Budget (Scotland) Bill: Stage 1

– in the Scottish Parliament at 2:30 pm on 29th January 2004.

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Photo of Murray Tosh Murray Tosh Conservative 2:30 pm, 29th January 2004

The next item of business is a debate on motion S2M-807, in the name of Mr Andy Kerr, on the general principles of the Budget (Scotland) Bill.

Photo of Andy Kerr Andy Kerr Labour 3:12 pm, 29th January 2004

My colleague Tavish Scott is not with us today—he is stuck due to travel difficulties—so I will also close the debate on behalf of the Executive, which is obviously a great pleasure for me.

Photo of Andy Kerr Andy Kerr Labour

Double helpings, indeed. [ Interruption. ] "Double jeopardy", as well, as another member says, but we had better not go too far.

I intend to talk about three specific issues: the budget process; factors that have caused the numbers in the budget to be different from the ones that we published in the draft budget; and how the budget will deliver economic growth for Scotland.

The Finance Committee published its stage 2 report on 10 December. We welcome the report's constructive approach to improving the budget process. Our response, which we published last week, makes it clear that we view many of the committee's recommendations favourably. We will continue to work with the committee on several areas that are of particular concern to it, notably time-series data and information on capital spending. The supporting document for the budget bill now includes fuller information on capital expenditure than we have previously provided in budget documents. We will build on that to provide the committee with more comprehensive information in the run-up to the spending review, and we have started work on time-series data to improve further the information that is available to the committee before the spending review.

In the spring, we will produce a very different stage 1 document, which will include an assessment of the Executive's performance against objectives, in addition to an analysis of future spending prospects. We hope that that will avoid the duplication of information that has been a feature of previous budget processes. It will also change the nature of stage 1 of the budget process into a more strategic look at the Executive's performance. That is in line with the initial intentions of the financial issues advisory group and should assist parliamentary scrutiny before the next spending review. We are also trying to ensure that budget documents are shorter and clearer. We have already started to do that, which is why this year's supporting document for the bill will be 252 pages shorter than last year's.

The Executive's willingness to work with the committee and to make major changes to the budget process and the budget documents is a clear indication of our commitment to transparent and rigorous scrutiny of the Scottish budget. We have already achieved a lot in this area. Any objective comparison of the Scottish budget process—including with the Westminster process—would demonstrate that. We look forward to working with the Finance Committee to improve further the budget process in the future.

Although we have made a lot of progress in improving the clarity of our documents, the nature of finance means that there will sometimes be changes to our treatment of the numbers in the documents. That can be annoying, but it is inevitable, given the need for us to keep up to date with accepted accounting and financial practices.

It might be helpful if I explain two major changes that have come into effect for this year's Budget Bill and which have had an impact on the numbers that we have already published. The first change is our implementation of financial reporting standard 17 for pension schemes, which affects our presentation of teachers' and national health service pension schemes. It means that the change in the total liability for teachers' and NHS pensions is put through the annual accounts. This year, that has had the effect of increasing our budget by more than £1 billion. However, no cash movements were involved in that and there has been no impact on other items.

A second change in the budget arises from the new prudential regime for local authorities. Because that regime removes borrowing limits for local authorities, we no longer need to include those limits in the Budget Bill. However, where borrowing consents were granted to support specific expenditure, they have been converted to specific capital grants, as has happened with the initiatives fund and the cities growth fund. That needs to be carried through in the budget documentation. The prudential regime will give local authorities the freedom to make their own decisions about how much money they borrow or spend within a framework that requires them to manage their expenditure rigorously and responsibly. That will allow local authorities to make the best possible use of public money and it exemplifies the Executive's overall approach to public finance.

We are determined to secure the best possible value for money. One of the main ways in which we will do that is by ensuring that the money that we allocate will help to grow Scotland's economy. If we can provide the conditions that allow people to create wealth, we will make a massive difference to the prosperity and happiness of people throughout Scotland. That is why growing the economy was our top priority when we put together the partnership agreement, which sets out our plans for this parliamentary session.

We want to increase our standard of living as measured by gross domestic product per head and we want to move from being in the third quartile of Organisation for Economic Co-operation and Development countries to the top quartile. We believe that the strategy of having a smart, successful Scotland will help us to achieve that long-term goal.

We also believe that the Scottish economy benefits from the stability of the current constitutional settlement and from the current macroeconomic climate.

Photo of Brian Adam Brian Adam Scottish National Party

The minister quite rightly has ambitions for Scotland and its economy. Where are we currently placed relative to other countries in the OECD?

Photo of Andy Kerr Andy Kerr Labour

As I said, we are currently in the third quartile; our longer-term objective is to get ourselves into the top quartile. That forms part of our ambitions to grow the Scottish economy. Those are longer-term strategic matters for which the Executive takes responsibility.

I had just mentioned the current constitutional settlement. At the moment, interest rates are at historically low levels, inflation is at historically low levels, unemployment is at its lowest rate for more than two decades and there are competitive levels of corporate taxation.

Photo of Stewart Stevenson Stewart Stevenson Scottish National Party

Can the minister tell me the average interest rate for the whole of Government borrowing?

Photo of Andy Kerr Andy Kerr Labour

No, I cannot give Mr Stevenson that figure at the moment. However, in relation to what I was talking about with regard to the pressure that Government places on the business community here in Scotland and in the rest of the United Kingdom, I guide the member to the survey that was carried out recently by the Executive on behalf of the manufacturing steering group, which places Scotland in a low-band grouping of business-taxation economies.

Rightly, many of the important fiscal and monetary levers are under UK control. The Executive does not, of course, control the global factors that matter so much to our open trading economy, but we do have substantial powers of our own to improve the microeconomic capability of our economy. Our budget will help us to make the most of them.

The spending plans that are set out in the budget will help to make our economic ambitions possible. We are investing in infrastructure by supporting broadband provision and by substantially increasing our investment in transport. We are investing in skills by creating 30,000 modern apprenticeships, by piloting business learning accounts and by providing funding that allows 50 per cent of young Scots to enter higher or further education. We are funding research and development through intermediary technology institutes and the Scottish co-investment fund.

We support business directly through regional selective assistance and many other schemes. We are keeping business rates low by freezing rates in the current financial year and increasing them at a rate below last autumn's inflation rate for the next financial year.

All those measures create the conditions in which businesses can create wealth. By doing so, they will have a real and lasting impact on the happiness and prosperity of the people of Scotland.

We believe that our rigorous approach to public spending has benefited Scotland over the past four years. The money that we have invested has already brought results and we want to build on those achievements during the next four years by fulfilling the commitments that we set out in the partnership agreement. The budget provides a basis for doing that, so I commend it to the chamber.

I move,

That the Parliament agrees to the general principles of the Budget (Scotland) Bill.

Photo of Fergus Ewing Fergus Ewing Scottish National Party 3:20 pm, 29th January 2004

The bill deals with some fairly dry material that falls into three categories, namely resource budgeting, prudential borrowing and the requirements of FRS 17. The Scottish National Party has supported resource budgeting on the basis that it allows us to show the underlying cash position and strength of the accounts. On prudential borrowing, we look forward to studying the fine print in the Finance Committee, which has not yet considered the bill.

On FRS 17, like a true anorak, I glanced at a document on the subject the other night and was concerned to note that, for many years, the UK has not followed the practice that has been adopted throughout the rest of the world, which is to value scheme assets at a fair market value as opposed to an actuarial value. That seems to me to be something that should have been corrected long ago.

While we are on the topic of pensions, I must say that it is unfortunate that Parliament does not have the power to tackle a serious problem in pensions law, which is that more than a decade after the events that led to the Maxwell pensioners—some of whom were very near to retirement—losing their pensions, the loophole in the law that allowed that situation to arise has still not been closed up. That companies can still borrow the actuarially calculated notional—I stress "notional"—surplus is wrong in principle and, if the Scottish Parliament had the requisite powers, we would not have allowed that to stand as Westminster has done.

The minister has canvassed on terrain that is far wider in its scope than the bill, so I will follow his example. With regard to the budget, the people of Scotland want to hear how we are going to ensure that proper value for money is obtained from the funds that are spent. Is the money that is being spent at the moment being spent wisely and to the greatest effect? Conversely, are some of the spending programmes and decisions not achieving real benefit for the public?

In that regard, I want to raise six points. First, it is wrong in budgetary and control terms that quangos are allowed to operate as independent organisations that are, in effect, free of Government direction and control. To some extent, the powers exist to exert control by means of direction. However, there have been widespread and well-publicised criticisms of, for example, Scottish Enterprise's decisions over the years to spend a great deal of money on consultants' reports. The Auditor General has opined on that, but I do not think that any effective action has been taken.

Secondly, the Executive has been proved by the economic wizards, Jim and Margaret Cuthbert, to have seriously miscalculated the borrowing limits that have been applied to Scottish Water and that, in consequence, it is possible that more than £100 million a year could have been borrowed. They have also identified that the investment by Scottish Water in the year 2002-03 was about £52 million. That means that, although we have had high charges, we have not had the high investment that people would expect and which they were assured was happening. As Jim and Margaret Cuthbert told the Finance Committee this week, that means that today's water rate payers have been paying for yesterday's accumulated debt and are not even getting the investment that we would expect.

