It is with pleasure that I open this debate on the Finance Committee’s consideration of, and report on, the Scottish Government’s draft budget for 2014-15. I thank all those who assisted in our consideration of the draft budget, including those who submitted written evidence and witnesses who gave oral evidence. I also thank the Finance Committee clerks; our budget adviser, Angela Scott; and the Scottish Parliament information centre for its very helpful briefings.
The budget process works to a tight and demanding schedule, and this year was no exception. We agreed before the summer recess that our main focus would be on the national performance framework and the Scotland performs website. However, not wishing to lose sight of topics on which we had concentrated in previous years, we also continued our on-going scrutiny of the Government’s progress in moving towards a preventative spend agenda, particularly with regard to the ways in which public bodies might work more closely with one another. In addition to those significant and substantive themes, the committee continued its on-going consideration of where the Government’s spending decisions are aligned with its stated purpose of increasing sustainable economic growth.
To support our scrutiny of the draft budget, we issued a call for evidence prior to summer recess, in response to which we received 34 written submissions. We also took oral evidence through the autumn from witnesses including economists, academics and representatives of the public, private and third sectors.
In early November we held an external meeting in Arbroath, which gave us the invaluable opportunity to hold workshops with local businesses, voluntary organisations and public bodies, from whom we heard at first hand about issues that mattered most to them. We then took evidence from the cabinet secretary and put questions to him based on the evidence that we had heard.
In addition to our own scrutiny, each of the subject committees, along with the Equal Opportunities Committee and the European and External Relations Committee, conducted its own inquiry into the draft budget. Those inquiries focused on the impact of the budget on the areas in the committee remit. Each committee then submitted a report to us highlighting its findings and priorities.
I turn to the national performance framework, which is intended to support an outcomes-based approach to performance. It is underpinned by five objectives and consists of 16 national outcomes that describe what the Scottish Government wants to achieve over a 10-year period. There are 50 national indicators that track progress towards the achievement of those outcomes, which ultimately contribute towards the delivery of the Government’s stated purpose. All those measures are tracked and reported on the Scotland performs website, which is intended to show at a glance whether performance is improving, worsening or remaining steady.
The Cabinet Secretary for Finance, Employment and Sustainable Growth has described Scotland performs as
“the primary source of information ... against the outcomes set out in the National Performance Framework.”
He also stated at committee that it
“is not a report card on the Government; it is an assessment of Scotland’s performance. Of course the Government contributes to that, but so do many other players.”—[Official Report, Finance Committee, 4 November 2013; c 3235.]
We heard from a number of witnesses that the NPF is internationally recognised as an exemplar of an outcomes-based approach to the measurement of Government performance. Nevertheless, there was broad consensus that, although the framework itself is commendable, it is not widely known outside policy-making circles.
In recognition of that point, we invited the Government in our report to detail the exact purpose of the NPF, its intended audience and how it works in practice. We also recommended that the information should be published on the Scotland performs website. Similarly, we sought clarification from the Government in relation to how it intends to further embed Scotland performs in policy-making circles across the Scottish public sector.
Another point that arose during our inquiry is the lack of a clear link between spending and outcomes. The Joseph Rowntree Foundation, for example, suggested that there is a need
“for much clearer links between the priority setting and resource allocation decisions that are made by Government and its partners in contributing to the targets and outcomes.”—[Official Report, Finance Committee, 2 October 2013; c 3080.]
Our budget adviser noted that there is
“no link between the Government‘s spending plans, as set out in spending reviews and draft budgets, and the intended impact spending will have on future performance.”
She also pointed out that some jurisdictions, including the state of Virginia, have moved towards a system of linking expenditure to performance.
Expanding on that theme, we asked the Government whether it has any plans to move to a more substantive approach to linking performance and resource.
