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FINANCE COMMITTEE Tuesday 1 February 2005 Session 2 £5.00 Parliamentary copyright. Scottish Parliamentary Corporate Body 2005. Applications for reproduction should be made in writing to the Licensing Division, Her Majesty’s Stationery Office, St Clements House, 2-16 Colegate, Norwich NR3 1BQ Fax 01603 723000, which is administeri ng the copyright on behalf of the Scottish Parliamentary Corporate Body. Produced and published in Scotland on behalf of the Scottish Parliamentary Corporate Body by Astron. CONTENTS Tuesday 1 February 2005 Col. INTERESTS ......................................................................................................................................... 2269 BUDGET PROCESS 2005-06.................................................................................................................. 2270 BUDGET (SCOTLAND) (NO 2) BILL: STAGE 2 ........................................................................................... 2286 CROSS-CUTTING EXPENDITURE REVIEW ON ECONOMIC DEVELOPMENT........................................................ 2291 FINANCE COMMITTEE 4th Meeting 2005, Session 2 CONVENER *Des McNulty (Clydebank and Milngavie) (Lab) DEPU TY CONVENER *Alasdair Morgan (South of Scotland) (SNP) COMMI TTEE MEMBERS *Ms Wendy Alexander (Pais ley North) (Lab) *Mr Andrew Arbuckle (Mid Scotland and Fife) (LD) *Mr Ted Brocklebank (Mid Scotland and Fife) (Con) *Jim Mather (Highlands and Islands) (SNP) *Mr Frank McAveety (Glasgow Shettleston) (Lab) *Dr Elaine Murray (Dumfries) (Lab) John Sw inburne (Central Scotland) (SSCUP) COMMI TTEE SUBSTITU TES Gordon Jackson (Glasgow Govan) (Lab) Dav id Mundell (South of Scotland) (Con) Alex Neil (Central Scotland) (SNP) Iain Smith (North East Fife) (LD) *attended THE FOLLOWING ALSO ATTENDED : Peter Wood (Adviser) THE FOLLOWING GAVE EVIDENCE: Richard Dennis (Scottish Executive Finance and Central Services Department) Iain Dew ar (Scottish Executive Finance and Central Services Department) Tavish Scott (Deputy Minister for Finance and Public Service Reform) CLERK TO THE COMMITTE E Susan Duffy SENIOR ASSISTANT CLERK Judith Evans LOC ATION Committee Room 1 2269 1 FEBRUARY 2005 2270 Scottish Parliament Budget Process 2005-06 The Convener: Agenda item 2 is consideration Finance Committee of the Executive’s response to our report on stage 2 of the budget process. I am pleased that the Tuesday 1 February 2005 Deputy Minister for Finance and Public Service Reform, Tavish Scott, is here to answer members’ [THE CONVENER opened the meeting at 10:01] questions on the response. He will also remain for our stage 2 consideration of the Budget (Scotland) Interests (No 2) Bill. With the deputy minister are Richard Dennis, the finance co-ordination team leader and The Convener (De s McNulty): I welcome Iain Dewar, from the efficient government team, in members to the fourth meeting of the Finance the Finance and Central Services Department of Committee in 2005. I also welcome the press and the Scottish Executive. I wish that the Executive the public to today’s meeting and I remind could find shorter names for its divisions and sub- members to switch off their mobile phones and divisions. pagers. We have received apologies from John We have the minister’s response in front of us, Swinburne. so the sensible way to proceed is to invite I welcome three other people to the committee. members to pose any questions that they have. Andrew Arbuckle is our new member. He replaces Alasdair Morgan (South of Scotland) (SNP): I Jeremy Purvis, as was agreed by Parliament last will go first, rather than let the minister go away week. Judith Evans, who is seated to the left of empty-handed. Susan Duffy, is now our senior assistant clerk and Edna Stirrat, who is seated in the corner of the With reference to the Executive’s response to room, is the new committee assistant. We still point 4 on the target for economic growth, the await a replacement for Emma Berry—who is of committee accepts that many factors that course irreplaceable—but somebody will emerge influence economic growth are not within the gift of in due course. the Executive, but it strikes me that those factors also affect other countries—in particular the rest of Agenda item 1 is to ask Andrew Arbuckle to the United Kingdom. Therefore, although those declare any relevant interests. factors might preclude the Executive from setting a Mr Andrew Arbuckle (Mid Scotland and Fife) target for economic growth per se, surely it would (LD): My interests are registered in the “Register be possible to set a target relative to our closest of Interests of Members of the Scottish comparators. Parliament”. The Deputy Minister for Finance and Public The Convener: You have no interests that are Service Reform (Tavish Scott): We have been specific to the committee. down this particular avenue a number of times. I would be happy to consider any suggestion that Mr Arbuckle: That is right—there is nothing the committee might make if it were possible to specific to the committee. define the comparators and what comparisons