The result is that in places such as Kingussie in my constituency, people are told that sewerage capacity will not be upgraded for 10 years, the result of which is that Scottish Water objects to every application for sewerage services for a new house or business. A total blight has been placed on development, partly because Scottish Water was given the wrong instructions. Those instructions were based on a flaw—that the Cuthberts identified—in the letter that commissioned the review of water charges. I know that Allan Wilson anticipates gleefully his visit to the Finance Committee next week to face questioning on the matter.

Thirdly, it is correct to say that financial memorandums, which the Finance Committee considers, are increasingly poorly worked out and ill thought through. Just yesterday, we heard a virtual admission by Mr Peacock that his figures were wrong, yet he said, "Don't worry—if we need more money, it will be there." He said that on the record yesterday. I ask him how much will be available over what period and whether other services will suffer if an unidentified surplus exists. That seems to be fiscally irresponsible.

Fourthly, we have seen the Administration's failure on individual learning accounts. Where was the monitoring then? Where is the monitoring of social inclusion partnerships?

My fifth point arises particularly from the Holyrood inquiry. I seriously question whether the model that the Auditor General for Scotland uses in his modus operandi is correct, because he must agree the facts with the audited body. Most people who are interested and who expect the Auditor General to be an independent watchdog expect him to be entirely independent and to reach his own view of the facts without a requirement to agree the facts with the audited body. That topic will emerge.

As for the macroeconomic climate, western countries fairly uniformly enjoy low inflation, low interest rates and economic success, but as the Institute for Fiscal Studies paper of December 2003 by Carl Emmerson and others showed, I expect that we will see the UK Chancellor of the Exchequer face a time of considerable pressure that he will be unable to withstand, given his commitment to, for example, defence expenditure at Tory levels. That is the conclusion of the Institute for Fiscal Studies. The SNP would pursue different spending plans and would therefore be able to devote resources where they are needed—to our prime public services and to allowing our businesses a fairer deal.

Photo of Brian Monteith Brian Monteith Conservative 3:27 pm, 29th January 2004

A perusal of this week's newspapers would make it easy to believe that the most important debates that affected Scots' lives were held not here, but in London. We have had the debate on top-up fees, in which Messrs Darling, McGuire & co abandoned their constituency interests and voted in favour of top-up fees. We have had the Hutton report's publication, which saved the Prime Minister's bacon and consumed vast acres of newsprint as people tried to understand how and why. Those were momentous occasions, but today's solemn and probably rather dry debate is, ultimately, far more important to the people of Scotland and may be the most important debate of the year.

The Budget Bill is the foundation on which all the Government's activities must be built. We can debate the health service, antisocial behaviour or violence in the classroom, but whatever the remedy to those ills, the Executive must be required to put its hand in its pocket to finance that solution. Of course, I should say that the Executive puts its hand in the public's pocket, for the Executive has no money of its own—it has only what it receives from the taxpayer. That point should never be forgotten.

Ministers have often said that the Opposition parties have not produced their own proposals and that we are willing to talk fine words about spending here or cutting there but we are not willing to show our hand. I do not believe that the job of Opposition parties is to propose numerous—I use that word intentionally—amendments through the subject committees at the initial stages of the budget process. First, it is often difficult enough for committee members to make sense of the available information at that stage and secondly, a committee's priority should be to scrutinise the Government's proposals rather than to debate alternative proposals from members, which would distract it. Therefore, it is no surprise that committees have suggested very few amendments in the previous four budget exercises—indeed, I think that only two amendments have been lodged, but I might even be wrong about that.

A debate about the core principles of the budget is needed. To achieve that aim, I lodged a reasoned amendment yesterday that showed our support for the Executive's need to produce a budget, but suggested that more could be done to improve economic growth. If the amendment had been accepted, we could have fulfilled the Opposition's role of offering a genuine alternative economic approach, which the Executive has rightly challenged us to offer. Conservative councillors in opposition regularly do that sort of thing every year when council budgets are set. Unfortunately, my reasoned amendment was not accepted and, given that amendments at stages 2 and 3 can be lodged only by the Executive, the bill will now pass through the process without Opposition amendments. I do not criticise the Presiding Officer's decision—

Photo of Brian Monteith Brian Monteith Conservative

The member should hear me out.

I merely suggest that if Parliament wants to have a more serious debate on the Budget Bill that would give it the importance that it merits and make the debate a grander occasion, ways will have to be found to allow reasoned amendments to be lodged and to turn a whole day over to debating the bill's first stage.

Before I eat up all my time on procedural matters, I will turn to the debate in hand. The minister has talked to us in the past and today about record spending on this and on that, but he has forgotten to tell us about the record taxation on this and on that, which all of us have to endure to pay for the Executive's grand schemes. Public expenditure has grown by some 73 per cent in the past five years. If the anecdotal evidence that I and many MSPs from all parties hear is true, there is a genuine worry that the vast majority of that much-vaunted increase in expenditure is going on expanding bureaucracy and on public sector salary increases.

As a list MSP, I meet many health board chairmen. More than one has told me that the uplift in health funding has gone entirely on pay increases to general practitioners, nurses and consultants and that there is nothing left to finance the improvement in services that the public expect. Such things are happening when private sector pay is at a standstill. That is a serious matter for all parties and we must consider it.

Finally, I say to the minister that it is not possible to continue to increase public spending ahead of inflation every year—doing so is unsustainable and will be the ruin of our economy. A day of reckoning will come when that will stop and hard and tough decisions will have to be made. The Parliament cannot borrow, so I finish with a simple question to the minister. Will he raise taxes or will he cut spending when the revenue that he receives from Westminster is not enough to finance his future commitments?

Photo of Jeremy Purvis Jeremy Purvis Liberal Democrat 3:33 pm, 29th January 2004

I share some of Brian Monteith's views. This debate should be a core moment for Parliament. It should be covered widely in the press and our constituents should be following it.

I rise to support the general principles of the Budget Bill. Those general principles are the provision of public services in Scotland, reducing inequality, improving and sustaining our environment and helping all our communities to live in peace and safety. Those issues are major issues for Parliament and the debate.

We are rightly debating the Executive's proposals and the financial tools to implement the partnership agreement. It is welcome to see, in the introduction to the bill's supporting documents, that the Executive has taken on board the views of members of the Finance Committee in respect of presentation of the budget figures. How the budget is put together and how clearly the information is presented is important to Parliament in scrutinising the Executive's proposals, but it is also important for the public to understand them.

It is much harder for the public to understand other parties' positions, however. We have heard about Fergus Ewing's spending plans, but where are they? I will touch on that in a moment.

Photo of David Davidson David Davidson Conservative

Can Mr Purvis tell us which part of the budget that is before us today was wholly and entirely a result of the activities of the Scottish Liberal Democrat Party?

Photo of Jeremy Purvis Jeremy Purvis Liberal Democrat

I helpfully hold up the partnership agreement so that Mr David Davidson can see the Liberal Democrat elements therein.

The SNP leader argued an incredible position this week when he said:

"Financial independence would, at a stroke, end the need for Scots MPs to ever vote on an issue like top-up fees again."

What total nonsense. How on earth would a separate Scotland be immune from policy and budget decisions that were taken south of the border? If the businesses in my constituency that export goods around the world are affected by severe acute respiratory syndrome on the other side of the world, students who were thinking of going to English universities would be affected by decisions that were made in England. University funding and student finance are policy decisions and not constitutional arguments.

Photo of Fergus Ewing Fergus Ewing Scottish National Party

Does Mr Purvis regret the fact that his Liberal colleagues in the previous session voted on every possible occasion to go ahead with the Holyrood fiasco, whereas we rejected that decision? If he wants to talk about spending, does he accept that it has been found that defence spending with BAE Systems has overshot by £3 billion, which is three times as much as the amount that Tony Blair says will be raised by his top-up fees? If we had slightly more efficiency at the UK level, those fees would be completely unnecessary by a factor of 300 per cent.

Photo of Jeremy Purvis Jeremy Purvis Liberal Democrat

His obsession with the constitution is matched only by Mr Ewing's obsession with the Holyrood project.

In the debate on the Finance Committee's report on the budget process in December, Brian Monteith said:

"it would be beneficial for the Parliament to have alternative budgets to discuss at some stage".—[Official Report, 17 December 2003; c 4322.]

I agree that it would be beneficial. It would have been interesting to see Mr Monteith's reasoned amendment. It would be beneficial to compare proposals for higher education. Scotland is sixth in the OECD league table for spending on higher education as a percentage of gross domestic product. For 2003-04, the Executive is spending £734 million on higher education institutions. In 2004-05, it will spend £783 million. The Executive is supporting students to the tune of £230 million in Scotland for the payment of fees, grants and bursaries. That is the answer to Mr Davidson's question. At no stage have the SNP or the Tories said what they would do for the sector or for students, how their plans would be paid for or how much they would spend.

