Y Pwyllgor Cyllid - Y Bumed Senedd
Finance Committee - Fifth Senedd13/06/2019
Aelodau'r Pwyllgor a oedd yn bresennol
Committee Members in Attendance
|Alun Davies AM|
|Llyr Gruffydd AM||Cadeirydd y Pwyllgor|
|Mike Hedges AM|
|Rhun ap Iorwerth AM|
Y rhai eraill a oedd yn bresennol
Others in Attendance
|Caroline Gardner||Archwilydd Cyffredinol yr Alban|
|Auditor General for Scotland|
|David Eiser||Cynghorydd i Bwyllgor Cyllid Senedd yr Alban|
|Adviser to the Scottish Parliament’s Finance Committee|
|Diane McGiffen||Prif Swyddog Gweithredu, Audit Scotland|
|Chief Operating Officer, Audit Scotland|
|Dr Angela O’Hagan||Ysgol Busnes a Chymdeithas, Prifysgol Caledonian Glasgow|
|School for Business and Society, Glasgow Caledonian University|
|Mark Taylor||Cyfarwyddwr Archwilio, Audit Scotland|
|Audit Director, Audit Scotland|
|Professor Michael Danson||Athro Polisi Menter, Prifysgol Heriot-Watt|
|Professor of Enterprise Policy, Heriot-Watt University|
Swyddogion y Senedd a oedd yn bresennol
Senedd Officials in Attendance
|Georgina Owen||Ail Glerc|
Cofnodir y trafodion yn yr iaith y llefarwyd hwy ynddi yn y pwyllgor. Yn ogystal, cynhwysir trawsgrifiad o’r cyfieithu ar y pryd. Lle mae cyfranwyr wedi darparu cywiriadau i’w tystiolaeth, nodir y rheini yn y trawsgrifiad.
The proceedings are reported in the language in which they were spoken in the committee. In addition, a transcription of the simultaneous interpretation is included. Where contributors have supplied corrections to their evidence, these are noted in the transcript.
Cynhaliwyd y cyfarfod yn yr Ystafell Scott, Cymdeithas Frenhinol Caeredin, Caeredin.
The meeting was held in the Scott Room, the Royal Society of Edinburgh, Edinburgh.
Dechreuodd y cyfarfod am 09:30.
The meeting began at 09:30.
Croeso i gyfarfod Pwyllgor Cyllid y Cynulliad Cenedlaethol. Dŷn ni'n cwrdd fan hyn yng Nghymdeithas Frenhinol Caeredin heddiw er mwyn cychwyn ar ymchwiliad y pwyllgor ar y broses o gyllidebu yn ddeddfwriaethol. Hefyd, wrth gwrs, rydym yn cychwyn ar y gwaith o edrych ar y posibilrwydd o ddiwygio Deddf Archwilio Cyhoeddus (Cymru) 2013.
A gaf i nodi fod clustffonau ar gael ar gyfer offer cyfieithu neu i addasu lefel y sain? A gaf i atgoffa pawb hefyd i sicrhau eu bod nhw wedi diffodd y sain ar unrhyw ddyfeisiadau electronig sydd gennych chi? A gaf i ofyn os oes gan unrhyw Aelodau unrhyw fuddiannau i'w datgan? Nac oes. Iawn, diolch yn fawr. A gaf i hefyd nodi ymddiheuriadau gan Rhianon Passmore a Nick Ramsay?
Good morning, everyone, and welcome to the meeting of the National Assembly's Finance Committee. We're here at the Royal Society of Edinburgh today to start our inquiry into the legislative budget process. We will also start the work of looking at the possibility of amending the Public Audit (Wales) Act 2013.
Headsets are available for interpretation or for amplification. I'd like to remind everyone to ensure that they have put any electronic devices onto silent. Also, do any of the Members have any interests to declare? No. Okay, thank you. I'd like to note apologies from Rhianon Passmore and Nick Ramsay.
Yr ail eitem ar yr agenda yw nodi dau bapur. Y papur cyntaf yw llythyr gan y Dirprwy Weinidog Iechyd a Gwasanaethau Cymdeithasol ynglŷn â'r Bil Plant (Diddymu Amddiffyniad Cosb Resymol) (Cymru), a'r ail bapur yw'r llythyr gan Gadeirydd Pwyllgor yr Economi, Seilwaith a Sgiliau, sydd yn cytuno i wneud darn o waith ar y cyd gyda ni ynglŷn â thaliadau cadw mewn contractau adeiladu. Felly, dŷn ni'n hapus i nodi'r ddau bapur yna? Diolch yn fawr iawn.
The second item on the agenda is papers to note. The first paper is a letter from the Deputy Minister for Health and Social Services regarding the Children (Abolition of Defence of Reasonable Punishment) (Wales) Bill, and the second paper is the letter from the Chair of the Economy, Infrastructure and Skills Committee regarding agreeing to do a piece of work on retention payments in construction contracts. Are we happy to note both of those papers? Thank you.
Felly, ymlaen â ni at y sesiwn dystiolaeth gyntaf y bore yma. A gaf i groesawu atom ni David Eiser, un o gynghorwyr pwyllgor cyllid Senedd yr Alban? Diolch am ddod atom ni. Mi awn ni'n syth fewn i gwestiynau os ydy hynny'n iawn. Fe gychwynnaf i efallai drwy ofyn i chi os allwch chi roi esboniad bach cryno i ni o'ch rôl chi yn y grŵp adolygu proses y gyllideb.
On we go to the first of the sessions today. I'd like to welcome to us David Eiser, adviser to the Scottish Parliament's finance committee. Thank you for being here. We'll go straight into questions if that's okay. I'll start by asking you if you could perhaps briefly explain your role in the budget process review group.
Sure. Good morning. Thank you for inviting me to be here. I am the fiscal framework adviser to the Scottish Parliament's finance committee. I was appointed fiscal framework adviser in August 2016, which was just before the budget process review group started. As fiscal framework adviser, my role is really to help the finance committee understand the technical nitty-gritty of the new fiscal framework that was adopted in Scotland following the Scotland Act 2016 and the transfer of the new fiscal powers.
So, it's helping the finance committee understand some of the detail of, for example, how fiscal forecasts have been made, how and why they've changed over time, what the implications of forecasts of Scottish taxes and forecasts of these block grant adjustments are for the Scottish budget and the implications for the use of the new budget management tools—borrowing powers and the Scotland reserve and so on.
Of course, the main motivation for the budget process review group was to think about how the process for parliamentary budget scrutiny needed to change to reflect the transfer of fiscal powers to the Scottish Parliament and the new fiscal framework. So, my role was really to input to the work of the budget process review group in terms of thinking about what these new powers and this new fiscal framework meant in terms of when bits of information would be available to the Parliament and to the Government and the implication of that for, in particular, the timing of particular budget events.
Okay. Thank you for that.
A gaf i ofyn hefyd—? Wrth sefydlu'r grŵp, sut aethpwyd ati i gytuno ar yr aelodaeth? Oherwydd roedd taro cydbwysedd addas, buaswn i'n tybio, yn ganolog yn yr ystyriaeth yna.
Can I also ask—? In establishing this group, how did you go about agreeing the membership? Because having a suitable balance, I would imagine, would be central to that consideration.
I wasn't involved in the setting up of the group. The Parliament and the Government—Ministers and the finance committee—were very clear at the end of the previous session that there was this need to review the processes for parliamentary scrutiny in light of the substantial transfer of new fiscal powers. The Parliament and Government therefore agreed to set this group up. What I believe happened is that Parliament and the Government suggested external members of the group, and then agreed that between themselves. But I wasn't involved at that stage. I was asked to be involved in terms of my role as adviser to the finance committee, but I had no role in setting up the group itself.
Ond, o edrych o bell, fyddai rhywun yn tybio bod yna dyndra naturiol yn mynd i fod rhwng Llywodraeth a'r Senedd. Hynny yw, sut oedd hynny wedi chwarae allan yn y gwaith gafodd ei wneud?
But, from looking from afar, you'd imagine there's some kind of natural tension between Government and Parliament. So, how did that play out in the work that was done?
In terms of the work that was done, as opposed to the selection of members of the group?
Well, clearly, there was a selection process, I'd imagine. Well, I know, actually; it was quite an equal split, wasn't it—four from each. Am I right? But I was thinking in terms of the dynamic, because there's always going to be a tension between Parliament's agenda and maybe the Government's aims in this kind of process. So, how did that really play out, in terms of—? Was it always in the background, in terms of Government, clearly, hoping to get something out of the process, and Parliament, maybe, hoping to get something a bit more robust in terms of their scrutiny opportunities?
Just to be clear about the previous question, I thought you were talking about the selection of external members to the group. So, you're right, the budget process review group was—. I suppose I'd describe it as tripartite group. There were, as you say, four members representing the Parliament and the finance committee, four Government officials, and then I think there were eight external experts. And what I was saying is that I wasn't involved in the—. The Parliament and the Government jointly agreed those eight experts; I wasn't involved in that process.
So, the point about to what extent were there tensions—. I think the first thing to say is, from the outset, the emphasis on this group was very much about having a consensual approach, and that was made very clear from the outset when at the first meeting, the Convener or the finance committee and the Cabinet Secretary for finance were at that meeting and emphasised that. But, of course, you're right; inevitably, there were some tensions.
It's perhaps worth then going back to the beginning and saying what the main issue was when we started the budget process review group. The main issue was one of timing initially, in the sense that what had tended to happen—the sort of process that existed before the Scotland Act 2016—was that the draft Scottish budget would be published, normally, around September time. There was then quite a long period of parliamentary scrutiny of that budget that lasted from publication of the budget in September through to the legislative process starting in January. And the Parliament was rightly very proud of that period of time that it had for budget scrutiny.
The Government's view was that that was fine when the budget was largely a spending budget. The UK Government might publish an autumn statement in November, and that might result in some additional Barnett consequentials, but of course that's relatively easy to accommodate within the budget plans. But when you have a substantial transfer of fiscal powers, that situation changes a bit, because the autumn statement could then have much more marked consequences, potentially, for the Scottish budget, because UK fiscal forecasts change and, of course, through this complicated fiscal framework process that we now have, changes in UK fiscal forecasts can affect the Scottish budget via changes to the block grant adjustment. So, in theory, the level of resources available to the Scottish Government could, potentially, be reduced between the draft budget being published in September and a UK autumn statement being published in November.
