Public Finance and Accountability (Scotland) Bill

– in the Scottish Parliament at 4:00 pm on 1st December 1999.

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Photo of Rt Hon Jack McConnell Rt Hon Jack McConnell Labour 4:02 pm, 1st December 1999

This bill is a fine example of how devolution can make a real difference to the people of Scotland. It will help the Parliament and the Executive to take decisions on expenditure that are critical to Scotland and to our future success. Those decisions will, of course, be taken in a Scottish context.

The bill has shown that a devolved Administration can tackle issues of real consequence. Its provisions go to the heart of good governance. The bill has shown that the Parliament and the Executive can work together—although it was developed by the Executive, it owes a great deal to the input of the Parliament, particularly to that of the members of the Audit Committee and the Finance Committee.

Let me place the bill in context. In February 1998, the then Secretary of State for Scotland asked the financial issues advisory group to mark out a blueprint for Scotland's public finances after devolution. Members will recall from earlier discussions that that group produced an extremely thorough report, proposing a variety of measures intended to ensure that, after devolution, Scotland's public finances could be managed effectively.

As many of us will be aware, the statutory framework that the bill will put in place is just one of several ways in which FIAG's recommendations are being implemented. FIAG's vision of a financial regime that would be open and accessible, and that would provide a balance between the Parliament and the Executive, goes to the heart of the bill. Although there was a deliberate decision not to throw out tried and tested Westminster procedures unless something better could be devised, there are a number of areas where the Parliament is about to lead the way on financial management. Examples that spring to mind are the statutory arrangements for ensuring that officials of the Scottish Executive are answerable to the Parliament for their financial stewardship, and the arrangements for public audit, which are perhaps epitomised by the proposal to establish a single public audit service for Scotland—a service that we all expect to be at the leading edge of public audit practice.

The main provisions of the bill cover Parliament's controls on the Executive's expenditure, including controls on temporary and emergency arrangements. They ensure that the Executive's spending programme will be subject to thorough parliamentary scrutiny. Members should be in no doubt—the partnership Executive supports those processes and we will meet their demands. We will account for our actions and ensure that Parliament is involved in our financial decisions. I reiterate that again on behalf of my colleagues; this is a challenge, but we will make it work.

Having covered the statutory requirements of the budgeting process, the bill goes on to deal with accountability. Crucially, it will make officials answerable to the Parliament, while in no way diminishing ministerial accountability. It puts officials under a statutory duty to challenge the decisions of ministers on the grounds of irregularity, impropriety or poor value for money.

Other measures will help to ensure that financial accounts are prepared promptly and that proper accounting standards can be insisted on. It is my intention that the public sector in Scotland should lead the way in producing financial information that is accurate, informative and on time. The bill's provisions for audit will help to ensure that that objective can be met.

Finally, the bill puts in place a value-for-money regime. It does not place unreasonable burdens on public sector managers, but it enables the Parliament to ensure that the expenditure that it authorises is spent economically, efficiently and to good effect. Overall, the bill sets up a statutory framework for financial management of which we all can be proud.

There have been a number of changes to the bill since it was first debated in Parliament; many stem from recommendations made by MSPs during meetings of the Finance Committee and the Audit Committee and during informal discussions. The process by which the bill has been prepared has seemed to me very positive; I hope that it will set a model for how the Parliament and the Scottish Executive will work together in future.

This bill would not have been possible without a great deal of help and support. I extend my thanks first to the members of FIAG; their report was the foundation of the bill and of wider matters covered by the standing orders and non-statutory parliamentary arrangements. I also thank the individuals and organisations, too numerous to mention individually, who responded to the consultations conducted by FIAG and the Executive. Help in drafting tricky technical issues came from a number of sources; I mention particularly officials from the Accounts Commission and the National Audit Office. My thanks also go to the members of the Finance Committee and the Audit Committee and to their clerk and her assistants. As I said, members of the committees approached the bill in a positive and constructive way and the clerk greatly assisted in that. I thank my colleagues on the Executive for their support.

The bill stems from recommendations whose sole purpose was to ensure that Scotland has the best possible framework for public financial management. Its provisions are often complex and, although its objectives are straightforward, its implementation will require our dealing with a variety of technical, financial and legal issues. Despite its complexity, the bill has been subject to thorough and effective scrutiny by the Parliament, which has resulted in a number of improvements. We now have a bill that allows us in a new way to set our budgets, to spend money openly and wisely and to account for what we do.

