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2nd Report, 2011 (Session 3)

Report on Scotland's Spending Plans and Draft Budget 2011-12

Volume 2: Reports from other Committees and the Scottish Commission for Public Audit

2nd Report, 2011 (Session 3)

VOLUME 2: REPORTS FROM OTHER COMMITTEES AND THE SCOTTISH COMMISSION FOR PUBLIC AUDIT

ANNEXE D – REPORT FROM THE ECONOMY, ENERGY AND TOURISM COMMITTEE
ANNEXE E – REPORT FROM THE EDUCATION, LIFELONG LEARNING AND CULTURE COMMITTEE
ANNEXE F – REPORT FROM THE EQUAL OPPORTUNITIES COMMITTEE
ANNEXE G – REPORT FROM THE EUROPEAN AND EXTERNAL RELATIONS COMMITTEE
ANNEXE H – REPORT FROM THE HEALTH AND SPORT COMMITTEE
ANNEXE I – REPORT FROM THE JUSTICE COMMITTEE
ANNEXE J – REPORT FROM THE LOCAL GOVERNMENT AND COMMUNITIES COMMITTEE
ANNEXE K – REPORT FROM THE RURAL AFFAIRS AND ENVIRONMENT COMMITTEE
ANNEXE L – REPORT FROM THE TRANSPORT, INFRASTRUCTURE AND CLIMATE CHANGE COMMITTEE
ANNEXE M – REPORT FROM THE SCOTTISH COMMISSION FOR PUBLIC AUDIT

ANNEXE D

Economy, Energy and Tourism Committee

Report on The Scottish Government's Draft Budget for 2011-2012

The Committee reports to the Finance Committee and the Parliament as follows—

Background

1. This report reviews the spending proposals within the Finance and Sustainable Growth portfolio in the Scottish Government’s Draft Budget 2011-20121 which fall within the remit of the Economy, Energy and Tourism Committee (“the Committee”). The Committee also consider whether the Scottish Government has adopted the most appropriate spending priorities to support economic growth and where its priorities for spending should lie.

2. To assist with its understanding of the implications of the budget proposed by the Scottish Government, the Committee took evidence from the following—

  • Professor Brian Ashcroft, Policy Director, University of Strathclyde; Alf Young, Freelance Journalist; and Jenny Stewart, Partner and Head of Infrastructure and Government - Scotland, KPMG LLP;
  • Stephen Boyd, Assistant Secretary, Scottish Trades Union Congress; Michael Levack, Chief Executive, Scottish Building Federation; Iain Herbert, Chief Executive, Scottish Tourism Forum; David Lonsdale, Assistant Director, CBI; Graham Bell, Policy and Public Relations Executive, Scottish Chambers of Commerce;
  • Crawford Gillies, Chairman, and Julian Taylor, Director of Strategy and Economics, Scottish Enterprise;
  • William Roe, Chairman, Highlands and Islands Enterprise, Alex Paterson, Chief Executive, Highlands and Islands Enterprise and Forbes Duthie, Director of Finance & Corporate Services;
  • Mike Cantlay, Chairman, Malcolm Roughead, Chief Executive and Ken Neilson, Director of Corporate Services, VisitScotland;
  • John Swinney MSP, Cabinet Secretary for Finance and Sustainable Growth, David Wilson, Director of Energy, Scottish Government and David Dow, Finance Team Leader, Scottish Government.

3. In addition, the Committee also received written evidence from Scottish Enterprise, Highlands and Islands Enterprise and VisitScotland, The Alliance of Sector Skills Councils in Scotland, Scottish Council for Voluntary Organisations, Scottish Retail Consortium, Scottish Building Federation, The Fraser of Allander Institute, Volunteer Development Scotland, the Confederation of British Industry (Scotland),Transform Scotland, WWF and The Federation of Small Businesses (Scotland).

4. The Committee would like to thank Mr Peter Wood, the Committee’s budget adviser, for his invaluable support and expert advice throughout the budget scrutiny process.

Finance Committee Guidance

5. In its guidance to Committees, the Parliament’s Finance Committee referred to its report on the Budget Strategy Phase, which called on decision makers within all publicly funded bodies, and the Scottish Government and parliamentary committees, to show far greater leadership by discussing in more open and realistic terms the impact that future budget cuts will have and the options that are available to deal with these cuts.

Our priorities

6. The Committee recognises that the challenge of framing a budget with reduced resources is considerable and that reducing spending on existing programmes and commitment is difficult. However, the Committee noted the call from the Finance Committee for leadership and open and realistic discussion of the impact of budget cuts on priorities. The Committee has therefore examined whether the Scottish Government’s in this draft budget will support the critical aim of securing economic recovery and promoting economic growth.

The economic environment

7. The UK Comprehensive Spending Review was published on 20 October 2010 and determined Scotland’s Departmental Expenditure Limit (DEL) year by year for the next four years. In his foreword to the Draft Budget 2011-2012, the Cabinet Secretary for Finance and Sustainable Growth states “This is a Budget set against the most dramatic reduction in public spending imposed on Scotland by any UK Government”.2

8. Scotland’s DEL will decrease by 6% in real terms in 2011-12 compared with 2010-11. This is broken down between resource (-3.9%) and capital (-22.3%). The Scottish Government’s Spending Plans and Draft Budget (“the Budget”) was published on 17 November 2010. The Budget contains plans to reduce budgets in all portfolio areas, with a below-average reduction (-1.1%) being made to the Health and Wellbeing portfolio. As this portfolio accounts for approximately 40% of DEL, it follows that the “non health” elements of the budget will face cuts of, on average, more than 6%.3

9. Furthermore, the Scottish Government’s decisions to protect spending on current concessionary travel arrangements, free personal and nursing care for the elderly, prescription charging and free eye examinations necessarily imply deeper cuts across other areas of the budget.

10. The UK Chancellor's expenditure plans have been set with the aim of achieving a steady and sustained reduction in the UK Budget deficit with the target of eliminating the Structural Budget Deficit by 2014-15. The success of this strategy depends upon many factors but a key assumption is that economic recovery and growth will improve the public finances by increasing revenues and reducing welfare spending.

11. The Comprehensive Spending Review assumed in its calculations that the rates of growth for the UK economy forecast by the Office of Budget Responsibility (OBR) in June would be achieved The OBR has since revised their forecast to show a higher rate of growth in 2010, slightly lower growth in 2011 and 2012 and similar thereafter (see table). The average of the latest independent forecasts are consistently lower than the OBR's figures.

UK Growth Forecasts 2010 2011 2012 2013 2014 2015
OBR June 1.2% 2.3% 2.8% 2.9% 2.7% 2.7%
OBR Nov 1.8% 2.1% 2.6% 2.9% 2.8% 2.7%
Independent (average) 1.7% 1.9% 2.1% 2.4% 2.5%

 

Sources: Office of Budget Responsibility; Treasury

12. The significance of this is that if growth is lower than the UK government expects then further expenditure cuts or tax increases may be necessary in order to achieve the target for deficit reduction. Brian Ashcroft pointed out that “The National Institute of Economic and Social Research in London is forecasting significantly less growth than the Office for Budget Responsibility—its figure is about 1.6 per cent over the next couple of years. Real revenue issues will arise for the Government.”4 In addition, the Fraser of Allander Institute has estimated that “the rise in planned welfare cuts…will take out nearly £2bn of demand from Scottish households by 2014-15.5

Budget proposals – an outline

Budget Figures

Scottish Government

13. According to the Scottish Government’s figures, the Scottish Budget will be reduced by £1.3 billion in 2011-12 compared with 2010-11. This reduction is shared between revenue (£500 million) and capital (£800 million) budgets.6

14. The Scottish Parliament Information Centre (SPICe) provided an analysis of these figures to the Committee. Table 1, below, sets out the reductions to the Scottish budget which will occur in 2011-12. The table highlights the disproportionate reduction in the capital Departmental Expenditure Limit (DEL) budget (-22.3%) when compared with the reduction in resource DEL (-3.9%). Overall, the Scottish Total Managed Expenditure (TME) will decline by 5%.