So, the Government's starting point was that, actually, publishing a draft budget in September was now really quite challenging. So, there was potential, certainly, for some tension there, and what we were doing as a group in the first couple of meetings was, on the one hand, a lot of analysis looking at past UK autumn statements to see, well, how much do things change at a UK autumn statement, how much would that actually change the Scottish budget via changes to block grant adjustments in reality, and to what extent does this really then therefore make this issue a game changer? And, at the same time, we were also thinking about, well, to what extent, if the Scottish budget was published later on, after the autumn reporting statement, could you make up for that loss of scrutiny time in other ways?
Now, in some ways, there could have been some difficult tensions to resolve there, but something then happened outside the group’s control that made that process easier to resolve than maybe otherwise it would have been and that’s that we had a new UK Chancellor, who announced that, from this point on, we weren't going to have a UK autumn statement; the UK budget was going to be in November. And I think, for the group, that was a game changer in the sense that, well, if the UK budget is in November, and there are potentially quite large tax changes at the UK level in November, then this probably overrides those other concerns. So, that was, I think, the area where there was the biggest potential for tension and for conflict and the group was adopting a consensual approach to see how that could be addressed, but, in some ways, this external change was the thing that helped that to be resolved.
That said, of course, there were other areas where there were—I wouldn't say tensions, but slightly different viewpoints around how far the group’s report should go in terms of recommending particular levels of detail to be provided in Government documents and so on. But, as I say, it was very much a consensual approach adopted to those sorts of issues.
Okay. Diolch yn fawr. Thank you. Alun.
I'm interested in that process, and my presumption is that the budget process review group makes recommendations and that is then enacted by—those recommendations are then enacted by—the part of the institution, the process, that needs to do so. So, the Scottish Parliament will change its Standing Orders or whatever and the Scottish Government then will reflect the needs, your demands, on their processes as well, yes? Is that—? Is that a reasonable reading of it?
Yes, I think so. So, the group prepared two reports: an interim report and a final report. Those were reports to the finance committee and to the Government jointly, and the committee and the—the Parliament and the Government agreed to the recommendations in the report and a new agreement was drafted.
And how would you ensure that the view of the group is reflected in discussions when, as you go through a process, of course, things sometimes change—sometimes they don't, sometimes they do; it's the way of these things—but how do you ensure that the views are always reflected as that dynamic moves forward?
The views of experts within the group?
Yes, the views—well, the collective views of the group, I would assume, but—.
As I say, I think it was a robust, consensual process. The group agreed the report, with, of course, some negotiation on wording of aspects of the report and so on, but that was all done on a very consensual basis, and the Parliament and the Government accepted the group's recommendations.
You sound like you're describing a very consensual—it's a word you've used several times in the evidence this morning—process, where there was a sense of joint venture, if you like, between the Parliament and the Executive. It's not always the case, of course, as we see down the road in Westminster at the moment. Is my characterisation a correct one, where the Government and the Parliament were able to work together? The Government, of course, doesn't have an outright majority in the Parliament, so I presume that there was, from opposition parties, a buying-in to this process, and a wish that the consensus that you've described in the review group is reflected in how, then, the recommendations were actually enacted.
I think, as I say, both the Parliament and the Government recognised that this substantial transfer of fiscal powers and the new fiscal framework made it extremely clear that there was a need to review the process for parliamentary scrutiny, without prejudice to what the outcomes of that review might be. But there was certainly consensus that the processes for parliamentary scrutiny did need to be reviewed.
But, of course—. As a—. I left Government at Christmas, and, certainly, when you're sitting in a Government position, quite often, I wouldn't—I would describe parliamentary scrutiny as an inconvenience; you know, it's not always in the interests of Government to provide greater and more opportunities for scrutiny. So, there's always, as Llyr described in his opening remarks, a tension between Government, between the Executive and the legislature, and that's a good thing—I think it should always be there, and it will always be there. So, my interest is that, in terms of introducing entirely new, in many ways, ways of working, with new powers extending existing powers, then that was—you were able to achieve that, through the budget review group, I presume, as a mechanism, in a very consensual way.
So, what advice would you give us in Wales, then, if we were to consider replicating that kind of process?
Well, I certainly think that the buy-in of both Parliament and Government is essential, and this sharing of the joint—a joint sharing of what the purpose of the group is and the terms of reference of the group is critical. It's worth saying that this is a model that the Parliament and Government are now following up. There's a group that's recently been established called the tax legislation working group, which is looking at a slightly different but overlapping set of issues around legislative processes for tax change, and, again, this is a sort of tripartite group with Parliament, with Government, and an expert group. I think a couple of the things to think about that I don't necessarily have the answers to: one is how to involve or engage wider civic society or other public organisations in this process. Clearly, all of these organisations have a keen interest in parliamentary process, and so how are those groups, those organisations, involved? Also, a question about—. One thing that I didn't say is that the budget process review group was really set up as a private group, by which I mean not only were there sort of Chatham House rules in relation to the review group meetings, but the meetings were private in the sense that we didn't publish agendas, we didn't publish minutes. The rationale for that was so as not to prejudice the outcomes of the group. But you could take an alternative view and say, well, actually—I mean, it's a question of balance between transparency and not prejudicing outcomes, so that's something else to consider. But the fundamental thing, I think, is that this has to be—. There has to be a sort of shared understanding, a shared vision, between Parliament and Government, as to what the terms of reference of the group are, and those need to be established at the outset.
I'm interested in the process that you're using at the moment, and I think the process that you've used for the first time in the last year or so. If I'm right in understanding it, the Financial Issues Advisory Group's view was that
'the right time for the main parliamentary input is not at the budget approval stage but at an earlier stage in the process, when priorities are being set.'
Now, for me, as a Member of the governing party, I'm quite content with that, but I would imagine my colleagues here from opposition parties would have a somewhat different view, and their view—. It's a matter for yourselves to describe how you feel, but I would anticipate, if I was in opposition, then I would say, 'Sorry, mate, I'm a parliamentarian. I've got the right to put amendments and to have my view at every stage—every parliamentary stage—of the budget approval. This is my money you're spending, and I've got the right to determine how you spend it, or certainly to make every effort—'. So, I'm interested that the Parliament, essentially, reclused itself from making amendments to a Bill.
Well, we did have a lot of discussion about these ideas. The group commissioned a very interesting piece of research by Joachim Wehner, which is on the Parliament's website, which looked at how these processes of parliamentary scrutiny and parliamentary influence work in different legislatures around the world, and it was very interesting in comparing places like Germany, where Parliament has the ability and does lodge hundreds of amendments, versus, for example, Australia, which is similar to the Westminster model, where, actually, it's really an Executive-dominated process. And, like everything else, there are different arguments put forward. Different people have different views about the extent to which the legislature should be able to influence the Executive's budget, and, if so, at which stage, and the group came to the conclusion, ultimately, that, effectively, the existing legislative process that we had was broadly the right one in terms of we're getting this balance right between legislative influence and the Executive's responsibility for public finances.
But the group's view was that although opposition Members should not be able to lodge amendments at Stages 2 and 3, what was really important was that Parliament should have the ability to influence the formulation of the budget in those earlier stages, and although the FIAG proposals envisaged that that would and should happen, that hadn't been happening in reality as well as it could have been happening, and that was why the group made recommendations about how the process of budget scrutiny should change before we got to that final legislative process—so, the idea that the Government publishes a mid-term financial strategy that sets out its broad priorities over a five-year period, and that's published in May, and that, in effect, marks the start of the parliamentary scrutiny process, with the idea being that Parliament is influencing the formulation of the budget, but that there are, perhaps, too many risks in the notion that the Parliament influences the budget proposals right at that final stage.
But Parliament doesn't influence them; of course, Parliament passes a Bill. It's not a matter of influence—standing there as a spectator, you know, hoping that the louder you shout the faster your side will run on the pitch. It's curious to me. That's why I come back on it. Because if, for example, the Scottish Parliament's finance committee takes a view that the Scottish health budget should be increased by 10 per cent in order to meet the needs of a growing and ageing population—for argument's sake—and the Scottish Government comes back and says, 'Well, we looked at the numbers. Frankly, we're going to cut it because we've been having terrible trouble with our schools, and we're going to put 10 per cent into schools', and the Parliament stands back and says, 'Well, actually, we've got different views. You know, Richard Leonard's been making all these speeches about ending austerity, and we want to do something different about tax rates.' For me, as a parliamentarian, I would want to pursue and prosecute those arguments through a budget process, not simply wish to in some way shape or influence an Executive at an early stage, which is a reasonable thing to do, but then also put forward amendments—reasoned amendments, rather than just wrecking amendments, I accept that—in the process itself. But, if that's how it works, then I'm surprised.
Well, I think the theory and the hope is that the sorts of issues that you describe would be things that Parliament could raise and address throughout this, in effect, what should be a more strategic year-round approach to scrutiny, which, as I say, starts with the mid-term financial strategy and then goes on. We have committees publishing pre-budget reports in October. The Government, when it publishes its budget in December, has to say how it's responded to those committee reports in its budget. Prior to the Stage 1 budget Bill, the Conveners of the subject committees have a debate in Plenary. So, the theory is that it's more sensible to address those kinds of issues, taking that more strategic and long-term view, rather than to wait until right at the end of the process.
I didn't realise that Scottish politics was so consensual. [Laughter.] But I'm delighted to hear it.
So, when the review group concluded its work, who took that forward, then? Was it the Government or a committee in Parliament?
The Government and the Parliament accepted the recommendations and decided to publish the report. It wasn't the group's decision to publish the report, and there was an agreement then published, the drafting of which was led by the Parliament, agreed by the Government, to set out the terms of what had been agreed.
Fine. Okay. Thank you. Rhun.
