This afternoon's debate is on motion S1M-1449, in the name of Mike Watson, on behalf of the Finance Committee, on the budget process.

I welcome the opportunity to open this debate on the Finance Committee stage 2 report on the 2001-02 budget process. I cower slightly in the face of the information that I have 20 minutes for the opening statement. [MEMBERS: "Oh dear."] Twenty minutes is quite enough for me. I may not use it all and so I wonder whether I might prevail on you, Sir David, to bank any unused time for me to use in any back-bench speeches that I make in the near future.

It seems to me that there are excitements elsewhere—you may have some latitude on time today.

Thank you.

This may not be startlingly original—indeed, I made similar comments when I introduced the stage 1 debate in the chamber on 28 June—but we are, in this process and in today's debate, indulging in what might loosely be termed groundbreaking stuff. We are two thirds of the way through the first year of the Parliament's budget process and two thirds of the way through the time allocated to the process.

As members may recall, that process began way back at the end of March, when the then Minister for Finance, Jack McConnell, announced the Executive's spending plans in the annual expenditure report, "Investing in You". In stage 1 of the budget process, the Parliament's subject committees examined the plans for their departments and reported to the Finance Committee. Their comments informed the report, which we in turn presented to Parliament for debate as the culmination of stage 1.

That report did not pull many punches and was critical of the structure, content and presentation of the information contained in "Investing in You". We called for radical changes and made a total of 14 recommendations on how the annual expenditure report should be improved in future. Following the stage 1 debate, the Parliament agreed to commend the report's recommendations to the Scottish Executive.

The fact that some of those recommendations had been acted on promptly became evident in September, when the Executive published its spending plans for this year, in "Making a Difference for Scotland". The plans were again referred to the subject committees for scrutiny.

It is worth contrasting this year's budget process with last year's. Last year, the Finance Committee alone subjected the draft budget to what was, in reality, rather cursory scrutiny; this year, nine of the Parliament's committees have examined it on two occasions—although not, as I will report, in quite the detail that was intended. Twelve months ago this week, the Parliament debated an Executive motion on the 2000-01 draft budget; this year, we are debating a motion on the Finance Committee's report. A year ago, the debate was opened and closed by the Minister for Finance; this year, it is opened by the convener of the Finance Committee and will be closed by its deputy convener. Last year, the Executive hosted the party; this year, it is the guest.

The Finance Committee report makes it clear that we regard the embryonic system of scrutinising the Executive's budget proposals as—to put it mildly—less than perfect. However, that should not be taken as a damning indictment. In a sense, the budget process is a microcosm of the Parliament. Both started from scratch, without a template to refer to. Both have begun the climb of a steep learning curve and both have had their setbacks—some of which, it has to be said, have been self-inflicted. Both will improve with time and in due course will, I am convinced, come to be accepted as fundamental changes to what was the established order, with both having far-reaching effects on the day-to-day lives of the people of Scotland. That the Parliament might reasonably lay claim to having advanced further up the curve is merely a reflection of the fact that it is into its second year, while the budget process remains in its first year.

As the Finance Committee report recognises, the fact that the new arrangements for scrutinising the budget are in operation is an achievement in itself. The underlying message is that a rigorous annual examination of the Scottish budget is now an established fact and will become a recognised part of the Scottish political landscape. That may merit restatement, because ministers, departments and their officials, as well as the subject committees, must also recognise that fact. Key dates must be marked in calendars and detailed forward planning must become the norm. I guarantee that the Finance Committee will remain assiduous in ensuring that the process evolves successfully. Ultimately, maximum benefit will be derived from the process only if departments and subject committees work in harmony.

At stage 1, the Minister for Finance signalled his intention to encourage the people of Scotland to engage in the budget process by participating in four public meetings around the country. As part of our stage 2 scrutiny, the Finance Committee maintained that trend by meeting in Aberdeen. We took evidence from representatives from a considerable number of sectors in the north-east and completed the day by questioning the Minister for Finance and Local Government. In so doing, we broke new ground on two scores: it was the first time that the Finance Committee had met outside Edinburgh and it was the first occasion on which a Scottish Executive minister had given evidence outwith the capital to one of the Parliament's committees.

The committee believes that meeting in public beyond the well-trodden territory of the central belt is an important means of connecting Scotland's Parliament to its people. We also see such meetings as an integral part of the budget process and intend that they should become a regular feature of our consideration at stages 1 and 2.

In the body of our report, our main concerns relate to the fact that, due to the lack of detailed expenditure figures, the Parliament will be, to a significant extent, unable to undertake proper scrutiny of the Executive's spending plans. Of course, this is not a typical year, given that, in July, the Westminster Government announced its comprehensive spending review and additional spending statements. The committee welcomes the additional resources, but it remains a matter of concern to us that a full breakdown of that additional funding has yet to be published.

We anticipated the late arrival, not the non-arrival, of level III figures for our stage 2 consideration. It is unsurprising that most of the subject committees commented in their reports to the Finance Committee that they were unable to undertake their task effectively and were denied the opportunity of examining whether the expenditure proposed for the relevant departments was likely to prove adequate for funding policy commitments.

I am grateful to Mike Watson for giving way and agree with nearly everything that he has said. Although he says that this is not a typical year, we will have comprehensive spending reviews in future—they will happen every second year. Therefore, we will encounter the problem regularly, and every second year will be typical.

I accept that point; I will come on to address it. We must find a means of ensuring that the difficulties that emerged this year do not recur. Of course we are aware that every two years—or possibly every three years—similar problems will arise, and we must find a way out of those problems.

Just to show that Mr Raffan intervened at precisely the right point in my speech, I will continue by saying that such announcements from Westminster may be made at a similar time in subsequent years. The Finance Committee does not regard it as acceptable that such difficulties should arise when UK spending plans are updated, which will probably happen every other year, as I said. The committee is working towards finding a solution to that problem, although the basis on which that solution might be constructed is not yet fully clear to us.

However, that is not our responsibility alone and we call on the Executive to turn its thoughts to how the problems that were encountered this year might be avoided in future. We trust that the Executive will do so and report to the committee as a matter of urgency. The Minister for Finance and Local Government told us that he shared our concern and we welcome his willingness to engage in the process of improving the current structures.

The introduction this year of resource accounting and budgeting is both welcomed and seen as significant by the committee. By introducing the definition of current expenditure to take into account depreciation of fixed assets, RAB will change fundamentally the means by which the Executive plans and manages its spending to achieve its policy objectives. By deciding to conduct an inquiry into RAB early in the new year, the committee recognises in those changes the importance of controlling and accounting for expenditure.

The Health and Community Care Committee and the Transport and the Environment Committee reported to us that RAB was likely to have the greatest impacts on their respective departments, given that those departments have large capital programmes. The Health and Community Care Committee also drew to our attention the difficulty of comparing the figures published at stage 2 with those given at stage 1, due to RAB adjustments. We noted the minister's comment that that represented merely a difficulty in this first year. None the less, we welcome the fact that, now that a baseline has been established, such problems should not arise in future.

The Finance Committee's main concern on RAB is in relation to the separation of capital charges from service purchases. We have recommended that, in future, there should be separation in budget documentation and we cited as an example the budget submission from the Scottish Parliamentary Corporate Body. Building on that example, we looked for the disaggregation to depreciation and notional cost of capital figures to be provided in future in respect of departmental budgets.

Shortly before the debate began, I received from the minister a copy of the Scottish Executive's response to the committee's report. I have not had time to go through it in anything like the detail that will be necessary, but I note that one of the responses that has been given is on recommendation 3 of the committee's report, on the separation of capital charges. I am slightly disappointed that the minister says:

"I am, however, concerned that separating out capital charges from service delivery could undermine the impact of this reform by giving Departments the impression they are an artificial concept rather than the real cost of capital. I hope your Committee will therefore support me in reinforcing the message that there is a real cost in consuming capital resources."

The inquiry to which I referred will be considering that, but members of the Finance Committee feel that the reason given by the minister is not sufficient for not separating the figures as we requested. I suggest to the minister that this issue will run for some time; we shall certainly revisit it in our inquiry.

I agree with Mike Watson's analysis and endorse what he said. How is it possible for the minister to argue that we must identify the true cost of capital if he does not do so in the budget? Part of the minister's argument is for enforcing a position in which the cost of capital is assessed, so that we can see what is being spent on capital and what is being spent on everything else. I think that the minister's argument is served by the committee's position.

I very much agree with what Andrew Wilson has said, which reflects the view of the committee. There was no division or difference of opinion on that matter among committee members. I cannot speak for the minister, but he will have an opportunity in due course to respond to those points.

The committee's stage 1 report highlighted some of the shortcomings of the presentation of figures in "Investing in You". We were therefore encouraged by the open and constructive approach shown by the minister and his officials when he gave evidence to the committee in Aberdeen last month. The clearer layout of the recent autumn budget provisions augurs well for further developments, and I certainly look forward to that trend continuing.

I must qualify that by saying that we remain concerned by the apparent reluctance to present figures uniformly in real terms. That is an issue that the committee has highlighted on several occasions over the past 18 months, yet tables 1 and 2 in "Making a Difference for Scotland" still do not display figures in real terms. This is not rocket science—it should be fairly simple and straightforward to deal with the matter. Having raised the issue with the minister and with his predecessor, and having received assurances, we do not expect to have to revisit this subject in future reports.

An issue that aroused our interest during our scrutiny of "Making a Difference for Scotland" was the introduction of the provision for a reserve. Despite the minister's assurance when he gave evidence that it was not the Executive's intention to create what he called a contingency fund, the existence of such a reserve cannot be denied. Our concern stems from the lack of any apparent controls on the flow of funds into or out of the reserve, and we could not establish how and when departments might access it. Furthermore, the existence of a Scottish reserve calls into question the relationship with its UK counterpart. We believe that clarification of that and other aspects of the reserve is required as a matter of urgency.

The Scottish Executive has often emphasised the importance of moving away from what has been termed departmentalitis in favour of a cross-cutting, joined-up approach to government. In Aberdeen, the committee heard some evidence that that approach was often not apparent. We welcome the fact that, in his previous post, the minister implemented a cross-cutting methodology in his work on drug-related issues. We recommend that he carry forward that approach into his new role, with the annual expenditure report and draft budget clearly illustrating the source of budgets from different departments and agencies.

Over the past few months, in parallel with its consideration of the draft budget, the Finance Committee has been undertaking a review of the budget process. The committee set up two reporter groups, one of which has considered the means by which budget documentation can be improved, linking policy development and budget setting. Essentially, that involves focusing on outcomes rather than outputs. We welcome the minister's endorsement of our belief in the importance of the measurement of performance. If "Making a Difference for Scotland" is to live up to its title, the additional funding that it outlines must demonstrably produce tangible gains. That must involve the regular updating of targets and objectives to reflect changed circumstances.

By requiring the subject committees to report at stage 1 on the issue of engendering budgets, the Finance Committee took the lead within the Parliament on the question of the impact of departmental spending plans on women. We are pleased that the committees have taken that task seriously. The demands that they make on Executive departments for the clear publication of the relevant information will assist us in arriving at a position where it is possible to identify where policies have different effects on men and women. Once that has been established, the inequalities inherent in implementing policy without such an audit can be addressed.

We further welcome the fact that this work will be complemented by the work of the Equal Opportunities Committee, which is urging all departments to ensure progress towards the Executive's overarching aim of mainstreaming equality in its widest sense. Before this year, the thought of including the budget in that process would have occurred to few. Indeed, we must be honest and say that it had not occurred to the Finance Committee until we were invited to consider it by the women's group Engender. The fact that Engender has influenced not just our thinking but the budget process as a whole is to be welcomed as an example of our Parliament's accessibility and its willingness to act on representations that are made to it.

We are aware that much remains to be done on that issue. For example, in our stage 1 report, we commented on the fact that, because of the lack of suitably disaggregated information, the then Minister for Communities was unable to give the Social Inclusion, Housing and Voluntary Sector Committee the assurance that equality issues would be integrated into policy making in her department. Six months on, the new Minister for Social Justice had to repeat that message, although she gave an undertaking to set in train the steps that are necessary to produce an improvement for next year. That is why, in calling for next year's budget documents to present explicit information on equal opportunities policies, we highlight the specific need for detailed and robust information on the impact that departmental spending plans will have on women and men.

