Finance Committee Report
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Finance Committee Report SP Paper 315 FI/S3/09/R5 5th Report, 2009 (Session 3) Report on the Review of the Budget Process CONTENTS Remit and membership Report Introduction Background Structure of the Scottish Budget Current budget process Overall views on the current budget process Stage One Problems with the current system Options for a revised Stage One Continuous financial scrutiny Scrutiny of financial memoranda Costing of policies and scrutiny of such policies Committee inquiries Stage Two - Draft Budget Scrutiny Current process Timetable Alternative spending proposals Budgetary information Stage Three Resources A parliamentary budget office Other Issues Terminology Proposed changes to the format of Budget Bills ANNEXE A: EXTRACTS FROM THE MINUTES OF THE FINANCE COMMITTEE ANNEXE B: EVIDENCE ON BUDGET OFFICES ANNEXE C: ORAL EVIDENCE AND ASSOCIATED WRITTEN EVIDENCE Please note that all oral evidence and associated written evidence is published electronically only, and can be accessed via the Finance Committee’s webpages, at: http://www.scottish.parliament.uk/s3/committees/finance/index.htm 16th Meeting, 2008 (Session 3), Tuesday 10 June 2008 WRITTEN EVIDENCE Peter Collings, Former Chair of FIAG Professor David Bell - Discussion Paper ORAL EVIDENCE Dr Peter Collings, former Chair of the Financial Issues Advisory Group; Professor David Heald, former member of the Financial Issues Advisory Group; Alf Young, former member of the Financial Issues Advisory Group; Des McNulty MSP, former Convener of the Finance Committee; Alasdair Morgan MSP, former Deputy Convener of the Finance Committee; Eddie Frizzell, Budget Adviser to the Justice Committee, Budget Process 2008-09; Jan Polley, Budget Adviser to the Rural Affairs and Environment Committee, Budget Process 2008-09; Prof David Bell, Budget Adviser to the Finance Committee. 17th Meeting, 2008 (Session 3), Tuesday 17 June 2008 WRITTEN EVIDENCE Centre for Public Policy for Regions Professor Irvine Lapsley Professor Iain McLean The Hansard Society ORAL EVIDENCE Jo Armstrong, Centre for Public Policy for Regions; Professor Irvine Lapsley, Institute of Public Sector Accounting Research, University of Edinburgh; Professor Iain McLean, Professor of Politics, Oxford University; Alex Brazier, Director, Parliament and Government Programme, Hansard Society; Professor Colin Talbot, Professor of Public Policy and Management, University of Manchester Business School. 18th Meeting, 2009 (Session 3), 24 June 2009 ORAL EVIDENCE John Swinney MSP, Cabinet Secretary for Finance and Sustainable Growth; John Williams, Head of Finance Co-ordination, Scottish Government. ADDITIONAL WRITTEN MATERIAL Arthur Midwinter CIPFA in Scotland Education, Lifelong Learning and Culture Committee Health and Sport Committee House of Commons Scrutiny Unit House of Commons Scrutiny Unit (Supplementary) Rural Affairs and Environment Committee Scottish Parliament Information Centre briefing: Comparative Budget Processes Scottish Parliament Information Centre paper: Summary of submissions from budget offices Scottish Parliamentary Corporate Body Scottish Parliamentary Corporate Body (Supplementary) Scottish Women’s Budget Group Virginia State Legislature Remit and membership Remit: 1. The remit of the Finance Committee is to consider and report on- (a) any report or other document laid before the Parliament by members of the Scottish Executive containing proposals for, or budgets of, public expenditure or proposals for the making of a tax-varying resolution, taking into account any report or recommendations concerning such documents made to them by any other committee with power to consider such documents or any part of them; (b) any report made by a committee setting out proposals concerning public expenditure; (c) Budget Bills; and (d) any other matter relating to or affecting the expenditure of the Scottish Administration or other expenditure payable out of the Scottish Consolidated Fund. 2. The Committee may also consider and, where it sees fit, report to the Parliament on the timetable for the Stages of Budget Bills and on the handling of financial business. 3. In these Rules, "public expenditure" means expenditure of the Scottish Administration, other expenditure payable out of the Scottish Consolidated Fund and any other expenditure met out of taxes, charges and other public revenue. (Standing Orders of the Scottish Parliament, Rule 6.6) Membership: Jackie Baillie (Deputy Convener) Derek Brownlee Linda Fabiani Joe FitzPatrick James Kelly Jeremy Purvis Andrew Welsh (Convener) David Whitton Committee Clerking Team: Clerk to the Committee James Johnston Senior Assistant Clerk Mark Brough Assistant Clerk Allan Campbell Committee Assistant Jennifer Bell Report on the Review of the Budget Process The Committee reports to the Parliament as follows— INTRODUCTION 1. The Scottish Parliament’s process for budget scrutiny was devised by the Financial Issues Advisory Group (FIAG) which was a group of experts established by the Scottish Office in 1998 to advise the Consultative Steering Group (CSG) on financial matters. The process recommended by FIAG has operated in the Parliament since 1999, with one amendment being made to it in 2005. 