A lot of what I was going to ask has been covered in a way. You say that the balance is right within the legislative budget process that you have, as opposed to the motion-type process that we have. My colleague here identified what he might perceive would be drawbacks. Can you point us to some of the drawbacks of a legislative budget process that were identified during work carried out in Scotland?
Can I just say first of all that I'm not necessarily saying that I think the existing process is right in some way? I'm trying to recall and rehearse the discussions and arguments that we had as a group and explain why the group came to the views it did. I think it remains too early to say how effective various stages of this new budget process are and will be, and I'm not trying to defend the outcome; I'm trying to explain the implications or how the recommendations were arrived at.
I'm afraid, in terms of the merits of legislative processes rather than non-legislative processes, it's not something that I feel I can comment on. It's not my area of expertise, and it's not something that, as a group, we considered.
And you work within a legislative budget process and that's what you have. How are budget revisions dealt with under the Scottish process—in-year budget revisions?
There are two in-year budget revisions: spring and autumn. These are dealt with through secondary legislation. They set out things like movements between budgets, accounting changes, additional consequentials from Westminster, that sort of thing.
Sorry, can I just ask a quick supplementary question? You say 'secondary legislation'. I'm assuming that goes through some sort of affirmative procedure.
Yes. That would be the Finance and Constitution Committee that scrutinised that.
That's fine. I wanted to move on, anyway, to how changes or amendments to tax rates are dealt with, or how tax rates are set. And there are a number of different procedures, depending on the type of devolved tax. Can you talk us through how the process works for devolved taxes and why it was decided to have different mechanisms for dealing with different types of taxes?
Like lots of aspects of UK constitution and devolution, it's all rather ad hoc, and I'm not sure anyone a lot of the time can point to the rationale, necessarily, as to why we've ended up where we've ended up. I mean, again, there's a risk here that I'm talking about legislative process things that are not really my area of expertise, but you're right to say we have very different processes for different taxes.
Income tax is technically not devolved, so we have this rate resolution and that's tied into the budget process. The Parliament has to agree the rate resolution before the budget Bill can move to Stage 3. The devolved taxes are then dealt with by a mix of primary and secondary legislation. So, for example, land and buildings transaction tax was introduced as primary legislation. We then had various amendments, through secondary legislation, on things like the first-time buyers relief and tidying up various issues that had arisen in the drafting of the initial legislation.
I believe for air departure tax, once that's devolved, that's a slightly different process that will be involved with that. So, whereas the Government can, in theory, change the rate of LBTT immediately through secondary legislation, and the finance committee then has 28 days to scrutinise that subsequently, if you like; with air departure tax, it's a slightly different process. The Government can't change a rate immediately; there's a 40-day period of scrutiny. In terms of the rationale for all these different things, you can ask experts in Parliament about the rationale, and I think a lot of the time the rationale for where we've ended up is something that's quite difficult to get to the bottom of.
And are you aware of questions about the levels of scrutiny that are allowable under the different mechanisms? As you say, there are some 40-day periods, 28-day periods, some changes that can be changed, and then there needs to be an affirmative resolution in order for them to continue and so on. Are there questions of scrutiny and the adequacy of it?
Well, clearly, there is less scrutiny of secondary legislation than there is of primary legislation, and given the slightly ad hoc nature of which sorts of amendments require primary legislation, which sorts of amendments require secondary legislation, there is an inconsistency in this.
There was a recommendation by the review group to explore options for alternative legislative processes for devolved taxes legislation, especially where, perhaps, tax measures needed to be introduced quickly, or if, say, minor amendments are needed. What's happening? There is a delay there; what are barriers to those recommendations being pursued?
A tax legislation working group has been established to look at those issues. I'm not involved in that; it's early days in that group's deliberations.
Okay. So, it's a matter of processes being followed, and it may or may not be the case that some decisions are made, or recommendations are made by that group.
There we are. Thank you. Mike.
Can I talk about the funding of other bodies from the Scottish Parliament? Can I start off with local government? As far as I'm aware, and tell me if I've got any of this wrong, February is when individual revenue allocations to local authorities are given. In Wales—I don't know what they do in Scotland—there's a duty on councils to set their council tax and their overall budget, not necessarily the detailed budget, very early in March. I don't know if Scotland has the same situation, but if that's the case, isn't it leaving it very tight?
Certainly this has been an ongoing issue. Of course, local government is very keen that it has finalisation of its funding settlements earlier and, indeed, is very keen that the Government more regularly sets out multi-year budgets. The Government's argument, certainly in recent years, is that the level of uncertainty around its finance position is such that it can't give firm commitments beyond the one-year period, and, of course, its argument is that it can't finalise individual local authorities' budgets until the budget has been finalised.
We have exactly the same argument being made in Wales on both sides. Coming back to the point you made about finalising the budget, we have indicative budgets that local authorities get—it's meant to be in November, but it normally drifts into December—and then the final one is sorted out probably around February time, when they have indicative numbers and it doesn't vary a great deal and it normally varies upwards. So, you don't follow that sort of process, they just discover, in February—
No, no. I think it's similar. There's an indicative settlement normally the day after the budget, I think, so in December there should be that indicative settlement number there.
I believe so, yes.
The overall numbers are not necessarily of great benefit. They might be of benefit to the Convention of Scottish Local Authorities, but not to the City of Edinburgh Council.
Sorry, I didn't catch that.
The overall number and how much it's gone up or down—it's probably up, but less than the rate of inflation—would be very interesting to COSLA, I would have thought, but not necessarily of interest to Glasgow or Edinburgh councils, which would only be really interested in how much money they're getting.
Yes. So, I think there's an indicative number in December and, as you say, it's finalised when the budget is finalised.
I'll move on to the NHS, which is another body that, in our case, gets over half of our budget. I assume that in your case it gets slightly less than half because you fund more things, but it's certainly a major recipient of funding. Are there any problems with them setting budgets when they're only getting the information in February, or do they also get indicatives?
That's a good question. I don't actually know the process by which NHS boards are notified of their individual settlements, I'm afraid.
I think the point—we'll take it up with somebody else—the point I was trying to make is that organisations have to, assuming their financial year's going to start in April, they have to set their budgets at the very latest at the end of March and probably most would want to set it early in March. If you're getting your information, without any indicatives earlier, in February and perhaps towards the middle end of February, it does reduce the time. I know people should have medium-term financial plans, but your medium-term financial plans are probably predicated on not having a reduction in income.
I agree with everything that you're saying. This is constantly a worry and a difficulty for all kinds of non-departmental bodies and third sector organisations—a real challenge.
I was going to raise third sector organisations, but you accept that it's a challenge for them as well. We're in exactly the same position. Some of us were hoping that you'd managed to get around it, but obviously—
No, I'm afraid the budget process to date has not resolved that as an issue. In theory, this year, there was going to be a UK spending review, and in principle that would then have enabled the Scottish Government to have undertaken a spending review and given more of an indication about a multi-year settlement. It's now unclear what the process is for that, so it may well be that we have another single-year budget with not much indication of what's going to come beyond that. Of course, what that means is local authorities are in the process of trying to guesstimate what their settlement might be in future years and do their long-term planning on the basis of those sorts of guesstimates.
Thank you. My last question, really, is one that—. We allocate budgets to Ministers within their portfolios, they give most of it out, but they then keep a certain amount back. Some people, who are very kind, would say it's an opportunity for them to fund gaps that they identify during the year; people who aren't sympathetic to them would say it's an opportunity to give out largesse and appear to be funding people well during the year. Do you have that sort of thing happening?
I'm not aware of those sorts of issues.
Ministers holding money and then giving it out during the year. I'll tell you—an example we had, which was outside the local government settlement, was the teachers' pensions. All of a sudden, they were going to create a huge problem for local schools via their local authority, so additional money was put out as a grant in order to support the teachers' pension changes. Did you have the same teachers' pension changes, and if you did, how did they address it?
I'm afraid I don't know about teachers' pensions changes.
Okay, we can take that across—. Okay, thank you. Can I just ask, then—? I think we've covered most bases, really. This shift in committee focus in terms of the way that they scrutinise the budget and front-loading it a bit more, has that—or is it maybe too early to tell, really—had a palpable change in the way that committees operate in that sort of context in the Scottish Parliament?
I do think it's too early to say. This is really the first full year of the new process.
In what way are they expected to really ramp up that focus on a 12-month basis, and not just a couple of finance scrutiny sessions per committee every now and again?
Well, in theory, the publication of the medium-term financial strategy, which we had a couple of weeks ago, is the kick-starting point that should set out the implications of the Government's existing spending plans at a fairly broad level and talk about the risks, threats and broad choices. That should then inform the committees' pre-budget reports in October. The Government should then make clear how it's responded to those, when it sets its budget. That's basically how this new process should work. As I say, it's quite early to see how it will work. It will depend, clearly, in part on the quality of some of these new pieces of budget documentation that we have, so the medium-term financial strategy that was published a couple of weeks ago—how effective will that be in catalysing some of these discussions?
And for those who are looking from afar and wanting to learn from the experiences, we need to keep looking, really, don't we? It's the way this plays out that's going to be the proof of the pudding, really, isn't it?
Certainly. Yes, it will be interesting to see how much this changes things on the ground in terms of—
There's a cultural change here as well, isn't there, really?
Could I ask that—? Take a look at—I'm looking at the research service here, Martin—at the debates at stages 2 and 3 of the Scottish budget, because I'd be interested to understand how opposition Members particularly were able to scrutinise legislation without having any ability to lay amendments to that legislation, because, normally, in legislation, the primary method of scrutiny is through the laying of amendments, whereby you would scrutinise line by line a Bill of whatever description. Now, if the only ability to lay an amendment lies with the Executive, then it enables opposition Members to make plenty of speeches and to put out YouTube videos and blogs and the rest of it. But it doesn't enable them to make—particularly where an Executive doesn't have a majority on the floor—. I'm very interested in how that works in practice—I'm very interested. I hope our opposition Members will learn from this.
So, the Government is—[Inaudible.] There we are. Okay. It'll be interesting to see that, actually, and, as you say, we need to keep an eye on things as things pan out. Great.
