strong lines of accountability—accountability of public spending bodies to Audit Scotland and accountability of the Executive to the Parliament. The latter relationship is crucial, as it is the means by which public spending becomes accountable to the public.

To quote the Minister for Finance, this is

"a bill that goes to the heart of the relationship between Parliament and the Executive".

The bill includes provisions to make officials personally answerable to the Parliament on matters of regularity, propriety and value for money. Once again, transparent and open procedures will enhance the reputation of the Parliament.

The Scottish public rightly demand that their taxes are spent in a way that ensures best value for money. I am pleased that the bill sets out clear powers to enable the Auditor General for Scotland to initiate and carry out examinations of economy, efficiency and effectiveness. An example of the bill's concern for public accountability is demonstrated by the provision of a right of access for the Auditor General for Scotland to the records of those organisations that depend, to a significant extent, on the money from the Scottish consolidated fund.

The bill contains measures that will allow the Executive to revise budgets and respond swiftly to unforeseen circumstances. The contingency arrangements will allow ministers to respond to urgent need, but will place a sensible limit on that spending. The bill will enable ministers to use secondary legislation to revise budgets through budget bills. That will ensure that the Parliament will be responsive and accountable.

The creation of Audit Scotland will ensure that public money is being spent prudently and that accounting bodies are not just asking for value for money, but practising it. I welcome the rationalisation of the audit arrangements for the national health service in Scotland. The NHS receives large amounts of money from the Scottish consolidated fund, and it is appropriate that the responsibility for carrying out its audit should be with the Auditor General for Scotland.

This bill will ensure that at all times the people's money is handled with the highest standards of honesty and integrity. I hope that members will join me in welcoming the bill and supporting the motion.

Photo of Andrew Welsh Andrew Welsh Scottish National Party 3:53 pm, 30th September 1999

Karen Whitefield has clearly set out the hopes that are being placed in this bill—that this Parliament can do things better and be a model for others to follow. I hope that that will be so. We all have a duty to the people of Scotland to make it so.

We are discussing one of the fundamental cornerstones of this Parliament's work—the best use of public finance for the public benefit. Assurances about probity, efficiency and effectiveness in finance, and rules of accountability and openness between Executive, Parliament and the people, are fundamental to the new Scottish democratic system. Achieving a broad consensus after widespread consultation has been important as a basis for progress. In drawing on a wide cross-section of opinion, and producing five overarching objectives and 82 recommendations, the financial issues advisory group has made the work of this Parliament easier and I congratulate it on its contribution to this debate.

I can report that the Audit Committee broadly accepts the structures and principles of this Public Finance and Accountability (Scotland) Bill. However, we have caveats on certain specific matters that, no doubt, will be explored further at stage 2. Specifically, although there is a right of access to the accounts of organisations for which public money makes up less than 50 per cent of their income, those organisations are not covered by the Auditor General for Scotland. As 49 per cent of such income can account for very large sums of public money, I think that accountability should eventually be extended to all publicly funded bodies. It is up to the Auditor General for Scotland and this Parliament to decide whether such a right should be taken up.

Being freed from Westminster time strictures should allow this Parliament greater focus and accountability at all levels of public finance. It gives us a chance to allow the people of Scotland to have far greater scrutiny than has ever been possible before to get to the root of how their money is spent, through us, by organisations throughout Scotland.

Higher education should also come under the remit of Audit Scotland, and I hope that that will come about within a reasonable time scale. Although it understands the constitutional problems involved, the Audit Committee has also expressed concerns about local authority accountability—that subject may be raised as the bill progresses. I also refer the minister to the comments of the Subordinate Legislation Committee regarding section 28 of the bill.

Scotland's population of 5 million people makes us an almost ideal administrative unit, making possible the introduction of greater accountability and closer scrutiny of resources. I hope that, using the standard mechanism of annual budgets, this Parliament can influence decision making in the medium and long term. Resources are finite and limited under devolution, so it is crucial to ensure continuity of policy and maximum efficiency for every pound spent. Parliament and the Executive must focus on the priorities to which those resources are put. Any mistakes will be costly and will hold back economic and social developments that have been outlined in debates in this chamber.

I hope that Audit Scotland will play a positive role and encourage innovation and ingenuity. The end product of its research and development work must be the imaginative and positive use of public assets for the public good. The greater the financial efficiency in the husbanding of present and future assets, the greater the benefit to all the people of Scotland will be. I take it as read that inputs will receive thorough examination to ensure probity, correctness and transparency. I also want ideas and innovation to flourish in encouraging the effectiveness of budget outputs and in the use of existing resources. We should ask how budgets are being drawn up for scarce resources and how the best services can be delivered to the people whom we serve.

Scotland is both a small enough and a large enough administrative unit to allow such detailed scrutiny. The broad outlines of the proposals for Audit Scotland, for the Scottish commission for public audit, for accountable officers, for the transfer of NHS auditing and for inclusion of further education are all sound; they set a pattern for more efficient and effective scrutiny of public finances.

The bill also sets out value-for-money provisions for the Auditor General for Scotland, which should presage future gains, both in financial efficiency and in the quality of financial accounting in Scotland. Any money freed up can immediately be turned to the services that this Parliament provides for the people.

This Parliament can be sure that its Executive is answerable through the bill and is open in its financial dealings. If Audit Scotland is fit for that task, there will be tangible benefits for the Scottish people. We have been given a fixed and finite overall budget and this legislation ensures that that limited finance is openly and effectively used and that reports about its use are brought back to Parliament and to the people. I believe that FIAG has given us a sound democratic basis on which progress can be made. It is now up to us, through this bill, to deliver the reality.

Photo of Mike Watson Mike Watson Labour 3:59 pm, 30th September 1999

I shall preface my remarks with a comment that, to some extent, reflects what Keith Raffan said. As we begin the development of the first Government legislation in the Parliament, we might reflect on how our deliberations are covered in the media and the importance that they are given there. We do not have to cast our minds back very far to remember some of the appalling coverage of the Parliament and of some members before the summer recess.