2. In November 2007, prior to the publication of the Scottish Spending Review and Draft Budget 2008-09, the Parliament agreed the following resolution which recommended that the budget process should be reviewed— “That the Parliament recognises the critical importance of the forthcoming three-year spending review to meeting the hopes and aspirations of the people of Scotland; welcomes the detailed scrutiny of the SNP Government's spending plans by parliamentary committees as a central part of the budget process; believes that an effective budget scrutiny process is critical in ensuring that public services are delivered in a way which provides optimal value for money; believes that the process should be sufficiently robust to cope with majority and minority government; believes that there is scope to review the operation of the current procedures as laid down in the Standing Orders and the agreement between the Finance Committee and the Scottish Government; believes that the appropriate vehicle for such a review would be the Standards, Procedures and Public Appointments Committee, in consultation with the other committees of the Parliament, particularly the Finance Committee, and requests that the Standards, Procedures and Public Appointments Committee undertakes a review of the budget process for future years.”1 3. Although the resolution called on the Standards, Procedures and Public Appointments Committee (SPPA Committee) to undertake such a review, it was agreed with the SPPA Committee that the Finance Committee should undertake a review in the first instance. Although some aspects of the process (such as the rule setting out that committees should be allowed time to undertake financial scrutiny and the rules governing the passage of the Budget Bill) are contained in Standing Orders, the majority of the detail of the process is contained in a Written Agreement between the Scottish Government and the Finance Committee (the “Written Agreement”). It was agreed that, once the Finance Committee had reported on its review of the process, the SPPA Committee would then undertake its own review, taking account of the report from the Finance Committee. It would, however, be at liberty to come to its own conclusions. 4. The Finance Committee published a consultation paper to launch its inquiry, seeking views on the effectiveness or otherwise of the current process and how it could be improved, focussing on the current individual stages of the process. The resolution passed by the Parliament suggested that any revised process should be robust enough to be able to cope with both a majority or minority administration. The Committee also took into account that any revised process should be able to cope with any additional fiscal powers that may be devolved to Scotland. 5. The Committee took evidence on 10 June 2008 from former members of FIAG, a former convener and deputy convener of the Finance Committee and current budget advisers to the Finance Committee and subject committees. On 17 June 2008, it took evidence from experts in the field of budget scrutiny and, on 24 June 2008, it took evidence from the Cabinet Secretary for Finance and Sustainable Growth. Oral and written evidence, and additional material, are published on the web as Annexe C to this report. 6. On the basis of this evidence, the Committee has identified a number of areas where improvements need to be made to the current process and has recommended some practical solutions to problems identified with the process to ensure more robust financial scrutiny. This report focuses on the changes which the Committee believes require to be made. BACKGROUND Structure of the Scottish Budget 7. The Scottish Budget funds the expenditure of the Scottish Government and its associated departments and agencies, health boards, local authorities, non- departmental public bodies, nationalised industries, the Scottish Parliament and Audit Scotland. 8. The majority of the Scottish Budget is comprised of the ‘block’ of money assigned by the UK Government (in this respect, Scotland is treated in the same way as a UK government department). This is known as the Departmental Expenditure Limit (DEL) and changes to Scotland’s allocated DEL budgets are determined through the Barnett Formula. The DEL accounts for approximately 80% of Scotland’s overall budget.