The Convener: Thank you very much. were being made. The committee is all too familiar with the fact that we have held to the view—I suspect that it is a commonly-held view—that when we are not directly responsible for all the external pressures that apply, a target might be a blunt instrument that would not necessarily achieve anything in terms of economic growth and the strength of our domestic economy. However, if the committee—in particular Mr Morgan—has specific comparative suggestions, we will be more than happy to consider them. Alasdair Morgan: There is not necessarily an easy solution, but the problem is that if there is no solution we are left with a situation in which there is no measure by which we can judge whether expenditure on the Executive’s main political target—economic growth—is successful, which would be the case even if we were to cross the other hurdle that we will face later in the meeting, 2271 1 FEBRUARY 2005 2272 when we try to work out which expenditure is The Convener: What is important from my point targeted at economic growth. Even if we can do of view is how we close the gap between an that, we would not have a clue whether that aspirational objective, which as you say is to move expenditure is successful. to the first GDP quartile, and the mechanism for moving in that direction. That might be a useful Tavish Scott: I am sure that Mr Morgan will subject for debate. agree that on the devolved areas for which we have responsibility—education, transport or any I will add one other issue to the discussion other particular expenditure programme—we have before I bring in Wendy Alexander. You said that set targets and objectives and that he, the you do not have control over many of the issues committee and other portfolio committees rightly that are involved, which is obviously true in the hold the Government accountable on those. I context of the role of the UK Government and of argue that in that sense there are checks and external factors that are not affected by balances and that there is appropriate scrutiny of Government. Is there dialogue between the the Government’s expenditure levels in order to Scottish Executive and your Westminster create the conditions within which the Scottish counterparts about setting forecasts and economy can prosper. Parliament rightly holds expectations in relation to economic growth, and Government to account for such expenditure. That about how such expectations might be met? Is is how we have dealt with portfolio expenditure. I there a process of informal or formal dialogue accept Mr Morgan’s point about the lack of a about how you can work together to deliver central big number at the top of that, but because stronger economic growth for Scotland? of external factors we are not convinced that that Tavish Scott: There is normal contact at official is achievable or possible. We have discussed and ministerial levels on economic development these matters before, so I will not repeat all the and growth in general, which is an on-going and slightly academic arguments again. I say again very live process—we would not expect it to be that we will be more than happy to consider any otherwise. Obviously, in the context of the suggestions that are made. spending review in the summer, for example, we The Convener: When we took evidence from Dr take decisions about strategic long-term Goudie in our economic growth inquiry, I took it investments, such as the significant increases in from his comments and from some of the higher education spending, in transport spending documentation that we had seen previously that and in tackling health. Those decisions are taken the Executive was in the process of considering by us. Although there needs to be dialogue and some comparative measures of performance in engagement at official and ministerial levels, the economic development. That is little more than a portfolio choices that we make are ultimately step and a jump from where the committee wants matters for us, so we must make judgments as to go. There is not necessarily a huge distance best we can. between us on the matter. If you are saying that The Convener: I was trying to make the point you are happy to engage in a dialogue with the that dialogue between the Executive and the UK committee to see how we could provide an Government geared towards economic growth appropriate mechanism for considering might be beneficial in promoting awareness of the comparative performance as a benchmark, the choices that ministers might make and the committee might be content with that suggestion. consequences of choices that the UK Government We would certainly welcome an opportunity to might make. have that discussion with you. Tavish Scott: Indeed. That process is on-going. Tavish Scott: I am happy to do that. I do not see any point in having a sterile or negative Ms Wendy Alexander (Paisley North) (Lab): I political argument; I would rather have a positive approach the issue from a slightly different one in which we looked for an agreed basis for viewpoint.

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