When some of us challenged journalists at that time, they said that they were reporting in that way because there was nothing of substance to cover—give us something to cover and we will be more serious, they said. This is a serious matter, and how full is the press gallery? I give credit to those who stayed, but I make no apology for saying that it is disgraceful that when there is serious discussion, there is no reporting of it.

I highlight the contribution of my colleague Karen Whitefield, who was the butt of unfair criticism some months ago and who made an excellent, well-researched speech showing wide knowledge of the subject. Who will report that? I hope that some of those who denigrated her will eat humble pie on the basis of what they should have heard this afternoon, and I hope that they will bother to read the Official Report.

It is disheartening for those of us involved in the Finance Committee and the Audit Committee to see that the legislation is not getting the coverage that it deserves. It is the first bill for us. The Finance Committee and the Audit Committee, in a joint meeting, were the first to take evidence from a Scottish Executive minister when the outline of the bill was discussed in June. Many of the comments made by the committees have been incorporated in the bill.

It is a sign of the broad measure of agreement that even Andrew Wilson in his comments was not greatly critical of the bill; he talked about what is not in it rather than what is. Of those issues, the relationship between the Scotland Office and the Parliament will be discussed in future, I am sure, and raising revenue is more to do with an amendment of the Scotland Act 1998, or future legislation.

The broad agreement on the bill has also been shown by Andrew Welsh's comments on behalf of the Audit Committee. I do not find that surprising, because we are putting in place one of the building blocks of the way in which the Parliament will operate. When the bill becomes law in a few weeks' time, it will affect for years the way in which the Parliament looks at its budgets and looks back on the effects of spending through the Audit Committee.

In the Finance Committee, we are pleased with the relationship that we have established with the Minister for Finance and we have made clear to him the need for openness, transparency and accountability. That message has been taken on board.

I do not intend to go into the details of the bill now as that is for stage 2, but it is important to re-emphasise a point that Richard Simpson made earlier, that this is about not just annual budgeting, as there will be an annual budget bill and revisions, but forward planning. It is likely that we will have the budget draft for the following year and perhaps the year after that as well. We hope so, as that would not only allow the Scottish Executive to plan ahead but enable the Parliament to have a fairly clear idea of the thinking of the Executive and the coalition, or whichever party or parties were in power at the time.

That is also important for the way in which the Parliament is viewed by the public. These are detailed and complex matters, but that does not mean that we cannot get it across to people that we are doing a serious job on their behalf. The way in which the money comes to the Parliament and how it is dealt with are important for the messages that are sent out about how the Parliament is operating and hence its reputation.

I want to say just a little bit about—

Photo of Mike Watson Mike Watson Labour

Of course. To restate the point that has been made and cannot be made too often, the bill is an example of the way in which the Scottish Parliament can do things differently. I welcome the bill being introduced so quickly; it is early evidence of a system above reproach, characterised by transparency and accountability at every stage of the process. That is a better and more effective way of doing things than has been the case in the UK Parliament.

We are a modern Parliament: we can do things in a modern and responsive way, and we are setting in train the procedures that will allow us to do that. The way in which the Finance Committee and the Audit Committee are already operating shows that at an early stage in this Parliament we want to be involved in establishing the basic foundation and framework that for years to come will underscore the effectiveness of the Parliament's budget and auditing procedures.

Photo of Brian Adam Brian Adam Scottish National Party 4:05 pm, 30th September 1999

I welcome the bill and some of the remarks made by the Minister for Finance. In particular, he referred to resources being used only with the Parliament's approval. He went on to qualify that to some extent by talking about emergency spending and contingency spending. I was glad to hear that even in those circumstances—I hope that I heard him correctly—Parliament would hear first. As we deal with the principles of the bill at this stage, I hope that I will be forgiven if I refer to some details.

Mr McConnell's colleague Mr McAveety was in a little difficulty at the Local Government Committee when he made announcements before Parliament had heard about them. I hope that Mr McConnell's remarks about reporting any contingency spending to the Parliament first will be adhered to. Indeed, when we come to deal with the detail of the bill, that might be an appropriate point at which to make that principle clear. Perhaps Mr McConnell will address that point when winding up.

One matter that has troubled me since long before I came to serve in the Parliament is the clarity of financial management, which the bill gives us the opportunity to address. Buried in the bill is a reference to the Keeper of the Registers of Scotland and the 6 per cent return on capital. That is a detailed point. The point that I wish to make is not peculiar to the Keeper of the Registers but is relevant to the health service—indeed, a similar point was made about the 3 per cent efficiency savings that are usually sought year on year in the health service, and the 1 per cent efficiency savings that are being sought from further education institutes. I hope that when such matters are reported to the Finance Committee and the Audit Committee, the moneys will be clearly identified as recycled, not as fresh moneys. We need to have a procedure that adheres to the principle that if the hangovers from a more competitive rather than collaborative environment are used, it is made clear that it is the same money that is being used again.

I echo some of the points that members made about local authorities and the access that the Audit Committee might have. I understand that much sensitivity surrounds that issue and I do not want to labour the point, but I would like to highlight a case from this week. Sir Stewart Sutherland identified the fact that across the UK there is a shortfall in elderly care, amounting to a large sum of money. Undoubtedly, that shortfall was measured against the grant-aided expenditure limits that were set by ministers. I know that that matter is left to individual authorities. Indeed, if we are to have local authorities, they still need to make decisions, but when the wishes of the Executive, to some extent, or indeed of the Parliament are ignored in such a way, that might be a matter for the Audit Committee, not just the Executive.

In line with the point made earlier by Mr Swinney, I hope that in future we will follow the expenditure of the public pound all the way down, not just to the local enterprise companies, but to enterprise trusts, and, in similar vein, to the non-departmental bodies: I cannot remember the grand title that they have these days.

I am glad to see that Dr Simpson has returned— I would like to touch on the point that he made on the comprehensive spending review and the introduction of a certain amount of flexibility. Perhaps when we are considering how we are to make that flexibility available, we should write into the legislation the percentages that we can carry over and the mechanisms of review. I accept that that is there, but the bill lacks clarity in that area. If we insert those details, it will satisfy the point made by Mr Wilson, and it will satisfy me.

