Hansard

Thank you, convener. To echo your remarks, I look forward to a constructive relationship with the Finance Committee. In a previous incarnation, I certainly had a constructive relationship with the Justice and Home Affairs Committee. The occasions on which we discussed legislation and on which that committee questioned me were some of my more enjoyable ministerial duties and I hope that that will be true in my new role.

It is a pleasure to be in Aberdeen. I should declare that I am a Hibernian supporter—the last time I was here, Aberdeen had just kicked us out of the cup in the semi-finals. On Saturday, we were dumped 2-0. It is always a salutary experience to come back to Aberdeen to be brought heavily back down to earth. In case the committee feels that it must do that, it has been done already.

I turn now to the business in hand. With the committee's indulgence, I will lean heavily on the advice and support of officials. I will make my opening contribution then move to questions.

I appreciate that, for a variety of reasons, the budget process this year has been difficult for the Finance Committee and for the subject committees. Two principal factors underpin that experience: the introduction of resource accounting and the UK spending review. Despite the fact that those factors have caused us some difficulty in conducting business, the latter is at least a welcome addition to the budget process of the Scottish Executive. However, I acknowledge that the scrutiny process has been interrupted.

The first matter to consider is why resource accounting and budgeting has been introduced at this point. RAB has been at the planning stage, which was started by the previous Conservative Government, for about 7 years. While we can manage our finances separately in Scotland, we have however, to deal with the Treasury in the terms that it sets for the entire United Kingdom. The Treasury planned that the introduction of RAB would coincide with the outcome of the 2000 spending review. For our budgets, therefore, the introduction had to coincide with the outcome of that review, which came midway between stage 1 and stage 2.

I appreciate that that means that it has been difficult for some subject committees to compare directly the figures that were presented at stage 1 with some of those from stage 2. My predecessor wrote to the committee to set out the changes that would take place to the programme baselines. I hope that that information has been useful in informing this committee and other committees about the main impact of the changes.

Peter Collings gave a presentation on RAB to members of the committee. I am happy for the department's officials to work with all the committees to help them with their questions on the change to RAB. I understand that the Finance Committee is conducting its own review of RAB. Despite the difficulties that RAB may have introduced into our process this year, the greater focus that it will bring to our deliberations should help us to deliver generally better value for money throughout the Scottish budget.

An example is that our budgeting now ensures that full economic cost, especially in the use of capital assets, is measured properly. That should make us improve our treatment of capital spending by introducing depreciation and the cost of capital into our budgets. That will require departments to report systematically on how resources were allocated to objectives in what will be achieved. That is a challenging part of the changes that have been made. It is important to acknowledge that we might not get it right first time, but I intend to continue to try to improve the way in which we link our spending to our objectives and to outcomes beyond the expenditure flow.

The second difficulty in the budget process—albeit a happy difficulty in the context of increasing budgets—has, I acknowledge, been caused by the UK spending review. We published our draft plans and a fairly detailed breakdown of figures in the spring. I know that the committee has particular concerns about that and I am keen to work closely with the committee to improve future publications. The written agreement requires that we propose a budget for the following year by 20 September. We acknowledge that that will be a difficult timetable, because the outcome of the UK spending review will not be known until mid-July. My ministerial colleagues and officials worked through the summer to reach decisions on the considerable addition of money—which amounts to almost £7 billion over the three years—to previous budgets. We managed to meet the deadline by publishing on 20 September the document that is currently being considered.

In the run-up to that publication, Jack McConnell wrote to the convener to say that we expected to have information available only at level II. I note that it has been a source of disappointment—to the convener, the Finance Committee and the subject committees—that more detailed information has not been made available to assist the process that the committee has been involved in. I regret genuinely the difficulty that that has caused this committee and the subject committees. That difficulty should not occur in any normal year, when we will not have the spending review.

However, decisions that are taken on budgets below level II are taken predominantly by ministers in charge of portfolios. In many cases, funding is allocated to bodies such as non-departmental public bodies outside the Executive. I am sure that members are aware of the wider issue about quangos and the funding that is allocated to them. That is under consideration by the Executive.

The situation is, therefore, that in some programmes, level III figures have not yet been finalised. The scale of changes that have resulted from the spending review 2000 has been far greater than was originally expected. Nevertheless, there might be areas in "Making a Difference for Scotland" on which committees wish to make strategic comments. I am happy to consider how we can improve our budgeting process to avoid such wholesale changes in future. There will, after all, be a further UK spending review in 2002. In the light of the experience of the current year, it would be sensible to try to plan now for what the circumstances will be at that time.

Although it is understandable, it is unfortunate that much of this year's discussion of the budget has been taken up with the process and its shortcomings, rather than the budget itself. I do not want to be overly party political at this stage, but the committee should bear in mind that the main result of that spending review has been to deliver a substantial, record level of public spending in Scotland, which will be sustained over a period of years. From this year to 2003-04, we will see almost 14 per cent real-terms growth in departmental expenditure limits. The challenge for the Executive and Parliament is to try to ensure that we gain the maximum possible benefit from that money for Scotland. To that end, I look forward to working with the committee in the coming months and years.