Earlier, I referred to the fact that the Executive responded to the recommendations contained in the Finance Committee's stage 1 report. In addition, it was pleasing to note that two committees—the Health and Community Care Committee and the Justice and Home Affairs Committee—were able to report to us specific expenditure reallocations that they had sought and that the Executive had carried out. That is encouraging evidence that the time spent by committees in scrutinising the budget proposals is beginning to have its reward. It demonstrates that the Executive and its officials have embraced the new process and are both willing and able to demonstrate flexibility in what is developing—as it should—into an annual rolling process.

At the end of stage 2 of this inaugural year's budget process, the Finance Committee has produced a report that, even I would concede, may not be the most absorbing that the Parliament has seen. However, it is not the role of our committee to produce reports that are eagerly anticipated by members, the media and the public—more is the pity. There was never much likelihood that we would be able to compete with the reports on the failures of the SQA that were debated this morning. The Finance Committee is much more likely to gain a reputation for producing heavy reports. At 287 pages, the report that is the subject of this debate certainly qualifies for that description—literally, if in no other way.

To be serious, I should say that we are charged with ensuring that the new budget process is refined so that it becomes as accessible and revealing as possible. It should provide not just MSPs but the wider Scottish public with information that enables them to track the Executive's spending plans, to assess the success with which the Executive meets stated policy priorities, and to gauge the extent to which meaningful performance measurement is possible. After examining "Making a Difference for Scotland", we have produced a report that is critical where necessary but that recognises where progress is being made. Much remains to be done, and not all the required changes are minor. The lack of level III figures at this stage to enable committees—the Finance Committee included—to give the draft budget the necessary detailed scrutiny is a major issue.

The problems that led to this year's difficulties have been well rehearsed, but they must be overcome. The Finance Committee is committed to pursuing that goal to a successful conclusion. Without that, the budget process will never achieve the smoothness in its operation that is essential if it is to become fully effective. In a letter that I sent to the Minister for Finance and Local Government today on behalf of the Finance Committee, I have outlined the changes that we expect to see in time for next year's annual expenditure report. Those relate to the general readability of the document, the manner in which expenditure figures are presented and how departmental performance can be measured so that the people of Scotland can assess whether Executive spending is helping to improve their lives. If we can achieve that aim, we will provide tangible evidence that the Scottish Parliament is beginning to have the positive effect that those of us who campaigned for it over many years always intended that it should.

I am not suggesting that next year's budget process will have developed into what might be claimed to be the finished article, but it is essential that progress is seen to be made. The Finance Committee has confidence in the principles that underpin the process. There is no reason why the process should not be subject to the performance measurement to which I have referred in respect of the Executive and its various departments. The same could also be said for the Finance Committee.

Perhaps an effective means of measuring the performance of the process—and within that the role of the committee—would be to monitor the extent to which the reports and the debates that follow them at stages 1 and 2 of the 2002-03 budget process comment on the content of the individual departmental budgets as opposed to the process. I look forward to the time—certainly within this parliamentary session—when the budget process is sufficiently well refined to ensure that the attention of the committee that scrutinises it is concentrated solely on the spending plans and priorities.

I move,

That the Parliament notes the 16th Report 2000 of the Finance Committee Stage 2 of the 2001-02 Budget Process and commends the recommendations to the Scottish Executive.

Considering the number of members present and the requests to speak that are shown on my screen, we can allow back benchers six minutes in this debate rather than the usual four minutes.

I thank the Finance Committee convener for a captivating 20 minutes. He should not do himself down. It was a very interesting report and a very interesting speech.

On behalf of the SNP, I welcome the content, conclusions and recommendations of the Finance Committee's report and I call on the Executive to implement those recommendations. Our conclusions represent the balanced and considered view of a cross-party committee. I hope that the minister will consider implementing some of the recommendations that he dealt with in his letter, which was delivered to us moments ago, and I hope that he will consider our recommendations in great detail following this debate.

On behalf of the SNP, I also thank the committee's convener and deputy convener, and our colleagues from other parties, for ably leading the process. I also thank the clerks—who are at the back of the chamber today—led by Callum Thomson, who have worked very well throughout a process that has been anything but straightforward.

Leaving aside the adequacy of the budget for now, I will concentrate briefly on the budget process, which has been somewhat chaotic. The reason for that is that it has to fit within a UK system, which moves the goalposts for the budget considerably. That makes it difficult for the Parliament to feed anything more than marginal points of substance to the Government on the content of the budget. There is an appearance of engagement with the Parliament, but we are left to make points that are mostly about openness and the process rather than about the substance of the budget.

This year, for example, the spending plans were published just after a UK budget. Almost immediately, when the Scottish consequentials were worked out, the plans had to be changed. That will happen every year. Moreover, the plans went to the committees for consultation only for that process to be interrupted in June when the goalposts were again moved, due to the announcement of end-year flexibility of £435 million, which had to be reallocated. A summer of public consultation was followed in September by the publication of the stage 2 plans, which was followed in October by in-year revisions. In November, the goalposts were moved yet again by the UK pre-budget report. The point is that the goalposts are constantly moving. We need better information and we need it sooner, so that there can be real consultation and input from Parliament.

If members examine our report from this stage last year, they will see that we called for greater detail earlier in the process. We called for inflation to be accommodated clearly and we called on the Government to provide information on cost inflation in different categories of expenditure. This year we are, yet again, calling for many of the same improvements. I hope that by next year the Government will have delivered.

I welcome many of the comments in the minister's letter, which, as I said, we received only at lunch time. I hope that the minister and his officials will reflect closely on several of the explanations, specifically on RAB and the reserve, which my colleagues will cover.

It would be churlish not to welcome any improvements in budgets, and I do so today as I would in any year. However, our duty is to look beyond short-term headline figures to an assessment of their implications. In a normal Parliament, the budget debate would be a wide-ranging assessment of how money is raised and allocated, what is fair and efficient in the way we tax our people, and what is the optimal choice for allocation. I suggest to the committee convener that our reports and discussions would perhaps be of greater interest in such a debate, not in these circumstances. This budget takes the funding allocated from a Westminster budget and divides it by 10. There is little in the way of an independent approach—indeed, the situation is quite the reverse. Although devolution has created a demand among the people of Scotland for a divergence in policy, we have a financial system in the Barnett formula that is designed to produce policy convergence. That position is absolutely unsustainable.

Our criticisms in the main are levelled not at this Government's budget choices but at its lack of ambition about the tools at its disposal. The Government can do little to meet the demands of the people and their public services, as we have no responsibility for raising the revenues and funds that we allocate. In that respect, this Parliament has fewer financial powers that any other legislative Parliament on earth.

We even have less control over the size of our budget than every local authority in Scotland has over theirs. The minister has made clear his view, which is shared by other Labour members and the SNP, that Scotland's councils should have a greater say in their budgets and should be able to engage in a dialogue with their electorate and council tax payers about the appropriate level of tax. Why should that be okay for Scotland's councils but not for Scotland's Parliament?

Will the member give way?

Of course. I would be over the moon. [Laughter.]

Does the member agree with me, as I am sure he will— [Laughter.] We have even got time for a laugh this afternoon. Does the member agree that the financial powers of this Parliament are fewer than those of an English parish council? Unlike this Parliament, a parish council has the right to borrow. Furthermore, a parish council has no capping level on the tax that it can raise, whereas this Parliament does.

I thank Alex Neil for his intervention. As always, I absolutely agree with everything that he says. It is right to point out that—as I am sure the Liberal Democrats will agree—our current financial powers are weaker than those envisaged in the plans of the Scottish Constitutional Convention for a devolved Parliament. It is absurd for any body such as the Scottish Parliament that is involved in major capital projects not to be able to borrow. This Parliament has fewer powers than English parish councils, local authorities and any other legislative Parliament on earth.

Will the member give way?

Again, I am over the moon at giving way.

I hope that the member will agree that this Parliament has the power to raise and reduce tax. However, he must recognise the political reality that the majority of elected MSPs do not want to use that power.

Of course I accept that point. We took a policy of progressive taxation to the electorate and our vote went up; the Liberal Democrats took their policies to the electorate and their vote went down. However, we did not win the required majority. We call that progress, but not a result—and I am happy to take progress any time that it is offered.

The Parliament's specific tax powers are utterly inadequate; we have an ability to change tax at the margins but at a significant political cost. We must furnish this Parliament with the tools to make a significant difference. It is not enough for ministers to boast that, in most budget areas, there will be record spending on public services. I accept that fact. Every year tends to be a record year in public spending. Indeed, almost every year of the Conservative Administration was a record year in public spending. In fact, the only year in which a record amount was not spent was 1997, which was the current Labour Administration's first year in power. The Government was the first in history to cut national health service funding in Scotland—that was its first act in relation to the NHS after 18 long years languishing in opposition and it was a sign of things to come.

Even increases in spending do not tell us enough to judge whether actual provision will improve, because costs in many areas rise faster than spending with the result that provision declines. The Government's boasts about cost allocations are less important than actual outcomes.

Some of those outcomes make poor reading; I will highlight two for debating purposes. In Labour's 1997 and 1999 manifestos, a key election pledge from Labour was to get NHS waiting lists down in time for the next election. However, there are now 2,000 more people are on the waiting lists in Scotland even before we enter winter. Homelessness is up by 7 per cent, with nearly 3,000 more registered homeless since Labour came to power. Those are two important statistics about which any social justice agenda should be concerned—two key measures of the reality of Labour in power, away from the spin and short-term headline figures. That is the reality that creates disillusionment on the ground, and it is the outcome of the fact that the Labour Government is investing less of the nation's wealth in public services than the previous Tory Government did.

The situation regarding public investment is even worse. Last year's net capital expenditure in the public sector was the lowest share of gross domestic product on record, with the exception of what was spent in the depths of the 1980s recession. Last year, Labour allocated only 0.4 per cent of GDP to public sector capital investment. Four times that amount was allocated in Mrs Thatcher's third year in office and 10 times that amount was allocated during the Labour Administration in the 1970s. We see the reality of this Labour Government's public investment in our rail and road infrastructure, in the NHS, in schools and around the country. The outcome is there for all to see.

There has also been a stunning growth in public-private financing, with Scotland acting as the capital of the privatisation of capital provision in Europe. Proportionally more PFI projects are under way in Scotland than in any other country in Europe. That is storing up massive problems for future generations and is completely short-termist. The current off-balance-sheet debt under PFI—by which I mean spending that is committed to cover PFI projects—is in excess of £7,000 million for projects that are worth barely £2.5 billion. That is just the beginning of the problems. The Government is planning to use PFI for everything from prisons to schools over the coming period, which may be jam today for politicians, but cuts fast and loose with the long-term well-being of the people's money. While the Executive makes big boasts about prudence, that is the expensive, privatised reality on which it will be judged.

In Scotland, no matter what the political make-up of the Government, there is little that we can do about that. However, it does not have to be like this. We do not have to watch the managed decline or privatisation of our public services. We do not have to watch as spending rises more quickly in the rest of the UK than it does here.

Mr Wilson's time is running out. I thought that we were here to discuss the budget process. Is he going to address that?

Mike Watson covered the bases adequately in respect of the report, and I have made my support for what he said clear. It would be remiss of members not to be expansive on the subject of the financing of Scotland's public services. The results of financing Scotland's public services cannot be addressed without discussion of how we go about it. That is what I want to discuss today. If David Davidson takes a close look at the position of some members of the Conservative party, he might find that their beliefs are in line with my thinking.

Hear, hear.

I am sure that Keith Raffan agrees and I am delighted to see him back in firm health and joining the debate.

We have a wealth of potential in Scotland. We are a rich country, but this Parliament does not yet have the powers to turn ours into a rich society. On any analysis, over the coming financial period Scotland will send more tax to London than we will receive in spending. Even by the most conservative estimates, our surplus will be getting on for £8 billion over this year and next year—some £1,500 for every person in Scotland. We have higher spending per head in some areas—about 8 per cent, according to some estimates—but that is dwarfed by our tax contribution, which will amount to 20 per cent more tax per person in Scotland next year than in the rest of the UK.

We have a wealth of opportunity at our disposal—we do not have to be bystanders in the process of allocating the nation's wealth, which we could do in a fair, efficient and progressive way through the tax system. In Ireland, members of Parliament are not bystanders in that process: they have the financial powers and responsibilities of parliamentarians of a normal country. In the past fortnight, they have made decisions on the Irish budget, which they have debated in somewhat happier circumstances than those in which we find ourselves today. They have made the choices of a country that is wealthier than the UK and that employs more people in manufacturing than Scotland does. Ireland's surplus for next year is IR£3.9 billion—curiously similar to Scotland's projected surplus for that period.