I move,

That the Parliament agrees that the Public Finance and Accountability (Scotland) Bill is passed.

Photo of Andrew Wilson Andrew Wilson Scottish National Party 4:07 pm, 1st December 1999

I welcome the bill in its final form and I congratulate FIAG for the role that it played at the start of the process, informing so much of the legislation before us.

The good governance that we can demonstrate as a Parliament is critical to the whole process. I think that it was Mr Welsh who said at stage 2 that one of the beauties of a small country was that one could govern better; that is the principle of devolution that we would like carried into all the areas of policy competence that normal countries have. If we can demonstrate that we can spend our resources more wisely, more effectively, more efficiently and with greater transparency and if we can promote better governance, surely that makes a powerful case for having the same responsibilities as a normal country in revenue raising. I look forward to the day when we have a balanced budget—when, like any normal country, we are responsible for raising as well as spending the money.

When Mr McConnell relaxes after the rigours of a tough day, I suggest that he reflects on his colleague across the Irish sea, Charles McCreevy TD, who is today administering perhaps the most exciting budget bill in Europe this year—the Irish Government is about to allow the people of Ireland to share in the country's economic success. It would be nice if we had the same opportunity in Scotland.

I commend the Minister for Finance for lodging 20 of the 28 amendments to correct previous inadequacies in his drafting. It would have been nice if he could have engaged with some of the positive, co-operative politics that the Finance Committee and the Audit Committee, under the able convenerships of Mike Watson and Andrew Welsh, seek to promote. Perhaps as we go on we can return to those good principles.

Photo of David Davidson David Davidson Conservative 4:09 pm, 1st December 1999

I welcome the approach that has been taken to the bill. The bill must be a fascinating piece of legislation, because we have the largest turnout of Labour members for many weeks—it is encouraging to see them supporting the Minister for Finance.

The Scottish Conservatives welcome the bill for providing a structure and a mechanism by which the Parliament can ascertain on behalf of the Scottish people where their money is spent and whether it is spent prudently and to the maximum effect. The bill sums up what we have tried to achieve in the Finance Committee and the Audit Committee; I hope that people recognise that we have approached it in a constructive, non-partisan manner. I also welcome the input, before the establishment of the Parliament, from FIAG and the many other organisations that the minister mentioned.

The written agreements are vital to the role of the Finance Committee in budget scrutiny. They will help the committee to support the work of Parliament's other subject committees. We must build on what we have done today to produce a good, proactive relationship between the minister and the Finance Committee and the Parliament's other committees. In particular, we must be able to call on the minister at fairly short notice when an item needs to be discussed. We will try to be flexible, as the minister has always tried to be.

We must have an assurance today that any potential Cabinet or Executive committee structure set up by Mr Blair—such as the one that has been mentioned in the past couple of days—will not undermine, in any way, any relationship between Scottish ministers and the Parliament.

We have always said that every penny must be traceable and that there should be no build-up of war chests. We hope that the bill will prevent the recycling of previous financial statements as new spending. We need clarity about the status of all on-going spending programmes. Perhaps the minister will consider the provision of monthly management accounts, or some such vehicle, to assist the committees in their work.

Public consultation, while laudable, takes place only at stage 1. The Finance Committee had problems at stage 2 and even the expert witnesses whom we brought in to give assistance and clarity had some difficulty. I hope that the minister will address that.

Perhaps the minister would like to give some thought to a contingency fund. I am always unhappy when contingencies are drawn from various budgets; that gives an opportunity for smokescreens, which we do not want in this Parliament. We want to be able to see clearly what ministers are doing. We must also recognise that honest Jack may not always be our Minister for Finance. It is important for whoever succeeds to that role, whatever end of the bench he currently sits at—I do not know, as I am not the First Minister—that what we do today progresses in a constructive manner.

In conclusion, I simply remind the First Minister—at least I would like to do so, but he is not here—of his words at the opening of the Parliament about Government openness and accountability.

Photo of George Reid George Reid Scottish National Party

Ten members have indicated their desire to speak. Any other members who want to participate should press their buttons now.