Thank you, David, for your evidence. We appreciate it very much. You will be sent, as always, a copy of the transcript to check for accuracy. But with that, can I again thank you for your contribution? The committee will now break til 10.40 a.m. Diolch yn fawr. Thank you.
Gohiriwyd y cyfarfod rhwng 10:15 a 10:40.
The meeting adjourned between 10:15 and 10:40.
Croeso nôl i'r Pwyllgor Cyllid yma yng Nghaeredin, ac a gaf i estyn croeso i'n panel nesaf ni y bore yma? Croeso cynnes i'r Athro Michael Danson, athro polisi menter gyda Phrifysgol Heriot-Watt, a Dr Angela O'Hagan, Ysgol Fusnes a Chymdeithas, Prifysgol Caledonian Glasgow. Croeso cynnes i'r ddau ohonoch chi. Mi awn ni'n syth i gwestiynau os ydy hynny'n iawn, ac fe wnaf i gychwyn jest wrth ofyn i chi efallai i amlinellu neu roi esboniad cryno o'ch rolau chi yn y grŵp adolygu proses y gyllideb. Angela.
Welcome back to the Finance Committee meeting here in Edinburgh. May I extend a warm welcome to our next panel of witnesses this morning? A very warm welcome to Professor Michael Danson, professor of enterprise policy with Heriot-Watt University, and Dr Angela O'Hagan, School for Business and Society at Glasgow Caledonian University. A very warm welcome to you both. We'll go straight to questions if that's okay, and I'll start just by asking you to briefly explain your roles in the budget process review group. Angela.
Thank you very much. Thank you very much, convener, and thank you very much for the invitation to be here today, and welcome to Edinburgh, I say as a Glaswegian, but I don't hold it against anybody. [Laughter.]
My role—I'm named in the review group as a gender budgeting specialist, which is rather grandiose, but I was part of the review group because that's my main research area. I had for a long time been involved in the Scottish and UK women's budgeting groups, and was co-convener of the European gender budgeting network, and had also been a long-term member of the Scottish Government's equality budget advisory group, of which since September 2018 I have been the independent chair, so I'm no longer the convener of the Scottish women's budget group in order to have that separation, if you like, of interests.
So, I was brought in because, I assume, of the long-running commitment from the Scottish Government and Scottish Parliament to try to advance equalities analysis, and embed equalities analysis in the budget process. And so, that was considered to be fundamental or a central part of the budget review.
Thank you. Interesting question, because I was never quite sure. [Laughter.]
Is that a good or a bad thing?
Again, a good question. I think the invitation came because I was a general economist and I'd done a lot of work on urban and regional economics, particularly regional development, regional development agencies, and some work on local government and local government finance, and the like. So, I think, really, as a generalist, as a representative of objective academic insight that would balance up along with the other experts and officers from the Parliament and from the Government.
Okay. So, were you involved at all in agreeing the set of principles that guided the work of the group, or had all that been done before you got involved?
I think they'd already been done beforehand; they were delivered to us—the overall objectives.
I would say the terms of reference were proposed to us, but there were discussions around what were the principles, and quite a lot of discussion early doors about whether or not to retain and build on the founding principles of the Parliament and the financial issues advisory group principles that were part of all of that process of founding the Parliament in 1999 and 2000. And the financial issues advisory group principles were considered to still be valid and relevant to the work of the review group, and did help frame some of our areas of inquiry.
And did you feel in terms of the terms of reference, particularly, maybe, there was anything that you would have liked to have seen included that hadn't been included?
I think that they were fairly broad, as Angela said. It was time to revisit the terms of reference and the principles because of the Scotland Act 2016, which had given an awful lot more powers over revenue raising, in particular, but also other changes that were happening elsewhere in the UK with regard to the budget process and timings, which meant it was timely to have another look.
Because I was just thinking, in terms of if we were interested in replicating some of that process in Wales, is there anything that, looking back, you thought maybe could have been included? But, you're pretty content that it was broad enough as it was.
I think so, and I'm sure we'll get on to it, but we started off with quite radical views on the principles and so on—broad—and the civil servants in particular were very careful at managing that.
Ah, right, okay. Well, that is going to lead us into a few interesting questions, then, because we've previously heard that there was a great deal of consensus around the whole process. And I'm interested in how the group might have overcome any differences or any tensions that may or may not have emerged between, particularly, Government agendas and parliamentary agendas.
I think the—. There may have been, but they weren't really overt, from memory. It was really letting the experts in particular know that the process had an awful lot of inertia in it, that the timings—. Because there was now going to be two Office for Budget Responsibility forecasts per year, two UK budgets, and, because of the changes—well, the introduction of income tax-raising powers—it meant that there was—. It became apparent that there was going to be very little time for scrutiny, for wider consultation, not only by committees, but the general public and so on. So, it was that sobering input, both from the Parliament, but also the Government officials, I would suggest, that really brought us back down to having limited suggestions of what might happen in changes.
Well, I'm interested in this now. I want to know what were those radical ideas that you started off with. I like the idea of having people like yourselves, who have academic authority and knowledge, to be able to aid and give something to the political process, where there can be a certain lack of knowledge, shall we say; politicians are called generalists, I think, in polite company. So, what were those radical suggestions, because you both come from very clear backgrounds in terms of gender, and in terms of fragile communities, I think, in Renfrewshire. And I'm interested, therefore, in, if you feel—it's a lovely turn of phrase, Professor, the 'civil service managed our radical ideas'; the civil service was born to do that, of course—. So, what were those radical ideas, and how did that input into the overall process?
Do you want to—?
You're the radical.
Okay. Thank you. [Laughter.] I think, as I said, what became apparent was there was actually very little time over the annual process, between budgets and so on, for the degree of scrutiny, general conversation out there, of going out to the general public, civic society and others, to be involved in setting the current year's budget, tweaking it and so on. So, this last year, the budget was on, I think, 12 December. I can't remember the actual timetable, or I'd tell you that, but it was very, very short, and Christmas and new year were there, but, in some ways, that was the earliest and the latest the budget could be presented. And a huge amount of inertia and so on. So, the radical idea was, basically, there'd be a much wider conversation in Scotland, Scottish society, as well as within the Parliament, between the parties and so forth.
The other thing is the reality is that it's a minority Government. Therefore, there have to be negotiations, trading with other parties, to get the budget through, and it's not long until the votes have to go through, for the sake of the NHS and local authorities having their own budgets confirmed, before they then set their coming year's budget.
I suppose there are different elements, really, to that question. One is, I think, about how radical could we be in terms of the process of the review group, and how contained was the review to be to the members of the group, and how much public involvement was there to be. The other thing, I suppose, linking the two questions, in terms of, from my perspective, the extent of equality and human rights scrutiny in the budget process, and the extent to which both Government and Parliament are prepared to be transformative and transformational in their approach to public finance management and what is the purpose of public finance—is it to support achieving well-being and equality objectives? Is it to ensure the progressive realisation of rights through the maximisation of available resources, to use the human rights framework? If that is the purpose of public finance, which is what I believe is how we should be managing our public finances, then that’s what I would have liked to see the whole budget process be about. We have yet to find, I think, a Government in the world—New Zealand have started on that track—with a well-being budget. But, all of that said, there was opportunity to raise all of those points within the budget review group and that, I think, was down to the people around the table, who—it might not necessarily have been their lead position, but it wasn’t a position that there was any opposition to from the invited members of the group.
I do recall, at one point, when we were talking about participation and transparency and openness—so, again, returning to the founding principles of the Parliament, but also in terms of the Financial Issues Advisory Group principles, which include providing the opportunity for the public to have the opportunity to put their views to subject committees as well as individual MSPs, et cetera—. And there was discussion about public engagement and the whole question of how open is the budget process in Scotland. And it has been a very open process in lots of ways, but it’s also hidden in plain sight, how open and accessible that process is. And so, there’s still, I think, a weakness and some areas of improvement needed in terms of delivering on those founding principles around openness.
But, in terms of policy coherence at the time, the Scottish Government has been advancing and resourcing participatory budgeting, and so I recall asking the question as to how participative would colleagues within Government and Parliament regard any future Government or any future budgetary process, and I think that was a bit of a tumbleweed moment, really, as to how participative—. There’s an agreement between the Convention of Scottish Local Authorities and the Sottish Government for 1 per cent of local government budgets to be decided through participatory means.
By 'participatory means', you mean—?
Through participatory processes.
Almost a local referendum?
No, not local referenda necessarily, but participatory, deliberative democracy processes at a very local level—so, communities deciding on priorities. But it's only up to 1 per cent of council budgets. And so asking that question of the budget review group: was this something that should be considered for the national budget? So, in terms of radical ideas that were not within the frame and within the scope of the budget review, that's the one that comes to mind.
Okay. I'm interested in the approach, in how you believe the Scottish Government and the Parliament have been able to respond to that level of input. In terms of your interest, Dr O'Hagan, in gender equality issues, do you think that, as a consequence of the work of the group, the budget takes more notice of issues around gender equality?
We're in the first cycle of the new process. We have, in Scotland, since 1999, which was when the Scottish Women's Budget Group was founded—so, we've been in dialogue with, and aiming to progress gender analysis in the Scottish budget process for the 20 years of devolution, with varied results, but sustained commitment. It's taken different forms—you know, it's had its ups and downs as all of these things do—but the fact that the Equality Budget Advisory Group has been sustained and retained, albeit in different forms, since 2009; the Scottish Government has produced an equality budget statement as an integral part of the budget documentation and was the first of the constituent countries of the UK to do that—so, there are a lot of ways in which that commitment is sustained, both in terms of the political rhetoric and in terms of some of the processes. And you can see, over the years of the equality budget statement, an articulation of the learning and a shifting of position around the robustness and appropriateness of the economic models that we make economic policy within in terms of their capacity to understand and advance gender equality. So, there's an ongoing conversation. As with everywhere, there are areas for improvement, no doubt.
Yes. I've been impressed with the approach of the Scottish Government to the place of women in the criminal justice system in Scotland and some of the work that's been taken on there, which I think is way, way in advance of what we've been able to do in Wales. I was wondering whether you felt that that is reflected—whether you agree, first of all, of course, but if that is reflected in other elements of the budget, for example, health or social services, or enterprise and economy.