Photo of Brian Monteith Brian Monteith Conservative

I thank the member for giving way and for allowing me to explain that, in the May elections, we published our full costs for higher education, and that they would result in an increase in funding that would reach both the HE and FE sectors. If the member is willing to accept those figures, would he support them?

Photo of Jeremy Purvis Jeremy Purvis Liberal Democrat

I will touch on the philosophy of cutting taxes and claiming to increase expenditure in a moment. There is a surprising similarity between that approach and some of the SNP's approach.

However, we do not have an alternative budget. The last one that I could find—I would be delighted if the SNP would correct me—was from 1997. In the duration of the Parliament, the SNP has not once said what its proposed tax would be, by how much revenue that would reduce the budget or where it would make cuts. We got close in the 2001 manifesto—[Interruption.] I am sure that the spokesman will send me the paper that he holds up—it will make delightful reading. We got close in the 2001 manifesto, in which the SNP told the world that in that year Scotland would contribute

"even by the most cautious estimates ... almost £8 billion more to the London Treasury than it receives" and that only through that money

"can we see the investment so urgently needed in our schools".

Yet again, however, we hear about tax cuts from the SNP. Cutting taxes while the budget is in deficit? I am sure that George Bush would be pleased with his new economic followers. Even the Policy Institute has said:

"over the past two or three decades and, so far as we can see in the coming years, Scotland is running a modest deficit relative to that in the United Kingdom as a whole."

That includes North sea revenue.

I have not mentioned the "Government Expenditure Revenue in Scotland" documents, so I will spare the SNP front bench's apoplexy. The only figures that I have mentioned so far are either from the SNP or from independent academics.

The budget is about providing better public services and more support for local authorities, and investing in infrastructure and people in Scotland. We should support it today.

Photo of Des McNulty Des McNulty Labour 3:40 pm, 29th January 2004

The first thing to be said about the budget could have been said about previous budget documents since the Labour and Liberal Democrats came into government in 1999: it shows that there are very substantial increases in spending across the range of portfolios. According to the budget plans, the amounts that will be invested in health this year, next year and the year after—as well as the substantial amounts that have been invested over the past four years—mark a significant departure from the situation that has existed since I came into politics.

I go back quite a long way. Indeed, I lived through the very difficult period in the 1980s and 1990s when, year on year, local authorities, health boards and other public agencies were lacerated by cuts and reductions in expenditure. However, the substantial and sustained increases in expenditure that we have seen have been made possible through sound management of the economy by Gordon Brown and the Westminster Government. We in Scotland have benefited from that approach.

I agree with Fergus Ewing that, in taking forward our responsibilities, we must manage our resources as effectively as possible. However, that is about the only comment that he made that I agree with.

Photo of Brian Adam Brian Adam Scottish National Party

Does the member agree that the important issue is not just the amount of money that is spent, but what that expenditure delivers? When will the changes in outputs, particularly in the health service, work their way through the system? We are not seeing the effects of those changes at the moment.

Photo of Des McNulty Des McNulty Labour

Brian Adam must live in a strange parallel universe. Substantial health improvements are being made. We have increased health expenditure substantially and, although we have not been able to meet every possible need, we have come closer to meeting those needs than we have done at any time over the past 20 years. We have been able to modernise and renew the health service, not least in my area of greater Glasgow. For example, the purchase of the former Health Care International hospital has allowed new operations to take place in a facility that was not being utilised effectively, and the new expenditure has also made possible other dimensions of change. The question is whether we can do things better. Undoubtedly we can, and one of the Finance Committee's roles must be to highlight how and where improvements can be made.

One matter that the past year's scrutiny process highlighted, and which I hope will be followed through when the budget is implemented, is how we organise our expenditure to structure and maintain growth in Scotland. Every political party in the chamber—with perhaps one or two exceptions among the smaller parties—would argue that economic growth is a top priority. However, achieving growth is not simply a matter of getting the right distribution among budget lines or departmental heads. We must ensure that the allocation, use and management of resources and the bringing together of different departments or agencies deliver meaningful change on the ground and in localities throughout Scotland.

The minister frequently refers to his experience in East Kilbride, which was a new town. Expenditure was brought together under one agency, which managed the future of that area effectively and well. If we are to transform Clydebank, for example, in the area that I represent, or the areas that others are concerned about in west central Scotland, there must be more effective co-ordination of the expenditure on economic development, regeneration, housing, health and local government so that the huge resources that the budget makes available are used to the maximum benefit of the people.

Photo of Brian Adam Brian Adam Scottish National Party

I agree whole-heartedly that we need to address difficulties in areas of high unemployment and high deprivation. However, where are the measures in the budget to assess the impact of the sums of money that are being poured in to tackle deprivation? As far as I can see, there is no way of monitoring that. We have no cross-cutting analysis in that area.

Photo of Des McNulty Des McNulty Labour

Brian Adam was a member of the Finance Committee when we discussed some of those issues. They are certainly on the agenda that the new Finance Committee, along with the Executive, is anxious to work on.

Issues of transparency arise. I welcome some of the issues that have been raised in responses from ministers to Finance Committee reports. However, I criticise the fact that we do not get enough specific information in the responses. Ministers must make improving the data a priority—especially the throughputs and year-on-year data that the Finance Committee has asked for. At the same time, as we consider, scrutinise and monitor the way in which money is spent, it is important that we ensure that outcomes are being delivered. That is crucial. It is not just a question of monitoring the process and thinking that we are doing a good job; we must ensure that the way in which money is levered in is really making a difference.

That is a job for everybody in the Parliament. It is not just a matter for Andy Kerr or other ministers; it is a matter for all of us. It is our collective shared responsibility. When the party-political in-fighting goes away, what the people of Scotland will expect from us is that we have made a difference. We will do that if we focus on outcomes rather than focusing narrowly on the scrutiny process and on jousting in this chamber.

Photo of Stewart Stevenson Stewart Stevenson Scottish National Party 3:47 pm, 29th January 2004

The minister opened the debate by saying that we needed a transparent and rigorous review of the budget. That is hardly a statement that anyone in the chamber would have any serious difficulty with. I want to cover a number of technical issues that can, however, get in the way of achieving such a review. Before I do so, I acknowledge that, over the years, we have seen improvements in the presentation of the data that are important to this process; we have also seen improvements in the scope of the data. However, there is more to be done. In essence, we are the management board of the company and we are reviewing the performance of the officers who have been given charge of the operation. I ask Fergus Ewing not to take away my copy of FRS 17 just yet; I shall need it.

Let me start with income and expenditure. The minister said something quite interesting. I think that he said that he had put in £1 billion to cover pensions liability, but that it was not a cash £1 billion. Of course, that is perfectly proper because we have not yet had to pay any money in respect of that particular liability. The minister placed the liability in the context of income and expenditure. However, were we talking about a company, I would have expected, as does FRS 17, that it would have come after

"Accruals and deferred income but before ... Capital and reserves".

In other words, it is part of the assets and liabilities of the enterprise that is the Scottish Executive, rather than part of income and expenditure. Of course, that figure will move from assets and liabilities to income and expenditure at the point when the liability for future payment of pensions—which has previously been underestimated—translates into our actually paying the pensions. In the Executive—as in many commercial companies—that provision has been underfunded. The minister has therefore immediately opened up a difficulty.

Jeremy Purvis referred to the deficit in the Scottish economy but, of course, he is talking only about identifiable public expenditure—

Photo of Stewart Stevenson Stewart Stevenson Scottish National Party

No. Wait.

Jeremy Purvis is talking only about identifiable public expenditure; he is not talking about the other 50 per cent of public expenditure that is non-identifiable. In that connection, I direct him to a Westminster parliamentary answer of 31 March 1997 from the previous Conservative Administration. The answer showed that from 1979 to 1997, Scotland paid £30 billion more into the Westminster coffers than it received. That was a clarification of an answer that had been given some seven weeks earlier, which had suggested a figure of £27 billion. Those are substantial sums of money and they more properly reflect the balance between identifiable public expenditure and non-identifiable public expenditure.

Photo of Stewart Stevenson Stewart Stevenson Scottish National Party

If Jeremy Purvis has not forgotten why he stood up, I will take his intervention.

Photo of Jeremy Purvis Jeremy Purvis Liberal Democrat

I was highlighting the deficit in the SNP's ability to provide an alternative, rather than the proposed surplus that we would have. Has the member seen the Policy Institute document "Paying our Way", by Professor Ross Harper and Iain Stewart, which is described as

"A definitive guide to the debate on 'fiscal autonomy'"?

That document says quite definitively that, even including all the aspects that Stewart Stevenson mentions and 90 per cent of oil revenues, there would still be a Scottish deficit of £1.1 billion.

Photo of Stewart Stevenson Stewart Stevenson Scottish National Party

We always welcome contributions to the debate from apolitical sources such as Ross Harper, but if Scotland is doing so badly, that is hardly a ringing endorsement of the present arrangements.