15. The balance between cuts in the Resource DEL and Capital DEL results from the operation of the Barnett formula. Thus Scotland’s Resource DEL to 2014 -15 is planned to fall by less than that for the UK as a whole because the Scottish Budget is dominated by an item (health) which has been protected in UK spending cuts. Conversely, Capital DEL will be cut by more than the UK average because Scottish Capital spending is heavily weighted with items which are being cut heavily at a UK level.

Table 1: Allocation of TME to AME and DEL

£ millions 2010-11 Budget 2011-12 Draft Budget Cash 2011-12 Draft Budget Real % Change on 2010-11 Real terms
Total DEL of which: 29,224.5 28,007.3 27,485.1 -6.0%
DEL Resource 25,931.6 25,400.7 24,927.1 -3.9%
DEL Capital 3,292.9 2,606.6 2,558.0 -22.3%
AME (annually managed expenditure) 5,513.2 5,612.4 5,507.8 -0.1%
Total Managed Expenditure 34,737.7 33,619.7 32,992.8 -5.0%

Source: SPICe

16. The heavy cuts to Capital Spending are of considerable concern to the Committee given the key role that Capital Investment plays in economic growth. This issue was explored with witnesses and is discussed later in this report. The following breakdown of capital spending plans for the entire Scottish budget was provided by SPICe.

Table 2: Capital Spending Plans

Level 2 or 3 budget line 2010-11 Budget 2011-12 Draft Budget Cash 2011-12 Draft Budget Real % Change on 2010-11 Real terms
Rail Infrastructure in Scotland 331.0 426.1 418.2 26.3%
Motorways & Trunk Roads 544.1 557.6 547.2 0.6%
Of which Forth Crossing 30.0 200.0 196.3 554.2%
NHS & Special Health Boards Capital Investment 594.4 496.7 487.4 -18.0%
Local Government – General Capital Grant 843.2 691.8 678.9 -19.5%
Scottish Court Service Capital 20.3 10.4 10.2 -49.7%
Capital Grants for FE Colleges & HEI’s 209.2 91.0 89.3 -57.3%
Scottish Prison Service Capital Expenditure 136.8 47.5 46.6 -65.9%
Rail – Major Public Transport Projects 175.7 53.0 52.0 -70.4%
Support for Scottish Water Borrowing 150.0 0.0 0.0 -100.0%

Source: SPICe

The Enterprise, Energy and Tourism Budget

17. The Enterprise, Energy and Tourism Level 2 budget line shows a reduction of 7.6% in real terms. The total resource budget declines by 11.3% but, capital expenditure within this budget line increases by 7.8%. All Level 3 budget lines under this heading show reductions with the largest changes in Energy (-21.4%), Innovation and Industries (-17.1%) and Industry and Technology Grants (-12.0%).

Table 3: Enterprise, Energy and Tourism Level 3 Spending Plans

Enterprise, Energy & Tourism 2010-11 Budget 2011-12 Draft Budget Cash 2011-12 Draft Budget Real % Change on 2010-11 Real terms
Enterprise Policy and Delivery (including Scottish Enterprise & Highlands & Islands Enterprise ) 290.0 283.4 278.1 -4.1%
ESF Programme 1.5 1.5 1.5 -1.9%
Innovation & Industries 20.6 17.4 17.1 -17.1%
Industry & Technology Grants 50.4 45.2 44.4 -12.0%
Energy 43.2 34.6 34.0 -21.4%
Tourism (including VisitScotland) 43.9 41.0 40.2 -8.3%
Scottish Development International 0.7 0.7 0.7 -1.9%
Total 450.3 423.8 415.9 -7.6%
of which Resource 363.3 328.2 322.1 -11.3%
Capital 87.0 95.6 93.8 7.8%

Source: SPICe

18. The Draft Budget provided the following comments on the plans for 2011-12:

  • “Enterprise and tourism budgets have been reduced partly by building on our earlier reforms and seeking further reductions in staffing levels, increased efficiencies within the bodies and the removal of lower priority activities”.7
  • “[in 2011-12 we will] implement the National Renewables Infrastructure Plan, including £17million investment in the Renewables Infrastructure Fund to strengthen port and manufacturing facilities and the supply chain for manufacturing offshore wind turbines and related components”.8
  • “[in 2011-12 we will] contribute to the preparations for the series of themed years in the build-up to the next Homecoming celebrations in 2014; and prepare for the staging of The Ryder Cup in Gleneagles in 2014. The tourism budget will also provide £0.3 million towards the project to replace the Royal Edinburgh Military Tattoo stands”.9
  • “[in 2011-12 we will] fund broadband interventions to support our Digital Ambition for Scotland and put in place the broadband infrastructure needed to support innovation in the digital economy and ensure Scotland’s business base can remain competitive in the global digital environment”.10

Enterprise Agencies – trends in Grant In Aid

19. Before considering the Draft Budget Proposals for the Enterprise Agencies it is useful to examine the funding trends established over the last few years. Both Scottish Enterprise and Highlands and Islands Enterprise have faced year on year declines in Grant In Aid (GIA) since 2007-08. SPICe provided the following charts, which illustrate the trend.

20. To enable the Committee to ascertain the scale of the GIA reductions at SE and HIE the Committee requested cumulative trend data on grant in aid provided to the enterprise agencies since 2007 from the Scottish Government and asked the government to quantify the scale of the reductions over time.

Enterprise Agencies and VisitScotland – 2011-2012 Budget and Spending Plans

21. The following table sets out grant in aid figures for Scottish Enterprise, HIE and VisitScotland, in 2011-12 compared with grant in aid in 2010-11. The table also contains a comparison of the agencies’ total planned spend or “total cash investment” which includes sources of income. The figures used for comparison are forecast outturn for 2010-11 against budgeted total investment in 2011-12.

Organisation Grant in aid 2011-12 £m Grant in aid in 2010-11 % change
Scottish Enterprise 194.4 208.9 -7%
HIE 48.3 58.5 -18%
VisitScotland 40.7 46.23 -12%

22. SPICe requested, on behalf of the Committee a financial summary, broken down by business theme, from Scottish Enterprise, HIE and VisitScotland. The data was requested in a format which would enable the Committee to compare both planned expenditure in 2011-12 as well as forecast outturn for the current financial year (2010-11) against the agencies’ Corporate Plans.

23. The tables containing all of these breakdowns are contained within the agencies’ submissions to the Committee.

24. Scottish Enterprise’s grant in aid in 2011-2012 will be 7% lower in cash terms than in the previous year. Because other income elements will fall even more than this, the total reduction in the agency’s spending will be 12.2% in cash terms . The draft budget based figure for SE spending is 6.3% lower in cash terms than was assumed in their business plan. In short, the draft Budget has led to a cut of 3.5% in SE spend over and above that which was planned. These figures exclude RSA and the Scottish Loan Fund.

25. SE have explained in their submission to the committee the prioritisation process they have used in addressing the impact of the draft budget. Comparing the current proposals with the Business Plan, support to growth business has received a less than average cut with a notable shift towards support for innovation and R&D.