I ask that we beef up the paragraph in the report which suggests that Audit Scotland might have some responsibility for development of the service in terms of performance indicators. I hope that Audit Scotland will be a little more proactive than that and will be the leading body for research and development in audit.

Photo of Lewis Macdonald Lewis Macdonald Labour 4:11 pm, 30th September 1999

As another member of the Audit Committee, I will touch on the audit and accountability aspects of the bill. It is in all our interests that we establish as wide a consensus as possible on the processes by which ministers are accountable to Parliament, and by which public bodies are accountable both to the Executive and to Parliament. From what we have heard today, there is the basis for a broad consensus on that, although there are areas of continuing discussion.

On the establishment of Audit Scotland, it is a welcome development to create a single public sector auditing service, which will service both the Auditor General and the Accounts Commission. The National Audit Office has been one of the successful agencies in seeking good government at Westminster and has exposed abuses of power and of public money.

I welcome the bill as a further act of devolution, in that it transfers the Scottish wing of the National Audit Office to a distinctive Scottish agency, making it directly accountable and putting its skills at the disposal of this Parliament.

Like Karen Whitefield, I believe it right that NHS accounts and spending in Scotland should come under the new body, Audit Scotland. It is also right that its remit should extend to cover the further education sector. In our committee on Tuesday, we heard evidence from the head of the new Further Education Funding Council. He confirmed that many of our FE colleges have struggled to achieve effective financial management over the past few years. They will benefit from being made directly accountable through Audit Scotland.

Andrew Welsh raised the point, as did John Swinney earlier, about bringing other bodies within the remit of Audit Scotland. It is important to recognise that the bill does not close the door on that, and leaves open the possibility of further evolution of the public audit system. It is also right that we should not leap ahead of ourselves in its development.

Conservative and SNP members implied that they had concerns about the continuing split, in terms of local government, between the Accounts Commission and Audit Scotland. Those concerns were raised at the Audit Committee, but were not agreed by the committee. It is a pedantic but important point to put it on the record that we discussed that, but did not take a committee position.

The concern is that local government spends our money and should be accountable, but there is an important distinction between a local council and an FE college.

Photo of Brian Adam Brian Adam Scottish National Party

I accept Lewis Macdonald's point that there was not an agreement on the committee. Does he agree that in the examination of the global sums, there might be a mechanism whereby it is possible to satisfy the need for accountability and openness at the level of the Parliament rather than just at the level of the Executive?

Photo of Lewis Macdonald Lewis Macdonald Labour

I think that to an extent the minister has already addressed that point. The global sum, the allocation to local government, is a matter for Parliament. It is appropriate that supervision and scrutiny of the detailed expenditure are kept at one remove from the way in which non-elected bodies account more directly to this Parliament. That is right and is in line with the principles of devolution and subsidiarity that we should continue to support.

Photo of Andrew Wilson Andrew Wilson Scottish National Party

Does Lewis Macdonald agree, therefore, that it is wrong that Westminster has the right to audit our activities? According to the principle that the member has set out with regard to local government, Westminster ought not to retain that right.

Photo of Lewis Macdonald Lewis Macdonald Labour

In the bill, we are creating a distinctive Scottish structure for the Scottish Parliament. Its relationship with Westminster will continue to evolve. I recognise the point that Andrew Wilson has just made—which he also made in his speech—but we are engaged in modernising structures. There is a commitment throughout the chamber to achieving value for public money. This is an important step in that direction.

Photo of Nick Johnston Nick Johnston Conservative 4:15 pm, 30th September 1999

Perhaps we should be thankful that this is not a particularly exciting bill, as that will spare us the horticultural hyperbole to which Miss Goldie treated us yesterday.

The framework that we establish with the bill will be critical to the success of the Parliament's work and to the way in which the Parliament is viewed by the people of Scotland. It is through the bill that we shall ensure that the budget is not only set properly, but spent properly.

As a member of the Audit Committee, I pay tribute to the work of the financial issues advisory group, without which we would not have the opportunity to put in place the checks and balances that will ensure that the wishes of Parliament are carried out.

There is no doubt in my mind that, over the next four years, great strains will be placed on the public purse. The bill will have to ensure that savings and efficiencies are identified to deal with the pressures on public spending.

When considering the bill, the Parliament will have to address a number of points. I have in my notes:

"the need to avoid unnecessary democracy"—

I meant "the need to avoid unnecessary bureaucracy". [Laughter.] We must also be aware of the need to fix budgets as early as possible, and to consider that annual processes might detract from long-term planning. As Karen Whitefield said, we must make the bill easy to understand, by using plain English.

We will want to examine the controls that are set out in the bill and ministers' proposals for the format of accounts. We appreciate that at this stage prescription is probably not wise, but we need to ensure that transparency is maintained.

I would like the minister to clarify the issue of a cut-off date for presentation of budget drafts to the Finance Committee and whether a deadline will be set for budget arrangements—no more than three months, say, into the spending year. I would not feel comfortable about rolling a prior budget on indefinitely. We do not want to have stonewalling in the Parliament. Unless budgets are set, outside bodies cannot project and plan new actions. Prior-agreed projects need to be amended so that they can operate under resource accounting and budgeting. It is also important that the transfers of staff are contiguous, because the transfer of NAO staff will require separate legislation.

Conservative members welcome the proposal that Audit Scotland should in future oversee further education colleges and national health service trusts. We share the belief that the introduction of external audit appointments will complement the measures that have been taken by further education colleges to bring more openness and accountability to their management.

My main concerns, which have been picked up by the Convener of the Audit Committee, lie in the section of the bill that deals with economy, effectiveness and efficiency. I refer members to my remarks of 14 September on the competency of the Auditor General for Scotland. I expressed concern about sections 21(3) and (4), which state

"that he is only competent to examine bodies that have more than half their funds provided from the public purse."—[Official Report, Audit Committee, 14 September 1999; c 3.]