Photo of Paul Martin Paul Martin Labour 4:12 pm, 1st December 1999

I welcome the fact that the bill will be passed today. I am sure that I speak for all members of the Audit Committee when I say that I welcome the minister's contribution to the process. The Audit Committee has had a constructive debate on the bill; that is to be welcomed.

I welcome the fact that the minister has accommodated a number of points that were raised during the committee's proceedings, particularly the point on value-for-money studies. The 25 per cent threshold will certainly be a start to the process.

The Parliament has been the subject of much criticism recently. The bill establishes financial accountability to ensure that we have a fully transparent process that will be a credit to the new Parliament. I ask that the public and the press give us some credit for what has been done so far. I see that three members of the press are sticking out the debate this evening. [Interruption.] I stand corrected—four members of the press are in the gallery.

Quite rightly, the Public Finance and Accountability (Scotland) Bill has leaned towards the FIAG recommendations. Those recommendations have been largely welcomed and have allowed us to ensure maximum transparency and financial accountability.

Given that we have more than £16 billion at our disposal, we must target funding towards priorities and avoid waste. We are entering a refreshing era, where the spending of public funds is under fierce scrutiny. I believe that the model that we are debating meets those aims.

I am pleased, in particular, with the bill's emphasis on plain English. As an ex-member of Glasgow City Council, I know that officials used to compete with one another to create new jargon. The only way in which we can excite interest in the budgeting debate is if we use plain English to make our accounts more accessible—that will ensure proper accountability.

The proposal to transfer the Accounts Commission's responsibilities for the health service audit to the Auditor General is crucial. I have been frustrated by not being able to raise in the Parliament issues concerning local health boards. The proposal recognises the prominent role that the Parliament must play in the health service audit. The Executive's plans to consolidate public accounts give us real powers to obtain information from bodies and to allow information to be audited. That is another example of effective financial management.

As Keith Raffan said, we will have a financial framework that will receive worldwide recognition. That framework will ensure the highest possible standards of financial accountability.

Photo of Keith Raffan Keith Raffan Liberal Democrat 4:16 pm, 1st December 1999

I am happy to follow Mr Martin, particularly given his remarks about the press gallery. It is interesting that the press gallery is so full when something minor or trivial happens, yet when the Parliament does a piece of work that is not just solid and substantial, but a first-class model for other countries—I include the United Kingdom and Westminster in that description—so many of the journalists have left. I am glad that there are a few more journalists now. The last time we debated the matter, there was only one journalist in the press gallery. We in the Finance Committee like percentages, so I could say that the amount of journalists has increased by 400 per cent. [Laughter.]

The bill goes to the heart of the relationship between the Parliament and the Executive. I doubt that the Parliament will pass a more important bill in this session. The bill establishes the financial management framework for the future. Most important, it establishes the budget-making process and the relationship between the Executive and the Parliament and the Parliament and its committees in that respect. It is not just a question of the Executive's accountability to Parliament, or to the Finance Committee and the Audit Committee in particular. What is important is that those committees and the Parliament will be involved in the budget-making process. That is central to the bill and it is infinitely superior to anything at Westminster.

I hope that what we have done today will have a reaction—occasionally at Westminster there is a response as well as reaction—and that the UK Parliament will begin to debate its right to be involved in the budget-making process.

Some questions remain. There is a question about stage 1 of the budget bill. The Minister has given a guarantee that he will provide a provisional expenditure plan for that crucial stage. At the beginning of the financial year, between April and July, not just the Finance Committee and the Audit Committee, but the subject committees, will have an opportunity to have input into the budget-making process. The provisional expenditure plan must be fairly detailed if the committees are to be able to make an intelligent judgment about different spending priorities.

Stage 2 will be in the autumn. September 20 is when the minister is likely to introduce his detailed budget, and by the end of November we will need to have fully debated and discussed it in the Finance Committee, the Audit Committee and the subject committees. That is a very short period. In the light of experience, we may well have to try to lengthen it.

Those are some current reservations—there are very few—about the bill. Much will be revised in the light of experience. As soon as we move into the new financial year—the first full financial year of the Parliament—we will be able to make a judgment about how well the process is working.

As the minister rightly said, we are leading the way. It is important that we pay tribute—as all parties have—to the financial issues advisory group. If it had not been for its excellent work—the foundation for the bill—we would not be at this stage now.