Of that money, Ireland will spend IR£1 billion next year on social housing. Direct tax cuts will take the income tax rate below the UK basic rate for the first time. Petrol tax will be reduced by 3p; IR£420 million will be spent on public transport; IR£620 million will be invested in roads; child benefit will rise by IR£25 a week; and the state pension will be increased by IR£10 a week. That is a summary of the Irish budget, which was announced by Charlie McCreevy only last week. I am sure that the Scottish Parliament would welcome the opportunity to debate that. I know that Angus MacKay has spent some time in Ireland over the past year. If the members of the Executive could open their eyes and lift their sights, they would recognise that other European countries are taking opportunities that we should be seeking to take today.

Those are the choices made by independent Ireland using the normal powers of a normal country. Scotland would be in a stronger financial position than Ireland is. That is the opportunity before us. Today's debate may go some way towards improving the structure of the current limited budget process, which is welcome, but more than anything, this Government, this Parliament and this country need proper financial responsibilities. To have them, we need no more than normality.

On behalf of the Conservative party, I welcome the report. It is a thorough document and much work has gone into it, particularly by the clerks, for which we must be grateful.

On Alex Neil's point, I am a former finance chairman of an English parish council, and I point out in passing that for three years in a row, I cut the parish council tax and delivered more services, so the issue is not just about collecting money.

Why do the Conservatives not want the opportunity to cut tax and improve public services in Scotland, given that they do not have the powers to do so at the moment?

That is because we have bought into devolution and, as far as we are concerned, as long as the Government manages well in Westminster—we look forward to doing that in the next few years—we can look thoroughly at how we spend what we have. Until we can get on top of that, there is not much point in doing as Andrew Wilson suggests.

Does not the member realise that where there is devolution in other parts of Europe, for example in Spain, the provincial governments have far greater fiscal powers—the power to borrow and the power to raise their own taxation—than we have? We have minimal financial devolution, but we could have much greater financial devolution. Would he support that? As a Conservative, does not he think that the Parliament that is responsible for spending the money should be the Parliament that is responsible for raising the money?

I am hardly likely to start off by saying, "Yes, let's go independent", am I? It is a shame that Alex Neil did not speak to his colleague Mr Quinan, who came with me to a conference at the University of Aberdeen recently, at which people from Galicia described the huge internal tensions and problems that are arising because of the different forms of devolution in Spain. What we must do—and this is what the debate is about—is ensure that the budget process in this Parliament does the job that it is supposed to do on behalf of the Scottish people. We must then go on to look at what we could do within that, before we worry about rocking the boat in the United Kingdom.

However, the plain facts are—I am sorry if this is a gloomy note—that the Scottish Parliament budget process this year has failed and the spending plans of the Executive have not been scrutinised properly by the Parliament's committees on behalf of the Scottish people. That is not because of a lack of planning by the financial issues advisory group, nor is it because of a lack of effort from the Finance Committee. It is because, under the agreed timetable, the necessary information was not available, either on time or in a form that made sense. There were many reasons for the chaos this year and they are stated clearly in the Finance Committee's report.

Some weeks ago, I said in the Finance Committee that the budget process for this year should be abandoned, thoroughly reviewed, and a new timetable for the presentation of budget information established, so that the subject committees of the Parliament could carry out their scrutinising role and produce adequate alternative proposals on time. To achieve that goal, the chamber must call on the Executive today, on the back of the report, to bring to the Finance Committee as early as possible a range of proposals that will allow for the openness and transparency with which ministers have declared their agreement.

Jack McConnell put great store in that last year. I pay credit to Angus MacKay who, when he came to the Finance Committee meeting in Aberdeen, gave the impression that that would also be his approach. We look forward to the fruits of that. However, the work cannot be done unless the Executive delivers the proposals within an agreed framework and time scale. Mike Watson clarified that point early on behalf of the committee. The issue for the future will be how we will resolve that problem.

I do not doubt that that will place a huge burden on the Executive and its staff, but in this new era of three-year budgets, much of the work will have been done early in the process and large parts of the funding will have been identified.

The doctor recommends an apple a day, but the Executive seems to have interpreted that to mean that there should be an announcement a day. The Executive must resist the temptation to litter the week with spending announcements. Under the current system, it is impossible for the subject committees to keep track of those announcements. It is hard to be sure where the money has come from; whether it is from an underspend, a new pot of gold or some other source.

As I said, the problem is not only the Westminster spending review, but the additional in-year announcements and the streams of announcements that we hear through the press, especially at weekends. If the Executive wants the process to work properly, it has a responsibility to move away from spin and the recycling of information. It must do away with the confusion that seems to be prevalent throughout the money- handling process. We need honesty and leadership if we are to salvage the process, and a firm commitment from the minister—which I hope he will give us today—that, in future, the subject committees will receive the information that they need when they need it and in the detail and form that they require.

All the committees' reports that are included in the Finance Committee's report are clear indictments of the situation. The matter is not about party politics; it is about the image of the Scottish Parliament and its ability to manage Scotland's finances openly and honestly. Today's debate is about democratic scrutiny and accountability; it is not about the scoring of cheap points. We are two years into the Parliament and it is time that we got a handle on the budget process. Mike Watson has told the Executive that the committee has offered to participate in anything that will move the process forward.

The move to resource accounting and end-year flexibility, which Mike Watson mentioned, means that every committee will carry a heavier load. Not only are projected spends by departments to be scrutinised, but actual spending is to be trailed. Underspends are to be accounted for, new announcements checked for their funding sources and the cross-cutting budgets that were mentioned are to be properly reviewed.

Mr Raffan mentioned the minister's cross-cutting work on drugs. However, do we know how much was spent on drugs issues and where that money came from? Did it come from agencies outwith Government, from the private sector, from the voluntary sector or from charity? Those are the issues that the people in Scotland want to be addressed.

It is not good enough for ministers to tell committees that they will have the information that they need so late in the process that there can be no chance that they will influence ministers' proposals. I believe that the Rural Affairs Committee was told that it might get some numbers in February—that will be a little bit late. To do that is almost to make a mockery of the Parliament. If the ruling parties are into modern democracy—as they insist they are—we must hear some serious proposals from the minister and his colleagues early in the new year.

It is impossible to undo the damage that the process has done to Parliament's credibility, but there is a lot that we can do together. Last year, when he was Minister for Finance, Jack McConnell said that there was to be no reserve, although there was one. This year, Angus MacKay has told us that there is a reserve. At the end of his performance this afternoon, will he tell the chamber what the rules of access to the reserve are? What does it exist there to do? Will access to that reserve mean a reduction in access to the UK reserve? Will it have any impact on the Barnett settlement? What will stop the Treasury clawing it back? Most important, why did not the minister come to the chamber to make a statement to explain the rules when the reserve was set up? Will the minister publish monthly statements on the reserve, detailing where the money came from and will he make announcements of any draw-downs as they happen? Have any programme underspends this year been placed there already? If the money is sitting in a reserve wasting away, under the RAB rules, will a charge be placed in the accounts for the opportunity costs of failing to spend the money on public services—on our health service, for example? How will the minister explain to those who are ill why they are waiting for treatment because of a shortage of medical staff that results from under-investment in the service while money sits in the reserve? Is the reserve to be used to accumulate wealth that can be spent in the year before the election? I hope not. The minister has an opportunity to explain to us today exactly what he intends to do.

The budget process is supposed to be a partnership between the Executive and Parliament. The Scottish Parliament is up to its side of that partnership—what we need is for the Executive to come out to play with us.

On a more positive note, I welcome the new Minister for Finance and Local Government's apparent willingness to be more open and co-operative with all the Parliament's committees. I hope that he and his officials, when they examine the proposals in the Finance Committee's report in detail, will return with some positive input—although that may leave us only the bare bones—as soon as possible.

A major problem of the budget process is that a standardised form of accounting and reporting is not yet in place in the Executive's departments. There must be a huge effort on the part of the Executive to ensure not only that departments issue the information on time, but that that information feeds into the centre in a uniform manner.

Other members have mentioned such issues as the use of real-terms figures. One issue that has not been fully played out is that of measurable outcomes. There are not enough statements about what outcomes are expected and there is not enough scrutiny of the desired outcomes. There is not yet enough work being done in Parliament on how to measure outcomes, in terms not only of perceived public service, but of delivery on the ground.

One of the objectives of the budget process is to explain to everybody in Scotland exactly what is proposed. One means of doing that is to produce a proactive, web-based spreadsheet of the budget, which has regular updates on spending flows and which highlights unspent balances. One of the reporter groups, chaired by Elaine Thomson, has done a lot of work on that. I hope that we can finish that work in due course, but we would like to hear the minister's response to that idea. The budget spreadsheet could then contain hyperlinks and descriptive comment on the various aspects that might be assessed as appropriate to the interests of any sector. If such a spreadsheet was produced to allow such features, we could have—as I regularly request of the minister—quarterly management statements of the Executive's spending plans. I acknowledge that, at the Aberdeen meeting of the Finance Committee on 20 November, the minister offered to try, as a start, to get six-monthly statements out. I welcome that very much—it is a tremendous step forward.

It is essential not to try to do everything with hindsight. I had assumed that Parliament was going to set its sights high, particularly on accountability and proactive exchange between the chamber and the Executive. That challenge has still not been fully met, but I look forward to its improved delivery during the coming year.

In a previous Finance Committee debate on the budget process on 28 June, I stated that the Finance Committee report that was being debated then was a

"well-constructed report, which not only demonstrates the inadequacies of the system introduced by the Executive, but clearly sets out the Executive's failure to play its part in what is supposed to be a transparent process."—[Official Report, 28 June 2000; Vol 7, c 794.]

That comment is almost valid six months on, but I look forward very much to hearing the minister's reply to the detailed questions that I have posed to him this afternoon.

Before I make my main remarks, I must come to the rescue of my good friend Mr Andrew Wilson, in the face of Mr Davidson's cruel and unfair intervention on his speech. That intervention suggested that today's debate is only about the budget process. It is actually about stage 2 of the budget process. I must establish that first—otherwise I would have to throw away half my speech. If I use my 12 minutes, I will gladly give way to nearly everybody, even if they do not ask to intervene.

Before I get to the more entertaining part of my speech—I think that it is more entertaining anyway—I want to comment on the Finance Committee's report. Important points are made in it and I have no doubt that the minister will take them on board. I will put the main points in more stark terms than the convener of the committee did. The budget process is not working, for the reason that was mentioned by Mr Wilson: as far as the timetable is concerned, we are out of kilter with Westminster. At stage 2 of the process, no committee was able to undertake detailed scrutiny of the spending plans, because we did not have the detailed level III figures. As the committee's report says, we were "thrown off course" by the Chancellor of the Exchequer's announcement of the comprehensive spending review at the end of July. At that time, Parliament was in recess, Scottish ministers were in Tuscany and officials were having a well-deserved rest. It is a major problem for Parliament that an announcement of such importance for the Scottish block was made when Parliament was in recess.

A majority of the subject committees made it clear that they were extremely concerned that the level III figures were not available. I understand that those figures will probably not be available until January. The Social Inclusion, Housing and Voluntary Sector Committee, of which I am a member, expressed that concern in the strongest terms. The committee said that it was virtually impossible to do its job unless detailed figures were available to it.

I am grateful that the minister has given an assurance that level III figures will be available in non-CSR years—I know that because I did not have lunch, but instead read the minister's response to the committee's report. I would be interested to hear when in the budget timetable he expects those level III figures to be available. Will they be available at the beginning or at the end of September? That is important. Stage 2 works to a tight timetable, not least because of the odd autumn recess, which seems to happen almost as soon as we come back after the summer recess.

As the minister said, there is "no straightforward solution" to the problem of those years in which we have a comprehensive spending review announcement. I will make two suggestions—one of which is a bit more dramatic than the other. First, he should get his good friend the First Minister to have a quiet word with his parliamentary neighbour, the Chancellor of the Exchequer, to suggest that comprehensive spending reviews should be announced sooner than they are. They should be announced at the end of May, just before the Whitsun recess, rather than at the end of July, just before the summer recess. The reviews are two-year or three-year processes, so presumably a couple of months will not rush the chancellor too much. That would be of immense benefit to the parliamentary process, to scrutiny of the budget and to Scottish Executive ministers.

The second suggestion, which is included in the report—although I would take it slightly further—is that departments should provide level III figures for spending in the current year as well as for projected spending. Perhaps departments would also indicate their spending priorities, if those were to differ markedly from their current level III spending.

