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Plenary, 17 Dec 2003

17 Dec 2003 · S2 · Plenary

Item of business

Budget Process 2004-05: Stage 2

Mather, Jim SNP Highlands and Islands Watch on SPTV

About three years ago, when I started to take the SNP economic case around the committee rooms and board rooms of Scotland, a director of one of our major civic organisations said that the two key measurements of any Government's performance should be life expectancy relative to other comparable countries and population growth relative to neighbouring countries. He believed that those measurements encompassed a range of issues—economic vibrancy, job availability, job satisfaction, housing, diet and, crucially, personal and national self-esteem.

The more I considered his comments, the more they rang true. Although any normal Government will properly also monitor and control borrowing, spending, growth and taxation in order to balance the books and achieve the best outcome for its people, its overall performance will be reflected, crucially, in life expectancy and population growth. We must face the fact that in Scotland at the start of the 21st century neither life expectancy nor population levels match what is being achieved by any of our western European neighbours.

That is not surprising, given that for 30 years we have underperformed compared to all of them in economic growth. Today, we are reviewing a budget that in the words of one of our expert witnesses, Donald MacRae,

"is more of a series of spending plans than a budget."

In other words we are reviewing a process that is a pale shadow of the budget processes of our competitor nations and that exposes the self-imposed handicap of branch-economy status with ample evidence of direct and collateral damage to the people, fabric and credibility of Scotland. Of the three attributes of real economic management that I mentioned earlier—borrowing, spending and taxation—only spending is really devolved to the Parliament. It is the only complete power that the Executive has to influence outcomes for the people of Scotland. Without its logical companion powers, it is woefully inadequate.

Nevertheless, we are where we are and I will not shrink from my duty of making suggestions for the better management of Scotland's finances under the current settlement, echoing some of the recommendations in the committee report. Three major recommended changes in the report strike me as important. First, there is a need for the restatement of historical financial data on a consistent basis, going back at least 10 years, thus allowing spending trends to be identified and analysed. Secondly, there should be much more comprehensive data on capital expenditure and a more appropriate balance between capital and revenue spending. There is a vital link between capital expenditure and long-term economic growth. Thirdly, we are also looking for a more tangible link between a policy objective being a priority—or even a top priority—and a planned expenditure total and relative percentage increase in that area, reflecting its priority status.

To those points I add a concern, which was voiced earlier, and by several witnesses, that our private sector is shrinking and that there is a danger that we have created conditions that have made us even less entrepreneurial and less likely to achieve the economic growth that we need to achieve. There is concern about the effectiveness of our Government's spending and its ability to achieve its specific objectives, let alone improve the lot of everyone in Scotland.

I will address each of those points in turn and I refer first to comparative data. Peter Drucker, the eminent author and consultant, once said famously, "If you can't measure it, you can't manage it." He was right. Scotland needs, and this Parliament must demand, proper comparative data for 1993-2003 and beyond. Only then will we be able to see the trends in spending and plot the effect of that spending on the measurements that matter to us all, including growth, life expectancy and population level. That is elementary and essential and it must be addressed soon.

Secondly, we need data on, and a healthier emphasis on capital expenditure, not only because that is right and proper—in line with Drucker's comment—but because we all aspire to living in a Scotland that builds infrastructure and assets that are rooted here and that can help us thrive and compete. Yet over the two years in question, the increase in capital expenditure is only 4 per cent, compared to the increase in the operational budget of 13 per cent. Those of us who aspire to taking the mature step of allowing Scotland to be all it can be, and who reject our branch-economy status, are duty-bound to highlight the Executive's excessive emphasis on revenue spending. After all, that is one of the historic problems in the water industry, for which we are all paying a heavy price. Surely sound management practice and painful precedent dictate that the Executive must ensure that there is a better balance in future.

Thirdly, I mentioned priority status, which is crucial, particularly vis-à-vis economic growth, because that continues to elude Scotland and it is no great mystery why. As long as the Executive is content for Scotland to be a branch economy—and to pay the price for that status by allowing Scotland to be a low-wage economy with high migration and low labour productivity—we will fail to realise anything like our considerable potential.

The unsustainable nature of that position is now clear and the key point is this: having made the indefensible choice of allowing Scotland to compete without the full set of macroeconomic tools, the Executive now has to say when the extra public spending is going to produce a revenue payback in terms of a more prosperous and vibrant Scotland and when it will produce better tangible outcomes for patients, parents, pupils, students and those who would like to come back to well-paid jobs in Scotland.

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Plenary, 17 Dec 2003

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