It is very important to pay tribute to those who, in the run-up to the Parliament, produced a very fine piece of work to help us to do our work once we were elected. Credit is due to them, and from now on—as authors always say at the beginning of their books—all the mistakes will be ours. I am sure that the press and the voters will remind us of that in the months and years to come.

I am happy to support the bill. I believe that it sets out a budget-making process for Scotland that is a model of its kind and to which other countries will look in future.

Photo of Andrew Welsh Andrew Welsh Scottish National Party 4:20 pm, 1st December 1999

I congratulate the minister on successfully piloting through this measure. What is happening today is of massive importance for Scotland. This bill sets out one of the foundation stones for the work of the Parliament. The objectives of clarity, openness, accountability and the need to obtain maximum effectiveness and efficiency in the use of public money are at the heart of the FIAG recommendations, and all are to be found in this bill. If the bill meets those objectives, it will be a massive achievement for the people of Scotland.

The Parliament has no option but to budget prudently because of the fixed, limited nature of devolution finances. Westminster regularly overshoots the chancellor's predictions by tens of billions of pounds, but no such luxury is available to this devolved Parliament. We have to harness, gather and maximise the effect of every available pound on behalf of the Scottish people. Therefore, the greater the openness, scrutiny and financial efficiency, the greater will be the benefits for the people of Scotland in terms of services delivered and the use of resources.

The foundation stones exist in this bill; now Parliament and the Executive must deliver. Scotland is currently governed by quangos in many areas. I hope that the powers that are available to the Auditor General will bring to public light and scrutiny many dark areas of Scotland, and will do so on behalf of the people of Scotland. Wherever public money is involved, the public must be assured that there is transparency and value for money. However, the proper scrutiny of public accounts goes further than simple close investigation and reporting back. The scrutiny powers in the bill have to be used positively and with sensitivity, rather than becoming the simple application of fixed-rote formulae.

I look forward to a public scrutiny system in Scotland that always seeks out, and encourages the dissemination of, best practice, without stifling innovation and initiative. Raising overall standards and the quality of the services that are provided to the public must always be an essential part of the new Scottish financial system. This bill can only set out the framework for action. It is now up to everyone involved to deliver the reality.

The Minister for Finance has now delineated the system, and the lines of responsibility between Parliament and the Executive, and between Parliament and Audit Scotland, have been made clear. Now we must all check against delivery. I congratulate FIAG and thank the minister for delivering this bill. I wish everyone concerned every success in delivering for Scotland.

Photo of Mike Watson Mike Watson Labour 4:23 pm, 1st December 1999

At the risk of giving my colleague, the Minister for Finance, a red face, I join Andrew Welsh and others in congratulating him on the way in which the bill has been piloted to a successful conclusion—the formality of the vote notwithstanding. It is important to recognise that this is an example of decentralised government in practice. This Parliament, and not just those who have been involved in the various stages of the bill, should take some credit for that. Decisions on expenditure in Scotland are clearly set out, as are the means of holding to account those who have responsibility for them.

The bill has provided an example of effective working by two committees in the various processes of a bill—the Audit Committee under the convenership of Andrew Welsh was the lead committee, but the Finance Committee had a considerable role as well. It has shown how the system can work for bills in other subject areas. The system is not perfect, but we have shown very effectively how it operates.

As everyone has acknowledged, the bill is crucial. It is both forward looking in authorising Scottish public resources and finances and retrospective in scrutinising spending and holding to account the Executive and public bodies. We cannot overstate the importance of that in the context of the governance of Scotland and the crucial role that this Parliament has in it.

The important principle of value for money has also been established and set out as part of a statutory framework for financial management based on maximum transparency, as my colleague Paul Martin eloquently outlined. This process has been an historic event: this is the first bill to go through the full process of this Parliament. All of us who have played a part in it have formed a template for bills that will follow.

Not many people knew what the financial issues advisory group was before the process started. FIAG, as we refer to it, produced a blueprint, which will endure and will be a cornerstone of the way in which this Parliament operates and the government of Scotland is carried forward. All those who have contributed to that group, over a considerable period of time, should be congratulated.