On presentation, I am grateful for the minister's assurance that he wants "continuous improvement" in budget documentation to make it clear, simple and accessible. I recommend to him as his bedside reading the Oregon budget book—one of my favourite subjects in the Finance Committee. As this is my swan-song as a member of the Finance Committee, I shall mention it yet again. Graham Leicester of the Scottish Council Foundation, who is a far more distinguished figure than I, said that he learned more in two hours about Oregon's budget after studying its excellent budget book than he had ever known about the Scottish budget. That book would repay some study.

Is it the case that the Oregon legislature is responsible for the revenue as well as the expenditure side of its budget?

No, not all of it. In any case, that was not my point. My point is about presentation—if we can get away from independence and the SNP's single-issue diet that we know so well for one brief moment and on to the subject at hand.

Obviously, as part of the clarity and transparency of the budget, it is important that we see through the fog of spin that is sometimes created—unintentionally, I am sure—and are given the figures in real terms. I welcome the minister's reassurance on that point, because we have pressed for that for some time. Figures in real terms are particularly important because, as the report says, they reveal

"the cost pressures within specific budget headings."

I refer in particular to the pharmaceutical budget, which I am glad is mentioned in the report, because I know the trouble that inflation of 10 per cent or higher in that budget caused for the three health boards in my region.

Despite the minister's response in his letter today, there is still a lack of clarity on the relationship between the Scottish and UK reserves. We need clear guidelines on that. Obviously, the split should be that the Scottish reserve should deal with devolved issues and the UK reserve should deal with reserved issues. I welcome the minister's assurance that devolution will not lessen the basis of entitlement of the Scottish Executive to access to the UK reserve.

Is the member aware that, for devolved matters, the Scottish Executive consistently and quite rightly makes a call on the UK reserve, as many territorial and other departments throughout the UK do? If we set aside Barnett-allocated money for a Scottish reserve, we would lose out on our rightful access to allocations from the UK reserve. That is a risk against which we need to guard.

I am not sure that Andrew Wilson is correct on that point. The crucial points are that, as the minister has said, the Scottish Executive is still entitled to make applications to the UK reserve and that Scotland is not financially disadvantaged, because it has, in effect, created its own reserve.

Will the member give way?

No, I have given away enough. If he will allow me to continue I will happily give way to Mr Davidson later, if I have time.

On cross-cutting issues, the Finance Committee is yet to be convinced that holistic or joined-up government is working in Scotland, because spending can be fragmented. Public transport, rural spend and tourism have been mentioned. It is sometimes difficult to identify overall spending and to track exactly what has been spent where—as with spending on drugs misuse in relation to the percentages that are spent on treatment and rehab as opposed to what is spent on enforcement, for example. The cross-party group in the Scottish Parliament on drug misuse, of which I am convener, is sending an all-party letter to Angus MacKay's successor as Deputy Minister for Justice, Iain Gray, to try to get a detailed breakdown. Drug misuse is a prime example of an area where it is difficult to identify the money that is spent and to ensure that the money is being spent on what has been agreed.

Will the member give way?

No, I will not. I have given way quite a lot. I am running out of time and I still have a lot to say.

No less a political commentator than Mr Iain Macwhirter, when referring to the partnership, described the Liberal Democrats as being the "radical edge" of the coalition. Members will not be surprised if I warmly welcome the record spending on health and education and the real-terms rise in local government spending. We are delivering on the key priorities in the Liberal Democrats' manifesto and in the partnership agreement. Thanks to our participation in Government and to the enlightenment of Scottish Labour ministers, we are not going down the path of the UK Labour Government and Chancellor Brown. That was summed up rather succinctly in The Economist last week, which stated:

"Despite the Chancellor's commitment to long-term planning for spending, Gordon Brown has in practice presided over a bust and boom in public expenditure."

Mr Brown's predecessor, Ken Clarke, put it more frankly. He said:

"I can't believe Gordon has stuck to my spending limits. I never would have."

That is a slightly back-handed tribute to the Tory party, but we all know what he means. The Liberal Democrats believe in long-term planning of spending and we are glad to bring that approach to the partnership.

That brings me neatly to the Conservative party. Such is the inner turmoil and tortured angst of the shadow chancellor that we have still to hear from him a detailed breakdown of the £8.025 billion in spending cuts that the Tories plan. I feel sometimes that Mr Hague treats Mr McLetchie, who waits patiently for his orders from Westminster, like the stationmaster at the end of a somewhat unimportant branch line on which the tracks are in desperate need of repair. The Tories must come clean and tell members exactly where in Scotland the nearly £1 billion of cuts—which would lead to fewer doctors, teachers and police in every constituency—would fall. I am tempted to say "Come back, Margaret Thatcher", although, of course, I never would, although not even she dared to inflict on Scotland the kind of spending cuts that the Tories are now talking about.

However, at least we know where the Tories stand. The same cannot be said of the SNP. One moment it makes huge promises to spend more—more than £3 billion more since the Parliament came into being—and the next moment it advocates cuts. When we challenge SNP members on their proposed spending commitments, they say that those commitments count only if they are in their manifesto. However, their press releases never say that they promise money to almost everybody. It is time the SNP's new leader, John Swinney, told us which are the definite commitments, or is he, like John Major, in office but not in power. Why I look at Mr Neil at this point, I do not know. The SNP's most recent manifesto, which we are told is its financial bible, committed the party to 2.5 per cent cuts on each non-pay budget. I do not know whether the party is still committed to that; it is, however, committed to cuts and to spending huge amounts of money.

The SNP will say that all the necessary money will come from oil. Mr Wilson loves to cite his favourite city accountants, Chantrey Vellacott, and to heap praise upon them when the oil price is going up. He says that the accountants provide "heavyweight analysis" when they indicate that independence is viable. He is not so keen on them when the oil price goes down—as it did in 1998—and Chantrey Vellacott says that income tax in an independent Scotland would have to go up to 49p in the pound. When that happens, he accuses them not of "heavyweight analysis", but of "economic gibberish".

rose—

I am coming to a conclusion. As the First Minister said in the chamber last Thursday in response to Mr Wilson, we cannot

"build a safe and secure economy on the back of a volatile oil price."—[Official Report, 7 December 2000; Vol 9, c 778.]

Will the member give way?

I have given way three times already. I am happy for the SNP to respond to my speech in its own time during winding-up. The SNP has yet to explain how—with a highly volatile oil price that can switch from $11 a year ago to its current price—it will avoid a growth and recession cycle, with expenditure increases that it will be able to implement at one moment, and huge spending cuts and tax increases that it will have to implement at others.

The Executive is on the right track. Liberal Democrats have always advocated long-term planning for public spending and we are glad that Scottish Labour members appreciate the importance of that. The SNP could never provide such long-term planning and the Tories have never provided it. We are on the right track and that is beneficial for Scotland.

I am reluctant to intrude, as they say, on private grief—especially when the grief was going so well—but I will do so none the less.

I would like to pick up on Mike Watson's analogy, which suggested that we are guests at the Finance Committee's party. As I look around at the number of members in the chamber, I am tempted to say that the convener and his committee need some more friends to invite. We are happy, none the less, to be guests.

I am grateful for the opportunity to give the Executive's response to the Finance Committee's report. I would like first to put on record an acknowledgement of the work that the committee has done in compiling evidence from the different subject committees, taking its own evidence, and producing its report within a very tight time scale.

When I gave evidence to the committee in Aberdeen a few weeks ago, I think I acknowledged that this has been another difficult budget process for all committees and for the Executive. This is the first time we have tested the three-stage budget process in full. As several members have said, we have done it in an unusual year. We have moved across to a completely new system of budgeting and, in the middle of the year, we saw our budget increase to a record amount in real terms. Both changes have caused difficulties for the committee and I am grateful for its forbearance in dealing with them.

Having said that, I do not want to be too apologetic for the great benefit that we have received in the increased budget. The chancellor's handling of the economy and UK prosperity has made an enormous difference for Scotland this year. The spending plans that we initially consulted on in "Investing in You" increased by £800 million in 2001-02, by more than £1.9 billion the following year and by £3 billion in 2003-04 in "Making a Difference"—the document under consideration by the committee. The plans now in front of the Parliament represent an average real-terms increase each year of 4.4 per cent, or almost 14 per cent over the three-year period. In considering some of the difficulties that the committee noted, we should not forget the fact that we have a record budget for services in Scotland—a record that will be sustained over the next three years.

I would now like to consider the matters that are raised in the committee's report. I have already written to the convener, setting out the Executive's response to his committee's conclusions and recommendations. For the benefit of those who have not seen that response, I want to set out briefly what I said.

It is important to address the substance of the committee's report. The comments of several members have ranged far and wide. Andrew Wilson managed to stay on the subject for three minutes—I give him credit for that—before venturing into the usual territory of reconstructing the constitutional architecture of Scotland. He at least confined his comments to the Republic of Ireland; Keith Raffan went somewhat further and explored the structures in Oregon, on the other side of the Atlantic. Curiously, the system in Oregon came up in recent discussions with some of my officials; it may not make bedside reading for me, but it may make Christmas reading.

I appreciate the difficulty and frustrations that some committees have experienced with the availability of level III expenditure figures. In normal years, such figures should be available. The substantial additions to the budget that we received over the summer have meant, in effect, creating a new budget from the start. Several members have acknowledged and criticised that.

The committee has taken a balanced view in recognising the challenges posed by future UK spending rounds. I am happy to take forward its recommendation that we should consider the handling of future spending reviews and I will report back to it with specific proposals. This is our first year under the new process and it has been an unusual year. We need to learn from the experience to ensure that the budget process can handle a wide variety of factors that may impact on its consideration year after year.

I was interested in the report's suggestion that publishing level II figures for future years could give subject committees greater importance. I can see how they would be able to consider how allocations could be made while the Executive was still working on its own allocations. I will be interested to hear what further discussions and representations are made on that.

The committee also made recommendations on the introduction of capital charges under resource accounting and budgeting. I am happy to provide further information on the figures for individual capital charges. I have set out to the committee my concern that, by quoting those figures separately, we may lessen the impact of that policy change. We want the public sector to take full account of the cost of capital when deciding how to spend the budget. On the other hand, I can appreciate that in larger programmes—roads is a good example—it would be helpful to see those figures separately. However, in many programmes the impact will be fairly minimal and it might not make sense to separate out a comparatively small figure. There is the possibility that documentation—which is not always simple—would be made extremely complicated if we had a separate line for capital charge and depreciation in every programme.

We hear what the minister has said, and his officials made the same point, but no matter how small the capital charge, how is it justifiable to argue that a department should take account of the true cost of capital when the Executive is not making clear in the budget what the capital charge is? The argument does not stand.

I understand the point that Andrew Wilson makes and it is fair. We are talking about the organisation of the delivery of information as much as anything else. It is a question of where and how we set out information, rather than whether we release that information. I am happy to continue that discussion further because there are arguments on both sides.

Part of the issue is the culture of how people operate if they do not understand the assets that are available to them and for which they are responsible. The wider Scottish public does not necessarily comprehend the assets in the public sector in Scotland at this time.

That is true. We are moving from base camp to try to achieve our ambitions. We are wrestling with two slightly contradictory objectives. First, we seek greater clarity and transparency about the budgeting process and how the decisions that are taken affect outcomes. Secondly, we want to make available further information to aid and inform the discussion about where the budget should be going. Members will not disagree with the fact that more information does not always lend itself to clarity and transparency. We must work out where the trade-off is between how much information is presented and how it is presented. It must be in a usable form. However, I take David Davidson's point.

I am happy to work with the committee more generally in improving the presentation of our budget documents. I appreciate the positive feedback on the autumn budget revisions document and we will endeavour to improve the presentation of that and other documents in the future. We are currently in the process of commissioning next year's annual expenditure report and we will take account of the feedback on that document that the committee has offered so far. We will, of course, take on board the committee's clearly argued desire for real-terms figures and a clearer layout. For example, we will take account of the need to write in plain English as far as possible, as well as the need to provide better cross-referencing.

We might not be able to make all the changes that emerge from the committee's current consideration in one go, but we will endeavour to do so through a process of continuous improvement. We must aim for year-on-year improvement in how the budget process is conducted, in how the information is presented and in the quality and quantity of information that is made available.

The committee also makes some recommendations about the creation of a central reserve in the figures in "Making a difference for Scotland". Several members have spoken about that. I will clarify one matter for the record. The committee's report suggests that the Executive has changed its policy and quotes Jack McConnell as saying that it is

"not the Executive's policy to create a de facto contingency fund".

That quotation is taken out of context. He told the Finance Committee that he did not intend to engineer underspends in annual budgets to create a contingency fund. The Executive has never said that it would not create a reserve out of any unallocated end-year flexibility or any additional funding from a spending review.