There are other technical issues that we must deal with and I will return to specific points about expenditure. In answering my intervention, the minister was unable to tell us the interest rate that we are paying on average. One of the reasons for his inability to do so is that we do not have a statement of assets and liabilities against which to assess whether the interest rate is sensible, what its nature is and how it breaks down. Furthermore, without assets and liabilities, we have no way of knowing our future private finance initiative liabilities and no way of assessing whether the depreciation that moves from assets and liabilities into the current account is a sensible provision in relation to the nature of the assets and liabilities that there may be.

We have plenty of targets—in the draft budget, there are 147. What is missing—from parliamentary answers, I know it to be missing—is any understanding of whether ministers are getting adequate support from civil servants in taking responsibility for delivering on those 147 targets. Privately, some people suggest that they are not. Sure, the minister can leave office if we fail to meet a target, but the reality is that that will just mean another minister will come in and fail, if the civil service does not change its culture to take on board accountability for the targets. Also, initiatives and projects that transcend both the budget lines and the yearly budgets are not described in a way that helps us to understand them. The minister should consider that point for the future.

I will end by pinpointing one target and commending the Executive. It is rare to miss a target even before we have reached the financial year to which it applies. Target 7 for health and community care states:

"No patient should wait longer than 26 weeks for a new outpatient appointment by the end of 2005."

Nonetheless, the Executive has already failed to reach that target. I have an appointment as an outpatient at Woolmanhill hospital for 14 August 2007—that is more than six months after the end of 2005. I say to the minister that he has problems.

Photo of Murdo Fraser Murdo Fraser Conservative 3:54 pm, 29th January 2004

I am sure that we all wish Mr Stevenson a speedy recovery from whatever ailment besets him.

Stewart Stevenson made a point about the famous budget surplus over 18 years. Interestingly enough, if we consider the figures, Scotland was in surplus in three of those 18 years because of the high oil price at that time. For the remaining 15 years, Scotland was in deficit. However, why pick those 18 years? I appreciate the fact that they correspond to the term of office of the previous, great Conservative Government, but that period is entirely arbitrary. Why pick 1979 to 1997? Why does Stewart Stevenson not take the period from 1950 to 1997 or from 1901 to 1997? I suspect that the reason is that, across the piece, Scotland would have been in deficit for the majority of time during those periods.

Photo of Fergus Ewing Fergus Ewing Scottish National Party

Does Mr Fraser argue that Scotland cannot be independent because it has sometimes had a deficit? If so, can he explain how the United States of America, which has a deficit of trillions, manages to remain independent and apparently successful?

Photo of Murdo Fraser Murdo Fraser Conservative

I would never make the argument that Scotland could not be independent. Of course Scotland could be an independent country. We may have a deficit, as many other countries do.

I am rather disappointed that the SNP keeps raising the issue about the balance of payments between Scotland and the rest of the United Kingdom. For me, the question whether Scotland should be independent is nothing to do with finance. It is about our place in the world, our culture, our history and our trade links to the rest of the UK. Anyway, I am digressing from the subject of the debate.

Photo of Murdo Fraser Murdo Fraser Conservative

Do not worry; I am not digging a hole for myself. I am sure that, when the people of Scotland are asked to judge, they will vote to remain part of the United Kingdom, as they have done consistently when they have had that opportunity.

I listened intently to the minister's opening speech, which I enjoyed, so I was pleased to hear him say that the bill provided a budget for economic growth. Indeed, that reflects the partnership agreement, which states:

"Growing the economy is our top priority."

I also agreed with much of what Des McNulty said about the need to achieve further economic growth in Scotland. The budget should be about doing that.

Let us consider, therefore, what the Executive is doing to achieve economic growth. I appreciate that there is only so much that the Executive can do, because many of the economic levers are not in the control of this Parliament but lie elsewhere. It is well known that I have some sympathy for the argument that this Parliament should perhaps have greater economic powers.

Although the Executive's powers are restricted, it has power over business rates. The minister mentioned that business rates had been frozen for the current year. That was welcomed by the business community, but it is pretty disappointing that the Executive will increase business rates next year. Albeit that the business rate poundage will increase by just 1p—up from 47.8p to 48.8p—that is still an increase, and it is being made at a time when the business community would be much happier with at least another freeze.

Let us remember that, under the unified business rate, businesses in Scotland used to pay the same rate poundage as businesses south of the border. However, when a certain J McConnell Esq was Minister for Finance, he broke away from the UBR that the previous Conservative Government had worked hard to establish and he increased Scottish business rates to a level that is higher than that for the rest of the UK.

I have heard all the minister's arguments about how the situation can be accounted for by the fact that the basis for rateable value in Scotland is different from that which applies down south. However, if the minister listens to business organisations, he will find that they often take issue with that. Certain sectors of the economy—for example, small and medium-sized hotels—are already disadvantaged by the basis for rateable value in Scotland before we come to the question of the rate poundage.

Even if, for the sake of argument, we accept that the minister is correct on that issue, why did he freeze business rates? If business rates are not the issue, why were they frozen? Surely the minister is arguing against himself. Secondly, even if businesses in Scotland are not paying more in rates than businesses in the rest of the UK, why does the Scottish Executive not have the ambition to give Scottish businesses a competitive advantage against businesses south of the border?

Scotland is already disadvantaged by our distance from markets, our relatively poor transport infrastructure and our disparate population. Many Scottish businesses trade with the south of the UK or with Europe, so they are further away from those markets than businesses down south are. Scottish businesses start at a disadvantage, so why not try to give them a leg up? Why not give them a hand by cutting business rates to at least the level that applies in the rest of the UK, if not lower than that? That is the challenge for the Executive.

I am sure that every member in the chamber has received letters from businesses about the rise in water charges in the current year. In many cases, charges have risen by 300, 400 or 500 per cent. We proposed a relief scheme for small businesses that would ease the pain of those increases in charges. The scheme would have cost around £10 million a year over the next three years. That is not a substantial sum of money—it is easily affordable in the context of the Executive's annual overspend. If we are serious about growing the economy and having a budget for business, why cannot we have a water charge relief scheme and a reduction in business rates? That would prove that when the Executive says that growing the economy is its top priority, those are not just words. Action is also needed.

Photo of Mark Ballard Mark Ballard Green 4:00 pm, 29th January 2004

This debate may not have attracted the largest number of members to the chamber, but in many ways it is one of the most important debates that we will have over the next year.

One of the key elements of the Scottish Parliament is that the budget process should be transparent and that that transparency should have at its heart proper scrutiny by the subject committees, the Finance Committee and, finally, the whole Parliament. We are moving towards the end of that process.

Back in 2002, the First Minister made

"a commitment to sustainable development running throughout all of our spending proposals".

However, during the stage 2 debate on the budget process last December, I echoed the concerns of Des McNulty and the Finance Committee that the budget information does not allow full scrutiny of cross-cutting themes such as sustainable development. For that reason, the Executive's claim to have greened the budget is not justifiable. Not only are we unable to see how the budget supports sustainable development and relates to cross-cutting issues, but it is becoming obvious that the Executive is actively undermining the sustainability pledges and obligations.

I do not have time to deal with the whole budget, so I will concentrate on one issue: the fact that this is still a road-building budget. Transport is the fourth-largest item in the Executive's shopping basket, with a budget of more than £1.2 billion in this spending year. Members may recall the oft-repeated commitment to target 70 per cent of transport spending at public transport. Unfortunately, that pledge does not come into effect until 2006. That is why the budget that we are debating allocates most transport funding to trunk roads and motorways. We have promises for tomorrow, but for now public transport gets the crumbs while the goodies go to the road builders.

We have heard members debate whether the M74 extension in Glasgow will cost £0.5 billion or £1 billion. Regardless of which figure is correct, that is far too great a capital investment in continuing to build motorways. We cannot build motorways to get ourselves out of congestion. Only the investment in public transport that the Executive has promised but is not delivering this year can get us out of that hole. The priorities are fundamentally wrong. Cutting three and a half minutes off a car journey may be a worthy objective, but we cannot do that at any cost. Until sustainability can be shown to be truly at the heart of Executive policy, we will continue to oppose its spending plans.

Today we have heard the minister say that economic growth will be the main priority of the budget and of the Executive. In particular, he defined economic growth as increasing our gross domestic product, which he saw as the way in which to increase our standard of living. I am sorry, but the minister must recognise that increases in people's standard of living and growth in GDP do not necessarily go hand in hand. We should concentrate on raising the standard of living of everyone in Scotland. A large part of that will be building a better environment for people in Scotland. That cannot be sacrificed for the sake of increasing GDP. The two issues are not one and the same. The target of this and every other budget must be to raise people's standard of living, rather than to seek slavishly increase on increase in GDP, regardless of how that relates to standards of living.