The point that I made was that if a public body receives 49 per cent of its funds from the public purse and 51 per cent from private sources, that is still a hell of a lot of money from the public purse.

Questions should also be asked about the accountability of ministers. To members who have not done so, I recommend that they read the interesting little booklet "Holding to Account" by Robert Black, who is the new Auditor General. He goes into some detail about whether we should hold ministers to account not only in expenditure areas, but for organisation performance and service delivery.

Finally, I would make the point that 85 per cent of devolved expenditure will be in the hands of local government, non-departmental public bodies and other agencies. It is vital for the operation of this Parliament that public auditors should be seen to be independent and unfettered in their ability to publish audit findings to elected representatives and the public, whose money we are spending.

Photo of Euan Robson Euan Robson Liberal Democrat 4:20 pm, 30th September 1999

At the risk of some repetition, I would like to welcome the bill and the minister's statement. The bill is clearly the product of exhaustive consultation before and since the establishment of the Parliament. Indeed, the phrase "consultation fatigue" might apply.

On behalf of the Liberal Democrat party, I add our appreciation of the financial issues advisory group's report. One of our manifesto commitments for the Scottish Parliament elections was to establish a public service performance committee, to hold politicians and civil servants to account for their use of public money. In the Finance Committee and the Audit Committee we have the mechanism that we wanted. They will deliver the scrutiny that was demanded by the Liberal Democrat party and others as long as the Executive maintains the constructive and open approach that it has adopted so far.

We support the three key objectives of the bill: to create a world-class system of financial management that is an example to others; to enable the Parliament to make informed and transparent decisions on expenditure and to hold to account those who spend public money; and to meet the requirements of the Scotland Act 1998. We believe that the bill will achieve those objectives.

There are areas of concern. We accept that the budget revisions should be by secondary legislation, mainly so that revision can be swift but, nevertheless, transparent. We recognise that local authority arrangements will remain unchanged and accept the importance of the independence of local government, but we have residual concerns about the fact that £6.4 billion might not be thoroughly scrutinised by Parliament.

We want to return to the issue of the quality of the scrutiny of Scottish Enterprise and local enterprise companies during later stages of the bill.

On the format of accounts, we are content that, in consultation with the Finance Committee and the Audit Committee, the minister be given powers to determine the format of accounts. I ask, however, that the accounts be in plain English and that the format should be intelligible to interested laymen such as me.

I share some of the concerns that have been raised about section 21. Why was the 50 per cent qualification introduced? Even 49 per cent of a body's money could be a substantial figure. To use an example from another area, the definition of a monopoly is a company that takes 25 per cent or more of market share. We need to think again about the figure of 50 per cent.

We should also return to the question of three-year budgeting because of all the problems that we well understand at the end of the financial year. Clearly, a three-year horizon is better for planning.

To Andrew Wilson I say that, yes, the Liberal Democrat party still believes in federalism. That, too, is a matter to which we should return later.

I was delighted to hear Jack McConnell quoting Gladstone. I thought that it was only my party's leader who quoted Gladstone—I will tell him of the minister's use of a Gladstone quotation today. I am glad that Jack McConnell chose to listen to the wise words of a former Liberal Prime Minister.

Photo of Adam Ingram Adam Ingram Scottish National Party 4:24 pm, 30th September 1999

What concerns me about the bill is not what is in it but what is not. In terms of legislating for transparency in a devolved context, the bill is adequate. In the wider context of Scotland's finances, however, much is missing.

I want to examine the most basic and fundamental flaw in the Parliament's financial system. The Scottish Parliament is expected to take responsibility for the expenditure aspect of the budget, but London holds the control of the revenue that the Parliament receives. In other words, the Parliament is responsible for money out but not for money in. That is a chronic defect. The SNP has always argued that money that is raised in Scotland should be spent in Scotland and that the Scottish Parliament should have responsibility for the debit and the credit side of the accounts.

Let us look at the relevant parallels with local government. It is beyond dispute that local authority budgets have plunged near crisis over the past few years. From those involved in managing that crisis, it is clear that the problem is caused not only by central Government cuts, but by the fact that local authorities have control over a diminishing amount of their income and are reliant on central Government for around 85 per cent of the money that they spend.

Councils are meant to be financially responsible, but cannot truly be so because they are not responsible for raising their own revenue. That pocket-money principle has been acknowledged as flawed. It does not put elected representatives in councils in control of budgets. It simply thwarts their attempts to provide services and leaves councils carrying the can for being unable to deliver the expectations of the electorate. In the same way that Scotland's councils were given their cash handout from London via the benevolent—or not so benevolent—Secretary of State for Scotland, the Parliament is dependent on a cash handout from London, although not before it is top-sliced on its way here by the Secretary of State for Scotland.

In the same way, the pocket-money principle cannot be applied successfully in the Parliament. How can we undertake to meet the expectations of our nation if it is London that dictates the finance that is available to meet those expectations? I can think of no better way to illustrate that point than to examine Scotland's ability to argue for European funds. We are dependent on the Secretary of State for Scotland going forward, cap in hand, pleading for the UK Government to take Scotland's case to Europe. Already the Government public relations machine has kicked into action, ready to talk up the crumbs swept from the table in Scotland's direction and preparing us for the worst, should John Reid fail on Scotland's behalf.

The Public Finance and Accountability (Scotland) Bill is—commendably—designed to ensure transparency and accountability in decisions made on the use of public money. That is welcome. It will not be possible for the Executive to take financial decisions behind closed doors, away from the scrutiny of members and the public.

I am pleased that the bill makes financial practice in the Parliament accountable. However, I am deeply disappointed that it is an in loco parentis measure, to ensure that a devolved Parliament spends its pocket money wisely. I look forward to the day when the Parliament grows up and is both breadwinner and the holder of the purse strings, so that we can meet and pay for Scotland's aspirations.

Photo of Lord David Steel Lord David Steel Presiding Officer, Scottish Parliament

I call Dr Richard Simpson, after whom—if they keep their remarks to three minutes each—there will be time for Alex Neil and Cathie Craigie.