26. In contrast, support to sector initiatives where spending was originally planned to rise sharply will now receive a slightly below average cut . The large cut in planned spending appears to reflect a staffing reduction and savings in ITI staff salaries. The SE evidence notes the activities under this heading to which it is giving priority (e.g. renewables and Life Sciences). The HIE grant in aid has been reduced by 18% in cash terms as compared with 2010 – 2011. The cut in overall income (excluding non cash elements) is in cash terms is around 13%.

27. Most expenditure lines, at the level of detail provided by HIE, will be at a similar cash level in 2011- 2012 as in the previous year (a small real cut). Operating costs will fall by 6% in cash terms with a very larger cut (50%) in admin costs as compared with the figure in the Operating Plan for 2011 – 2012.

28. The greater part of the cuts by far will be accounted for by a reduction of £7m (over 33%) in Transformational Projects. In response to a request for more information HIE have provided data showing that the reduction is accounted for by anticipated “slippage” in spending on the Beechwood Campus amounting to £6m and to a re-phasing of spending on Scrabster Harbour. The Beechwood Campus originally accounted for over 50% of planned HIE spend on transformational projects.

VisitScotland

29. Grant in aid to VisitScotland in 2011-12 will be £40.76 million. VisitScotland’s overall budget, including receipts, will decline from £62 million (Corporate Plan 2010/11) to £54.24 million (Draft Budget indicative resource allocation 2011-12).11 This represents a reduction of 12.5%.

30. VisitScotland has provided a comparison of its planned spend as per the Corporate Plan 2011 – 2012 with the spending now anticipated for that year. The spending cut is 15.2% in cash terms. Partnership Engagement and Support Services will be cut by just over 17% while marketing has been relatively protected with a cut of 14.8%.

Key issues

Will the Draft Budget 2011-12 support economic recovery?

Background

31. The Draft Budget12 comes at a time of fragile economic recovery in Scotland and a great deal of uncertainty exists regarding the rate of that recovery. As stated in the background to this paper, The Committee wished to examine the Scottish Government’s decisions both at the broader, strategic level and within the detail of the Enterprise, Energy and Tourism portfolio and draw conclusions on whether this Draft Budget prioritises economic growth.

32. Witnesses attempted to identify policy shifts as a result of this draft budget. Jenny Stewart found that “the percentage share of the cake is not shifting radically. There has been no huge, radical shift”.13

High level decisions which will affect the economy as a whole

33. The UK Treasury defines the reduction to the Scottish DEL in 2011-12 as 10.6% while the Scottish Government’s own figures place it at 11.3%. This disparity arises as a result of whether account is taken of the Scottish Government’s decision to defer its share of the £6 billion of cuts from 2010-11 to 2011-12 and of end year flexibility draw downs.

34. The Fraser of Allander Institute estimated that the impact of a total reduction of 11% to the Scottish DEL would result in between 50,000 and 113,000 job losses in Scotland. It predicted that approximately £2 billion will be removed from the Scottish economy from 2012 as a result of UK spending plans on welfare, which will result in a reduction in spending.14 A range of other measures – such as an increase in rail fares – will further constrain people’s ability to spend.15

35. During evidence to the Committee, Brian Ashcroft summarised three key measures which the Scottish Government has decided to take which do not involve reductions in services—

“One is a pay freeze for one year for staff earning more than £21,000. Another is the efficiency saving of 3 per cent, although it is not clear exactly what that applies to—we assume that it is the resource budget. There is also the increase in non-domestic rates for large, out-of-town retail properties such as out-of-town supermarkets and retail parks.”16

The banking sector

36. Continuing issues within the banking sector in the UK and Ireland were cited as a contributory factor to uncertainty within the economy. It was pointed out that lending to Ireland by The Royal Bank of Scotland amounts to approximately 90 per cent of its current net assets and for Lloyds Banking Group 60 per cent. The extent of Scottish banks’ exposure to Irish debt is estimated to be in the region of £55 billion.17 Alf Young explained—

“so the current crisis in Ireland and the potential crises in Portugal and Spain could have direct and obvious impacts here and could trigger significant consequences for the banking recovery here.”18

37. He pointed to the fact that, in any case, the UK and Ireland’s economies are intertwined and “the consequences for growth of the resolution of those problems are absolutely central”.19

38. It was argued that Scottish banks are no longer incentivised to benefit the Scottish Economy and that deleveraging in order to enhance share prices rather than lending to Scottish businesses was inappropriate activity for a bank which is largely state-owned. Brian Ashcroft asked: “we own these banks. Why can we not get them to lend?” Alf Young agreed that banks appear reluctant to lend. He said: “everyone I speak to who has a commercial relationship with them confirms that.”20 It was Brian Ashcroft’s view that “Deleveraging will be a major issue for the growth of the economy”.21

The Enterprise, Energy and Tourism Budget

39. Witnesses explored the fact that the Enterprise, Energy and Tourism (EET) budget within the Scottish Government will fall by 7.64% in 2011-12, a bigger fall than the average DEL reduction of 6%. Within that, its resource budget will fall by 10% and (average resource DEL will reduce by 2.5%) whereas its capital element will increase by almost 10%.22 The Cabinet Secretary for Finance and Sustainable Growth described for the Committee how the Draft Budget 2011-12 would deliver benefits across the economy, notwithstanding the reduction in the EET line, by investing in services and infrastructure in every region of the country.23 Stephen Boyd observed that “a number of things in the budget demonstrate that the Scottish Government is doing what it can to sustain the weak growth that is evident”.24

40. In the absence of level 4 budget figures, it was very difficult for witnesses or members to take a view on whether spend areas such as innovation and research were being protected in relation to other areas in an attempt to prioritise growth. Level four budget figures were provided after the Committee had taken evidence from its witnesses but in advance of the appearance of the Cabinet Secretary.

41. The Committee regrets the failure of the Scottish Government to provide level four budget data in advance of the Committee’s evidence taking. This has seriously hindered our ability to understand many of the figures presented in the Draft Budget and the policy intentions which underlie them.

42. Following the provision of level 4 budget figures to the committee, it appeared that the energy line within the EET budget was forecast to under spend by 25% in the current financial year.25 The Cabinet Secretary explained that allocations are only fully utilised when supportable proposals come forward in sufficient time and assured the committee that the cash is reallocated to emerging priorities.26

43. David Wilson described the challenges which had been encountered with the profiling of projects coming forward under the Water and Tidal Energy Support (WATES) Scheme but stated that he did not recognise a figure of 25% and noted that the Scottish Government decided to reallocate £10 million originally earmarked for the Saltire Prize27 to the Wave and Tidal Energy: Research, Development and Demonstration Support (WATERS) fund.28

44. The renewable energy line within the draft budget represents a reduction of almost 50% in 2011-12 compared with 2010-11.29 David Wilson explained that much of this change was due to changes away from support for capital wave and tidal projects by the Scottish Government to funding of renewable energy projects through Scottish Enterprise in the coming year. He explained that, in addition to these changes, support for energy action will be accounted for under the low carbon economy line from 2011-12. He confirmed that funds for the WATERS scheme will be administered through Scottish Enterprise in the current financial year via a spring budget revision.30

45. Further clarification was provided by the Cabinet Secretary in relation to the Energy line in the Draft Budget. He stated that “The 2011/21 budget for Energy has, in effect, increased…from £31.2million to £34.55 million” once allowance is made for the closure of the Boiler Scrappage and WATERS Schemes.31 In relation to the renewable energy line, The Cabinet Secretary’s letter states that the apparent reduction is due to a redrafting of the budget lines. The table below summarises the 2010-11 and 2011-12 budgets. The 2011/2012 items corresponding to Renewable Energy are, according to the Cabinet Secretary’s letter, Renewable Energy, Low Carbon Economy, SEGEC&Grid Enhancement and Energy Resilience and CNI: the 2011/12 spending on these totals £22.55m which is a small cash increase and a small real terms reduction. Taking these factors into account, the main cause of the fall in the Energy Budget is the presence of the Saltire Prize money in 2010/11 and its absence in 2011/12. The Saltire Prize money was conceived as a “one off” payment and was placed in the 2010\2011 Budget even although the money was not expected to be spent in that year. As noted above, that funding was subsequently transferred to the WATERS project.