Perhaps unsurprisingly, we heard a number of different views regarding the national indicators, with organisations such as Oxfam and the Scottish Trades Union Congress calling for the inclusion of an indicator measuring median household disposable income, which they stated would be a
“much better indicator of national collective prosperity than GDP.”—[Official Report, Finance Committee, 9 October 2013; c 3120.]
The committee was persuaded by that suggestion and has recommended that the Government incorporate such an indicator into the NPF. In keeping with the importance placed on the NPF both by the committee and the witnesses from whom we took evidence, we welcome the Government’s commitment to consulting on the option of putting it on a statutory footing.
Turning to another subject of our budget scrutiny focus, I will address the topic of preventative spending. It has been a key area of interest for the committee and its predecessor in the previous session. We also considered the importance of the preventative spend agenda in the context of demographic change and an ageing population, which is an increasingly important issue on which we conducted an inquiry in 2012.
We committed to monitoring the progress made with regard to the Government’s various change funds, including those related to the care of older the people, the early years of childhood, and programmes aimed at reducing rates of reoffending. For that reason, we requested that the Government provide an overall assessment of the progress being made towards implementing a preventative spend approach. In doing so, we recognise the need for robust monitoring and evaluation frameworks, and we would welcome an update on the progress made towards putting them in place.
The Government committed to investing up to £500 million in change funds in its budget for 2012-13, and the committee welcomed that investment. It is clear that local authorities have responsibility for much of the service delivery that has the greatest impact on people’s daily lives. Local authorities must also contribute towards those funds, but the committee is concerned that not all local authorities appear to be doing so. For that reason, we ask the Government to provide us with details of how much new money has been contributed to change funds by local authorities.
We heard from third sector bodies that evidence of the required shift in spending priorities is lacking, with the focus continuing to be on treating the symptoms of problems rather than on preventing them from arising in the first place. NHS Greater Glasgow and Clyde summed up the difficulties faced by councils and health boards in seeking to
“invest in new programmes of prevention and intervention while managing their budgets in a way that deals effectively with the problems that confront them at present.”
It argued that that
“balancing act is probably the biggest challenge that health boards and local authorities in the west of Scotland are facing.”—[Official Report, Finance Committee, 9 October 2013; c 3143.]
Our report highlighted the committee’s concerns relating to the apparent lack of evidence of the necessary disinvestment taking place to support the shift towards a preventive spend agenda. Without the disinvestment in existing services, it is difficult to see where the additional resources required for investment in preventative services will come from.
We recognise that difficult decisions require to be taken and appreciate that that is not easy. Glasgow City Council said to the committee that disinvestment is
“extremely difficult to do at any time ... but it is particularly difficult to do at the moment”.—[Official Report, Finance Committee, 9 October 2013; c 3153.]
We ask whether the Government is content with the progress that public bodies are making in that regard and that it provide examples of resources being unlocked for preventative measures through disinvestment in existing services.
There is some evidence that the necessary shift in spending is taking place in certain areas. One that stood out as a role model was the Highlands, where a partnership agreement between Highland Council and NHS Highland was signed in 2012. The agreement is intended
“to achieve better outcomes for people through directing resources more effectively, and through new and integrated service delivery models.”
The committee welcomes that approach.
We recognise that it is not possible simply to switch off existing services in order to reallocate funding, and we heard of the importance of bridging funds that allow the temporary double running of services until demand for existing services is reduced. We also recognise that there is a range of challenges and barriers that can prevent the necessary cultural and structural changes from taking place, and we would welcome the Government’s views on how best to address them.
As I mentioned in my introductory remarks, another key focus of our scrutiny of the draft budget was the continuation of last year’s consideration of the Government’s progress towards realising its purpose of increasing sustainable economic growth. A key element of the Government’s strategy for realising that goal is capital investment through which it intends to accelerate the country’s economic recovery. Much of that investment is intended to be allocated via the non-profit-distributing model.