On a more personal note, I thank those involved in steering through the first bill to go through all the various processes. It was not easy and often the way in which the process was set out was not as obvious as it might have been and had to be tested. I thank Sarah Davidson, who is clerk to the Finance Committee and the Audit Committee, which is not an easy task. I also thank her staff and colleagues on both committees for the successful conclusion of what, I am sure in retrospect, will prove to have been an historic bill in this Parliament.

Photo of Dennis Canavan Dennis Canavan Independent 4:26 pm, 1st December 1999

The declared aim of the bill is to make public finances accountable. I am not sure that the bill will achieve that aim to the extent to which many of us would like. I will give the minister an example, on which I would like him to respond.

Last year, serious allegations were made about misappropriation of public funds by senior management of the former Central Scotland Healthcare NHS Trust. The prima facie evidence was so strong that it convinced Mr John Rafferty, who was then chairman of the trust, to arrange for the setting up of an independent review panel to investigate the matter, which was also reported to the procurator fiscal. Mr Rafferty, who is now special adviser to the First Minister, gave me a commitment at that time that the findings of the independent review panel would be made public.

Sam Galbraith, then the health minister, reiterated that commitment in a parliamentary reply given to me in the House of Commons in January. That commitment has never been fully honoured. I want to know how this bill will ensure the honouring of that commitment.

Last week, Forth Valley Primary Care NHS Trust published a report of an internal audit that raises more questions than it answers. It identifies failures and irregularities but it does not identify who was responsible or say how much public money was misappropriated. Those are matters of legitimate public concern. Will the minister tell us whether this bill will help to ensure public access to information about alleged misappropriation of public funds?

Last week, we had a statement about freedom of information; this week, we have this bill, which is a statement about the need to bring public finances more to public account. It is time that we turned those fine words into action.

Photo of George Reid George Reid Scottish National Party

Under the terms of the business motion, we now move to the winding-up speeches.

Photo of Nick Johnston Nick Johnston Conservative 4:28 pm, 1st December 1999

I am pleased to be speaking at the final stage of this bill. Like Andrew Welsh, I think that in it we have laid the financial foundations for the governance of Scotland and for proper scrutiny.

Two points have emerged from this process.

First, we have exposed the consistent underspend of the Scottish Office. I hope that by exposing that underspend we will make better use in future of the £16 billion block grant.

Secondly, we have the chance to ensure that every public body that spends public money does so in the bright light. Perhaps we will be able to ensure better and more effective use of public funds. My colleague, David Davidson, spoke at length on the financial sections of the bill, so I will not dwell on that.

I welcome the establishment of Audit Scotland and give the good wishes of the Parliament and the Audit Committee to the staff of the National Audit Office and the Accounts Commission. I hope that the bringing together of those two bodies is a smooth transition.

We also welcome the transfer of audit of health boards and trusts to the Auditor General for Scotland. Speaking of the Auditor General, I was honoured to be asked to play a part in the appointment of that august gentleman. The calibre of all the candidates was extremely high.

I wish to put on record again the Conservative party's concerns that the bill, in broad terms, will not embrace the allocation of £6.4 billion to local authorities. I know that the Convention of Scottish Local Authorities has highlighted the need for an independent accounts commission that is free from political influence. Perhaps now we may get the openness that will ensure that the Executive does not keep constantly recycling, under the guise of new expenditure, money that has already been committed.

Finally, as time is tight, I want to add my thanks to Sarah Davidson and all the clerks to the Finance Committee and the Audit Committee for giving us guiding light and showing us the way through often stumbling footsteps. I commend to the chamber the patience that the clerks showed to people who, like me, have not been involved in this process before. I commend the bill to the chamber—it is a good bill and I have been proud to take part in its formation.

Photo of John Swinney John Swinney Scottish National Party 4:11 pm, 1st December 1999

I begin by placing on record thanks from a number of my colleagues to the financial issues advisory group for the considerable work that was put into this area of thinking before our Parliament was established. I am glad that the minister has shown a willingness to go as far as he can to incorporate FIAG's thinking into the bill That is much appreciated. I also wish to record the SNP's thanks to the clerks for their support throughout the process and for helping to enhance the parliamentary process as a result.

In his opening speech, the minister set out an impressive list of hopes for the financial management and control process that the bill gives the Parliament. He talked about openness and accessibility and about his determination to meet the demands of the parliamentary process. The SNP warmly welcomes those concepts and commitments: we intend to hold the minister to them vigorously.