2010/11 (£k) 2011/12 (£k)
Renewable Energy 22,025 11,350
Saltire Prize 10,000 0
Energy Efficiency (Energy Markets) 9,380* 12,000
Low Carbon Economy 0 10,200
SEGEC & Grid Enhancement 0 680
Energy Resilience and CNI 0 320
TOTAL 41,405* 34,550
* Budget increased in-year by £2m consequentials for Boiler Scrappage Scheme taking it to the £43.2m published in the draft budget document.

46. While the Committee appreciate the cross-cutting nature of spending on renewable energy, it considers that overall expenditure plans for renewable energy could be presented in a more coherent way, to assist scrutiny.

Capital expenditure

47. As stated in an earlier section of this report, the Scottish Budget’s reduction of £1.3 billion in 2011-12 is shared between revenue (£500 million) and capital (£800 million) budgets.

48. Concerns were expressed by witnesses over the substantial overall reduction in capital DEL, particularly given the construction sector’s significant contribution to growth in the first two quarters of 2010.32 Jenny Stewart predicted that, if this trend continued through to 2014-15, it would “have a differential impact on jobs and on the economy”.33 Alf Young concurred. It was his view that “all the evidence is that a significant cut in the capital budget will have a much more direct impact on growth”.34 Jenny Stewart added that “When capital is squeezed, that constrains the ability to make operational efficiency savings”.35

49. The Scottish Government’s growth figures for the second quarter of 2010 revealed significant growth (10.4%) within the construction sector, (possibly as a result of a bounce-back following a hard winter) but the sector contracted by 3.2% over the year to end-June 2010.36 A cut of £600 million to the Scottish Government’s capital budget equates to 3-4% of the turnover of the Scottish construction sector. To make up the difference, the private sector construction sector would have to grow by approximately 5%. Set against recent growth figures for construction and growth predictions for the Scottish economy as a whole in 2011 ranging between 1.9% and 2.3%37, this looks difficult to achieve.38

50. Brian Ashcroft considered that the rebound in the construction industry would be short-lived and suggested that the Scottish Government should be making the argument with UK ministers that the cut to DEL capital should be phased in more gradually rather than front-ended in 2011-12.39 End year flexibility of £100million mitigates the cut in capital DEL, but only marginally.40 Brian Ashcroft argued that “fiscal consolidation and starting to cut capital damage the recovery”.41

51. Significant reductions are planned for the capital budgets for prisons, affordable housing and higher education, while increases to the capital budget for motorways and trunk roads will be made42 and views were sought on whether this represented an appropriate balance.

52. The reduction to the capital budget for affordable housing was of particular concern to Michael Levack and he called for the decision to be reviewed, while David Lonsdale reiterated previous calls by CBI for Scotland to shift its focus to infrastructure, capital expenditure and skills development rather than current spending.43 Stephen Boyd argued that “having increasing sustainable economic growth as your main objective is completely inconsistent with cutting capital spending on further and higher education so dramatically”.44

53. The Cabinet Secretary acknowledged the significant challenge with regard to capital expenditure and pointed to the additional £100 million and the Non-Profit Distributing (NDP) models as means of overcoming this to some extent. He argued that the 25% reduction in capital expenditure imposed by Westminster was a reality but that there remained scope to commit to “substantial investment” through these routes.45 He added that “We are taking a focused approach to the opportunities in the low-carbon economy sector. In several areas, we are ensuring that we identify the opportunities to support and fund projects through the decisions that the Government and its agencies take.”46

Non -profit distribution model

54. The Draft Budget 2011-12 sets out new investment to be financed through the Non-Profit Distributing (NPD) model. A cap will be introduced on the maximum percentage of the Resource DEL budget to be allocated in any one year to meet unitary charges as a means of ensuring that “proposals for revenue finance investments are assessed rigorously in relation to future revenue affordability as well as value for money”.47

55. The Draft Budget 2011-12 states that the hypothecation of an additional 1% of Resource DEL will provide at least £250 million of revenue support, which will be used to fund up to £2.5 billion of capital expenditure through the NPD model.48

56. Witnesses observed that the programme “seems to be dominated by the completion of some motorway projects, a big hospital in Glasgow and the early work on the new Forth crossing”.49

57. Michael Levack welcomed the NPD programme but warned: “unless the projects are moved forward and the investment decisions are made quickly they will have little positive impact in the short to medium term with regard to protecting capacity in the industry”. Graham Bell also welcomed the announcement and stated that “capital spend is key to generating wealth and revitalising the economy”.50

58. Concern was expressed that the pipeline of construction projects may contain very few projects which could benefit from the availability of capital through the NPD model because of uncertainties in the months and years leading to the Draft Budget and a resultant unwillingness of firms and organisations to make plans. Michael Levack agreed and argued that it was time to update the infrastructure investment plan which was published in 2008 fearing that “it will be well into the next financial year before we can get some projects moving”. Mr Levack also pointed out that “year-to-year funding is a major hurdle to efficient procurement for affordable housing, simply because of the gestation period”.51

59. It was pointed out that the Scottish Government’s Future Deals website does not detail any NPD projects for health, education of justice capital infrastructure. The Cabinet Secretary argued that projects within the hub initiative under the Scottish Futures Trust52 would deliver community infrastructure and that procurement was underway.53 In follow-up evidence to the Committee, the Cabinet Secretary stated that the Transport, Health and Education projects listed in the Draft Budget 2011-12 document54 are intended to be financed under the NPD model.

60. The Committee notes the legal requirement for all projects which have reached the OJEU (Official Journal of the European Union) stage of procurement to be made public and concludes that their absence from the New Deals web site reveals the fact that none of the projects listed on page 42 of the Draft Budget 2011-12 document are yet at this stage

61. The Committee regrets the long delays in bringing these valuable projects forward – delays which amount to three years in the lifetime of this Parliament.

62. In its written submission to the committee, Transform Scotland said of the Scottish Government’s NPD plans “for us, this is clearly a mixed bag: it may secure funding for these projects, but given the lack of any projects to be financed on this basis until now, it may also jeopardise their completion”.55

63. The Cabinet Secretary pointed out that, had capital projects requiring revenue support been brought forward two years ago, the Scottish Government would struggle to meet the revenue obligations at this time. He argued that it was better to have such obligations coming into play once economic recovery was underway.56

64. In follow-up evidence to the Committee relating to specific Motorway schemes, the Cabinet Secretary stated that, subject to Parliamentary approval, the Ballieston to Newhouse scheme would be “clear of the statutory process by early summer 2011.” He also stated that the M74 Raith Interchange would come under a single NPD contract with M8 Associated Network Improvements. The statutory processes for this contract were expected to be complete early in 2011 and construction would be under way during 2013-14.57

65. In terms of those projects which will be funded under traditional expenditure mechanisms, concern was expressed that these would consume a large proportion of the capital budget and the argument was made by many witnesses that other forms of finance, such as design, build and operate, or the introduction of tolling, should be considered as means of financing the Forth crossing. Graham Bell argued that “In this climate, we need to consider everything that is available”.58

66. The Committee welcomes the fact that steps have been taken by the government to make use of resource DEL monies to support capital investment but is concerned that more progress has not been made in bringing projects forward. The Committee also regrets that the ability of those within the industry to undertake long-term planning is hindered by the absence of indicative spending proposals beyond one year and the uncertainty surrounding the timing of the £2.5 billion of additional programmes although it acknowledges the Cabinet Secretary’s intention to produce indicative spending proposals in January 2011 for the remainder of the CSR period.