Photo of Richard Simpson Richard Simpson Labour

I will cut out all the major welcoming bits that everybody else mentioned. One thing that I want to welcome is the new arrangements for health boards and trusts. That change, which will allow greater democratic scrutiny, is of considerable importance and I am pleased that it is occurring.

I share Mr Raffan's concerns about access to the figures at one level below the global figures that were presented in the initial considerations. I hope that we will address that in the stage 2 consideration. That is vital if we are to appreciate the detail of what is going on and hold the Executive to account in the way that the new arrangements will allow. The combination of that and the early input of the subject committees to the budget process is vital.

Beyond that, we must get the process correct, to allow input into the subject committees by experts and the public. I take the overall strategy one stage beyond what Mr Raffan was suggesting. The process provides what our colleagues in the Scottish National party seem to be calling for—that caught the attention of SNP members. It is now the most democratically accountable and scrutinised expenditure system—a model of democracy. We should deal with that and ensure that it works well, before we move on to other forms of examining income—or variations on income—that might emerge at some point.

The process is not static. Within a Scotland that is not independent, it is perfectly possible for that process to move forward gradually. I hope that the general terms of the process that we are setting up today will be ones that we are proud of in a year's time.

I will refer again to Robert Black's excellent essay, "Holding to Account". The cross-cutting nature of budgeting will be important, but I am not certain that we will get the scrutiny of it correct. I hope that we can consider that at stage 2, as Government departments will have pooled budgets and there will be joint budgets for public bodies. Robert Black has quite rightly drawn attention to the fact that we need to be careful about how such budgets are held to account. I am giving notice of a matter that I intend to raise at stage 2.

Photo of Alex Neil Alex Neil Scottish National Party 4:31 pm, 30th September 1999

I thank the Deputy Presiding Officer for including me in the list of speakers. I want to confine myself to a number of suggestions to improve the bill, as the nationalists' points have already been put adequately by my colleagues.

First, I wish to build on John Swinney's point about local enterprise companies. I realise the minister's difficulty, as they are technically and legally private limited companies but spend something like £370 million of public money a year. Given that the total amount that this Parliament manages is only £15 billion, £370 million is a large chunk of public money not to be covered properly by the bill. I ask the minister to consider that again. There may have to be a change in status of local enterprise companies to wholly owned subsidiaries of Scottish Enterprise, but there is a case for doing that anyway.

Secondly, I welcome the principle of resource—and not just cash—accounting. We are all familiar with what happens in the last three months of the year: new road works start and a massive number of public works take place so that people can spend their budgets before the end of the year. The quicker we move to a better system of accrual resource funding, the better; that should reduce the problem somewhat and let us get better value for public money.

The third issue that I wish to raise is about the Accounts Commission for Scotland. Last year, the Accounts Commission was asked to investigate East Ayrshire Council's direct labour organisation disaster—as it was commonly known. However, the Accounts Commission is also the auditor for East Ayrshire Council. There is a potential conflict of interest in the Accounts Commission acting as the auditor and, when things go wrong during the financial year, as the independent investigator. The bill should provide, in relation to local authorities in particular, but also to other public bodies, that one body cannot be both judge and jury.

My fourth point relates to the act that set up this Parliament rather than this bill. The bill covers the borrowing powers of public agencies other than the Scottish Executive and the Scottish Parliament, which have no borrowing powers. I suggest that the minister should take up that issue with his counterpart in the UK Government as it is a serious deficiency in the financial management of the Executive and the Parliament.

My final point—I will set a personal record by finishing within my three minutes—is on transparency for the cumulative, year-on-year effects of changes to the Barnett formula. Again, that is strictly not within the scope of the bill, but in the spirit of freedom of information and full access to statistical as well as other types of information, it would be extremely helpful if the minister would publish an annual assessment of the impact of changes to the Barnett formula.

I hope that the minister will consider those suggestions in the spirit in which they are made. Of course, when we become independent, we will make them all even better.

Photo of George Reid George Reid Scottish National Party

That was three minutes and two seconds.

Photo of Cathie Craigie Cathie Craigie Labour 4:34 pm, 30th September 1999

I think that Alex Neil's speech went over that time—he did not see the signals to finish.

Jack McConnell talked about his long campaign to establish a Scottish Parliament—it was a long hard fight. It is an honour to be involved in the debate that establishes the financial framework for the first Parliament. I want to congratulate him and his team, as well as the members of the financial issues advisory group, on all the work that they have done. I thank everyone who was involved in that work.

Participation and consultation with the people of Scotland is at the heart of the Parliament and should be the foundation on which we build all our legislative proposals. The bill has been prepared following wide consultation—before and since the election—with experts and practitioners in public finance and accountancy. They have embraced the consultation process and given their support to the principles of the bill as a mechanism to ensure public accountability. Both the Finance Committee and the Audit Committee are satisfied that there has been adequate consultation on the bill. We are pleased about that.

The minister has expressed his desire for the bill to be subjected to detailed scrutiny by all members of the relevant committees. I welcome those comments and can assure him that, as a Labour member of the Audit Committee, I will hold him to them and will play my full part in examining the details of the bill and comparing them with the principles that we have heard about today.

We promised the people of Scotland that the Parliament would bring power closer to the people. I believe that the approach in the bill is right and that we should leave control over local authority audits to the Accounts Commission. If the bill contained provisions to alter that, to draw control closer to the centre, we would send the wrong message to our democratically elected councils.

In recent weeks I have been pleased to take part in the process of appointing the Auditor General for Scotland. That is a public position, independent of the Executive, with a clear remit to scrutinise public finance and to ensure that the money of the people of Scotland is properly spent. That is a huge step forward, both for our country and for our system of government.

The principle behind that appointment must be followed through into the auditing of large and small public organisations; it must be carried through into the budget decisions of the Parliament and the daily expenditure by the Scottish Executive on our behalf.