As members are aware, a small reserve was created this year and modest reserves are proposed for budgets in future years. I stress that they are modest.

I am curious about how the Executive can forecast a reserve figure for two years from now when it has absolutely no idea what the end-year flexibility consequential will be at that time. If the Executive does not yet know what the end-year flexibility will be, surely there must be another source of funding for the reserve.

As Mr Wilson probably knows, in any budgetary year there is almost inevitably some EYF. Generally, the EYF varies between 1 and 2 per cent of base budget. It is possible to predict with some confidence that some funds will be available in that band.

The decisions on the reserve and its size were taken by the Cabinet at the same time as it decided on other allocations from the spending review. The committee asked us about rules for access to the reserve. The process is exactly the same as that for any other expenditure. First, the minister responsible for finance must be consulted and asked to agree additional funding. Secondly, the Cabinet must agree to the expenditure being incurred. Thirdly, parliamentary approval for the budget must be sought, normally in a budget revision. If the expenditure is urgent, the Public Finance and Accountability (Scotland) Act 2000 and the budget acts will allow resources to be provided.

The committee questioned the distinction between a UK reserve and a Scottish reserve, a matter that Andrew Wilson has raised again today. Access to the UK reserve is covered in section 9 of the statement of policy on funding the Scottish Parliament, the National Assembly for Wales and the Northern Ireland Assembly, issued by HM Treasury. It says that reserve claims on behalf of the devolved Administrations will be judged on the same basis as those submitted by Whitehall departments.

The document says that when a UK department is granted access to the reserve to enable it to meet exceptional pressures, a devolved Administration will have the opportunity to make its case, if it has a comparable programme and can establish that it faces similar exceptional pressures. An example of such pressures is the recent flooding throughout the UK. UK departments were given access to the reserve to fund measures to prevent flooding in the future. The Scottish Parliament also successfully petitioned for funding.

The minister is being very generous in giving way.

I have two points on what he just said. First, if there are exceptional pressures, would not the Treasury argue that the Executive should call on the Scottish reserve? Does not that diminish the Executive's ability to call on the Treasury reserve when money is available?

My second point concerns the sourcing of the reserve. As part of the total sum of money in the budget, there is an allocated reserve of £53 million in two years' time. The end-year flexibility for that year and the previous year has not yet been calculated. That cannot be in the overall budget as the basis of end-year flexibility from the previous year when it is already there as part of the total sum. The reserve has a source other than end-year flexibility. Some clarity would be helpful.

I have some further comments on the reserve, because it has caused some contentious discussion.

As I said, we made a commitment to a very modest reserve when we dealt with the three-year period of the comprehensive spending review, as a consequence of the spending review. There was no difficulty in predicting a modest reserve in the context of those financial decisions, which affected every department. The insurance policy on that is the 1 to 2 per cent of EYF that emerges every year.

The existence of a fairly modest reserve in Scotland, where we seek to cover circumstances in which access to a UK reserve is not appropriate, is, in my view, extremely uncontentious. As we move towards three-year settlements or indicative allocations to public bodies, it is right that we should hold something back in reserve to make adjustments year on year.

The idea that we are holding back a reserve of £18.1 million for next year, out of a budget of £19.7 billion, as a war chest—as has been suggested by one contributor to this debate, not today but through a Sunday newspaper—is quite ridiculous. To put it in context, that sum is about one day's expenditure on the national health service.

When the minister talked about end-year flexibility in the past, he was talking about a roll forward of 1 or 2 per cent of the annual budget. We now have end-year flexibility for departments. When something has been put into a programme, is he assuming that if it is not spent he will grab it instantly? The two approaches do not go together; we have changed the process.

Clear rules govern what happens to end-year flexibility. There is a 75 per cent:25 per cent split. David Davidson is probably aware of the mechanism that governs how end-year flexibility is dealt with. If there is lack of clarity on that, I am happy to write to him in detail after the debate.

My remarks today do not deal with all aspects of the report because—I am surprised to find—time does not permit it. Perhaps I have been over-generous in giving way. However, my remarks constitute a fairly positive response to the committee's report which, I acknowledge, is measured and sensible. I hope that members will read the report's conclusions and recommendations, if not all of it—as Mike Watson said, it is substantial. I hope that members will at least read beyond the heading on the committee's press release, which suggests the entire budget process is deeply flawed. It is not. I acknowledge that it could be improved, and I want to improve it.

I hope that, as we gain experience, we can shift the focus away from the process and look at the substance of budgets. We have a duty, in this first Scottish Parliament, to make a positive difference to the lives of everyone in Scotland. The money we spend on public services plays a core role in attempting to reduce social injustice, rebuild our infrastructure and give people in Scotland the skills they need for our economy. We have a £20 billion budget next year. The committee and the Parliament have a powerful stewardship role in ensuring that every last pound of that money is well spent.

I welcome the report's recognition of the areas where we need to improve our budgetary process.

Will the minister give way?

Not at this stage.

I also welcome the fact that, while it has been difficult to conduct detailed scrutiny, the committee has not made any recommendations to alter the overall shape of the budget.

However, in saying that, I want to add a final point. It seems to me that on almost every occasion when we have debates of this sort, the Scottish National Party in particular pays brief lip service to the substantive issues at hand, then quickly moves on—as I mentioned earlier—to the constitutional architecture. The time has come when such an approach is no longer acceptable, if only for this reason: the SNP argues that if a majority of people in Scotland vote a majority of SNP MSPs into the chamber, that will not constitute independence; we will require a further referendum on whether independence is acceptable to the people of Scotland.

That shows that, in the minds of the SNP, there is the possibility of people in Scotland supporting that party to run the Executive but not voting for independence. By its own argument, the SNP sees the possibility of its running the Executive under the existing constitutional settlement. If that is the case, the people of Scotland need to know what the SNP would do with this budgetary process, under this constitutional settlement. One day we have to hear an SNP spokesperson tell us what those issues are and how they would make a difference.

We move to the open part of the debate and, as Sir David indicated, members have up to six minutes plus interventions.

Before I get to my substantive points, I want to point out—especially to the Parliamentary Bureau—that the debate could have been done and dusted in an hour or an hour and a half this afternoon. We did not need to eat into the SQA debate.

We have been through that. On you go.

It is a fair point and I want it to be recorded.

I will deal with the technical issues in respect of the Finance Committee's report, then I want to deal with what Mr MacKay said about constitutional architecture. It seems that, in all our debates, every Labour, Liberal and Tory spokesman goes on to talk about the constitutional architecture. The only difference is that we want independence and they want the status quo.

Three or four technical points have been made about the committee's report. The minister cleared up some of them to an extent, but others remain open questions.

Will the member give way?

Keith Raffan is not going to talk about Oregon, is he?

Of course not.

Alex Neil said that the Liberals are in favour of the status quo, but we are not. As he pointed out helpfully during my speech—although I was too slow to respond—Oregon is part of the federal United States of America.

We have always believed that devolution is not an event but a process and that the powers of the Parliament may increase as time goes on. Revenue-raising powers may increase within a federal set-up, and I am grateful to Mr Neil for pointing that out.

As Keith Raffan said, he is slow on the uptake. I will leave aside his rather irrelevant intervention and carry on.

My first technical point concerns the minister's seeming to say that the Finance Committee is right: committees should have access to figures on capital charges. If we do not deal with that problem, we will not have a proper picture of the real costs of service delivery.

Secondly, Andrew Wilson raised the important point that access to the Scottish reserve and to the UK reserve must be transparent. We must ensure that we get our fair share of the UK reserve, although I do not think that the committee is calling for detailed rules on access to either the Scottish reserve or the UK reserve. We want the process to be transparent so that we can see where the reserve money is going. I will leave aside the fact that the reserve money in the Scottish budget peaks in the run-up to 2003. I am sure that the advent of an election in that year is purely coincidental.

Thirdly, on performance targets, I reiterate Mike Watson's comments on outputs and outcomes. The subject committees in particular have a problem when measuring value for money. We must examine not only the inputs but what has happened as a result of changes to the performance targets in the budget. When we are given three sets of budget figures in the space of three months, it is only right that the performance targets should be reviewed in accordance with the changes to the budget figures. Otherwise, we cannot evaluate value for money properly.

My final technical point is that while the budget process is all very welcome, the reality is that the flexibility in the Scottish block is limited, as previous secretaries of state have pointed out. So much of the money is already committed to salaries and associated costs that, taking the £18 billion that we will spend this financial year, it is probable that the flexibility to change budgets around is no higher than £400 million or £500 million a year. We should not consider completely rejigging £18 billion because, quite frankly, that is not a realistic proposition.

I suggest to the minister that rather than highlighting the constitutional architecture, that approach makes financial sense. Certain principles that operate throughout the rest of Europe do not operate in Scotland. The Minister for Finance and Local Government is misnamed—he is not a minister for finance; he is a minister for spending the budget. He is not a minister for finance because he is the only finance minister in the whole of Europe who does not have responsibility for raising any revenues—

Will Alex Neil give way?

I will give way to Mike Rumbles later.

The minister is the only minister for finance who cannot borrow money.

Will Alex Neil give way on that point?

Of course.

Does Alex Neil recognise that the Minister for Finance and Local Government has the power to raise or reduce income tax if he so wishes? The Scottish people voted for the Parliament to have that important power.

Mike Rumbles was not in the chamber earlier when we were discussing parish councils.

I was.

We benefited from the practical expertise of Mr Davidson, who agreed with me that English parish councils have more power than the Scottish Parliament to borrow and raise finance. I repeat the point that Angus MacKay is the only minister of finance in the whole of Europe who can only spend money, and cannot raise it.

That is not true.

It is true. It is not an issue of constitutional architecture; it is an issue of financial sobriety that the Parliament responsible for spending the money should also have at least some responsibility—I would argue all the responsibility—for raising the money. Indeed, it should also have the power to borrow money. I do not see why this Parliament cannot have those powers.

The reality is that the big financial decisions are taken in London, with the comprehensive spending review and similar decisions. The decisions that are delegated to this body are the marginal decisions arising from the real core decisions made in London.

That is ridiculous.

It is a fact. All decisions about revenue and borrowing are taken in London. Whether or not we have a financial surplus, which I believe we have—

Will Alex Neil give way?

I would be delighted to.

What is news about that? Is that not what the Scottish people voted for? Is Alex Neil suggesting that the Scottish people voted for devolution not knowing what he has just said?

What the Scottish people want is that their money should be spent in Scotland on essential services. As a percentage of gross domestic product, public sector investment in Scotland today is 10 per cent of the 1979 level. That represents a massive real cut in the level of public sector investment in transport, housing, education and all the rest of it. I do not believe that that is what the people of Scotland want. I think they want Scotland's money—not just the oil money, but including the oil money—spent in Scotland for the people of Scotland. That is the fundamental flaw at the heart of the whole strategy.

Thank you, Presiding Officer, for calling me to speak for a second time today. It seems to be my lucky day, so I may break the habit of a lifetime and buy a lottery ticket this afternoon.

I welcome the tone of this afternoon's debate. Like the approach of the Education, Culture and Sport Committee and the Enterprise and Lifelong Learning Committee to the exam results inquiry, that of the Finance Committee to stage 2 of the budget process was consensual and open-handed. I welcome the opportunity to pay tribute to colleagues on all sides of the chamber, although I think Andrew Wilson was trying to spoil the party with a few bons mots.

I shall talk about the process rather than about the budget. I suggest that we have some way to go before we get the process right. This Parliament values the principle of accessibility, but the budget process is not easy to follow or understand. Many of our fellow members find it difficult to find the information they need to scrutinise the Executive's priorities effectively, so goodness knows how members of the public find the facts and figures that they want. Having said that, I recognise and welcome the undoubted commitment of the Executive and the parliamentary committees to making the process more accessible and the work that is currently under way to achieve that objective.

This year, the process has been dislocated by the on-going spending review, which has knocked us off timetable. The biggest single problem that that has brought about is the lack of detailed information—so-called level III information—being made available to committees. We understand why that has happened, but it is regrettable nevertheless. I certainly hope that it will be avoided in the future.

I think that all members of our committee were dismayed to have to return to the presentation of figures in real terms as well as cash terms. Again we understand that some of the difficulty this year is to do with the move to resource accounting and budgeting. That is indeed an added complication, but it is frustrating to have to keep returning to this subject, and I hope that we will not have to do so again.

I am glad that Kenneth Macintosh made that point about level III figures. We have had an assurance from the minister that they will come earlier, but that means nothing if we get them in January when they should have come in September. Perhaps Ken will add his voice—so that it is an all-party affair—to the call to the minister to tell us when in the financial year he will let us have level III figures.