67. The Committee specifically regrets the lack of progress with capital infrastructure projects for education, health and justice and the slow progress on transport infrastructure.

Specific concerns for the construction sector

68. Earlier sections of this report have touched on the impact of the reduction of the availability of capital funds on the construction industry. Members wished to hear from witnesses their views on how best the Scottish Government should support recovery within the sector.

69. Witnesses emphasised the importance of speeding up the pipeline of jobs and projects and expressed frustration with the fact that projects within the new pipeline of revenue financed investment set out in the Draft Budget 2011-12 were in the original infrastructure investment plan published in 2008 yet had not been taken forward until now. Michael Levack said: “the only time when construction employers can protect jobs and apprenticeship training is when we are putting the shovel in the ground” and urged national and local government to examine all possible ways of accelerating the procurement process. Mr Levack also pointed to the retrofit programme for domestic and non-domestic premises as a way of both sustaining the industry and attaining carbon reduction targets.59

70. Graham Bell emphasised the key importance of training in order to provide a workforce which would “hit the ground running”. He called for a better contract between local and national government and the education system in order to deliver this.60

Public sector pay policy

71. Witnesses spoke of the impact of the public sector pay freeze on protection of jobs and pointed out that ministers have the option to freeze recruitment and halt pay progression in order to protect more.61 The Independent Budget Review estimated that a £140 million saving could be made through a pay freeze, (the rising pay bill will cost about £320 million without a freeze, or £180 million with a freeze).62 Clearly, a recruitment freeze, or action on pay progression would make further savings to the pay budget. It is not clear from the budget documents whether the Scottish Government intends to enforce a freeze on recruitment or to seek to negotiate on pay progression or flexible working.

72. Stephen Boyd argued that a freeze on pay represents “a significant real-terms wage cut over the next year” and pointed out that it comes with a backdrop of retail price index inflation of 4.5, higher still food and energy inflation, an imminent VAT increase, likely increases to pension contributions and a reduction in housing benefit. He highlighted the unfairness of these measures on some members of society but also stressed the macroeconomic impact of potentially constraining growth.63 The Scottish Council for Voluntary Organisations warned that: “Job retention policies by definition work against a root and branch service transformation and in some areas this may therefore act as a barrier to reform”.64

73. On the subject of a public sector recruitment freeze for all but essential workers, Stephen Boyd pointed out that such a policy required an agreed definition of an “essential worker”. He argued for an evidence-driven debate on this issue.65

74. The Committee regrets the lack of discussion within the Draft Budget documents regarding the development of a sustainable and coherent policy on public sector pay.

75. The Committee asks the Scottish Government to set out in more detail its intentions with regard to public sector pay bill and what sums may be expected to be released for other expenditure as a result.

Alternative routes the Scottish Government could have pursued

76. The Committee wished to explore with witnesses the other options which were available to Scottish Ministers in order to manage the reduction in the funds arising from the UK

77. It was suggested that charging for some services, such as eyes tests and prescriptions, would assist the Scottish Government in freeing resources for activities which would support growth, yet such action could further constrain the ability of the public to spend, impacting the economy negatively.

78. As discussed below, witnesses were critical of the decision to “ring fence” health spending and other social programmes including free bus travel and free personal care, arguing that all expenditure lines should be open to reconsideration and scrutiny in the budget process.

79. The CBI’s written submissions to the Committee, over successive draft budgets, have argued the case for outsourcing of government services as a way to deliver services with greater efficiency. Rationalisation of local authorities and the use of shared services is another recurring theme. During evidence to the Committee, David Lonsdale accepted that some of CBI’s proposed reforms were “politically challenging” but argued that “if some of them had been implemented, that would have generated greater savings that could have been invested more in the economy and wealth creation”.66

The social contract

80. The Draft Budget 2011-12 states—

“At the heart of our decision-making has been our desire to reinforce our social contract with the people of Scotland. In difficult economic times, the Scottish Government has acted to create new economic opportunities, protect household income, support frontline services and improve our environment. We reaffirm that social contract by providing the resources to continue the council tax freeze and for the full removal of prescription charges. These initiatives will help households facing pay restraint, a necessary measure to protect jobs and assist the economy.”67

81. Graham Bell said of the social contract: “if we get it right, it makes Scotland a desirable place in which to live and work. That is crucial for attracting inward investment”.68

82. The impact of the Draft Budget 2011-12 reductions on the third sector was explored by the Committee. Stephen Boyd felt that projects such as those providing affordable childcare are often a hidden casualty of cuts and can adversely affect the labour supply.

83. Stephen Boyd warned the Committee that—

“People are not confident that the contract will hold in areas outwith the direct control of the Scottish Government. When jobs are already being lost and that type of efficiency is being talked about, people who are working in health, education and local authorities are not confident that the trade-off between a pay freeze and jobs will hold over the course of the coming year”.69

Delivery of efficiency savings

84. The Draft Budget 2011-12 states that: “The profile of reduced public spending in the next four years makes it all the more essential that we reform the way in which we deliver public services in Scotland. We have established the Commission on the Future Delivery of Public Services…which will be charged with making recommendations about the future provision of our public services”. The document includes a specific aim of “driving out further efficiencies, with a clear target of 3 per cent improvement in 2011-12”70

85. Stephen Boyd explained the inherent difficulties which exist in attempting to make like-for-like comparisons between public and private sector productivity and pointed out that quality-enhancing investment – such as the employment of classroom assistants, has an adverse impact on productivity.71 He went on to warn that his recent communications with union members suggested that “If we tell people who deliver front-line services that 3 per cent efficiencies can easily be achieved in their workplaces, they will laugh in our faces. They do not think that that is realistic or achievable”.72

86. It is not clear from the budget documents whether the 3% efficiency savings required of public bodies are intended to be cash-releasing (i.e. the same output for less money) or involve an increase in output (more output for the same money). A lack of clarity on productivity and output measurement within the public sector, and difficulties with methodology were cited as obstacles to achieving such efficiencies.73

87. The Committee regrets the lack of clarity within the budget documents over what, if any, sums are expected to be released as a result of the planned 3% efficiencies.

Fiscal levers available to Scottish Ministers

88. The Draft Budget 2011-12 states that “The limited financial powers available under the existing devolution arrangements mean we cannot do nearly as much as we would like to cushion the impact of spending cuts”.74

89. Alf Young concurred, saying: “the real levers to achieve sustainable economic growth…do not reside with this Parliament” and added “I think that some of the choices that have been made by both the UK Government and the Scottish Government effectively exclude sustainable economic growth from being a primary objective”.75

90. Stephen Boyd also expressed his concern that “there are a number of levers at the Scottish level with respect to long-term growth, but in addressing the immediate economic difficulties that face us, the levers are extremely weak”76

Ringfencing of the NHS budget and preservation of other social programmes

91. As mentioned earlier in this report, Scottish Ministers have taken the decision largely to protect the National Health Service budget. Witnesses argued that this was at odds with the Scottish Government’s purpose to increase sustainable economic growth77 and that all areas of spend should be up for scrutiny at a time of declining resources and increasing demand on public services.78

92. Graham Bell argued that efficiencies within the health budget are achievable and pointed to NHS Lothian’s success in finding £20 million of savings for three years in a row and pointed to the value in devolving budgets down to the local level.79

93. Stephen Boyd pointed out that inflation in the health sector runs in excess of inflation in the general economy and argued that it was not, therefore, receiving the increases which would be required to deliver the same quality of service. He called for better audit of the efficiencies claimed by public sector organisations and cautioned that claimed efficiencies, once properly audited, were often found to be cuts in the quality or quantity of service delivered. 80

94. The Scottish Council for Voluntary Organisations argued that “protecting budgets in this way creates disincentives to reform within those service areas. It also reduces the ability of other service areas, such as transport, arts, sports, education and so on to join up in a meaningful way with health services in order to achieve the service outcomes desired, in this case health outcomes.”81

95. The Cabinet Secretary defended his decision to protect the health budget, referring to the majority of members of the Scottish Parliament and of the general public, who wished to prioritise this area of spend. He asked the Committee to “bear in mind that the Parliament must approve the budget or not on a wide variety of considerations”.82 He stated that during difficult times such as these, it was all the more important that the Scottish Government sustained its social contract with Scottish people.