I believe that the Public Finance and Accountability (Scotland) Bill puts the principles of transparent and open politics into practice. I am sure that MSPs will give the motion their enthusiastic support. I am sure that we will thoroughly scrutinise the bill so that it will create a sound and secure framework for financial control in Scotland.

Photo of Bill Aitken Bill Aitken Conservative 4:38 pm, 30th September 1999

Although today's debate has been highly technical, it is important because we are discussing the proper scrutiny of the expenditure of £14 billion. Many of this afternoon's speeches have left me having mainly to say that we are ad idem with regard to the proposals.

Jack McConnell is to be congratulated on the fact that the Executive has introduced the bill so quickly. In a week when lucky white heather has been in rather short supply for the minister, I think he will be the first to acknowledge the fact that the consultative steering group report on the matter enabled his department to draft the bill very quickly indeed. Credit should go to those people and to the financial issues advisory group for their input.

Having said that, there are some aspects of the bill which the Conservative party regards as deficient. The most obvious deficiency is the absence of local government spending. As Annabel Goldie said, local government spends £6.4 billion of the Scottish block. We should be examining that more closely. I am intrigued to know whether that was an unintentional omission.

The Accounts Commission was given the powers to supervise local government under the Local Government (Scotland) Act 1973. However, I wonder whether, when the Scotland Act 1998 was passed, that aspect of the legislation was transferred en bloc without scrutiny. Stranger things have happened. It is open to the Executive to introduce amendments and we would commend that course of action.

Another point—which Brian Adam made—is that audit nowadays should be somewhat more advanced than it was formerly. Frankly, the days have long since gone when the Audit Commission—or the new body that we are setting up—would count the paper clips and check the petty cash. Auditors must now look closely at the way in which organisations spend and obtain money. They must make positive and coherent recommendations on how organisations can make themselves more efficient. I hope that Audit Scotland will do that.

The speeches made by SNP members have intrigued me somewhat. They varied from Andrew Wilson's slightly mischievous interpretation of the Scotland Act 1998, to Andrew Welsh's more subtle interpretation of that act when he talked about the budget process. The Conservative party recognises the merit in what Andrew Wilson said. The new body—Audit Scotland—should be given the power and the facilities to control and scrutinise the budget of all public spending authorities.

I hope that the minister, in his summing up today or in the stage 2 debate, will deal with the fact that, although the bill goes some way towards creating a transparent process, the committees are not being used to the fullest possible extent. We want the Finance Committee and the Audit Committee to be involved as fully as possible in the budget process, at the determination stage and at all subsequent stages. It is not good enough to deal with budget amendments by using secondary legislation—primary legislation should be used.

On the whole, we welcome the bill. We hope that the minister will take on board the suggestions that we have made—suggestions that have been entirely constructive, as I am sure he will concede. We hope that, when it is finalised, it will be worthy of this Parliament.

Photo of Andrew Wilson Andrew Wilson Scottish National Party 4:42 pm, 30th September 1999

I would like to repeat my earlier congratulations for Mr McConnell and his team on the work that they have done on this bill. Andrew Welsh said that Scotland is the ideal size to run. I think that we are seeing the start of how we are going about that in a modern way.

Mike Watson, who is the convener of the Finance Committee, said that the debate is not the most popular among the people in the press gallery, but we should all join in congratulating the Press Association and Joe Quinn—the only representative of the press here—for sitting through the entire debate. There are one or two news stories in this debate, as will emerge in the course of my remarks.

I would like to commend the conveners of the Finance Committee and the Audit Committee for the way in which they have conducted the passage of the bill so far. In those two committees we have just what we are after in the Scottish Parliament—impartial but vigorous scrutineers of the Executive.

Miss Goldie filled in very ably for the unwell Mr Davidson, whose speedy recovery we pray for. She went about her job with her usual clarity of pronunciation and delivered one of those devilish political snipes where the opponent gets killed with a hug and a smile. It was a performance that I will have to learn from.

Euan Robson had the No 1 exclusive for Joe Quinn in the press gallery. According to Euan, the public service performance committee is a Liberal manifesto commitment that has been delivered. It is the first, and it clearly sneaked through during the negotiations that led to the coalition. However, there was a more important point in Euan's contribution—the figure of 50 per cent in section 21 is random. Why, minister, is it such a random figure, and why cannot we deal with it?

Brian Adam made an excellent and detailed speech. Can we have a commitment today, Mr McConnell, that the Scottish Parliament will always hear first whenever any financial announcement is made, and that we will not again have announcements being made elsewhere? Will he also make a commitment today that when recycled funds are announced, they are announced as just that—recycled funds—and not as new spending commitments?

There is an important point on the accountability and transparency of spending that I would like to address, through the Presiding Officer, to Lewis Macdonald. We cannot close the door—and Lewis Macdonald is right to say that the bill does not close the door—on having the activities of local enterprise companies and local authorities accessed and scrutinised by the Finance Committee and the Audit Committee; but surely at this early stage, when we are setting precedents with our structures, we should actively open the door. Mr Macdonald says that we should not get ahead of ourselves, but this is precisely the time when we should get ahead of ourselves, to set out exactly the structures that we want. That is the kind of point that we want to take through stage 2 of the bill.

I want to endorse Mr Watson's comments about Karen Whitefield. In her very informed speech, she drew attention to the fact that agency heads will now be accountable to the Parliament. Will Mr McConnell confirm that, although those agency heads will be accountable, the final responsibility for all these matters will rest with ministers? Ministerial accountability must not be undermined by any measure introduced by the bill.

I want to return to my point about the unsustainable constitutional anomaly which means that the Secretary of State for Scotland can take what he likes from the Scottish budget. I plead with Mr McConnell to suggest ideas or to be open to suggestions about how we can set a precedent now that prevents us from having, shall we say, any difficult relationships between this Parliament and Westminster in future. Once again, a nationalist has come up with a constructive idea about how we can have a healthy relationship with London, despite rumours to the contrary.