Photo of Bristow Muldoon Bristow Muldoon Labour 4:05 pm, 29th January 2004

I agree with the point made by a number of other members that the budget debate should attract more attention than it has in the past and is likely to on this occasion. To some extent, I say that as a challenge to the Opposition parties. If they brought more comprehensive proposals of their own to the debate, it would be far more interesting and the people of Scotland would pay far more attention to it. I have not seen the amendment that Brian Monteith tried to lodge, so I do not know whether it would have achieved that end.

The challenge in future years is to make this a debate about the way in which each of us wishes to take Scotland forward. We have alternative visions of the Scotland that we want to build and it would be good to use this occasion to engage in that debate with the people of Scotland.

Photo of Stewart Stevenson Stewart Stevenson Scottish National Party

I hope that the member recalls standing order 9.16.6, which prevents the lodging of amendments to the bill in its substance. However, if Bristow Muldoon is able to tell the Opposition that we can have access to civil servants and to all the numbers that have been used to derive the budget, with an appropriate resource, I am sure that we would be happy to match every single number in the Executive's proposals with an alternative.

Photo of Bristow Muldoon Bristow Muldoon Labour

I have to confess that I was not aware of that particular rule, so I bow to Stewart Stevenson's greater knowledge of the standing orders. However, I would have thought that his previous involvement in banking would have given him all the expertise necessary to prepare an alternative budget to put before the Parliament.

I will concentrate on two issues. First, I will raise some issues about the budget process and the recommendations that the Local Government and Transport Committee, in particular, has made to improve the process. Secondly, I will talk about some of the specifics as they apply to transport and raise some issues with the minister about progress in that regard. I do not intend to touch on local government issues, because the debate on the Local Government Finance (Scotland) Order 2004 next week will give us an opportunity to go into such issues in far more detail.

I very much welcome the minister's announcement that in future budgets there will be clear statements of progress against the targets that the Executive has previously set. That will aid committees in ensuring that the appropriate scrutiny takes place.

I also recognise that the overall level of the budget will enable the Executive to invest in many of its key priorities—whether that is enabling the Scottish economy to grow, delivering on social justice or developing first-class public services. I recognise that it has been possible to produce that budget largely because of the strong partnership that exists between the Scottish Executive and the United Kingdom Government.

The Local Government and Transport Committee made some specific recommendations to the Executive and I would appreciate it if the minister took them on board. In future years we would like to see a greater identification of the inflationary pressures on local government, so that we can have a clear understanding of the degree to which increases in the budget address those pressures to an extent that enables investment in enhancements to services. We could then move beyond the annual debate between local government and the Executive about whether improvements in services have been fully funded.

We also want in future years to see a statement by the Executive on how the prudential borrowing framework has impacted on the ability of local government to enhance its investment in capital. I know that varying reports come from local authorities on the degree of additional flexibility that the framework gives them. It would be very good to see a strong report from the Executive that sets out how local authorities throughout the country have applied the new arrangements.

We would like to see greater financial clarity on where all the funding streams are coming from to deliver many of the transport projects. I know that in some cases the Executive will want to give itself a degree of protection when projects are still being let and contractors are bidding for them. However, a greater degree of clarity at as early a stage as possible would be useful for an analysis of the Executive's delivery of such projects.

It is important that targets should be clear and unambiguous and that they should relate to a specific base year. I will give a couple of examples of instances when targets in the draft budget document were not specific. For example, the target

"to increase rail passenger journeys on the Scottish rail network by a further 5% by 2006" did not specify the base against which the target was set. There was a similar problem with the target for increasing local bus journeys. Those matters have been raised with the Minister for Transport, but I raise them again to illustrate how the Executive might improve the way in which it sets targets.

I move on to areas that we will consider in the future. The Scottish Labour manifesto and the partnership agreement clearly state that the number 1 priority of the Labour Party and the Executive is to grow Scotland's economy. I believe that one of the best ways in which the Executive could give a leg up to business—to use Murdo Fraser's words—would be to invest in a first-class transport infrastructure for Scotland. Scotland is situated on the western periphery of Europe and has suffered from underinvestment in the transport infrastructure for many years. The programme of transport improvements that has been developed by previous transport ministers reflects the right priorities, but we must now deliver on many of those projects. In particular, we should deliver the links to airports, complete the motorway network and ensure that we complete other major rail enhancements, such as the Stirling to Kincardine line and a local hobby-horse of mine, the Bathgate to Alloa line—I mean the Bathgate to Airdrie line; maybe we will go for a Bathgate to Alloa line in the future.

On Mark Ballard's point about the proportion of the transport budget that is spent on public transport as opposed to roads, I understand from the Minister for Transport that, already, the majority of transport funds are allocated to public transport projects and that the proportion will rise to 70 per cent by 2006. I believe that that represents a dramatic transformation, as only around 10 per cent of the transport budget was spent on public transport when the Conservatives were in power. That situation will improve in years to come.

I urge the minister to consider the recommendations of the Local Government and Transport Committee and other committees. I have no doubt that the budget will lead to major improvements in our transport systems, which will benefit Scotland's economy, and I have no doubt that it will enable local authorities to enhance local services. I urge members to support the bill.

Photo of Mike Rumbles Mike Rumbles Liberal Democrat 4:12 pm, 29th January 2004

Unlike Bristow Muldoon, I want to take the opportunity to focus on the Executive's local government spending proposals, which are of course covered under several different headings in the bill.

As with health service spending and other areas of Executive spending, there is no doubt that the Executive is ploughing additional and welcome funds into local authorities. Aberdeenshire Council, for example, will receive an extra 6.4 per cent next year and an extra 4.1 per cent the following year, as a result of the Budget Bill. That increase is, of course, well above the rate of inflation and I very much support it.

However, if councils are receiving additional funds from the budget, why has Aberdeenshire Council launched its fairshare campaign? Audit Scotland considers that the local authority is well run and I know that the minister also believes that. The council has, for instance, the lowest ratio of staff per head of population in Scotland. It has responsibility for 10 per cent of the country's road network. It is the fourth-largest local authority in area in Scotland and the fact that it has a growing population means that there has been a huge rise in demand for its services, with which it has coped by maintaining a council tax that is in the lowest quartile of Scottish council tax levels. By almost any measure, Aberdeenshire Council is efficient.

Aberdeenshire launched its fairshare campaign in November, because it believes that it is being underfunded—that is the word that the council uses—by some 11 per cent compared with other councils. The average allocation from the budget for all councils works out at some £1,557 per head of population, but in Aberdeenshire the figure is £1,359. There is a strong feeling that my constituents are missing out on about £200 per person every year. I will give one example of the perceived injustice of the system of allocation of funds from the budget. Aberdeenshire Council will receive around £3 million from the budget to provide transport for school pupils in what is a large rural area that, as I say, has 10 per cent of Scotland's roads. However, Glasgow City Council, which has a similar number of pupils who require transport in a much more compact area, will receive not £3 million but £10 million. To any observer, that cannot be right.

There is no doubt that the processes that are involved in the allocation of the budget to local authorities cannot continue. I am holding up an example of the card that Aberdeenshire Council has produced for its fairshare campaign. I will not go into the details but, as members can see, the card is rather strange because about 11 per cent of it is missing. I note that the Scottish Executive has agreed to establish an independent review of local government finance, following consultation with the Convention of Scottish Local Authorities. Obviously, I welcome that commitment, which was in the partnership agreement between the two coalition parties. Ministers recognise that the present system cannot continue without reform. I stress my concern that the commitment in the partnership agreement to establish an independent review of local government finance seems to be taking an inordinately long time to come to fruition.

I ask the Minister for Finance and Public Services in his summing-up speech to comment on the points that I have made and to say clearly when the independent review might get down to work, which would be helpful. My constituents in West Aberdeenshire and Kincardine look forward to real progress from the Executive on that commitment so that we can make proper use of the fairer distribution of funds among local authorities. My constituents expect the Parliament to agree not only to allocate funds fairly among budget headings—which we have been considering today—but, once that is done, to allocate local government funds fairly among councils. I would like to see progress on that matter.

Photo of Brian Adam Brian Adam Scottish National Party 4:17 pm, 29th January 2004

The Government has suggested that growing the economy is at the top of its agenda, but we have yet to hear what the target for that growth is. In spite of repeated requests, we have no target for the key priority of the joint Administration. The minister admitted that Scotland is in the third quartile of OECD countries in terms of performance. He has worthy ambitions to take Scotland into the first quartile, but I am not sure that he spelled out exactly how we will get there and what measures in the budget will deliver that.

I see that the minister is getting to his feet. I ask him to let me develop my point, although I am more than happy to take an intervention.

Photo of Andy Kerr Andy Kerr Labour

Sorry, I was just pulling up my chair.

Photo of Brian Adam Brian Adam Scottish National Party

If we are to have a successful economy, we must get taxation right, but the minister has limited control of taxation policy. If we are to have a successful economy, we must have proper infrastructure. As Fergus Ewing rightly pointed out, we have significant problems in getting the water infrastructure in place because no investment is available. The arcane methods of financing Scottish Water are rather unusual and suspect; they are not delivering an infrastructure change, which is key, particularly to developments on the east side of Scotland, particularly in the Highlands.