96. He reiterated the view that inflation within the health budget runs at a higher rate than inflation in the rest of the economy and reminded the Committee that demographic change and the development of new therapies and procedures placed increasing pressure on the budget.83

Increase in non-domestic rates for large retailers

97. The Draft Budget 2011-12 announced plans by the Scottish Government to use its discretion over non-domestic rates “to help increase resources in 2011-12 by increasing business rates paid by the largest retail properties, including supermarkets and out-of-town retail parks”.84

98. Witnesses were divided on whether the policy would have a significant negative impact on retailers and risk a reduction in investment in Scotland by UK and international retailers.85 CBI’s written submission to the Committee speaks of CBI’s “alarm” over the proposed changes and argues that it is at odds with the Scottish Government’s stated aim of ensuring Scotland is the “most attractive place for doing business in Europe” and also pointed out the inherent contradiction with enterprise agency policy in having a disincentive for a business to grow beyond a certain size.86 Brian Ashcroft informed the Committee that “the academic evidence is that business rates and non-domestic rates do not have a stable impact on employment and output…as land is a fixed factor—it is not going anywhere—the impact is shifted on to the rentier—the owner who rents out the land, who has to take a lower rent”.87 Graham Bell disagreed with this, and added “We do not believe for a moment that that increase in business rates will encourage town centre investment.”88

99. Written evidence from the Federation of Small Businesses (Scotland) broadly welcomed the proposal by the Scottish Government, saying that it would “redress the balance between town centres and supermarkets/out-of-town retail parks” The FSB hope that it will create a more level playing field for smaller retailers.89

100. The Scottish Retail Consortium (SRC) set out its concerns over the proposal in written evidence to the Committee. Its submissions stated that it is “critical to the sector that business rates remain consistent, affordable and predictable” and highlighted the impact of the recent rates revaluation compounded by a dip in consumer confidence. The SCR argued that “retailers will find it difficult to absorb this additional levy without having a detrimental impact on jobs” and cautioned the Scottish Government against penalising companies for investing in Scotland.

101. Finally, the SRC’s submission questions whether legislation to vary business rates in the way proposed could be in contravention of European Union competition legislation on state aid.90

102. The Cabinet Secretary emphasised the need for the Scottish Government to find a balance between reducing spend and increasing revenue and argued that the strong performance of the large retail sector represented an opportunity to raise additional income. On the question of whether this policy would support economic growth, he responded by saying that the logical conclusion of that argument would be for a removal of all business taxation.91

103. The Cabinet Secretary estimated that the revenue which will be generated from this course of action will be in the region of £30 million in 2011-12. He described the system to be applied, under which businesses of a rateable value more than £750,000 would pay an additional tax, at a range of rates, depending on the size of the business. The Cabinet Secretary made an announcement to Parliament on 9 December which stated “Today I have laid before the Parliament legislation that sets out how the large-retail levy will operate. Retail properties with a rateable value of more than £750,000 will pay a different level of large-business supplement, which will be stepped so that the properties that have the highest rateable value contribute most. I have kept our commitment to match the English poundage but I am applying a supplement to that poundage to a very small proportion of properties.”92

104. His statement confirmed that large retailers in town centres would also be subject to the supplement, adding that “We took the view that, on balance, increasing the contribution that such large businesses make to local communities through their business rates could begin to redress the balance a little. It is only fair that they now make a greater contribution.”93

105. On the issue of consultation with business over these proposals, the Cabinet Secretary confirmed that while the Scottish Government discusses general matters of rates policy with business sector representatives, the specific proposal that rates be increased for larger retail properties was not discussed with retailers or business representatives ahead of the proposal being announced.94

106. On the question of poundage rate parity with the rest of the UK, the Cabinet Secretary confirmed that rates would continue to be pegged at the UK level with the large-retail levy as an additional supplement.95

107. The Committee are aware of the concerns which will be felt among business owners regarding poundage rate parity for non-domestic rates and the maintenance of a level playing field with competitors in the rest of the UK.

108. The Draft Budget 2011-12 states that the introduction of the new rates “will serve also to support our town centres”.96 The Cabinet Secretary’s announcement, however, confirmed that large retailers, wherever they are based, will be subject to the new rate supplement.97

109. There appears to be a disparity between the statement in the draft budget that the new rate supplement will support town centres and the Cabinet Secretary’s admission that large retailers in town centres will be subject to the supplement. Greater clarity is required on the question of whether this policy will survive a legal challenge.

110. On a related issue, some witnesses lamented the rates revaluation, which had led to a doubling in some instances. Witnesses argued that this would lead to a loss of jobs and nervousness about investment.98 It was also argued that childcare establishments had been hit hard, which could jeopardise an essential element of the support required to get people back into the workplace during the economic recovery.99 Graham Bell called for the Scottish Government to revisit the rates revaluation and reconsider altogether the way rates are charged on commercial property.100

Small Business Bonus Scheme

111. During oral evidence to the Committee, the Cabinet Secretary argued that reductions to the enterprise agencies were offset, to a certain extent, by support for businesses in the form of the Small Business Bonus Scheme (SBBS), which provided a greater degree of support than that delivered under the small business rate relief scheme available under the previous administration. Stephen Boyd had argued that this scheme “is of dubious value to the Scottish economy” and called for the funding to be used instead for investment in Scottish industry through the Scottish Investment Bank.101 When this idea was put to the Cabinet Secretary, he responded by saying that the scheme was particularly important in the current climate and would have helped some small firms to survive.

112. A written submission from the Federation of Small Businesses (Scotland) estimates that “one in eight recipients of the Bonus claim that it has contributed significantly to their continued viability during the recent economic downturn”.102 Information supplied by the Cabinet Secretary confirmed that “SBBS has removed the rates burden for some 64,000 properties in Scotland and provided a bill reduction for an additional 11,000” and that “following the uplift and expansion of SBBS at this year’s business rates revaluation, the number of properties potentially eligible for SBBS increased by 12%.”103

Scottish Water

113. Scottish Water would normally require £150 million in borrowing to cover its regulatory settlement104 but the Draft Budget 2011-12 does not contain any support for borrowing within Scottish Water.

114. Jenny Stewart pointed out that if Scottish Water was to become a public interest, non-profit distributing company, its debt could be refinanced, releasing £3 billion to be shared between the UK Treasury and the Scottish Government.105 There was a consensus among some witnesses that this route should be pursued. David Lonsdale spoke of CBI’s support: “we feel that the organisation should become much less reliant on the public sector for funding. As a result, money would be available for spending on other gross domestic product-enhancing capital projects”,106 and Graham Bell proposed that the model could be extended to publicly run ferries.107

115. Stephen Boyd was supportive of the concept of allowing Scottish Water to borrow against its revenue stream but cautioned against a sale of the asset.108

Affordable Housing

116. Concerns were expressed by witnesses over the impact of the decision within the Draft Budget 2011-12 to reduce funding for affordable housing. Witnesses believed that this decision would impact on the construction industry, on the labour supply and on the delivery of the social contract.