Mr Raffan's point is well made. I am sure that the minister has listened to him and will give him an answer when he winds up.

I should point out that it is not up to the Executive alone to produce the figures on time; the committees have a role to play here, too. Last year, for example, we allowed the timetable to slip—and we did so again this year. It is difficult to imagine a year when the process will be neat and tidy.

Both Keith Raffan and Mike Watson reminded us that there may be a spending review every two years. It is up to members of the Finance Committee and the subject committees to be disciplined in our approach to the budget and not to allow supposedly exceptional circumstances to derail us every year.

I want to return to an issue that many colleagues have raised—the budget reserve. I welcome the minister's explanation of the previous Minister for Finance's comments on creating a contingency fund. I also welcome the letter that he sent out today. I was eating my lunch when it arrived and I have not been able to examine it in detail. It will take some time for me to digest the minister's remarks on the reserve and the contents of his letter. I hope that members will excuse the pun, which was unintended.

From what the minister was saying in Aberdeen, it seems that the Executive is getting a reserve because other UK departments have a reserve. That sounds like a good idea. It offers the sort of flexibility that ministers would welcome. However, the rules of access to our reserve and to the Treasury reserve are far from clear. For the benefit of us all, they need to be clear. Two examples that were cited in Aberdeen—one of them by the minister—are flooding and the Lockerbie trial. The minister explained that this year money to deal with the serious flooding that we experienced was made available from the Treasury reserve. The Scottish Executive was able to get its share of that. However, when flooding is less severe, will the money to deal with it come from the Treasury's reserve, the Scottish Executive's reserve or the reserve of the relevant Executive department? We need to know the rules.

If, as in the Lockerbie trial, we have suddenly to pay £50 million to establish a new court in a foreign country, we need to know where we can find that money. I may need only to look up section 9 of the statement of funding policy to find the answer to that question, but a bit more clarity is needed. I am sure that decisions will be fair, but they need to be seen to be fair and to be understood.

Alex Neil talked about the move towards focusing on outcomes. I, too, welcome that. For the budget process to make any sense, we need to know exactly what we are achieving with public money.

I hope that the member has noticed the report of the Rural Affairs Committee, which was included in the Finance Committee's report. Its main point was that

"it is the impact that spending of all executive departments has on rural communities that is the crucial indicator of success, rather than the expenditure figures themselves."

That is the point Kenneth Macintosh is making and I want to re-emphasise it from a rural perspective. It is very important that the minister takes it on board. The most important indicators are outputs rather than just departmental spending figures.

Mr Rumbles is absolutely right. The minister said the same thing to us in the evidence that he gave to the Finance Committee in Aberdeen. He added that the Executive is still in the foothills of this process, although it is moving forward. We should all welcome that, as information on outcomes will enable us to attempt to get value for money in the budget process.

Having highlighted some of the shortcomings, I would like to mention a couple of positive aspects of this year's budget process. The Health and Community Care Committee recommended maintaining grants to voluntary organisations; the Executive accepted and acted on that recommendation. The Justice and Home Affairs recommended increasing our commitment to Victim Support Scotland, among other things. Again, the Executive endorsed that recommendation. Neither development could be described as earth-shattering, but both are welcome.

I want to end by noting a slight concern about the way in which the Scottish Parliament conducts its affairs. It was always going to be difficult to estimate the budget for a new institution such as the Scottish Parliament. In some ways, our underspending our revenue budget by £10 million is to be welcomed—if that means we are showing a degree of frugality. There was a further £10 million underspend in capital, arising from the fact that contracts have not yet been allocated for the new Parliament building. However, I hope that members recognise that by allowing the Parliament to carry over that £20 million underspend, we are allowing it a leeway that we would not allow the Executive. If we expect the Executive to respond to our concerns about the budget process, we ought to demonstrate that we practise what we preach.

I am very pleased to speak in this debate, not least because the Social Inclusion, Housing and Voluntary Sector Committee, of which I am a member, took an active interest in the budget proposals, not just at stage 2 but at stage 1. Some of my remarks will be directed at issues arising from the stage 1 budget process.

I refer those members who have with them a copy of the Finance Committee's stage 1 report to annex J and pages 242-43, where the Social Inclusion, Housing and Voluntary Sector Committee expressed concern that certain issues had not been taken on board. We were particularly concerned about the fact that there was no baseline information, that there was insufficient narrative to explain and justify the choice of particular targets and that in-year adjustments to budget lines and the impact of previous years' underspends had not been dealt with. The last point is particularly important.

I am sorry that the minister is not in the chamber, because, after the previous speeches, I have a new title for our Minister for Finance and Local Government. He should be called the "Minister for Scottish Block Allocation (with Marginal Tax-varying Powers)". That is what he is, as Alex Neil pointed out in his speech.

I will concentrate on the variation in budgets. Part of what we must do, especially at stage 2, is to see if the Government has taken on board some of the issues that were raised in the stage 1 debate. I refer the chamber to the section in our report in which we examine the variation in the communities budgets.

Ken Macintosh made the important point that we are not talking about the theory of budgets and the theory of what we do, but about what the Parliament decides to do with the money. It is not our money; it is the taxpayers' money. What are they getting for it? We must examine the communities budget and the new housing partnership budget. Are people getting the homes that they need in a year when there are record levels of homelessness? That makes what we discuss in Parliament relevant to the people.

When the minister gave evidence to the committee, we returned to the new housing partnership budget, which had concerned us during the stage 1 discussions. The minister was asked if she could clarify why the budget for 2001-02 for new housing partnership, which is now called community ownership, had dropped from £160 million down to £100 million. That is a big drop. Where did that money go?

That drop was despite an additional £44 million being allocated by Jack McConnell from NHS capital allowances. Remember that last year he said that the Executive would use NHS money by putting it into housing. We might want to do that in certain cases, but in a year when many NHS trusts were struggling with their budgets it was a questionable decision. When we pursued that matter, it was clear that Jack McConnell was saying in October that the Executive was using NHS trust and Scottish Homes money, but that although the effect of those changes was to reduce the published figures for spending on housing, it did not reduce investment in housing.

If members examine the housing investment lines in the budget, they will see that there are four areas of housing investment: new housing partnership money drops by 20 per cent; the housing revenue account stays neutral; money for Scottish Homes and the warm deal goes up, but it goes up by only £32 million from April next year for a year. I refer members to the table on page 243 of the report, which shows that there has been a reduction of £64 million in housing investment. We have lost £32 million from the housing investment budget.

Was Jack McConnell wrong in October last year when he said that the money from the NHS trust was a new contribution? Was Wendy Alexander wrong when she said in correspondence to the committee that it was already allocated? Or was Jackie Baillie wrong on November 2 when she said that the NHS money had been allocated previously?

We must receive explanations about mid-year adjustments. There are record levels of homelessness, yet in 2000 no public sector houses were built that were financed by the public purse and the housing investment budget was highly questionable. If the budget process is to mean something not just to theorists or economists but to the people outside, we have a duty and responsibility to take account of that. I do not expect the minister to know the ins and outs of the social justice budget, but I ask him to let us know in his summing-up, and in writing, where that money has come from. Was Jack McConnell right, or was it Jackie Baillie or Wendy Alexander?

I refer the chamber to paragraph 3 of the Social Inclusion, Housing and Voluntary Sector Committee's report on page 243. One of our concerns was that we were told that we could not get level III figures as those would not be available until January, but that there would be interim announcements. We were told that there would be savings because of debt charges for new housing partnership—remember that that budget has gone down significantly—and that there would be interim announcements between now and Christmas.

However, we do not know what those announcements were. When I asked the minister whether that money was part of the previously announced funding for domestic abuse, she said no and told me that that money had been allocated from the comprehensive spending review. We are still waiting on at least £20 million that the minister promised to be allocated somewhere.

I want to conclude by responding to some of Angus MacKay's remarks. He said that we do not have any borrowing powers; however, we should remember that much of the new housing partnership budget relies on agreements to service debt. What is the relation between Gordon Brown and his Treasury and this chamber on that issue?

Furthermore, if reserves are to be funded through end-year flexibility, we have a stock transfer proposal in which the balance might not kick in until next November if not later. There is a very great danger that the new housing partnership budget—which has already been raided and is decreasing—might not get spent in the next financial year. I will not be party to a Parliament that decides not to spend money on housing because of a flawed policy decision that shoves out other decisions such as housing stock transfer.

Furthermore, I will certainly not agree to a situation where the housing budget funds the reserve budget, as Jackie Baillie said. There are record levels of homelessness and no houses are being built. If we want a budget system that makes sense, we should not have this shuffling of budgets between different budget lines. If we have clarity and transparency on this issue, we will have the respect of the Scottish people.

I suppose that it was always going to be difficult to bring a sparkle to such a debate. However, I must congratulate Mike Watson on a very competent presentation, even though he made the Rev I M Jolly look positively jaunty.

Any consideration of the budget process must examine the whole concept of that process. I was particularly struck by stage 1, which I found very healthy, and welcomed the public engagement, even though I detected some cynicism from those who participated. I was once asked whether anyone would pay a blind bit of attention to a word that was said. I also welcomed the committee involvement at stage 1 and felt that there was a very constructive dialogue between the minister and the committees.

Everyone, including the public, expected stage 2 of the process to shine a light on areas that had not previously been illuminated. Although I had hoped that that would happen, there seems to be darkness pretty much all around. That is not the fault of the Finance Committee. In noting this report, we should acknowledge the deficiencies of the budget process and, by doing so, put a torch in the minister's hand and tell him where to point it.

The whole process takes place against the backdrop of UK spending reviews. The fact that those reviews are undertaken every two years means that our stage 1 and stage 2 processes are out of kilter. The Executive must urgently address that issue and introduce proposals for a better dovetailing of the two processes.

The second area of concern is the absence of level III figures for consideration by subject committees, the technical word for which is disaggregation. I am concerned that, without sufficient disaggregation, the budget process will lurch towards disintegration. If it turns out that the Local Government Committee, the Rural Affairs Committee, the Transport and the Environment Committee and the Social Inclusion, Housing and Voluntary Sector Committee were all unable to comment specifically on the budget proposals through lack of information, the budget process is hitting the buffers.

I listened with interest to Fiona Hyslop's comments about the Social Inclusion, Housing and Voluntary Sector Committee, which has concluded:

"The Committee has serious concerns about the lack of availability of detail of the Level III figures. This meant that it was extremely difficult for the Committee to form an opinion as to whether proposed expenditure and Executive policy commitments concurred. . . The Committee believes that this represents a piecemeal approach that does not provide an overall picture of the budget, does not allow scrutiny of how the latest spending figures have been changed as a result of the consultation 'Investing in You' and does not assist in the delivery of transparency of Government."

That very neatly encapsulates the difficulties.

The next area of specific concern is the impact of RAB on budgets, as it will vary tremendously between departments. It is particularly relevant to health, transport and environment budgets. The department responsible for the environment has large capital expenditure programmes and the Transport and the Environment Committee reported that the general information in "Making a Difference for Scotland" was inadequate as the document did not explain the implication of the new system for specific spending lines.

Indeed, the Health and Community Care Committee has encountered similar problems. The situation raises the issue of capital charges—which has already been alluded to in the debate—and poses the question of whether they should be split from service purchases. I think that they should, as that clarity would go a long way towards focusing minds and clearing the vision of those who are involved in these essential areas of activity.

The fourth matter of concern is the Scottish reserve, to which reference has been made. It is essential that we know what rules apply to the Scottish reserve: what money goes into it and in what circumstances departments can seek to access that money. It is vital that such information is provided. Additionally, cross-cutting initiatives that involve various departments are a notorious source of obscurity, and can screen what ought to be a clear accounting process. It is vital that there is transparency when various departments are involved in budgeting activities.

I have no clue how much time I have left, but I have come to the end of my speech. I said that I would help the minister to shine a torch, but I feel that I have lit him up like a Christmas tree. I hope that he is fully enlightened.

One of the great problems that we encounter in the budget process is that it is difficult to compare apples with apples—we are not given the detail. I understand why we were not given the detail in year 1, perhaps even why we have not got it in year 2, but I hope that the figures will be much easier to compare when we get to year 3. In the initial discussions that we had last year, some of us tried to get percentage changes included in the figures, which would allow an opportunity for comparisons to be made.