How long have we got? [Laughter.] So, I think the question always with—. There are a number of questions around gender budgeting, but if we accept, firstly, the premise that the budget is the principal expression of any Government's priorities, because it's where it's putting our money, where it's putting public revenue, so the next thing is an examination of resources to see are resources being allocated in such a way that they're going to eliminate persisting inequalities or advance equalities, and then to redistribute resources in such a way that they will bring about those objectives. So, while we have, I think, some very strong policy rhetorics, some very strong political commitment, and we've had some very progressive legislation, we also need to look at how that is funded and resourced. Just this week—you referenced criminal justice there—the justice Secretary was talking about having to look at community sentencing and community support for women offenders as alternatives to custodial sentences, and the response from women's organisations involved in that area was, 'Well, we need to be investing in prevention; we need to be investing in community support.' So, like every aspect of policy or legislation, there are—it needs to be looked at at both ends.
I've just completed a piece of work with the Scottish Government on behalf of the WiSE Centre for Economic Justice, looking at gender analysis in economic policy. Again, there's a lot of goodwill, but there's a need to build the gendered knowledge within Government—that's not particular to the Scottish Government—so, how to interpret, analyse, ensure that we have the baseline data. And how to interpret and analyse that for effective policy, I think, is common to all Governments. At least what we have in Scotland is a willingness to listen and to engage in improving that.
I'm interested in participatory budgeting as well. Intellectually, philosophically, I like the idea of active citizenship. It was active citizenship that created the NHS—the Act of Parliament followed it. I'm interested in that; I'm interested in how we achieve that. I'm also interested in how we protect that, because we've all seen, you know, Cambridge Analytica, dirty data, the manipulation of populations that's taken place on an industrial scale over the last few years, and that frightens me, quite frankly; it absolutely terrifies me. I'm interested in how can we move forward to do what you've both suggested in different ways to engage and involve and to do that in a positive way and to enable populations to shape budgets and services in a way that—not the 'this is what you're going to have, whether you like it or not, be grateful' sort of approach to politics. How do we do that a time when our access to information has never been so great and so possible, but also access to corrupted information, if you like, is also an extraordinary—? Certainly, in my constituency in south Wales, Facebook is a rumour mill that creates as many difficulties as it solves, at least, and that's me being very generous.
There's a lot in there.
I'm not sure I would—I'm not even following some of the links to big data and participatory budgeting. I think having just, again, completed a three and a half year evaluation of participatory budgeting in Scotland on behalf of the Scottish Government, looking at the impacts on communities, services, policy and the extent to which it's tackling inequalities—. And that report was published on 31 May, so that might sort your train ride home. [Laughter.] What we found there is the need, again with gender budgeting or approaches to equalities budgeting, to have a clear conceptual framework: what is it you think you're doing here when you set out—. You know, we're not looking to be counting women and men, for example. Participatory budgeting, if it is to be more than transactional, needs to be about more than, 'Well, here's £50 for some craft supplies for a local women's or carers' group', for example. And that's the kind of example that we were finding in the very early days. If it's to move into a transference of power and resources—that's about a different relationship between the citizen and the state, which moves us into a transformation of that relationship and where power lies, and so we get into discourse and the realities in practice of what we mean by community empowerment and local governance. And that's about a renegotiation of those relationships, wholesale. And participatory budgeting has also revealed itself to have all the elements of structural inequalities, exclusive and non-exclusive participation, as any other form of governance.
Go on then, Mike, yes, if you want to come in.
You talk about 1 per cent in local government being spent on local priorities, but it's come off the amount of money local government had to spend in the first place. So, which parts of local authorities have lost out by the 1 per cent being spent on locals? I used to be a local councillor. In the area that I represented, they wanted to spend more money on collecting dog mess, keeping the streets clean, and they wanted to spend less money on community services and social services, because they are things that don't impact on most of them. Basically, who's losing out on that 1 per cent?
I fear I have set a hare running—
I was going to say, we could have an inquiry, and maybe we should have an inquiry on participatory budgeting.
I'll, maybe, restrict my comments, then. The 1 per cent is about the process. The 1 per cent is the value across council budgets. So, it's not about taking it out of one budget and putting it into another. It's about ensuring that there's a floor—1 per cent of the overall council budget is decided upon through participatory processes. So, what are the local community priorities? And that's the agreement that has been reached.
To return to the budget review group, we did have discussions about how effective the public consultation process was, how effective current practices were in terms of explaining and ensuring transparency of the budget process, and it was agreed that there was really quite a bit of work to do around that. And so, in the current iteration, going back to Mr Davies's question about how effective the recommendations are, particularly in relation to equalities rolling out, we're in the first iteration of the new cycle. And there have been attempts to improve the budget process. There are ongoing needs to improve budget documentation, to improve clarity and consistency, and ease of access.
And the Scottish Human Rights Commission has also, in the last 18 months or so, undertaken some really excellent work around human rights budgeting in Scotland, and the extent to which we are compliant with a whole lot of international indicators on open budgets, open government and so on. And that's revealed that there's a fair bit of work needed around transparency, the ease of access, and use of and utility of the consultation processes that are available. So, again, there is some very positive learning coming out of that.
And that takes me to my next question, really, in terms of what your advice would be to us in Wales if we were to look to implement some kind of review group. What would your advice be to us and, maybe, something about that balance that needs to be struck in terms of the experts on the group?
There was equal representation, roughly, from the three groups—so, the Parliament, the Government an external experts, and Angela and I were in the latter group. I think we were very well served by having the auditor general and colleagues there who had been heavily involved in scrutinising, were very aware of process, and so on. So, a lot of discussion was about process as such, and process in quite a rapidly changing and new environment with the increased revenue powers, and so on. So, having those external experts was important—having external professionals. But, also, some of those who were asked to come and give evidence were very useful—from Her Majesty's Revenue and Customs, from those with experience of the New Zealand models and participatory budgeting there, and so forth. Anything to add?
I would absolutely agree with Mike, and, going back to an earlier point about consensus, I think it's important to say there was consensus within the group over most issues, and most issues were also discussed well and in a very collegiate manner across the group, and that, I think, helped move our thinking and shift positions, and it was a thoughtful process. I thought it was unusual and obviously very welcome that there was a distinct equalities perspective on the group, and I would certainly encourage that, but to not be a sole voice, so it's not that that's the equalities person. Now, that's not to say that colleagues didn't support or, at times, lead on equalities or human rights considerations, but there is a tendency to view that, rather than as a mainstream perspective, as a singular perspective. So, I would certainly encourage that external knowledge. I wonder, as well, about ensuring that there is representation from the public agencies who are discharged or to whom—in this case the Welsh Government budget—to whom it's discharged and who has the responsibility for discharging that finance and achieving the outcomes that are set. Again, we had a lot of discussion about that—that the outcomes as set in our national performance framework or the aspirations, for example, in your own case of the well-being of future generations aspirations, are to be delivered by other agencies. So, in terms of what kind of scrutiny is effective, what kind of scrutiny could be improved, and what the evidence base for that scrutiny could and should be and how that might be improved, I think those perspectives are very important to have as well.
Yes, okay. Thank you. That's interesting. Thank you. Rhun.
Yes, let's have a look at how the legislative budget process works, so we can draw some comparisons with our process whereby the Welsh Government budget is approved via a motion. What are the pros and cons of the legislative budget process, do you think?
I seem to be talking a lot.
You do, but you do it so well. I think the problem with it, as I've already said, is the little time available to scrutinise. So, I think, taking on board everything Angela said and the reviews to the process and so on, I think one of the most important recommendations is that everybody should be taking a much longer time horizon to look at multi-annual budgeting, or just to accept that the reality is that, because most of the budget has an awful lot of inertia in it, and it's really just the bits on the top that are debated and discussed in the public sphere in the Parliament. So, to accept that and to get committees, as well as the Members themselves and the Government and so on, to take a much longer term view, would then impact back on what the actual annual process is about—so, to scrutinise more, to anticipate what the budget's going to be, rather than reacting, because there's so little time available.
To pick up on some of the things Angela was talking about then, for civic society out there, they're in an even poorer position. So, again, we could have very radical suggestions, and so on, on the review group, which then get made more realistic, let's say, through the process. Then what we're seeing with civic society is you've actually got a very, very short time to influence the budget scrutiny, the debates and so on, and, for many in civic society, they're small organisations. They don't have the resources. So, we have lots of consultations, and so on, but the capacity to respond to those in a meaningful way is much less than might be suggested.
And does it favour Government more than opposition, as opposed to the Welsh model, do you think? Because Alun here is very concerned about opposition not being able to amend, and so on, after Stage 1.
As was said earlier, it's a minority Government and therefore they have to have discussions with other parties. You then get into the party politics, and, for the last two or three years, it's been quite apparent, whatever is said before Christmas after the draft budget, the Greens will be persuaded to come forward with a couple of suggestions, and those will be accepted by the Government and it'll go through. Behind the scenes, there are negotiations, and so on. So, the opposition parties do have the capacity to influence there. Whether they choose to dictate, that's another matter. And there have been instances in previous years where Lib Dems, not as a party, but as individual MSPs, will get something into the final budget, which means they will vote for it and it'll go through.
Pros and cons.
Ultimately, the budget process is a political process as much as everything else, and, so, yes, the horse trading that goes on in the background will happen, really, whatever the mechanism is. I think, given—again, within the context of the budget review group—such a lot of the focus over deliberations were on improving scrutiny, improving the understanding both within Parliament and within the public that a budget as set is set at a moment in a time but the outcomes and the deliverables from that budget happen over different time periods, different time frames and different cycles, and that by expanding, as Mike has said, the time and opportunity for scrutiny and expanding the breadth of that scrutiny, drawing in a range of different types of evidence to support that scrutiny—. One example there that I can remember consistently making was that, in the pre-scrutiny, there should be greater use made, for example, by parliamentary committees and parliamentarians of the public sector equality duty reports, the mainstreaming reports, the equal pay reports, et cetera, because that tells us a lot more about what public sector organisations are doing than perhaps might otherwise be looked at if you're solely looking in terms of spending or spending related to specific policy targets. Look more broadly at the range of evidence there. And so, by extending the budget process to be a year-round process, improving that scrutiny, it helps with the other principles that we were concerned about in terms of transparency, accessibility and accountability, and it extends that process.