Last week, the minister produced a glossy document, "Spending Plans for Scotland". If that document, with not one real-terms figure in its 24 pages of glossy print, reflects his definition of openness, I am afraid that his definition is different from mine. He gave commitments to ensure that accurate information is available to Parliament—and on time. As an Opposition, we warmly endorse those concepts, but we must look back to some of the steps in the bill's progress and recognise that not all the information was available on time.

I return to the major question about the process, which remains unanswered. As we approve the bill today—we will do so in a moment—the Finance Committee has not agreed the financial procedures aspect of the bill. These are important issues about the responsibility of Parliament and the scrutiny that Parliament can exercise over the Executive. The SNP intends to use this Parliament's procedures to ensure that that scrutiny is applied to its fullest extent. However, we need the Executive's co-operation to guarantee that the partnership that has existed so far on these issues can continue during the remainder of this parliamentary session.

Photo of Rt Hon Jack McConnell Rt Hon Jack McConnell Labour 4:33 pm, 1st December 1999

I wish to reiterate my thanks to those outwith the bill team who were involved in producing the bill. I also wish to record my thanks to the officials who managed to deliver a bill that, in September, was presented to Parliament two weeks ahead of schedule. Even at that stage, I did not really expect that my hope of a Christmas finish would be met. However, today we have managed to reach stage 3 and the closing speeches three weeks ahead of schedule. I wish to thank those officials for their help in ensuring that that happened. It has given me a lot of pleasure to be part of the team that produced the bill and to speak to the bill today.

This has been an interesting, if short, debate, covering many issues that are crucial to the good management of the Parliament's finances. I do not want to pick up on the various close-to-party-political points that have been made. While that might liven up the afternoon, I do not think that it would be appropriate.

Twenty years ago, I was one of Dennis Canavan's constituents. I clearly remember him entering his second term in Parliament and entertaining the students of the University of Stirling with descriptions of appropriations in aid and various other phrases used at Westminster in order to, as he put it then, confuse members of Parliament and the public, and to hide decisions away from openness and transparency.

I am pleased that we have produced a set of procedures that will use plainer English and will be more open and transparent. However, I also remember Dennis describing to us at great length how he was able to use the procedures of the House of Commons to raise issues in debates that people were not expecting or which were not appropriate. He clearly still has that talent 20 years on.

It would not be appropriate to talk about the former Central Scotland Healthcare NHS Trust today, but it is important to note that the Auditor General for Scotland will be responsible for auditing the health service in Scotland and that the powers that this bill gives the Auditor General will ensure that the health service is subject to more scrutiny than it has had for a long time.

The bill is not the end of a process. Granting resources and scrutinising the use of them ranks among the most important functions of any Parliament. Detailed procedures will be put in place and will be agreed in the Parliament, but they will have to evolve to suit changing circumstances. We must be vigilant to ensure that the procedures remain appropriate; we must not be afraid to make changes if circumstances demand that we do. The bill provides the framework for the proper conduct of financial affairs by this Parliament, the Executive and other bodies.

Photo of Richard Simpson Richard Simpson Labour

Does the minister agree that the process that we are setting up, whereby the Finance Committee will be able to scrutinise the general budget intentions and consult the subject committees, which will be expected to consult the public, means that we will have one of the most open systems in the western world?

Photo of Rt Hon Jack McConnell Rt Hon Jack McConnell Labour

I agree with that and confirm that we want to make the process work.

The partnership agreement said that the people of Scotland wanted open, stable and responsible government, fully accountable to a modern, representative Parliament. The Scottish Labour and Scottish Liberal Democrat partners said that they wanted innovative government that was open and that they welcomed from any source good ideas that encouraged participation. Those statements built on the work of the consultative steering group, which said that the Scottish Parliament should be accessible, open and responsive and should develop procedures that made possible a participative approach to the development, consideration and scrutiny of policies and legislation. That is what we have done today and I commit the Executive to working towards that.

This is a good bill, a Scottish bill, and the first in our programme for government to complete its parliamentary passage. It was made in Scotland and it is characterised by timeless Scottish values: public service, probity and democracy. It contains rights and responsibilities for all of us in this chamber and I am honoured to ask members to vote for it today.