One of the main difficulties with delivering a big change in public transport is that we do not control the railways. We are going to deliver a change for the Alloa area, but we are not going to do the same for the east coast or west coast main lines because we do not have control over that significant part of the infrastructure.

Photo of Brian Adam Brian Adam Scottish National Party

No, thank you.

We must also develop the skills that are required for the economy. It is fair to say that the Government has introduced a series of programmes to try to address that issue, but I will highlight one issue on which we must make significant improvements. As well as having skills, our industry must show innovation and make productivity gains if we are to get growth. One of the measures of that is how we deliver business education. This week, the Financial Times published its worldwide assessment of business schools and their master of business administration courses. In the top 100, Scotland has precisely one business school, the position of which is on the slide: it is now 93rd. Schools were measured against a wide range of parameters closely associated with entrepreneurship, such as the success of the graduates, how much more they were getting paid than the year before, how they feel about the business education that they received, the placement record of the school, and the employment rate within three months of graduation. We are not doing well.

Photo of Brian Adam Brian Adam Scottish National Party

No, thank you.

The small amount of money in the budget to drive forward innovation and entrepreneurship is welcome, although we should be particularly grateful to Tom Hunter for coming up with half of the money that is required. However, that money is aimed at the early stages of school. We want to have prestigious business schools that produce people with new business ideas that will drive our economy forward.

Photo of Brian Adam Brian Adam Scottish National Party

No, thank you.

To deliver a successful economy, we need people. The only solution that the Executive has proposed to deliver people and the change that we require is that the First Minister will invite the Home Secretary to relax the rules on foreign students to give them permission to come here to work. That might be helpful but, once they have permission to stay here and work, what guarantee do we have that they will work in Scotland? It will be difficult to ensure that they stay here, for exactly the same reason that our own students choose not to stay here: the opportunities are not here. The headquarters and research and development are not here. We are exporting our best, and we are exporting the kind of people who would bring forward the next generation. It is our 18 to 34-year-olds who are emigrating and not coming back, because we do not have an attractive, smart, successful Scotland. There is nothing of great significance in the budget that will deliver that. The key target is not there. There is no target in the budget to increase GDP.

Photo of Wendy Alexander Wendy Alexander Labour 4:23 pm, 29th January 2004

The year after an election is the one when politicians sometimes seek to rise above the political fray. I will try to do that in my speech.

We are fast approaching a spending review, which it is anticipated will be tighter than for many years. We are also approaching the fifth anniversary of this Parliament which, as many people hoped, was to be governed by the principles of transparency, openness and direct engagement with the Scottish people. So today, instead of focusing on the specific measures in the budget—because that is properly the prerogative of the Executive—I will focus on the budgetary process and the Executive's fidelity in financial matters to those principles of transparency, openness and public engagement.

When the chief economist of one of Scotland's leading banks testified to the Finance Committee, he said:

"Coming fresh to this budget, I was surprised to find no real inter-year comparisons. Secondly, I defy anybody—including my colleague Peter Wood—to tell me the balance between capital and revenue spending."—[Official Report, Finance Committee, 28 October 2003; c 379.]

So Peter Wood, Scotland's best in the field, cannot tell how much we are spending now compared with 10 years ago on health, transport, education or anything else that members care to mention, nor can he say how much we are spending today relative to what we are investing for tomorrow.

Those are not new concerns. I raised them regularly in the Cabinet, with no success. Having failed as a minister, I decided to pursue those matters again in the Finance Committee. Since September, the Finance Committee has been in correspondence with the Executive to ask for 10-year trend data and accurate estimates of the total capital spend, which we requested to be provided before the spending review. The Executive responded formally last week. In essence, its response was, "We're working on it, but it's very difficult and the Treasury keeps changing the rules." My candid view is that we can do better. No one in the Treasury says, "Sorry, we can't tell you how much we were spending 10 years ago," and it operates under the same public accounting rules that we do.

Photo of George Reid George Reid None

There is an infinity of time at this point.

Photo of Wendy Alexander Wendy Alexander Labour

I should be as uncontroversial more often.

There are no more basic data required for a tight spending review than how much we are spending compared with how much we were spending a decade ago and what we and the public purse collectively are getting for our money. If ministers are to stop the spending review descending into unseemly horse-trading that is more a reflection of ministerial muscle than of underlying need—I believe sincerely that they wish to do that—we need to know how much we spent 10 years ago and how much we are spending today.

What should we do next?

Photo of Wendy Alexander Wendy Alexander Labour

No, I am going to finish. We need to be aware of the speck in our eye—if I may call it that—which is growing. Less than two weeks ago, under the watchful eye of the Financial Services Authority, Standard Life, which is the nation's largest mutual, was compelled to demonstrate transparency in public reporting within a matter of weeks. We cannot go on defending delays of months or even years in producing long-term trend data of our own. The responsibility for providing the most robust information possible about what we spend rests squarely with the Executive's officials, no one else. If they are too busy, they should hire someone else to do the work for them. We now know that, as the spending review goes on, it will not have the transparency that it should have, which makes it harder for it to be seen as truly strategic.

I said that I was not setting out to be party-politically controversial. I genuinely believe that the First Minister, the Minister for Finance and Public Services and the permanent secretary to the Scottish Executive are all committed to public service modernisation. I simply say to them that, in the absence of transparency on trends in spending and of accessibility to such data, their chances of success are diminished. I note in passing that it is a measure of the opportunism of the principal Opposition party that it cares little about such matters. We on the partnership side can do better.

There is little that is more important than what one is spending and how much is being spent on current versus capital. Securing that information should not require constant harrying by a parliamentary committee. We now know that the forthcoming spending review will take place in the absence of publicly available trend data. That is a cause of sadness and it has consequences for ministers, the Parliament and the country, because we will be setting budgets for the next three years without fully understanding what has happened in the past 10 years.

I urge the minister to try to succeed where so many of us have failed in the past, by ending the shortcomings in accounting for the public purse and our collective stewardship of it. All power to his elbow in achieving transparency on what we were spending 10 years ago compared with what we are spending today and on how much we are investing for the future compared with how much we are spending now.

Photo of George Reid George Reid None

We now move to wind-up speeches.

Photo of Jeremy Purvis Jeremy Purvis Liberal Democrat 4:29 pm, 29th January 2004

I have sympathy for members, who have a reprise of my speaking in the debate.

We are at the beginning of a process that we will continue in the committee and the chamber, and I look forward to the continuation of debates with Wendy Alexander and others on the process, especially on securing consistency of data over at least the previous four years so that, at the very least, we understand the effect of different accounting procedures. We also need further work on capital budgets and on the Executive's results from expenditure. We are making progress—the supporting documents that we have in front of us are evidence of that—but the committee will continue its relationship with the minister, and I pay credit to his openness and responsiveness on that.

We must focus on a further move towards qualitative outcomes rather than quantitative outputs. Des McNulty gave examples from his constituency of improvements in public services and health, and asked all of us to have a self-denying ordinance in how we treat the results of data. I hope that, as we go forward, there will be an opportunity for us all to do that.

A further move in another direction would be welcome: towards a closer relationship in the setting of budgets in the differing levels and areas of government—Mike Rumbles and Stewart Stevenson touched on that. I am sure that many members have examples of pilot programmes or initiatives being created and local government and other agencies being given little notice to prepare bids for moneys, which, if the bids are successful, often have short lives. There are two effects of that: first, preparing the paperwork places a burden on agencies and local government; and secondly, for pilots that are not rolled out nationwide, there is a danger of false expectations.

Stewart Stevenson touched on targets and the difficulty of ensuring a closer relationship between the financial years of central and local government. I add that there would be much to be gained from a much closer relationship with the financial years of health authorities, police forces, voluntary organisations and all other services that, in effect, provide public services, whether in the more private sector—the voluntary sector—or the public sector.

Murdo Fraser joined Fergus Ewing and the Parliament's cross-party group for the support of Reaganomics was formed, wanting to cut taxes while spending on services. Fergus Ewing's pointing to there being no problem in sustaining massive public deficits was a delight to see. I now know why the Conservatives and the Scottish National Party have not proposed alternative budgets.

Photo of Murdo Fraser Murdo Fraser Conservative

I have no shame in aligning myself with Mr Reagan on many issues. Can Jeremy Purvis tell me why the economy of the United States has shown 8 per cent growth over the past year? Is it not as a direct result of tax cuts?

Photo of Jeremy Purvis Jeremy Purvis Liberal Democrat

I do not want Scotland to go down the route of sustaining a massive deficit while slashing taxes for the rich. That is not an approach for a Liberal Democrat Scotland.

Mark Ballard challenged the budget's green credentials, but it was interesting that he was immediately followed by Bristow Muldoon, who mentioned investment in transport. The two topics are linked, and it is a shame that Mr Ballard did not point to the real increase in public transport investment. He is right to expect results—I do, too. A real increase in public transport investment will benefit my constituents, with a new railway line that is badly needed.