The other conversation that was part of that wider discussion was a move away from viewing the budget as political theatre and adversarial plenary functionality, and that the budget is much more than that—that it's part of the policy process and we need to understand better that it's part of the policy process.
As politicians, we have expectations of what we're able to do through various stages of budget scrutiny, and so on. On that decision and the opinion of the group that amendments should only be allowed by Ministers after Stage 1, give us a taste of how that conclusion was reached. And, again, it may well be that you can influence in different ways. You can influence through amendments, you can influence behind the scenes, you can influence through—.
I mean, again, in part, the parameters of—. We went back and forth on the stages of the budget and the time frame of the budget, and, obviously, as well, we're talking about—and you may come on to this—the timing of the Scottish budget in relation to the timing of the Westminster fiscal moments as well. And, so, with those time constraints, and always mindful that there needs to be a budget set with sufficient time for public agencies who rely on that, I think it was always that balance between the political and the pragmatic: how to expedite a budget process that doesn't leave us adrift in terms of managing our public sector.
Could I just ask—? I mean, it's probably too early, maybe, but I don't know whether you're close enough to parliamentary committees to get a feel for whether that cultural change is actually being embraced by committees—the twelve-month, year-round sort of focus on budgets.
I think we need to be—. I say this not just from an academic research perspective but as an activist, in a sense, as well, it will be after this first time—
Yes, it is too early.
It is, really, too early. We'll need to look back to see: have the committees been calling in a wider range? Have they been setting up evidence sessions, et cetera, to look more widely at pre-budget scrutiny? Some of them have, but I don't have a feel at the moment how widespread that is across all the committees.
Okay. That's fair enough. Thank you.
On scrutiny of tax rates and changes to tax raising and the setting of rates and so on, there is a whole host of different mechanisms depending on what the devolved tax is. Is that working that there are different models? Do the different models reflect the need for scrutiny? Is scrutiny sufficient under the different models? I recognise I'm asking you to comment on a whole host of different things, but, in general.
Could you clarify which models?
Well, you have an affirmative resolution for the setting of some taxes, you have other taxes where you need 28 days' scrutiny, 40 days' scrutiny and so on. So, it's horses for courses. Are the right horses in place, and is there sufficient time and capacity for scrutiny under the different models, if that makes sense?
I don't really know. Do you?
I recall some of the conversations in the review group and the concern to address what had been practised up to date as things are evolving in quite a fast changing process and where there had been sort of catch-up measures in a sense and where changes in tax instruments had to happen very quickly. So, we had excellent evidence from Revenue Scotland on those points. Since the budget review group completed and produced its report, the Scottish Government had a consultation on the role of taxation in the Scottish budget, which was not entirely a cross-party exercise, but the Scottish Government produced a report looking at what the different party proposals were and ran several consultation opportunities to try and get a feel for, in some ways, the politics of that and the sensitisation around taxation, et cetera, et cetera. But it has been part of, I think, a very much needed conversation on taxation, and there's a long way to go there.
But there's also just recently been consultation on devolved tax policy, trying to bring into line an approach to making tax policy that is aligned with the budget and aligned with normal legislative processes in Scotland, with a view—my interpretation anyway—to trying to avoid those kind of catch-ups or patch-overs, but rather there's a way of bringing forward tax policies and proposals around tax instruments that is transparent and consistent, and that's just been consulted on. The consultation closed on that last week, so there'll be proposals forthcoming, as I understand it.
Okay. And on any suggestion for new taxes, are there processes through which new taxes can be brought forward or is that part of that?
That'll be part of the tax policy proposals, but also there are the tax proposals that were contained in the Scotland Act 2016 that are coming down the line, or not, depending on various decisions elsewhere—air passenger duty and various—. There are various other things in the mix there that aren't entirely within the governance or control of the Scottish Government, but I'm sure other colleagues with more practical knowledge will be—.
On the question of there being different mechanisms of dealing with different taxes through the budget process, you're comfortable that there needs to be perhaps a different model, depending on the taxes. You don't look overly concerned about this.
No. One thing that came through very clearly was just the time to introduce new tax. It was already alluded to, the lack of data, the number of agencies doing different sorts of forecasts, and they have to mesh together and interlink and so on at a UK level and at a Scottish level. Under the current budgets, one of the Green proposals, which is in the budget, is for a workplace parking levy, which is quite controversial. Now, that's not being introduced; it's to give the right to local government to set a levy for parking over a certain size of number of spaces and so forth. Now, that's not introduced immediately; that would have to go through the whole process and consultation and so on. So, even quite a small change that may never actually come about takes time to go through. And in some ways, it's a way to shelve it.
And I'm well briefed on that one, thanks to BBC Radio Scotland this morning and the discussion on it.
The review group didn't recommend to move forward with the finance Bill, and I presume—is that the research or the piece of work, the consultation that's just finished that you are referencing? Because there has been an undertaking to do some work before the end of this Parliament, hasn't there, in terms of looking at a finance Bill that would bring maybe the budget process and the taxation stuff that we've just been talking about into one process? What were the arguments? Why did the group not feel that they could recommend that? Is it just because you felt that much more work was needed or would you have been biting more off than you could chew?
I'd need to look back to the report for that.
Yes, okay. That's fine. We'll move on to Mike, then, if that's okay.
Thank you. You came to me faster than I expected then. If we look at third sector organisations, the budget is set in February, so some of it will go to local government, some to third sector organisations, some money from local government as well as from central Government. Is this very late provision of finance having an effect on third sector organisations? I can tell you that in Wales there are third sector organisations who, every December, put out redundancy notices to a number of their staff to finish on 31 March because they don't know if they're going to be able to afford to fund them next year. Do you have exactly the same problem?
Yes, effectively, and it's been like that for a long time. Again, there was a suggestion of multi-annual budgets and so on for third sector, for local government and so forth. Tied up in the local government, which would then impact on third sector, is for them not to be so dependent upon central Government.
When I was leader of a council many years ago, we actually gave third sector organisations a comfort letter, telling them they would be no worse treated in terms of funding for the following year than the council was as a whole.
But you had a Labour Government then, didn't you?
It didn't matter what Government you had, and some of it was under a Conservative Government, but it didn't matter what Government you had because you knew you were going to get your budget, so you would tell them they would not be worse treated, which, I think, does—. Because there's a fear amongst some third sector organisations in Wales—I assume also in Scotland—that if things get really tough, they're an easy line on the budget to be deleted. Do you have the same sorts of fears?
That wouldn't be a great comfort, given the cuts from the UK Government to the Scottish budget. Much of that has been passed on to local government, so local government has already had austerity cuts for a number of years. To ring-fence some of their reducing budget for third sector organisations would mean cuts elsewhere, which would then put greater pressure on those third sector—. It's nothing new; I used to work for Strathclyde Regional Council in the late 1980s, and it was a lender of last resort because the European funds would often be delayed. So, this isn't new, but tying local government's budget up for the forthcoming year wouldn't be very popular for those in education and so forth, social services, I expect.
Okay, thank you. When setting the timing of the Scottish budget, which is within the system very late—. We in Wales have indicative budgets for local authorities, for example, in December, which are then finalised when we get the money, when we're told what we're getting from Westminster, but I cannot think of a time when the movement has not been upwards. So, there are indicative budgets and unless some people have had serious population loss, the final budget for each authority will go up slightly or stay the same. Do you have the same here or do you have a situation where it's wait till February and then set your budget in March?
In many ways, yes, it's wait till February, set it in March. If you've seen the Scottish press today, Derek Mackay had to admit that there would be hundreds of millions of cuts to the Scottish budget over the next few years, because of cuts that have been passed on from Westminster. Therefore, setting indicative budgets would really tie them up, and there also have been changes to local government moneys coming from the Scottish budget.
Sorry, I misunderstood what was happening in Scotland. I thought part of the problem with the reduction of the Scottish budget was that they weren't collecting as much in taxes that had been devolved to them as they'd expected.
It's highly complex. It's based upon the relative rates of growth in Scotland and, basically, London, Greater London. And David Eiser would've taken you through some of that, I think. But, in Scotland, those forecasts are then driven by the Office for Budget Responsibility, by revisions at the UK level in November, given that's when the main budget is, and that can have radical effects upon how much funds are coming to Scotland, to the Scottish budget, for the following year. And we've then got these revisions due to income tax forecasts in the past and income tax outcomes, and they'll become more important over time. And all that, as I said before, there is very little time to be able to set the Scottish budget, to have scrutiny, and so forth.
I need correcting on my thoughts on this, because I thought that the money Scotland had from Westminster was coming through under the Barnett formula still, but the money that Scotland was collecting was based upon Scotland's capacity to predict and collect it, and that they've had a reduction in the amount of money they had, to set it as net zero at the date at which the different taxes were devolved.
I'm trying to unpick that. As I said, it's all based on forecasts of what income will be in Scotland and the UK, and then revised by outcome. Those forecasts are dependent upon data, on models and so on. We've got some of the best models in the world in Scotland—[Inaudible.]—it's what drives those models, what drives the outcomes are often out of the hands of the Scottish Government and Scottish Parliament and so forth.
But the money that is the non-devolved taxes still comes under the Barnett formula, doesn't it?
Well, changes come under Barnett, yes.
Yes, changes. But changes are good, because Scotland did incredibly well in the past, but it was going through a population loss and, therefore, the amount per head went up.
But the land area—[Inaudible.]
No, the land area, but land areas don't visit doctors, for example.
It's an awful lot more expensive to provide GPs in the Western Isles, for instance, than it is elsewhere, in the big cities, therefore, the Barnett formula is driven by—[Inaudible.]
Yes, but changing the Barnett formula—. The amount per head is driven by population and the amount going up—
Yes. We're not going to deconstruct the Barnett formula here at the moment, although I'm sure some people would like to take it apart, literally.
I'd like to deconstruct it.