The minister's colleague—and my colleague on the Finance Committee—Richard Simpson gave an excellent speech. I point out to the press gallery that this is the second exclusive of the debate. Does the minister agree with Richard Simpson that the settlement is not static in financial terms and that there are ways of improving it within the current devolved settlement? Dr Simpson seems to hold the same candle as I do to a future where we have a more modern, more accountable and more responsible Scottish Parliament and I welcome him to the nationalist fold on that point.

We will consider at stage 2—the committee stage—some of the ideas that have been suggested during the passage of the bill so far. Alex Neil made several suggestions. To be serious, we need to recognise the limits of this bill, which were so ably outlined by Adam Ingram. We have to aim at growing, not constraining, the settlement.

If Richard Simpson, members on the Liberal Democrat benches and some of Annabel Goldie's colleagues "in the country"—as the Conservatives traditionally put it—can get their views across, perhaps we can grow towards a situation where the Parliament not only talks about good housekeeping but delivers on policy priorities using Scotland's resources in a more constructive way than is presently possible.

Photo of Lord David Steel Lord David Steel Presiding Officer, Scottish Parliament

Mr Jack McConnell will wind up the debate for the Executive. Mr McConnell, you can speak until 16:59.

Photo of Rt Hon Jack McConnell Rt Hon Jack McConnell Labour 4:47 pm, 30th September 1999

I will do my best to last that long, Presiding Officer. I am aware of the need to allow members to return before 5 o'clock.

I join members in thanking the finance officials and many other officials throughout our organisation who worked so hard on the bill over the summer. I genuinely thank them for their hard work on preparing the way for today's debate. Their work is often not recognised—indeed, it is occasionally criticised—in this chamber and elsewhere. They have done a tremendous job and I am very grateful to them not just for the work that they have done but for the work that they will need to do in the months ahead.

I also thank every member who has spoken. This has been a quality debate about a very high-quality subject and I hope that we can have the same quality of debate in the committees and the further Parliament meetings. I am particularly grateful to Euan Robson, Andrew Wilson and Annabel Goldie. I am pretty certain that they indicated their general support for the principles of the bill.

As Annabel Goldie said, this is not a particularly exciting subject. Perhaps it should be. However, although the subject is not necessarily exciting, I am determined that we proceed as far as we can with this bill on an all-party basis. The financial procedures of the Parliament should, if at all possible, be agreed amongst us all to give those procedures the credibility and foundation to allow us to make future individual budget decisions.

As part of that all-party support, I thank Keith Raffan for his contribution to consensus in the chamber. I am sure that his consensual remarks were appreciated by every MSP and it is nice to welcome him back after his operation during the summer. I hope that everyone welcomes him back, even those who are occasionally subject to his speeches.

Keith Raffan made some very important points. In the weeks ahead, we will agree in writing the procedures that will govern access to information, the framework for stages 1 and 2 of the annual budget round and many other matters.

Mike Watson is right to say that the Finance Committee has a vital role in that work. It is particularly important to determine—although it is never the Executive's job to do so—which committees will work on which bills and how the written agreements will be made. We will propose drafts and discuss them in due course. We should ensure, given the importance of this subject, that the committees of this Parliament, not just the Finance and Audit Committees, are involved in the deliberations at all times.

I thank my Labour colleagues, Richard Simpson, Karen Whitefield, Lewis Macdonald and Cathie Craigie for their support for the principles of the bill and for their references to the health service, to further education colleges and to local government. On that subject, I disagree fundamentally on the principles behind the recommendations of Annabel Goldie and Bill Aitken—and, to some extent, of Brian Adam.

I think that local authorities are democratically accountable to the people who elect them, not to this Parliament. We have to remember that division of responsibilities in all that we do.

Photo of Andrew Wilson Andrew Wilson Scottish National Party

I repeat the question that I put to one of Mr McConnell's colleagues earlier: does the Minister for Finance agree that it is wrong for the Westminster Parliament's Public Accounts Committee, or indeed for the National Audit Office, to take any interest whatsoever in the activities of the Scottish Parliament, given the same principle?

Photo of Rt Hon Jack McConnell Rt Hon Jack McConnell Labour

Given that I did not say that we should take no interest in local authorities, I would not agree with that argument—from the point of view of consistency that Andrew Wilson is attempting to advance.

It is right and proper that the Local Government Committee of this Parliament, in its deliberations, meets, as it has already done, the Accounts Commission, examines Accounts Commission reports, comments regularly and, perhaps, tries to influence the work of local authorities, individually or collectively.

It is right and proper that this Parliament—not ministers; not the Executive—will agree the annual allocations to local authorities, in both capital and revenue. It would not be right, however, for this Parliament and our auditing system to be involved directly in the auditing of local authorities. That is a principle that should be maintained. It was recommended by FIAG, which we have all praised today, and we should go with that recommendation.

Other points made by Brian Adam were much more interesting and important. In particular, he made a point about Audit Scotland's research and development work, which is central to the creation of the new body.

I hope that the amalgamation of the audit offices will let us expand the auditing opportunities, the skills in those offices, make more resources available for research and development work and make Audit Scotland, as Brian said, a champion for good practice.

Photo of Rt Hon Jack McConnell Rt Hon Jack McConnell Labour

I was grateful for Andrew Wilson's contribution because of the time that I had to fill up, but I think, perhaps, that I should press on.

The points about local enterprise companies that Alex Neil and others made perhaps sounded right in principle. We should have an interest in what is going on—in the money that is spent through the LECs. We will have an interest. The committees will have an interest and the Executive has a direct interest. It would have been wrong to delay this bill to use it to change the status of local enterprise companies or to wait for Westminster to change the Companies Act 1985, which would probably be necessary to give us the right to audit the books of local enterprise companies.

I welcome the fact that Mr Swinney's committee, the Enterprise and Lifelong Learning Committee, is examining that matter. I am sure that Mr McLeish and I will continue to discuss it, but I do not think that this is the time to take on the issue. I am very keen, however, that as much public money as possible is publicly accountable and open to scrutiny at all times.