Growing the economy is about investing in people as well as investing in infrastructure. Brian Adam chose not to give way to me three times, but it is welcome to see in the supporting documents almost a tripling of the enterprise in education budget between 2003-04 and 2004-05. Brian Adam appealed for that, but had obviously read neither the partnership agreement nor the budget documents. The increase is a welcome sign of an investment in people that will be good for the Scottish economy.

Mike Rumbles raised the review of local government finance and spoke of the opportunity to build a relationship between central Government, local government and the public that will see us into the future. Like Mike Rumbles, I share the desire to get started on that review and for it to be a thorough examination. There is a big debate to be had on the Parliament's financial settlement and financial powers, but let us not forget local authorities' existing powers and the future development of their relationship with the Scottish Parliament.

Wendy Alexander spoke about the process, which the Finance Committee has discussed in detail, particularly in relation to the need for transparency and time-series data. That is important, and I take nothing away from the argument, but Wendy Alexander knows that I take a slightly different view. She said that we need to prevent ministers' obsession with flexing their muscles in putting budgets together. I share that view, but time-series data that show us only how successful previous ministers were in flexing their muscles will not help us to understand better the relationship between ministers and departments in setting budgets.

Mr Stevenson said that he wanted the figures that would effectively bring the budget document together. There is still work to be done to understand the relationship between government departments and to understand what is success and what is failure. I hope that some of the work that the Finance Committee has begun will help us to understand better the mechanisms that are in place. Fergus Ewing has quoted some of my comments on the Finance Committee's inquiries. When it comes to understanding where the money goes, is it about a gentlemanly agreement between officials or is it about writing blank cheques? I hope that it is neither. The Finance Committee's work on the budget and its various inquiries will uncover more about such relationships.

I am happy to support the budget.

Photo of David Davidson David Davidson Conservative 4:37 pm, 29th January 2004

We must remind ourselves that the debate is about the general principles of the Budget (Scotland) Bill. If our opening comments are about anything, they should say that a budget's principles ought to be to give value for money and to provide accessible, efficient and accountable public services on an increasing-value basis. I do not think that we have heard much about that from the minister. Perhaps he is saving his best until the end. I remind him of the comments that were made by his esteemed colleague Wendy Alexander, whose assessment was that we could do better.

The Finance Committee has been saying for the past four years, including when I was a member of it, that we have to do better, achieve transparency and accountability and get the necessary information. For goodness' sake—can we sort out the muddle that arises between the spending reviews and the rollover budgets, whereby nobody, apparently including ministers from different departments, follows what is happening on the ground? There are mid-term reviews and little amendments here and there but, if we are going to be transparent, we really need to have a fundamental review. I very much support the comments that Wendy Alexander made on that point.

We should also remember, as a matter of principle, that we are dealing with taxpayers' money—the money that comes out of the pockets of the many people in Scotland who put their share into the Treasury and which comes back to us in the form of the grant that is then used by the Executive. Waste is rampant and bureaucracy is becoming over-burdensome. Central interference is growing out of control on every possible front. If we want clarity on the ground, we should give the people who are accountable for services the freedom to use their professional expertise instead of making them waste their time—and employing lots of civil servants—to pen-push, fill in forms and tick boxes. The minister did not talk about that principle at all.

The budget should be about outcomes not about outputs. Extra money is going into the budget, but are public services getting better? Are public services becoming centralised on the basis of cost or on the basis of management? What about the people trying to access those services—for example the maternity services at Wick, with ambulance drivers having to drive for two and a half hours? What is going wrong? The Executive crows about all the additional money, yet we are never told why delivery on the ground does not reflect the increased amount that the Executive is managing to spend. We do not see comparable figures for the improvement in public services. All the money must be applied to reformed organisational approaches in the various services. That will deliver improved service.

The minister talked about prudential schemes but, listening to some of the comments that are made in local government, I think that there is a risk that the idea will lead to higher council tax. Is it simply another way of the Executive getting more money out of the taxpayer—and those who pay council tax are the minority—and into the pot, whereupon the ministers at the centre can say something that we hear time and again: "It's not our fault; we gave you the money. What are you doing with it?" That cannot continue to be the case.

The most important comment that the minister made during his opening speech was his announcement that the stage 1 document that the Executive will produce in spring will include an assessment of the Executive's performance against objectives. Linked to the comments of Wendy Alexander about realism and transparency, that might—in the fifth year since the establishment of the Scottish Parliament—move the process on. I know that my party would be keen to be involved in anything that makes the budget more accountable.

I will deal with the SNP's comments briefly, as they do not warrant much more time than that. I whole-heartedly agree with Fergus Ewing's opening comment about value for money. That echoes my sentiments. Of course, after that, he retreated to the bunker of constitutional change. Further, he did not prepare well enough for his debate. When he talked about the Cuthberts' views on the funding formula for Scottish Water, he was talking about a subject that I raised three years ago and which my colleagues have raised in various committees since. We have stated from the beginning that Scottish Water's funding formula is flawed. Fergus Ewing is only beginning to pick up on that, but I welcome his support in any case.

My colleague Brian Monteith was correct when he said that we need to take the budget more seriously. I could not possibly disagree with that sentiment. I am not the minister, but I can tell him that we will not be able to do that until we achieve the transparency that will allow the committees of the Parliament the opportunity to get their teeth into what is done on the ground.

Murdo Fraser talked about business rates and competitive advantage. When Wendy Alexander—who I am glad to see is here—was a minister, she talked about that, but everything has gone quiet since. I am disappointed that the Executive does not understand that wealth creation is what makes the world go round. Once we have created the wealth and given people jobs, we will have some money to spend on public services. In that regard, I support the scheme that we proposed for water rates relief for small businesses.

On the costs of the various proposals that the Government has made this year, if we take health as an example, we see the financial memorandum for the Primary Medical Services (Scotland) Bill being challenged right and left across the Parliament. Not enough provision is being made to roll out what is proposed. Where is the money for the junior doctors that we need to employ? What about the consultant contracts? Nobody seems to have figures for such things, yet, allegedly, commitments are being made. What will happen on the ground? More cash than ever is going into health, but there is no increase in the quality of the service. In debate after debate—even in members' business debates on motions lodged by members of the Labour Party—all we ever talk about is cuts in services and difficulties in accessing them.

Education—post-graduate and graduate—is the topic on people's tongues this week. However, we do not train enough doctors, pharmacists or dentists. We need a new pharmacy school, a new dental school and more doctors being trained. As changes occur throughout the service, we now realise that nurses go to university as well and can be the specialists that we need to take over many of the roles that qualified medical people played in the past. Where is the money in the budget for those necessary improvements? Does the budget recognise the challenges that we face in this country? We need to have planned reform, to decide objectives for the future and to lay the groundwork for the process in the middle of everything.

I will finish with a reminder of the black hole that Mr Brown, our worthy Chancellor of the Exchequer, is approaching, which my colleague Brian Monteith asked about. When the crunch point is reached, the block grant will be cut. Has the Scottish Executive, in particular the Minister for Finance and Public Services, borne that in mind in prudent planning? Does he have a contingency plan? Will services be cut? Will we borrow money? We do not have the power to do that. Will we be bailed out from somewhere? Will we sell assets? What will we do to balance the books? That should be addressed in the bill.

Photo of Jim Mather Jim Mather Scottish National Party 4:45 pm, 29th January 2004

The minister's view on the budget's effectiveness in relation to the Executive's economic growth priority does not stand audit. In the Executive's period in office, growth has not even reached the minimal average of the past 30 years, which is the lowest figure in western Europe. Average incomes have fallen further behind those in the rest of the UK and the private sector has shrunk to become only 50 per cent of the economy. It is now forecast that the population of economically active people will drop by about 8 per cent by 2027. That is especially bad news for rural Scotland.

Jeremy Purvis's lack of ambition for Scotland is deeply disturbing. He ignores the fact that the UK is in massive deficit and shows no positive attitude to Scotland's prospects. His view is typified by his refusal to add back our fair share of the oil and of corporation and income taxes and to make a proper assumption of a decent allocation of civil service and defence spending to Scotland. He has painted himself into a corner and put down a marker that is liable only to damage Scottish prospects, investment and confidence.

The minister's aspirations are much more commendable than Mr Purvis's nihilism. However, the minister's budget process is almost exclusively an expenditure-only exercise. It has no borrowing implications, does not state or manage a growth target and does not adjust tax rates to reflect Scotland's economic needs. Therefore, it cannot be as effective for Scotland as budgets are in other countries.

That is not just our opinion. The view that was expressed recently by the constitution unit and which was reported in the Sunday Herald last weekend is that the Scottish Executive is

"too concerned with how to spend money."

I trust that that means that the Scottish Executive is too exclusively concerned with how to spend money, as can be seen in the first line of Douglas Fraser's article last Sunday, which said:

"The Scottish parliament"— by which he undoubtedly means the Scottish Executive—

"suffers from a 'pork barrel' approach to spending money, without making imaginative use of its powers to shape Scotland by other means".