Alex Neil rightly made the point that the amount of discretion that exists in the budget is fairly marginal—he suggested perhaps several hundred million pounds. That discretion for each spending department and minister pales into insignificance in comparison with the three lots of changes that were made during the current year. If we are to have as many changes each year as there have been this year—admittedly, there will not be three changes every year, although we can look forward to the possibility of at least two each year—and if they are to have as big an impact as the flexibility that already exists in the system, it is critical that the sums of money are allocated in a transparent way, so that we can identify what changes are possible and what options are available, to allow choices to be made in an informed way rather than by saying, "We will have another announcement of £10 million here, £20 million there and £100,000 somewhere else." At the moment, it is difficult to trace exactly where the money is going. If the impact of in-year changes can be greater than the capacity in the overall budget, that highlights the particular weakness.

If we are not provided with level III figures until so late in the process that there is no opportunity to change those figures and make an informed choice, that does not say much for our democracy. That is not just a problem that the Opposition has; it is a problem that the Administration has. Consequently, it is a problem that the people have. They will not be able to have confidence in a system that says: "This is the bag of money that we have to spend by the end of the year. What are we going to spend it on?" The system should say, "These are the options that are available to us" and begin a process of consultation—something that the Executive is very keen on. Consultation should be conducted on the basis of the amount of money that may be available and the courses of action that the Executive is considering, and people should be asked what they want the Executive to do with the money. Such consultation is currently not possible because of the way in which the process is structured.

I was quite disturbed by the minister's response to the queries about access to the UK reserve. He rightly pointed out that if something exceptional happened, access to the reserve might be possible. He cited the example of flooding. But what would happen if there was flooding only in Scotland? Would we get access to the UK reserve if the exceptional occurrence was only in Scotland? Or would the exceptional problem have to be UK-wide, and would a UK spending department have to have decided already to provide exceptional access to the reserve before Scotland could get its share, based on population, need or whatever?

We need clarity on whether, if there are exceptional circumstances that are exclusive to Scotland, we will have access to the UK reserve. If we have our own reserve, it is unlikely that a UK spending minister will say, "Yes, you can have your share of the UK reserve as well." There are significant dangers, and I hope that we can have some clarification on that point.

On capital charges, we have been in a period of stable interest rates. What happens when, as appears to be more common than not, there are significant variations in interest charges? That will have a major impact on individual budget items, and if we do not separate out repayment for capital, interest charges and normal revenue on direct service provision, it will be difficult to have clarity and transparency in the system. We will be unable to make an informed choice on any recommendations that we may wish to make.

It is highly appropriate that from time to time we talk about constitutional architecture. The fact is that this budget process is extremely limited. It is limited by legislation. Choices should be made, but along with that should come the responsibility of funding them. We in the SNP are not seeking just the opportunity to spend money but the opportunity to raise money, and to accept the responsibilities that come from both. The current arrangements devalue the Parliament. We are not taking on the responsibility of raising taxes ourselves, which is the other part of any fiscal regime. That is not to say that we should raise any more in taxes, but we should accept the responsibility for making that choice here. Perhaps then we would be less open to deflection from choices made somewhere else by someone else, reflecting their circumstances and needs.

I wish to address two issues: first, budget changes and, secondly, presentation that allows transparency and accountability.

The Health and Community Care Committee was specific when it was asked to participate in this process. It recommended changes to the mental illness specific grant, proposing that it should be uprated to the value at its introduction in 1996, and, as is required in the process that we agreed with the Minister for Finance, that the funding should be transferred on this occasion from within the health budget. Of course, it was open to the committee to suggest that it should come from somebody else's budget. The committee also recommended that grants to voluntary organisations should be maintained at the real-terms value of the 1999-2000 budget—in other words, uprating them by £1.8 million.

The Health and Community Care Committee welcomed the fact, as did the Finance Committee, that the minister confirmed at stage 2 that grants to voluntary organisations were to be increased, and that the mental illness specific grant was to be increased. While only small amounts were involved, that was fundamentally important, because it established the principle that subject committees and the Finance Committee can make specific budget proposals, and that ministers listen to them and accept them.

It is not just the fact that the minister listened to the Health and Community Care Committee and the Finance Committee. We listened to the community that came to us and talked about the budget. For example, the National Schizophrenia Fellowship Scotland has welcomed the increase to which I referred, which helps many of the projects that it runs throughout Scotland. The interaction on the budget that we now have—and I accept that other speakers have said that it is far from perfect—is beginning to establish principles and processes of considerable importance.

The other thing that I welcome is the minister's commitment to present the figures in a better way and to consider further the appropriate level of detail to be included in future reports. That commitment is recorded in written evidence that accompanied the 22^nd meeting of the Finance Committee. I hope that that will mean that we begin to get much better expenditure level information. I know that we have not had the level III figures this year—I will not go into that as others already have—but it is important that those expenditures, when we get them, be understandable. In the area of health, they are not.

The Health and Community Care Committee believes that the finance targets should be based on 10 to 15-year health targets and that the annual targets should be linked to those long-term targets. I hope that those long-term targets can be agreed by the whole Parliament, across parties, so that we get some general intention of where we are headed. Within that general long-term target, we can set up much more specific targets for much shorter periods of time. Some of the targets in the various budget processes have been woolly.

I will give some examples. Tomorrow, we will debate an SNP motion on delayed discharges. It seems appropriate to me that we should have a target in that area, perhaps to deal with those who have been in a delayed discharge situation for longer than a year or to eliminate delayed discharges in acute hospital beds. Specific targets of that sort will have meaning for this Parliament and for the public, who will know that they can hold the Scottish Parliament to account if it fails to meet those objectives.

Another general objective in the health budget has been the establishment of one-stop clinics. Everybody is keen to have them, but there is no indication of how many one-stop clinics exist already, how many it is hoped will be achieved in year 1 and how much of the target is to be met in years 2 to 5, so we can monitor it against the next year's budget. Perhaps I am hoping for utopia, but I think that we need to get a better timetable for this matter.

Having said all that, I think that the Executive is to be congratulated. Progress has been made and I am confident that Angus MacKay will continue the start that has been made by Jack McConnell, not only in working with the committees but in working directly with the public. The meeting in Aberdeen demonstrated that that is continuing and is important. If we can get openness and targeting and we can deal with the problems that exist in relation to the comprehensive spending review, the resource account budgeting and the question of the separation of capital charges and interest charges, we will have moved some way from Westminster and a long way towards involving the public in a participative budget process. I hope that we can continue that process.

I want to give credit to my colleague Keith Raffan, who has led on finance for the Liberal Democrats for some time. He adds to the gaiety of nations and brings a bit of entertainment and sparkle to the proceedings. I do not always agree with him, but he would not expect me to.

I look forward to becoming a member of the Finance Committee. It seems extraordinary, but even Opposition parties seem to go in for the ludicrous practice that Governments have of constantly changing people around just when they have some sort of grip on what they are trying to do. The changes in personnel and the wicked proposal that we will debate tomorrow to reduce the size of all the committees mean that various changes will be made.

I look forward to trying to contribute to running our affairs better. Jack McConnell, Angus MacKay and the committee deserve a lot of credit for the fact that we are beginning to conduct the budget process better than Westminster does. There is a huge way to go, but there has been a definite move in the right direction. The tradition that we have inherited from Westminster is the time-honoured British public finance tradition that says that the important matter is to waste money legally. People who spend the money are not interested in whether the money is well used, just in whether it is correctly used.

According to Professor C Northcote Parkinson, the famous satirist of a few years ago—and I think that he was correct—we are still working from a system at Westminster that was set up to prevent Charles II spending money that his Parliament had voted for ships to fight the Dutch. He spent it on his mistresses. We are still operating on that basis, and we should move on from that. It is notorious that the last time that the House of Commons challenged and altered some expenditure was in 1919, when the Lord Chancellor had an exotic bathroom. More recently, the current Lord Chancellor had exotic wallpaper, but nobody did anything about it.

There is also a basic failure in our United Kingdom finances, which we are trying to address: that there is no proper distinction between capital and revenue. Even the much-maligned local government financing distinguishes between the two, as does any reputable commercial concern. At a UK level, however, we do not, and we are still wrestling with such a system here.

One of my colleagues at Westminster, Ed Davey, has produced a pamphlet on how to improve Westminster scrutiny of finances. Some of his proposals could, with some changes, take effect here. I would be happy to try to promote those.

Does Donald Gorrie agree that the great increase in expenditure through the private finance initiative/public-private partnerships or whatever we want to call it has a significant distorting effect on revenue budgets? That expenditure increase has moved money that really ought to be capital into the revenue field, and therefore constrains what can happen in future with regard to revenue, because the revenue is tied up for a very long time, not allowing choice.

I am sure that the partnership Executive that I support has a view on PFIs and PPPs. My view is that they were invented, I think in good faith, to get round the Treasury rules, which are the sort of things that I am complaining about. We should get the Treasury to change the rules—I know that that will be difficult—rather than invent subtle ways of getting round them.

We need to devise a system under which we can move money around. We have started doing that a little bit, but we need to be able to do far more, as well as identifying and tracking down savings. For example, the Sutherland report and the issue of personal care have general support, but there is a question whether we can afford such care. The Parliament could have an active role in finding out ways of saving money in the health service. Everyone we speak to in the health service, be they important people or nurses who have only joined the service recently, thinks that economies could be made, and that, if we could track down savings, we could probably manage to pay for personal care. It is a matter of moving money around and identifying where we could make economies.

There is also the voluntary sector, which cuts across all sorts of departments. We should be able to bring together money from different sources and support the voluntary sector, whether in the form of youth work, community care or whatever.

Everywhere we go, people complain about over-bureaucracy, too many regulations, too many initiatives and too much bumf. My offers to become a bumf tsar have, so far, been rejected. Perhaps the Finance Committee could collectively consider the matter. I am sure that savings could be made if we went round like, for example, French revolutionary inspectors, seeing what bumf there was and saying "We don't need this, and we don't need that." We would save a lot of people's time, which is money.

We also have to overcome the inherent secrecy in the system. A good start has been made, but, unfortunately, the civil servants are trained to keep as much information to themselves as possible. Information is power, and we have to share out that power. If we are to have joined-up, grown-up government, we must try to have joined-up, grown-up opposition. The problem is that if the Executive is more forthcoming about finance and giving out facts and feels that the Opposition is merely making undue use of that information to kick the Executive round the park unfairly, it will stop giving the information. It is like ping-pong: if we get more reason and co-operation from the Executive and from the Opposition—although it can still make its legitimate complaints—we can improve our system. I am hopeful about the system. We are wandering around in the jungle, and we have a wee bit of a path, which I hope that we can continue to follow.

Before I begin my speech, could I be the first member of the Scottish Parliament to congratulate President-elect Bush on winning the US election?

Alex Neil made a very good point this afternoon. We have spent two and a half hours on something that we could have got rid of in 45 minutes. It is quite remiss of the Executive to fiddle parliamentary time. There are many things that we could consider in the Parliament. I am sure that even Mike Watson faced with trepidation the prospect of quite so long on a report that, though worthy, does not deserve to have so much time spent on it.

I find it impossible to accept what has just been said. The budget bill underpins everything that the Parliament does. The idea that it is excessive to have a debate lasting two and a half hours is perverse. The most important bill that is passed every year in the Parliament is the budget bill.

I quite accept the importance of the budget bill. What I do not accept is that we need to spend two and a half hours discussing Mr Watson's committee's report, as there has not been much deviation from agreement in anything that has been said.

There are six main items: the reserve, the real-terms budgets, level III funding, focused outcomes, spending reviews and cross-cutting initiatives. Of course, there is always the added agenda item from the SNP: the constitutional architecture, which is drawn into every debate.

I congratulate Mike Watson and his committee because the report is very interesting. The fact that we have had two and a half hours for the debate has at least given me time to leaf through it. However, even the minister began yawning at 14:40 and continued most of the afternoon.

Andrew Wilson raised the issue of chaos. Andrew, of course, feeds on chaos with the alacrity of a spider finding a particularly juicy horsefly in its web. The debate also provided the platform for his usual speech on how we have an abnormal Parliament, and we gave him a batter at Barnett, as usual.

Is Nick Johnston aware that the formula for which the SNP called today was not just supported by Brian Monteith in the aftermath of the Scottish election, but was referred to by his leader, David McLetchie, in The Herald , a week previously, when he said that fiscal autonomy should come, but just not yet?

Andrew Wilson makes the very good point that Conservatives have always added to the debate on many issues in Scotland. Whether the time is right yet to talk about fiscal autonomy is another point of debate. I am glad that he values his kneecaps by wisely agreeing with his friend Mr Neil. I like Andrew; he reminds me of when I was young and foolish, and he is also a valued member of the Irish Tourist Board.