Mr Neil also mentioned end-of-year amounts being spent perhaps too quickly and readily by public organisations of all kinds, at all levels of government. I welcome the situation that exists for the first time this year, which was initiated by Mr Neil's good friend Gordon Brown, who I am sure he knew well in the '70s even if he does not know him so well nowadays.

This year's system, which has allowed us to retain moneys not spent before 31 March, is good, and I think that the chamber will be happy when, next Wednesday, I make the expenditure statement in which I announce the Executive's plans for dealing with the matter in years to come.

Although Andrew Wilson made some good points about the need to carry over money, to be strategic in our thinking and to be policy-driven in our approach to budgeting, I do not think that his point about the need to announce our budgeting decisions in advance to Parliament and get its approval for them can relate to every financial announcement ever made by a minister. That would be impractical, unnecessary and—frankly—inappropriate for the people of Scotland. There are times when it is more appropriate to make announcements elsewhere. The important thing about this bill is that it will ensure that no announcements that authorise expenditure can be made without this chamber's authorisation or, in an emergency, without members having been informed. That is an important principle.

I do not intend to comment in length on the various remarks that have been made about our relationship with London, as Adam Ingram rather unfortunately put it, as if it were the bogey in the south.

A number of important issues will need to be debated in Parliament in years to come—the operation of the Barnett formula, the relationship with the Secretary of State for Scotland and the Parliament's revenue-raising powers—but they are not issues for debate on this bill. We must focus our scrutiny on the elements of the bill that relate directly to the financial procedures of the Parliament.

I know that Andrew Wilson has a particular—indeed an increasing—interest in the workings of the United Kingdom and in the good governance of Britain. I welcome Andrew's new approach.

[Laughter.] However, it is important to note, as Adam Ingram almost did—although he reached the wrong conclusion—that the Secretary of State for Scotland plays an important role in fighting Scotland's case inside the UK Cabinet in London, for example our case for European structural funds which, as the member mentioned, are so important for so many communities.

Photo of Rt Hon Jack McConnell Rt Hon Jack McConnell Labour

I have an important point to make.

Photo of Dr Winnie Ewing Dr Winnie Ewing Scottish National Party

I have an important point to make, too.

Photo of Rt Hon Jack McConnell Rt Hon Jack McConnell Labour

You did not speak in the debate.

Adam Ingram's point about European structural funds was important. We need a well resourced Scotland Office, based in London, but which operates here in Scotland too, to ensure that the best settlements for Scotland are won at United Kingdom level. I will defend that position in any chamber at any time.

I also hope that the remarkable consensus that appears to be developing on the Liberal Democrat and Scottish National party benches lasts—perhaps Adam Ingram has been at the Keith Raffan school of consensus speech-making.

Photo of Rt Hon Jack McConnell Rt Hon Jack McConnell Labour

I have full confidence in the work of Andrew Welsh and the Audit Committee in scrutinising this bill.

Members:

Come on. Give way.

Photo of Rt Hon Jack McConnell Rt Hon Jack McConnell Labour

Okay, I will let Dr Ewing in, because I understand that she is unable to join us for the launch of Scotland week in Brussels a week on Monday.

Photo of Rt Hon Jack McConnell Rt Hon Jack McConnell Labour

I will intervene to try to get Dr Ewing an invitation. She tells me that she cannot even come, which is very unfortunate, so I will give her the chance to speak today instead.

Photo of Duncan McNeil Duncan McNeil Labour

On a point of order. Is it appropriate for someone who has not participated in the whole debate to come along and make an intervention?

Photo of Lord David Steel Lord David Steel Presiding Officer, Scottish Parliament

Yes. I rule not on what is appropriate, but on what is in order and it is perfectly in order for Dr Ewing to make an intervention.

Photo of Dr Winnie Ewing Dr Winnie Ewing Scottish National Party

I have sat through the whole debate, except for five minutes, so I think that I am entitled to speak. I have followed the debate with great interest.

My question relates to the situation that we are in regarding Europe and the negotiations that affect Scotland, such as those on structural funds. Does not the minister think that it was disgraceful that the Government boasted about its failure to secure a continuation of objective 1 funding for the Highlands and Islands, considering that we were the only part of the whole European Union to be in that particular near-miss situation? The money for the transitional fund was already on offer, yet Labour boasted about the great job that it had done.

Photo of Rt Hon Jack McConnell Rt Hon Jack McConnell Labour

Presiding Officer, I have the utmost respect for the mother of the house, as Mr Canavan refers to Dr Ewing, but I think that her constant ungracious remarks about the very good deal that the Prime Minister achieved for the Highlands and Islands do not do her proud at all.

I have the utmost confidence in the ability of Andrew Welsh and his committee to ensure that this bill is properly scrutinised. I wish him well in that task and I hope that all members of all parties will be involved in it. We have an opportunity with the bill—and with an act—to sweep away some of the out-of-date terminology that exists in another place, as Dennis might have said.

The consolidated fund bills and acts, the appropriation acts the supply estimates, the supplementary estimates, the appropriations in aid—these phrases will go when this bill is passed. In place, there will be, if you like, the Scottish people's phrases: budget bills and acts, detailed agreements, budget revisions, retained receipts. We will put in place proper phraseology that people can understand. We will have a transparent financial decision-making and accounting system. The Public Finance and Accountability (Scotland) Bill—with, I hope, all-party support—will allow us to move forward to ensure that this Parliament and this set of ministers have the highest possible reputation.

Photo of Lord David Steel Lord David Steel Presiding Officer, Scottish Parliament

That concludes the debate.

Motion moved,

That the Parliament, for the purposes of any Act of the Scottish Parliament resulting from the Public Finance and Accountability (Scotland) Bill, agrees to—

(a) the following expenditure payable out of the Scottish Consolidated Fund

(i) expenditure of the Scottish Administration and Audit Scotland in consequence of the Act, and

(ii) increases attributable to the Act in the sums payable out of the Fund by or under any other Act,

(b) payments into the Fund and to the Scottish Ministers, and

(c) charges imposed by Audit Scotland in respect of the exercise of its functions.— [Mr McConnell.]