The draft budget states:
“Progress continues to be made on delivering the full Non-Profit Distributing ... pipeline of investments”,
with an estimated £809 million-worth of projects due to start construction in 2014-15. However, the cabinet secretary noted in his ministerial statement on the draft budget:
“In the short term, NPD investment is lower than was originally forecast.”—[Official Report, 9 October 2013; c 23471.]
He attributed that to two reasons: first, some NPD projects are being concluded at lower than expected costs; and, secondly, some are taking longer than expected to be prepared and planned.
We took evidence from the Scottish Futures Trust, which stated that,
“overall, longer preparation time, rather than confirmed cost savings, is the greater part of what has changed the profile.”—[Official Report, Finance Committee, 30 October 2013; c 3179.]
It also stated that “very significant” progress has been made, yet it explained that some projects
“have taken longer than anticipated to bring through early project development and hence the overall build up in construction activity will be slower than that anticipated in the earlier projections which were based on high level information.”
The SFT is ambitious in setting targets for the delivery of NPD-funded projects, and the committee agrees that it should be. As the cabinet secretary stated,
“it is better to set an ambitious target and not reach it than it is to set an underambitious target purely and simply for the device of passing it.”—[Official Report, Finance Committee, 4 November 2013; c 3241.]
Despite that aim, it would appear that a pattern of consistent overestimation of the delivery of NPD projects has emerged in recent years, so we recommend that the process for formulating those estimates be reviewed.
The committee also considered the Government’s plans to switch more than £700 million from resource to capital between 2012-13 and 2014-15. However, the estimated resource to capital switch in the draft budget is £165 million, which is significantly lower than the estimated £270 million that is set out in the 2011 spending review. When we questioned the cabinet secretary on the reasons for that, he explained that he considered it the best way to respond to budgetary changes resulting from Barnett consequentials. He emphasised the fact that it has not affected the planned delivery of any specific projects.
Although the committee recognises the need for the cabinet secretary to make budgetary changes in response to changing circumstances during the year, we highlight the need for greater clarity in presenting past proposals for resource to capital switches. We therefore recommend that all future budget revisions provide the latest available figures in relation to the transfer of funding from resource to capital.
Another important theme to which the committee returned during its budget scrutiny is improving employability, particularly with regard to young people not in employment, education or training. That was one of the main topics of discussion during our workshop sessions in Arbroath, where we heard of the problems that are faced by some local employers in accessing the modern apprenticeship scheme. The Economy, Energy and Tourism Committee and the Equal Opportunities Committee also expressed concerns relating to access to modern apprenticeships, and we have invited the Government to respond to those concerns.
The committee also considered a wide range of other issues during its scrutiny of the draft budget, ranging from the impact of welfare reform and fuel poverty to the Government’s progress towards achieving its climate change targets. I am sure that some of those themes will be touched on later in the debate. Although I could discuss those topics in detail, I have covered a number of issues in the time available and I am conscious that time for the debate is limited.
I said at the beginning of my speech that the committee’s budget scrutiny focused on the national performance framework but that we also sought to monitor progress in relation to preventative spending and increasing sustainable economic growth.
The committee greatly welcomes the NPF and applauds the Government for developing an internationally recognised exemplar of an outcomes-based approach to performance measurement. However, it is clear that the NPF is not widely known, which would appear to be at least partly due to a lack of clarity with regard to its purpose and intended audience.
On preventative spending, the committee has concluded that there is some evidence of progress despite a challenging fiscal environment. Nevertheless, there is less evidence of the necessary disinvestment and the system and cultural changes that are essential for the shift towards a preventative approach to be fully realised. The committee would like to see a much better and clearer alignment between the NPF, draft budgets and the emphasis on a preventative approach. On those key findings, and all other aspects of our report, we look forward to the Scottish Government’s response.
That the Parliament notes the Finance Committee’s 10th Report, 2013 (Session 4): Draft Budget 2014-15 (SP Paper 431) and its recommendations to the Scottish Government.