Be careful what you wish for.
Yes, okay. Well, that's a whole other inquiry as well. We're setting up our own work stream here, I think. Okay, we've covered most of the areas that we were hoping to cover. Is there anything else that Members would like to—?
Could I just ask a question of Professor Danson? You said on a number of occasions—and I'm interested in this—you talked about the speed by which the process flows, and my understanding of your evidence this morning has been that that sometimes precludes and prevents organisations from fully participating in the process, if I understand you correctly. I'm interested, therefore, given this operates within a context, which is not in the control of any of us, in different ways, how then would you see changes to this process to enable wider participation, perhaps, in the way that Dr O'Hagan has indicated that she would like to see?
If we look at the framework that has been proposed it is that the Government, the Parliament and the committees and so on should take a much longer view with multi-annual budgets and look at what the—
That isn't always possible in the real world. I agree with you in theory, and I've got no issue with that, but it's raining on Saturday, and I wish it was sunny. That's not how the world actually works most of the time.
No, but you knew it was going to rain, therefore, you think, 'Okay, it's going to rain today—[Inaudible.] So it's encouraging the committee—[Inaudible.] I've been involved in a number of committees and other meetings where civil servants—[Inaudible.] It's such a difference from Westminster, because it is round-table. We've got civic society, we've got academics, we've got experts et cetera et cetera. So, it's encouraging the committees to recall that and to take a longer-term view. We don't have five-year plans, as such, but we do have a national performance framework, which is generally agreed across the Parliament. That's embedded into the sustainability development goals of the United Nations, and there are indicators et cetera et cetera. So, a lot of what the Scottish Government and the Parliament have a consensus about is looking at longer-term change, and it will take the long term to change things. So, the committee should bring that on board, in which case it changes how they approach the budget scrutiny and so forth.
In terms of increasing participation, which is something I'm very, very interested in—politics shouldn't be about people who look like me sitting in rooms like this and having dry exchanges about the intricacies of things. Politics has to be alive. I come from the same street as Aneurin Bevan; we want to thump some tubs sometimes and have real conversations with people outside in terms of where we do our politics. But that also implies and requires an informed conversation, and an informed debate and discussion. Given the time constraints, which I think are real—I don't think that Governments make these things up to make life difficult for us, although there is a suspicion that sometimes they do, I accept that. Have you given any thought to how do we empower people through informing people and finding different ways of providing people with—? Knowledge is power, you know. How do we provide people with the power to challenge Government, to challenge parliamentarians on the decisions that have been taken? So, in terms of participation, have you given any thought to how that can work?
Angela has spoken at length about the gender aspects and so on, and about the length of period over which that's been building up is since 1999—is that right—onward. So, it takes time. It's well embedded, but it needs refreshing on occasion and so on. As I just said, Scottish Government, Parliament are much more—[Inaudible.]—than Westminster, so it's about ensuring that's built upon.
One aspect we did discuss was about the presentation of the budget, particularly around the local authority aspect to that. It wasn't wholly transparent, and there were different figures in there that meant different things to different people. So, the finance Cabinet Secretary was called to account on that—that he should change—. Now, the word 'change' is in the most recent budget, but it was still—[Inaudible.]—actually saying. So, it is about knowledge, information and empowerment, and having the fora where people can talk or be involved. But for those below that, civic society, do they have the resources? Should we be giving them the resources for that and so forth?
And just one aspect, when we're talking about change coming through, is island-proofing. So, you have these three big archipelagos—Orkney, Shetland, the Hebrides—where any legislation is island-proofed, and this leads to a petition that rural areas should also have proofing introduced. And the more and more you add in a particular aspect or dimension to any legislation, the less any particular aspect is considered, because getting this—[Inaudible.] When everything is getting proofed against, nothing is.
That's a very real discussion that we've been having in Wales, actually, because we've had concurrent meetings with other committees in the Assembly to scrutinise Government on some of these impact assessments, and the long list of checks that are required and how meaningful those become when it's such a large process. And, of course, weighting that against the expectations of the Well-being of Future Generations (Wales) Act 2015. So, how much of that should be happening as part of the normal process anyway. But that's quite a timely relevant point, really.
One thing we did recommend was that the committees should talk to each other and recognise other portfolios as well when they're considering their scrutiny.
Just to add a couple of points. There's nothing I would disagree with there. I think, trying to link a couple of points to Mr Davies and Mr Hedges—and again within this context of very tight timing and opening up the budget process to avoid those bottlenecks and the prevention of greater transparency and participation. So, there's emphasis on the budget evaluation and formulation period, and then there's the parliamentary committee, the pre-budget reporting to consider pre-budget formulations, what priorities the subject committees might wish to see, and promoting those priorities to Government. It might end up being a bit of a wish list that couldn't be funded, but it's also in terms of trying to do some of the prevention and protection work around maintaining funding streams to particular agencies, particular policy priorities, and to re-balance that process in terms of the perception, if not practice, that the budget starts every year with a clean sheet, rather than there already being ongoing policy commitments and ongoing spending commitments.
That's where we also, in the budget review group, as well as elsewhere, had conversations and pressed hard for that information to be improved—the quality of the information, the format of the information, not just around the budget content but around the budget process. SPICe, the Scottish Parliament Information Centre, do an excellent job and have improved consistently the infographics and the interactive way that the budget information is presented, but you need to know that it's there, and you need to have a level of interest for that to be effective.
I think there's a long way to go in the Scottish budget process and, potentially, the Wales budget process as well, having been looking at that for other reasons recently, other than today's meeting, precisely to address the issues Mr Davies has in terms of empowering and informing people. But that needs to be resourced, and there needs to be a commitment to the politics of public finance, and the emphasis being on public—that this is public money and is the spending and allocation of revenue raised from the public. And the focus not necessarily always being on the numbers in a political way—'Yah boo, where are the 100 extra police officers? Where are the 500 extra beds?'—but rather what has been the outcomes and what are the ongoing priorities, rather than an assumption as well that the public's priorities change as well in line with budget cycles. Those public priorities may well remain the same, and people might want to see the same types of funding commitments.
The final thing: I'm trying to become familiar with the strategic integrated impact assessment process in Wales for looking at gender budgeting in Wales. And I think, to link to something that Mike Danson's just said there about the emphasis on different areas of proofing, it's about not seeing, I would argue, particularly gender and equalities as competing priorities, but as the starting point for analysis, and that alleviating child poverty, intra-household resource pooling, climate change, remote and rural, are all—. If we address those issues as part of addressing a wider equalities and well-being agenda, rather than that they are competing, that way we should be attempting to avoid either a politics of equivalence—that we need to talk about equality, then we talk about climate change, then we talk about these things—but rather, they are all part of the same process.
And it is not beyond the wit of woman or man to actually see the integration, but that comes from improving our data, improving our analysis, and improving capacity, building the confidence and competence of officials in taking on these different approaches to policy making that we've been encouraging them, under the public sector equality duties and the Wales and Scotland specific duties, to drive policy making towards, but we've not quite managed to get there yet.
Okay. Thank you very much for your evidence. We're very grateful. You'll be sent a copy of the transcript to check for accuracy, but as I say, we're very grateful to you for your participation this morning. Diolch yn fawr iawn. Thank you.
The committee will now break. We're scheduled to reconvene at 12 o'clock. I suggest that if our next witnesses are present, we might try and start a bit sooner. Okay? Diolch yn fawr. Thank you.
Gohiriwyd y cyfarfod rhwng 11:40 ac 11:57.
The meeting adjourned between 11:40 and 11:57.
Bore da. Croeso nôl i'r Pwyllgor Cyllid, sy'n cyfarfod fan hyn yng Nghaeredin, wrth gwrs, ar gyfer derbyn tystiolaeth ar broses y gyllideb ddeddfwriaethol. Dwi'n ddiolchgar i'n tystion nesaf ni am ymuno â ni: Caroline Gardner, Archwilydd Cyffredinol yr Alban, a Mark Taylor, cyfarwyddwr archwilio gydag Audit Scotland. Diolch yn fawr iawn i'r ddau ohonoch chi am ddod atom ni. Mi awn ni'n syth i gwestiynau, os ydy hynny'n iawn a gwnaf i gychwyn drwy ofyn i chi esbonio inni yn gryno eich rôl chi fel rhan o'r grŵp adolygu proses y gyllideb.
Good morning and welcome back to the Finance Committee, which is meeting here in Edinburgh, of course, to receive evidence on the legislative budget process. I'm grateful to our witnesses for coming to meet us: Caroline Gardner, Auditor General for Scotland, and Mark Taylor, audit director with Audit Scotland. Thank you very much, both of you, for being here. We'll go straight into questions, if that's okay, and I'll start by asking you to briefly explain your role in the budget process review group.
Thank you, Chair. As auditor general, I was a member of the budget process review group. I think the committee will know that it was established as a joint enterprise between the Scottish Parliament and, particularly, the Convener of the finance committee and the Scottish Government, the Cabinet Secretary for finance. The group was established as a shared enterprise with eight independent experts, of whom I was one, four Scottish Government officials and four Scottish Parliament officials, and the aim was to make sure that it both had access to all of the legal, professional and technical expertise that it needed from people currently responsible for the process, plus a sufficiently large and diverse group of external advisers who could bring their experience, challenge and support to the review of the process.
And I very much supported the auditor general throughout that work, but also—it may be relevant to the committee—since then have worked with parliamentary officials about, essentially, explaining how the budget process has been designed, and working around some of the development issues that flow from that.
We were interested to hear the great degree of consensus that existed, because, coming here, we had thought that there might have been some tensions between different agendas in terms of Government wanting certain outcomes, Parliament wanting others. Could you talk a bit about that? It seems to us that the group was given the space it needed to deliberate in a way that was immune from some of that influence.
I think it was. I'll elaborate on that a bit, because I understand the sort of tensions the committee might be interested in. First of all, I think the fact that it was jointly sponsored by the Cabinet Secretary and the Convener of the finance committee was very important. It was a shared endeavour that both were committed to. They showed real leadership to us in the way it was set up, and came along to our first meeting of the group. Do you want me to—?