Support for Broadband

117. As stated above, the Draft Budget 2011-12 includes the commitment to “fund broadband interventions to support our Digital Ambition for Scotland and put in place the broadband infrastructure needed to support innovation in the digital economy and ensure Scotland’s business base can remain competitive in the global digital environment”.109

118. In supplementary written evidence to the Committee, Scottish Enterprise explained that it had not been successful in its joint bid with Borders and Dumfries and Galloway to Broadband Development UK (BDUK) but emphasised its commitment to securing such funds in the future to assist areas that require additional public sector subsidy for telecoms upgrade.110

119. HIE aim, in partnership with BDUK, to deliver superfast broadband to “40 or so towns in the highlands and Islands”.111

120. Willy Roe said—

“The availability everywhere of 20MB or 25MB broadband will create completely new kinds of opportunities for the economy, for the delivery of education and for the national health service to become more effective and efficient, and will in time provide a means of allowing the young population in the Highlands to stabilise or even to grow. We think that investing in superfast broadband will create transformational—with a capital T—change”112

Industry & Technology Grants Budget Lines

121. The Committee heard that innovation and technological development in business are key drivers of economic growth and that witnesses were, therefore, concerned to note that funding for the Industry and Technology Grants is set to decline within the Scottish Government’s Enterprise, Energy and Tourism budget overall.113 The Innovation Grants budget will decline from £8.8 million in the current year, to £6.7 million in 2011-12, RSA grants from £43.4 to £39.9 and RSA receipts from £-2 million to £-1.5million.114

122. The enterprise agencies confirmed that innovation and R&D were priority areas. In its budget for 2011/12, Scottish Enterprise has increased its support to projects of this type by 19.3%.115 The Committee wished to explore this apparent contradiction between Scottish Government and agency priorities.

123. Crawford Gillies was unable to comment on the apparent contradiction between SE’s priorities and the cut in the grants to innovation and technology projects. He stated that a “bilateral ongoing process” was underway in order to align SE’s budget with the Scottish Government’s and with other agencies.116 The Cabinet Secretary said that the Scottish Government aimed to—

“integrate, much more effectively than has been the case in the past, the range of financial interventions that can be made available to individual companies that are seeking support from Scottish Enterprise and from the public sector in general. We want to achieve greater efficiency from the drawing together of all those funds. Our objective is to ensure that we can maximise the impact and effectiveness of funds that are clearly at a lower level than the funds that were available in the past.”117

124. He confirmed that discussions were underway between the Scottish Government and Scottish Enterprise in advance of a transfer of funds which will take place in April 2011 when Scottish Enterprise will take over administration of the grants.118 He did not comment specifically on the rationale for the cuts in grants to technology and innovation projects.

125. The importance of long-term funding for innovation and technological support was discussed and it was regretted that urban regeneration companies, for example, which have the potential to attract and maintain companies, operate on a year to year basis. Alf young stated that “In the inevitable day-to-day pressures of crisis and one-year budget reviews, that longer-term view goes, by default, which is bad for all of us”.119

Skills

126. Members wished to establish witnesses’ views on the impact of the budget on skills development and the resultant impact on the Scottish economy’s ability to recover.

127. Brian Ashcroft pointed out that “there is an expected efficiency saving in higher and further education such that, if the cut is delivered, the outcomes will remain the same, even though the resource expenditure is less.” He also expressed concern over the reduction of the capital budget for higher education and its potential to impact science and commercialisation. 120

128. The Cabinet Secretary set out the Scottish Government’s contribution to ensuring that skills are retained in order that Scotland is in the best possible position to respond to the economic upturn when it comes. He referred to the government’s various elements of support for apprenticeships and the government’s policy of maximising activity in public sector construction, particularly in relation to public sector housing, given the downturn in private sector housing construction. He said “we are trying to ensure that we sustain public activity while private activity recovers”.121

129. The Scottish Council for Voluntary Organisations noted “the major reductions in SDS, skills and lifelong learning budgets in 2010-2011” and said “we will want to ensure that the very distinctive skills needs of the third sector workforce will not suffer at a time when the third sector’s role is being seen as increasingly central to achieving Scotland’s social and economic aspirations”.122

Support for Rail and freight

130. The Draft Budget includes a reduction from £10.3 million in the current year to £2.9 million in 2011-12.123 Such a dramatic reduction appears to be at odds with the Scottish Government’s ambition for a low carbon economy. The Cabinet Secretary explained that, over successive years, it had not been possible to utilise all of the allocation to develop freight schemes. He assured the Committee that resources could be found if demand outstripped supply during 2011-12.124

131. Transform Scotland, in its written submission to the Committee laments the closure of the Freight Facilities Grant scheme to new applicants, arguing that “this fund…has been successful in delivering modal shift from road to rail and sea” and that “the budget saving (understood to be £7m p.a.) seems trifling in comparison with the benefits”.125 The Freight Facilities Grant supports projects which transfer freight from road to rail and the Committee notes that facilities such as Fife Energy Park could benefit from investment in rail freight facilities.

132. The Cabinet Secretary for Finance and Sustainable Growth told the Committee that to date there had been an consistent underspend of the resources provided for the Freight Facilities Grant and that the £2.9 million allocation was sufficient to meet existing Scottish Government commitments—

“Since 1 April 2007, the capital budget for the Freight Facilities Grant projects has totalled more than £40 million, while the awards of freight facilities grants have totalled less than £8 million. That puts into perspective the challenge that there has been”.

And that—

“Resources have been available and have been reallocated to other projects, because we have not been able to get the demand. If I am suddenly inundated with requests from companies with good proposals that are state aid compliant and supportable, and which transfer freight from road to rail, I will be more than happy to search for the additional resources that will be required to address that demand.”126

The Enterprise agencies

The Draft Budget 2011-12’s plans for enterprise agency funding

133. As outlined in earlier passages of this report, the enterprise agencies’ budgets face real terms reductions of 11.5% for Scottish Enterprise and 18% for HIE.

134. Members were concerned by the fact that the Grant in Aid to HIE has been cut much more deeply than the Grant in Aid to Scottish Enterprise and wished to establish the reason for this. The Cabinet Secretary described the work undertaken between the Scottish Government and the agencies to establish an appropriate configuration and commensurate resources. He referred to the reductions of staff numbers within the agencies, a number of exceptional items such as capital acceleration and a one-off increase to HIE as the reasons behind the apparent discrepancy between the rates of decline in the budgets of each agency.127

135. In follow up evidence the Cabinet Secretary stated that the entire reason why HIE’s budget had been cut more than that of Scottish Enterprise was that Scottish Enterprise’s 2010/11 capital budget had been cut (by £35 million) because of the acceleration of capital investment into earlier years. The lesser cut in Scottish Enterprise’s 2011/12 budget was thus a consequence of restoring the agency’s capital budget.

136. To help the committee place these changes in a longer term context, the Cabinet Secretary agreed to provide data on the resources provided to each agency since 2007. The figures provided show that the the overall percentage reduction in support for each agency over the period 2007-08 to 20011-12 as follows:

  • SE – 62.01%
  • HIE – 52%
  • VisitScotland – 18.82%

137. For HIE and SE these figures are affected by transfers of certain functional responsibilities of the agencies to other bodies over the period. The Cabinet Secretary provided figures which show that in the 2011 – 2012 Draft Budget the Scottish Enterprise Grant in Aid for those items not transferred to other agencies was 27% lower than in 2007- 2008. For HIE the corresponding reduction in funding for “non transferred” functions was 34%.