However, within the current constraints, we should be grateful for signs of movement from the Executive and the minister, given the indications that they are willing to make budget information clearer and easier to understand and to provide a clearer breakdown between capital and revenue.

I am happy to be in the company of Wendy Alexander in being totally intolerant of the continuing delay in providing time-series data to allow committees, members and the people of Scotland to see spending trends and to map those trends against outcomes. That information would put Scotland in a position to evaluate properly the Executive's custodianship of Scotland's economic and social fabric. In the absence of such data, the Executive's commitment to "undertake scoping work" and to continue its discussions with the Finance Committee is not good enough. Members should recognise that the lack of time-series data would be unacceptable to the board of directors of any company or public organisation, and it must be doubly so to the Parliament.

If it is difficult to restate current data in the same format and according to the same accounting protocols as were used in the past, the Government should restate old data in the new format and according to the new accounting protocols. We would be willing to accept whatever was produced as a true and fair view of historic time-series data. We would look forward to the accumulation of more consistent and robust data in the future.

Having those time-series data and being able to depend on them are the basic building blocks to support measurement and scrutiny of the Scottish Executive's financial and operational performance. Even now, given that the budget is an expenditure-only exercise and that we do not have complete data that stretch back in time, we could and should expect to have more ability to access and interrogate the current data.

Massive paper schedules that have a distinct absence of cross-references and many oblique and confusing headings surely do not represent openness, transparency and accountability in the modern sense. Nowadays, even small and medium-sized enterprises can provide their managers and directors with computer access to read-only files that allow them to interrogate financial data, drill down to deeper data and produce reports that illuminate and inform. Surely we should ask our Government for the same provision in relation to the most important accounting records in Scotland.

I do not want to leave members with the impression that improved clarity, time-series data and better access to financial information will placate me and my colleagues—that is not the case. The core issue for us will always be the sheer ineffectiveness of the expenditure-only approach to the financial governance of Scotland. It remains our view—and it is the view of an increasingly large number of people in Scotland—that the longer we stick with such an approach, the more we will underperform in respect of economic growth, value for money and the delivery of the maximum social good.

Of course, most of the budget is spent on vital projects that are needed to maintain the well-being of Scotland and its people, which is as things should be, but we will always regret that money is not being spent in a way that credibly builds and retains economic muscle in Scotland, that credibly builds and increases the capabilities and living standards of Scottish people and that credibly and openly persuades everyone that value for money is being achieved, rewarded and celebrated.

It is sad that that is not happening at present and that the situation will continue until we have the genuine openness and accountability that we crave and the powers to take this great country to a sustainably higher level of economic performance. Only then will we be able to address the key numbers that should drive all our budget activity, the material reversal of our population decline and our increasing demographic skew, and only then will we have a budget that is worthy of that name.

Photo of Andy Kerr Andy Kerr Labour 4:52 pm, 29th January 2004

I will address as many of the points that have been made as I can. I expected little of the debate, but I think that we have got quite a lot out of it. Some fiscal irresponsibility has fluttered about the chamber, but members have addressed some of the key issues in the budget and so I am happy to respond to comments that have been made.

Usually, we hear doom-and-gloom stuff from the SNP and we have heard it again. To say that we want to be part of a UK that delivers low interest rates at record levels, low unemployment rates at record levels, high employment rates at record levels, stability in the economy, access to our greatest markets and access to partnership lacks no ambition. People in Scotland's financial services sector must shiver in their corporate chairs every time Jim Mather and his colleagues speak. The financial sector is the most successful part of the Scottish economy and is growing at a faster rate than equivalent sectors in the rest of the UK. The worst thing for the Scottish financial sector is to hear the SNP talking about separation, which will make people say, "Why should I have my insurance policy with a company that is based in a foreign country? I tell you what I'll do—I'll move it out of Scotland, out of the business community in Edinburgh, Glasgow or another part of Scotland and move it south." If that happened, it would have an extremely detrimental effect on Scotland's trading position.

Photo of Andy Kerr Andy Kerr Labour

The member has had long enough. I have a lot to cover and Stewart Stevenson has had his chance.

Jim Mather and his colleagues made ironic comments about a pork-barrel approach. Since the beginning of January, the SNP would have spent literally millions of pounds—I will address that matter in a minute—so it is a bit rich for SNP members to accuse the Executive of fiscal irresponsibility. The Scottish Executive is well aware of the economic environment, which is why we seek to ensure that the key microeconomic conditions that we want to create in Scotland—through the agenda outlined in "A Smart, Successful Scotland", intermediary technology institutes, getting university ideas into the business community, 30,000 modern apprenticeships and investment in the transport infrastructure—contribute to economic growth.

David Davidson moaned about targets. We should put in context how far the Executive has come since 1999. From a standing start of zero in respect of fiscal accountability and transparency, we have delivered a lot. I accept the point that many members have made that we can improve on delivery, but we should give credit to civil servants who are now working in a completely different environment for the 129 MSPs and ministers to whom they are accountable. Let us give them credit for going on the roadshows with me, my deputy and others in the past, to present the budget to Scotland's communities, and for being accountable to the people of Scotland. We have come a long way, but there is further to go.

I do not recognise the accusations of rampant waste and bureaucracy. I invite David Davidson to look at what we are spending our money on. We are spending our money on more doctors, nurses and consultants. We are spending on infrastructure, health and education—

Photo of Andy Kerr Andy Kerr Labour

I have a lot of ground to cover.

There are no blank cheques in the Scottish Executive. We seek to ensure that every pound of the public's money that we spend is spent as effectively as possible. I make the point often enough in debate that I know that that money is not the Scottish Executive's money or the Parliament's money; the money belongs to businesses and to the people of Scotland. There will be no muscle flexing around the Cabinet table; we will seek to make collective decisions based on the partnership agreement and we will deliver the partnership agreement commitments.

Wendy Alexander is right to point out that the fiscal climate will be tighter than in previous years. We are aware of that situation, we are planning for it and we are ensuring that we squeeze every penny out of the pound. As I said, we have come a long way with regard to the financial information that we provide, but we can and will do better. It is light and easy to say that the scoping work that has begun is just not good enough. However, that work has begun and we will deliver on our commitment. We have employed hired hands, as Wendy Alexander suggested, in addition to our current staff to ensure that we reach our goal. I, too, want to see the time-series data, because they will show the contribution that the Executive is making to public services in Scotland. We will work with the Finance Committee to provide that information. On her point about current versus capital, the two are linked, but I agree that we need to get some work done in that area.

Brian Adam was astonishing when he spoke about the lack of proper infrastructure—that from the party that opposes billions of pounds of investment in our public services through public-private partnerships, which deliver hospitals and schools and other infrastructure throughout Scotland. Yet Brian Adam moans about infrastructure spend. That spend would not happen under the SNP.

Photo of Andy Kerr Andy Kerr Labour

I will not take an intervention, because I have plenty to get through.

We are working in partnership with Scottish companies to create a climate in which they can deliver. We are working in Scotland to support the chancellor's efforts to increase the productivity of Scottish companies. I think that it was only today that Murray International Metals announced a huge contract in Africa that will ensure work in Scotland. That is another example of great Scottish success, but the SNP does not want such success because that would remove its ability to moan all the time.

Mike Rumbles talked about the effect of the review of local government finance on Aberdeenshire. I am aware of those arguments, but we cannot unpackage all the arrangements. The example that he used of roads and transportation was good. However, the argument that I will get from Glasgow City Council is that, because its roads are travelled on by many more buses and cars and the damage to its roads is greater, it needs more money. The review of local government finance has to bring out some of those arguments. I will work with COSLA and others to produce that review as soon as we can.

Bristow Muldoon referred to the flexibility and the funding streams that arise from the prudential regime. I accept his point about infrastructure planning over the years; the Executive seeks to address that matter. In delivering the projects, we have to accept and understand the huge modal shifts that are taking place in Scotland, such as the increased use of buses.

I assumed that I would have more time to speak, so I must speed to some conclusions. When the SNP reads the GERS and Chantrey Vellacott DFK reports one year, it declares game, set and match to independence. The next year, when the reports do not give the SNP the news that it wants, it says that they are gibberish written on the back of an envelope. The SNP cannot have it both ways. It was interesting to hear Fergus Ewing describe the Cuthberts as financial wizards. The Cuthberts said that fiscal independence

"poses an essential discipline on SNP policy ... SNP policy must avoid simply being a wish list of all the desirable things money could buy."

Well, since the beginning of January, Kenny MacAskill has wanted more money for public libraries, rates relief and the main line station at Edinburgh airport; Richard Lochhead has asked for more money for a dental school and to fight drugs; and the list goes on and on. While Jim Mather argues for fiscal responsibility, all his SNP colleagues are arguing for the kind of fiscal irresponsibility that will drive a stake through the heart of the Scottish taxpayer and tax people out of Scotland. That is the real agenda. No wonder the Tories are becoming the real Opposition in this Parliament.