No, I was just going to ask, have there been other examples of where there has been joint sponsorship of ventures by a Convener and a Minister?
I think this was by far the most significant. There have been smaller working groups, but nothing on the scale of revising the budget process. So, they sponsored it jointly, they came along to our first meeting, and set a tone of ambition for us. They asked us not to be timid, not to be looking at simply tinkering with the existing budget process, but if necessary to feel free to put forward transformative proposals for what was required in future. Then they let us get on with it within that space.
I think inevitably there was a bit of low-level tension within the workings and within this setting I think it is not surprising that some of the slightly less ambitious thrust was coming from Scottish Government officials who were aware that they would have to make work whatever was put forward, and of the scale of the additional resources that would be required for some of the issues that we discussed. I think the external advisers had a range of different priorities coming through, and I know you'll have heard some of that earlier, for example, from Dr O'Hagan.
But I think we worked well together in coming up with something that was realistic but still ambitious, setting a direction of travel that would take the budget process a long way but also being realistic about the time it would take to get there and the need to take steps towards it. I would say, from my perspective as auditor general, I was very content that the process we came up with was adequate to meeting the challenges of Scotland's new fiscal powers—and I wasn't at all convinced that would be the case at the beginning of the process.
Okay. And you share that view, I'm sure.
I'll just add a little to that around the context, which I think is also very important for the success of the group. So, there was an understanding of new powers and the volatility, the uncertainty, the complicated nature and the transparency issues that that brought. But, equally, the Parliament as a whole was generally unsatisfied with how the budget process had been operating and there was a recognition it was an opportunity to move things and address some of those issues.
Okay. So, there was a will to change things. Yes—if you want to pick up on that.
I'm fascinated that you said, Mrs Gardner, at the beginning of the budgetary process you weren't quite sure that it would work in the way that you'd hoped. I'm just wondering why you said that. What were your concerns? Why didn't you think—? Why did you have those worries, if you like?
I don't want to overstate them, but I think, as Mark has said, we were very conscious going into this that the budget process that the Scottish Parliament had used since 1999 had been designed to make decisions about how to spend the block grant from Westminster, in broad terms. That's an important job, but it's very different from the job of deciding how much revenue to raise, how to make sure that's sustainable over the longer term, and how to deal with the complexities and the volatilities that are baked into our fiscal framework.
So, you may have heard this morning that, as we're now into year three of the new income tax powers, the forecasts are that there will be a £1 billion shortfall between what's been included in earlier budgets and what we think has been raised actually in those years, which will have to be picked up in a couple of years' time. That's a really significant problem that the Parliament and the Government have never had to deal with before. Against that backdrop, the Parliament has an interest in having a process that will let it scrutinise and challenge and really test out the budget in the round and the way it's contributing to outcomes for the people of Scotland.
The Government has got a similar interest, but with a different political starting point for it, and also with a recognition that all of the things that we in Audit Scotland, for example, have been asking them to do around producing a longer term fiscal strategy, about producing whole of Government accounts for Scotland, are all quite resource intensive and are quite politically sensitive in a number of ways.
So, I went into the process hoping I could achieve all of the aspirations we had for it, but recognising there was a risk that that kind of consensual approach might not be possible, but those concerns didn't materialise.
The £1 billion figure, which is a considerable sum, do you believe that that has been identified late in the day? Could it have been identified earlier? And do you believe that there are weaknesses in the processes of scrutiny of the budget that led to the non-recognition, if you like, of that issue?
I'm sure Mark will want to add to this in a moment, but my starting point is that, although you're absolutely correct, and it is a large number, I don't think it's emerged because of shortcomings in the process. In Scotland, we've been doing this for the first time over the last two or three years. One problem in that is that some of the information that's been needed to produce good forecasting simply hasn't been collected until very recently. Until last year we were reliant on the survey of taxpayer incomes to give us an indication of how many higher rate taxpayers there might be in Scotland and how much tax they were paying. We simply haven't had some of the building blocks there. That uncertainty has been one of the concerns that we've been relaying in our work in this area and it's also why we think that other parts of the packages are so important—so, having, for example, a medium-term fiscal strategy that sets out what the most likely course for tax revenues looks like, but also what the best-case and worst-case pictures might look like and how Government would respond to it. So, I'm not surprised the figure's emerged, but it does really highlight the importance of having a process that can respond to that. Mark.
Thank you very much. So, at the heart of the arrangement for Scotland, as it is increasingly the case for Wales, is that complexity, that uncertainty and volatility about how the numbers will play through through time. And that's built and hard-baked into the process. It's built in and will be hard-baked into the way in which the process works. What the budget process has done is try to design a process to respond to that to be able to understand that flexibility, and to take a much more strategic approach to not, necessarily, spot the individual numbers coming, but to give a sense of how the wind's blowing, the direction of travel, and what that's likely to mean for choices that need to be made by Parliament and Government going forward, and take that more strategic look at how money's being spent, what we're getting for our money, what's working and what's not working, and that to be the basis of budget scrutiny that's carried out.
Okay. Sorry—[Inaudible.]—I'm keen for us to keep our focus on the budget process, so, Rhun.
We're looking at how the legislative budget process compares with our system, whereby the budget is passed by a motion. What are the benefits and, possibly, disadvantages also of a legislative process? And to what extent are you confident that the advantages outweigh the disadvantages?
I think it's important for us to say, to start with, that the Scottish budget process has always been a legislative process since 1999. It's a requirement of the original Scotland Act that set up the Scottish Parliament. In many ways, I think it's similar to what's in the legislation governing Wales, but the language is different—we have the wording of a budget Act in our legislation, and that's always been the case.
It's obviously important that the budget, as such an important set of decisions that Parliament is making about Government's proposals, is set in statute in that way, and the debate then is how it's taken forward. I think, as a budget process review group, we recognised that the process that had been followed up until last year simply wasn't adequate to deal with that growth in the scale of the task and it's complexity and uncertainty, as Mark has been saying.
Because the legislation that we're talking about was becoming very, very complex in the scrutiny required.
It was, and also simply because the amount of time that was available for Parliament to scrutinise, challenge and test the proposals was increasingly being squeezed, both because of the timing of UK fiscal events and because of the scale of the decisions within the budget Bill itself—as you say, more taxes, and more tax rates and bands to be set. It's something that the budget process review group looked at quite hard. We considered the pros and cons of different approaches, of allowing opposition Members to put forward amendments to the budget Bill, and the challenges that were in there. We also commissioned some research on international best practice, which we found very helpful in looking at what the options were that were available to us. And, in the end, we agreed to retain the status quo, in broad terms, of there being a budget Bill with the scope for reasoned amendments from Members of Parliament. But that's one of the unfinished pieces of business, I think, and there is currently a working group under way, which Mark can tell you more about, looking at how we can streamline the ways in which the different legislative pieces of work happen—the affirmative procedure, the Scottish rate resolution and the other things that are in there—to bring those together and help to make them more coherent. Mark, do you want to add a bit to that?
On the basic tenet of having a legislative process, I think the group recognise, and it was certainly something the original financial issues advisory group recognised, that legislation has a certain status and standing, and it signalled the importance of the budget as the device that it is and that was conveyed in the legislative approach. And looking back at the notes of that group, the original founding group who looked at the founding of the Scottish Parliament, that was very much what one of the impetuses for that was, and I think, very much, within the budget process review group, that was recognised as well.
A legislative process brings a certain overhead in terms of parliamentary procedure and what that means, and again, in Scotland, you'll be aware, it is a modified legislative process for the budget, which is different from the general legislative process, which really recognises that often these things are time critical. That trade-off between time and scrutiny, again, is one of the big issues that the budget process review group considered in a number of areas—at its heart a recognition that that legislative process for the spending side of the budget had been working and wasn't really the area of concern. The area of concern was: how do we understand where public money is spent and get better traction on decisions about that?
You mentioned, Ms Gardner, the question relating to opposition parties not being able to put forward amendments after Stage 1. What do you think are those safeguards and processes that are in place that mean that opposition parties aren't up in arms about that?
I think, partly, it's that that has always been the Scottish budget process since 1999—
So, they're always up in arms about it, are they?
Well, no, it's accepted as custom and practice. We looked at it quite carefully, as Mark said, as part of the budget process review group, and we're weighing up, first of all, the importance of there being genuine parliamentary scrutiny, which could lead to change, but also not leaving the Government in the position where it loses control of the budget entirely. We were conscious of both sets of risks, and we've all seen the example of the US Congress and how difficult that can get. The decision we took as a group was that sticking with reasoned amendments, which allows committees to bring forward their reasoned proposals for change, was the right move for now, but there is a group that is continuing to look at that very detailed, legal, legislative approach to making all of those decisions in a way that is joined up that I suspect will make some proposals for moving that on a bit further. That's due to report by the end of this year, I think.
And on that streamlining work, looking at the various models of setting rates and bands, does the fact that work is being done on that suggest that there is some discomfort about the fact that you have different ways of going through, or different processes and parliamentary processes to go through, depending on what that law is? Would you be looking at a uniform model, for example?
I think it's important to say we're not on this group. It's one that the Government is sponsoring. I think, first of all, you're right that there is a range of different mechanisms in place, and that can be confusing for anybody involved, let alone an MSP who is dealing with all the range of things that all of you do as elected representatives. But probably more importantly, it limits the scope for making decisions in between each annual budget cycle. So, for example, changes to rates and bands, where that's required, can only be done in the specified way, and we often hear from particularly the tax advisory community about some little practical details that actually have quite a big impact on people paying and administering taxes for things like land and buildings transaction tax. I think the move is to look at ways of streamlining the maintenance of tax legislation over time, as it builds up, and as the decision making becomes bedded into the annual budget cycle, can we make some of that more straightforward as well.
Okay, thank you.
Okay, thank you. Alun.
Can I just go back to something you said in an earlier reply, Ms Gardner? The 1998 legislation—. Sorry, perhaps I should know this. The powers there and what it contained in order to create the context for budget setting in Scotland, were they permissive powers or directive powers?
They were directive powers, but the detail that underpins them, that was then a matter for Scottish Parliament legislation. Mark's my expert on this.