Does that mean that Nick Johnston is looking after his kneecaps?

Indeed.

David Davidson made a considered speech. He made a serious point on the confusion that is caused by continually spinning figures, reannouncements, and the timing of announcements. He also addressed the matter of the reserve. On 1 November, the Enterprise and Lifelong Learning Committee, of which I am a member, identified an underspend of £27 million, which represented 3 per cent of the budget. There is a big question there. The minister mentioned a figure of £20 billion. If end-year flexibility is 2 per cent of that, it will add up to £400 million, which will put £100 million back into the central reserve. We need some clarity and there has to be a way in which ministers can reaccess that money. The Minister for Enterprise and Lifelong Learning applied for only £10 million of the £27 million that was underspent.

It always occurs to me when watching Keith Raffan that the wheel is turning but the hamster is dead. However, I welcome his recommendations on the Oregon budget. I am sure that that is very relevant to the lives of crofters in Fife. Quite rightly, Keith Raffan and Richard Simpson talked about clarity in areas such as drugs and tourism. It is important that we move towards measured outcomes. I thought that Richard Simpson's contribution, as always when he is time-barred, was pertinent.

Will the member give way?

I am running rather short or time. [MEMBERS: "Give way."] Okay.

Before he winds up his entertaining but somewhat obscure contribution, will Nick Johnston tell us where the planned Tory cuts will fall?

I am just coming to that.

I hope so. It is an old tactic for members to say that they are coming to a point, but it means that they will never come to it.

I am indeed just coming to it. We are always refreshed and challenged by Keith Raffan's unique point of view. I am pleased that he is moving towards reality. He has said before that there would be £16 billion of cuts. Then we were down at £8 billion. Michael Portillo has made it clear where the cuts will come.

Tell us the figures.

No, I do not have time, but if Mr Raffan wishes, I will write to him with the full details. It may even entice him back into the fold.

Will the member give way?

I must say to Mr Raffan that any connection between his view of reality and mine is totally coincidental.

Angus MacKay, honestly enough, admits to difficulties with the process. He had even more difficulty filling his allotted time.

The discussion on capital charges must continue. David Davidson made good points on the public perception of assets.

Fiona Hyslop made an excellent contribution. Sometimes views are held across parties. Her point about capital receipts was good. We need to enter into a debate on that. I wish that we had more time to do so.

On level III figures and impeding scrutiny, one would be cynical to say that the Executive holds back level III figures so that we cannot produce alternative budgets.

There are too many statements. We need more detail on individual capital charge figures. We need to know who has access to the Scottish reserve and the rules of the reserve need to be clarified.

On the whole, we welcome the report. It is a good start to the budget process.

Debates on the budget process are not a waste of time. They go right to the heart of the devolution settlement, and are a good indicator of the progress that is being made in making the Parliament work for Scotland.

SNP members welcome the report and support its conclusions and recommendations, but are strongly of the view that the shortcomings of the budget process, illustrated today by Mike Watson, David Davidson, Keith Raffan and Ken Macintosh, will never be fully or even adequately addressed under the current arrangements—the current constitutional architecture.

As for the mechanics of the process, the goalposts have moved continually since the Executive's annual expenditure report, "Investing in You", was published in the spring. Many members today catalogued the external and internal shocks to the system from numerous spending announcements. The upshot has been that the budget timetable has been—to quote from the report—"thrown off course", and that detailed scrutiny of the Executive's spending plans by the Parliament's committees has not been achieved. The question is: can the process be amended to accommodate similar events in future years?

I welcome the minister's undertaking to work with the Finance Committee. I do not doubt the Executive's willingness to submit its plans to scrutiny. However, whether the improvements that are needed can be achieved is open to doubt. This year, the Parliament has been tolerant of the problem, not only because we all recognise that everyone is on a learning curve, but because spending announcements have been expansionary—Chancellor Brown has loosened the purse-strings in a pre-election year at Westminster. However, there is no guarantee that post election he will not revert to type. If Mr Portillo succeeds him, we can expect a full-scale attack on public expenditure. In either scenario, the Barnett squeeze threatens to throttle the room for manoeuvre available to the Executive and the Parliament. What price then the sustainability of the budget process under the devolution settlement?

I guess that we can expect revolting back benchers in the coalition if any of those problems come to pass—although, judging from last week's debate on the abolition of poindings and warrant sales, a few cracks of the whip will soon bring them into line, regardless of the principles involved. More important, civic Scotland will be outraged, and the esteem in which the electorate holds the political process will be lowered yet further, to the detriment of our democracy.

Sooner or later, members on all sides of the Parliament will be driven to the conclusion that a lack of fiscal autonomy leads to impotence in terms of making a difference for Scotland. The arch-unionists among the members present may reflect that it may be in their interests to advocate fiscal autonomy—perhaps on the Basque model— to avoid the inevitable conflict that will arise between this Parliament and Westminster. For the SNP, the achievement of fiscal autonomy will represent another stepping stone on the road to independence, which this nation so badly needs and deserves.

Does Mr Ingram want to bypass the devolution settlement? After the election statements that his party made, would not that be dishonest? I thought that the SNP had declared to the people of Scotland that it would come here and make devolution work, yet Mr Ingram wants to move straight to independence.

We want to surpass, not bypass, devolution.

Andrew Wilson ably put the case that the citizens of Scotland had been short-changed by Westminster to the tune of £1,500 a head over the next two years, with Scotland's budget surplus being sucked into the grasping maw of HM Treasury in London.

Unionists have made much of the fact that public spending per capita is higher in Scotland than in the rest of the UK. Much of the differential has been a consequence of a higher level of need—need for more social housing and for more extensive health services, which are a consequence of higher levels of poverty and deprivation. That is hardly a glowing advertisement for the benefits of the union. Unsurprisingly, much less has been made by proponents of the union of the fact that Scotland's per capita revenue contribution far exceeds any spending differential. Scotland will pay 20 per cent more per person in tax revenues than England and Wales over the next two years.

Keith Raffan spoke about oil. Rather bizarrely, he suggested that it is a handicap for Scotland to have an oil-fired economy. Members may be interested to learn that Scotland's positive fiscal balance for 2000-01 is second only to Norway's.

Will the member give way?

No, I am sorry.

Moreover, over the past 20 years, Scotland has consistently had a better fiscal balance, by some margin, when compared with the UK as a whole. History will not be kind to those who, in denying Scotland wealth, end up spending it and wasting it.

Notwithstanding the criticisms that I have made of the fundamental flaws in the budget process under the current devolution settlement, I commend the Finance Committee's report.

Elaine Thomson will wind up for the committee.

As various members have said, this afternoon's debate was never going to set the heather on fire. Nevertheless, it represents an important step in the development of the Scottish Parliament and the maturing of the annual budget process.

The process, originally developed by FIAG, is beginning to take on characteristics unique to this Parliament. As the convener of the Finance Committee said, we widened the consultation process and went up to Aberdeen. As part of the process, we now propose to go out of Edinburgh twice a year—once during stage 1 and once during stage 2. In Aberdeen, we heard from a number of local organisations and so were able to assess the impact of the Scottish budget locally rather than remotely. Such things are a vital part of opening up the budget process and encouraging all Scotland to participate in it.

This is, as many have said, the first year in which we have dealt with a full budget cycle and the first time that many of the processes that FIAG developed have been fully used. As various members highlighted, the process has many strengths, although it also has some weaknesses. As Andrew Wilson and others suggested, and as the Scottish Parliament information centre report indicates, several events at UK level have impacted on the budget process, including the UK spring budget, end-year flexibility announcements and, most important, the comprehensive spending review. The CSR resulted in a welcome major increase in spending for most areas. There were also in-year changes in October and the recent UK pre-budget report.

Although, as I said, the increase in the overall budget is welcome, the CSR has caused several difficulties for committees, particularly in relation to the fact that the level III figures were not available. As the minister said, the budget had, in effect, to be reconstructed after that announcement. I know that my committee colleagues will be pleased that the minister has committed himself to working with us to try to improve the overall budgetary timetable, particularly in years when we have a CSR. The committee recognises that the open and constructive approach taken by the minister and his officials is positive in helping to develop an even better and more accessible budget process.

There has been much focus on the presentation and content of budgetary documents. As the convener of the committee mentioned, we have reviewed the stage 1 documents. That review is nearly complete and we will make several recommendations for future documents, some of which we hope to see incorporated in next spring's expenditure report and some of which are longer-term ambitions.

The committee report raises the issue of the inclusion of real-terms and cash-terms figures in all tables. The commitment from the minister that those will be included in both stage 1 and stage 2 documents, at all levels, in future years is welcome. Consideration of how to make the financial documents more accessible, understandable and comprehensive is under way. We look forward to seeing the results of that in future years. One of the results of a budgetary process in the Scottish Parliament is that there is much more interest in the budgetary cycle than previously. That interest is found at various levels—academic, parliamentary and among the general public. It is essential that we find ways in which to communicate sometimes complex financial information simply and straightforwardly. I can assure Keith Raffan that we will not forget Oregon.

Scrutiny by the subject committees is an important aspect of the budgetary process. This year, most committees have concentrated on the procedural and presentational aspects. Nevertheless, several specific spending recommendations were made at stage 1. Richard Simpson mentioned the mental illness specific grant, which was felt to be too low. The Executive took on board that recommendation and the MISG was increased, as is noted in "Making a Difference for Scotland". That is exactly the kind of effective scrutiny and dialogue between the Parliament and the Executive that FIAG envisaged when it developed the process. It should be noted that the Executive has taken on board all the recommendations for expenditure that were made at stage 1. The committees have had a clear impact on the budgetary process, although the lack of level III figures this year presented a difficulty, as many committees pointed out in their reports. We need to work on how to get round such difficulties.

Another issue that was raised in the debate was that of resource accounting and budgeting. Although that represents an improvement in overall Government financial accounting, it causes some difficulties in the short term. I know that the Finance Committee will examine in more detail the impact that resource accounting will have on departments.

Given that we have five minutes before decision time, will Elaine Thomson reflect on the SNP's suggestion that we consider extending the Parliament's revenue base powers? I think that the Liberals and the Conservatives agree with that in principle, although not on the timing. Does she agree with me and John McAllion that the powers of the Parliament are not fixed and should be allowed to grow in time?

As Andrew Wilson knows well, his suggestion does not match the position of the party that I represent. We want to work effectively with the powers that we have and to ensure that we use them to benefit all the people of Scotland, as indeed they are being used.

The Finance Committee report also asked for clarification of the rules on the Scottish reserve. The minister spoke about that this afternoon. I am sure that I and my colleagues on the committee will consider that in some depth later.

Excuse me for a second. I am having difficulty hearing the debate. Those members who are just coming into the chamber ought to be courteous and listen to the member who is speaking.

The Parliament has discussed cross-cutting initiatives on drugs and other matters—I know that Keith Raffan has mentioned them. Mike Rumbles talked about the impact on rural affairs when spending comes from several departments. We welcome improvements in the financial reporting of such spending, which should make clear the total amount of spending on cross-cutting areas.

One of the committees has just produced a report on drugs issues. The ministers may allocate money from the budget for drugs measures in January. How will the budgetary process go forward? Would it be an idea to establish a group whose members were drawn from the Health and Community Care Committee, the Education, Culture and Sport Committee, the Social Inclusion, Housing and Voluntary Sector Committee and other relevant committees to examine how the cross-cutting budgets are determined and allocated? Does Elaine Thomson think that the Finance Committee would welcome that suggestion?

The Finance Committee is always interested in suggestions that would improve the quality and quantity of financial information. The Scottish Executive finance department is conducting some interesting work. The new systems that it proposes will considerably increase and improve the quality and depth of information that we can access. That might include some of the cross-cutting issues to which Fiona Hyslop referred.

I will mention another topic that is dear to my heart—disaggregating financial information according to gender, to make it clear how moneys are spent on men and on women. I know that much work is being done on mainstreaming gender issues. I welcome the minister's response in the letter that he sent to the committee. He said that robust figures on the matter would be provided next year. I look forward to the report from the working group that is studying the issue.

To a large extent, we are still discussing presentational issues rather than spending decisions. Like many other members, I look forward to more discussion in the future of the spending decisions that the Parliament makes. I do not agree with Nick Johnston's suggestion that the debate is too long; in future, we are likely to find that there is inadequate time to conduct the debate effectively.

I thank the members of the Finance Committee for their work, and the committee clerks, who have made valuable contributions in their assistance to the committee over the past year. The minister said that the Finance Committee has produced a measured and sensible report—the work of the clerks has contributed to that.