Hansard

I will hold the convener to his promise of giving me a light toasting rather than burning me to a crisp. The perspective sitting at this end of the table is different from that sitting at the members' end. I hope that I have a long and healthy relationship with the committee. I am sure that it will be based on the fact that we all want the best for Scotland.I must go through some formalities in relation to the Budget (Scotland) (No 3) Bill. First, I thank the committee for the invitation to give evidence. I have a brief statement, which sets out what the budget documents are and, perhaps more important, what each of them does. There are three documents: the Budget (Scotland) (No 3) Bill with the schedules to it, the pre-Budget Bill report and the detailed budget documents for 2002-03.The Budget (Scotland) (No 3) Bill authorises the use of resources by the Scottish Executive and the payment of cash out of the Scottish consolidated fund. The bill is split into three parts. Broadly speaking, part 1 deals with the maximum amount of resources that are payable out of the Scottish consolidated fund and the application of income that is otherwise payable into the fund. Part 1 also deals with contingency arrangements, local authority capital expenditure and borrowing by statutory bodies. Part 2 contains emergency arrangements in case there is no Budget Bill for the financial year 2003-04. Part 3 contains an order-making power, which will allow ministers to revise the numbers in the bill.Some of the changes from the Budget (Scotland) (No 2) Bill are worth pointing out. First, the Budget (Scotland) (No 3) Bill gives ministers the power to net account for VAT. Previously, VAT was treated as an accruing resource—it appeared under that heading in schedules 1 to 4 to last year's bill. In this year's bill, section 1, on the Scottish Administration, and section 2, on direct-funded bodies, have been drafted so that VAT is separated out and given authorisation without limit. Section 1(7) and section 2(6) provide a definition of VAT.Secondly, the Budget (Scotland) (No 3) Bill gives ministers greater powers in relation to budget revisions. The power to amend schedule 5 has been extended to apply to the whole schedule and not only—as in previous years—to the amounts specified in the schedule. That allows the bill to be amended so that an appropriate entry can be inserted where a body that is subject to a borrowing limit is set up during the financial year to which the bill relates. A good example of that is the Water Industry (Scotland) Bill, which is going through the Parliament and with which the convener and I are pretty familiar. Section 7 in part 3 of the Budget (Scotland) (No 3) Bill has been redrafted to reflect the extended powers. After the bill's introduction, the amendment went before the Subordinate Legislation Committee for scrutiny.The bill has 10 sections, which refer to the spending that is set out in the five schedules. Sections 1 and 2 set limits on the expenditure and income of departmental and direct-funded bodies. Section 2 has six subsections and deals with the funding of the direct-funded bodies, such as the Forestry Commission, the Food Standards Agency, the Scottish Parliamentary Corporate Body and Audit Scotland. Section 3 provides the authority for, and sets limits on, the payment of cash from the Scottish consolidated fund.Section 4 provides ministers with the powers to make contingency payments and sets out the conditions under which such payments might be made. For example, a payment might be made to meet the public interest, but only if it is required with such urgency that the public interest cannot be satisfied by budget legislation. Section 4 sets a limit of £50 million on contingency payments.Section 5 provides for the capital expenditure of local authorities and for the borrowing of a series of statutory bodies. Those bodies are the national health service trusts, Scottish Homes, Scottish Enterprise, Highlands and Islands Enterprise, the water authorities and the Scottish Environment Protection Agency.Section 6 puts in place arrangements in case there is no Budget Bill for the financial year 2003-04. The section applies only to cash authorisation. The emergency powers to authorise the use of resources in the absence of a Budget Bill are set out in section 2 of the Public Finance and Accountability (Scotland) Act 2000. It provides that the purposes set out in the schedules to the Budget (Scotland) (No 3) Bill are applicable to 2003-04 if there is no Budget Bill for that year. It also sets out the maximum amount that may be paid in any calendar month in 2003-04: one twelfth of the maximum amount authorised by the bill to be paid out in this financial year, or the amount paid out in the corresponding calendar month of this financial year.Section 7 gives ministers an order-making power to amend the bill when it is enacted. That power allows for budget amendments. Section 7 specifies that the order will be subject to the affirmative procedure. Section 8 repeals part 2 of the Budget (Scotland) Act 2001. Section 9 gives interpretations and section 10 gives the short title.There are five schedules to the bill, which set out the purposes to which expenditure may be put, the maximum amount of expenditure, the types of receipts that may be raised and the limits applicable to those receipts.Schedule 1 sets out the purposes for Scottish Executive departments and associated departments, and the maximum amount that can be paid out of the consolidated fund to meet the specific limits on incomes. Schedule 2 sets out by Scottish Executive department and associated departments a general spending limit on a range of incomes, each of which has a specified purpose. Schedule 3 is the equivalent of schedule 1 for the direct-funded bodies. Those are the Forestry Commission, the Food Standards Agency, the Scottish Parliamentary Corporate Body and Audit Scotland. Schedule 4 is the same as schedule 2, but applies to the direct-funded bodies. Schedule 5 sets out the borrowing of the statutory bodies—the national health service trusts, Scottish Homes, Scottish Enterprise, Highlands and Islands Enterprise, the water authorities and the Scottish Environment Protection Agency.The introduction to "Scotland's Budget Documents 2002-03" provides background on the overall public expenditure aggregates and how the system of public finance works. It also gives information on the limits on non-voted spending which is not covered by the budget documents. The budget documents contain the departmental summary, which is supported by a series of schedules and which shows the current and capital expenditure by level 2 subheading and the various categories of receipts. Where possible, further details are provided on the programmes that make up level 2, that is, level 3. In addition, we have provided the real-terms figure after each vote.I have covered the core aspects of the documents that members have before them. Now that they have been introduced, I am happy to take questions. Unlike me, David Palmer has been steeped in the budget from the word go; I might have to use his services throughout the morning.