138. The Cabinet Secretary acknowledged that the cut in HIE’s budget next year and the longer term demands of larger projects, such as the Beechwood Campus for the University of the Highlands and Islands, would present a challenge to HIE in finding the necessary resources, particularly at a time when market conditions did not lend themselves to attracting investment from external sources. He cited the Scottish Government’s new loan fund arrangements as a means of ensuring that public resources had a wider impact.128

139. The Committee considers that the rate of decline in HIE’s budget, presents a risk to the delivery of large transformational projects and to renewable projects in the Highlands and Islands region and may result in “either or” decisions.

National Renewables Infrastructure Fund

140. As stated earlier in this report, the Draft Budget 2011-12 states: “[in 2011-12 we will] implement the National Renewables Infrastructure Plan, including £17million investment in the Renewables Infrastructure Fund to strengthen port and manufacturing facilities and the supply chain for manufacturing offshore wind turbines and related components”.129 The First Minister announced the National Renewables Infrastructure Fund (NRIF) as a “£70 million” fund to be administered though Scottish Enterprise and HIE and the Draft Budget 2011-12 contains a commitment to “implement the National Renewables Infrastructure Plan, including £17million investment in the Renewables Infrastructure Fund to strengthen port and manufacturing facilities and the supply chain for manufacturing offshore wind turbines and related components.”130

141. On examination of the enterprise agencies budgets, it became clear that Scottish Enterprise have budgeted £8.5 million in 2011-12 and HIE do not expect to administer any of the fund. During evidence to the Committee, Scottish Enterprise indicated that, prior to the NRIF announcement, it was planning projects of a similar nature, to a value of approximately £6 million,131 which prompted the question of how much of this money was actually additional.

142. The NRIF funds do not in any case alter the fact that the combined funding for HIE and Scottish Enterprise has been reduced by 7% in real terms.

143. Witnesses from Scottish Enterprise confirmed that resources for the NRIF would come from within Scottish Enterprise’s budget and said that if projects worth more than the £8.5 million earmarked within its current plan were put forward, SE would find the extra resources up to a limit of £20 million in 2011-12, citing property disposals as a means of balancing the books.132

144. Scottish Enterprise hope that it will be possible to lever the additional funds necessary to achieve the £230 million estimated requirement for renewables infrastructure.133

145. The Cabinet Secretary said that expenditure would depend on demand and that it would be possible to stretch the expenditure envelope further if necessary.

146. The Committee notes the substantial discrepancy between the £17 million which was indicated as expenditure under NRIF in 2011-12 in its letter to the Committee and on page 94 of the Draft Budget 2011-12 and the £8.5 million currently earmarked within Scottish Enterprise’s budget for 2011-12. The Committee did not receive a fully satisfactory explanation for this anomaly.

147. The Committee concludes that, given the fact that NRIF monies will come from within Scottish Enterprise’s budget and that this budget has been reduced, the NRIF does not represent new investment on behalf of the Scottish Government, rather it is a re-prioritisation exercise.

Scottish Enterprise

Priorities

148. Witnesses representing SE set out the agency’s key priorities for 2011-12, with renewable energy topping the list. Company support bringing the greatest returns also remained a high priority. Crawford Gillies explained that resources would be reduced in the areas of intellectual asset development, business infrastructure and running costs.134

149. If more resources were available to the agency, it would choose to accelerate investment in renewables projects “as fast as the market will allow us to” and to—

“pursue a range of other priorities, such as internationalisation. Can we really address the opportunities for what has been referred to as an export-led recovery? We would want to help more companies to export and those companies that are exporting to export further, wider and deeper. We would need to take a step back and reflect on the overall budget and distribution of resources. Rest assured that there is still ambition across the whole organisation”.135

Support for business

150. Julian Taylor assured the Committee that SE supports businesses of all sizes and that their potential for growth was the most significant criterion and that those in rural areas were equally eligible.136

Shared services

151. Witnesses from Scottish Enterprise outlined the ways in which resources are pooled with organisations such as Skills Development Scotland in order to make them stretch further and said that such savings were continually being sought.137

Property portfolio

152. With regard to income from property disposals, the committee questioned whether plans to continue to yield income were sustainable. Witnesses considered that income from property disposals was likely to be sustained for some years to come.138 It was noted that the cost of maintaining property assets, particularly at a time when many remained vacant, outweighed the income from the asset but it was hoped that these losses would be recouped by their eventual sale.139

Pay policy

153. It was noted that staff support costs within the cost of “running the business” would not decline in 2011-12 despite the resources declining overall. Witnesses explained that this was due to the absorption of 2010-11 salary increases.140 SE witnesses confirmed that no bonus would be paid to the CEO in the current year.141 The Committee wished to establish the saving which would be accrued from the removal of staff bonuses in the current year and a pay freeze and withdrawal of bonuses in 2011-12. Supplementary written evidence from Scottish Enterprise indicated that the assumed saving in 2011/12 from the withdrawal of bonus payments will be £1.1m and the assumed saving in 2011/12 from the introduction of a pay freeze will be £1.2m.142

154. Graham Bell emphasised the importance of other mechanisms of business support in a climate of declining spend on the enterprise agencies and pointed to the smart exporter programme, a joint venture between the Scottish Government and SDI as a good example. David Lonsdale welcomed the protection of export assistance within Scottish Enterprise’s budget. 143

155. Stephen Boyd argued that the demise of RDAs in England represented an opportunity for Scotland and that to attack Scottish Enterprise’s budget at this time would therefore be “unwise” and praised its leadership and management support for business.144

Highlands and Islands Enterprise

156. Witnesses representing HIE outlined the priority headings for the agency, as set out in its written submission to the Committee. These are:

  • Supporting businesses and social enterprises to shape and realise their growth aspirations
  • Strengthening communities and fragile areas
  • Developing key sectors, particularly to pursue regional opportunities
  • Creating the conditions for a competitive and low carbon region.

157. Witnesses also underlined the importance of capitalising on opportunities to support renewable energy infrastructure and the access by the Highlands and Islands population to superfast broadband and described the balance which they must strike between long term investments for the area and opportunities which arise and require immediate capital. It is estimated that it £20 million is required to unlock the potential in port infrastructure for offshore renewables in the Highlands and Islands area though this would depend on market demand.145

Support for renewables in the Highlands and Islands

158. HIE’s ability to cope with increasing demand for support for renewable projects at a time of declining resources was questioned. In particular, HIE have managed its reduction in resources by re-profiling its support for the Beechwood Campus project for the University of the Highlands and Islands (UHI). The requirement for larger sums in the coming years has the potential to place a squeeze on monies left to support renewable projects.

159. Alex Paterson stated that—

“we could spend all of our budget on renewables. The scale of opportunity and the call on cash over the next few years are huge in that sector. Can we provide all the necessary funds? Probably not. Various other sources must come together, and the fossil fuel levy is particularly important, given the port infrastructure investment requirements. We must all think about more creative funding packages and options rather than using the standard enterprise agency investment tools”.146

Grid Connection Issues

160. The viability of renewable energy developments is dependent on cost-effective connection to the national grid. Alex Paterson welcomed OFGEM’s investigation into these issues, declaring it—

“absolutely critical. Some of the costs of generating and distributing renewable energy from the northern isles and the Western Isles are incredible compared to the payments that are made for doing it in parts of England. We therefore welcome the Ofgem consultation and the Department of Energy and Climate Change's move to look at transmission capping at least as an interim measure”147

161. In its submission to OFGEM, HIE cites the two main regulatory barriers to the development and deployment of renewable energy in the Highlands and Islands area as the transmission charging regime and connection arrangements. The full submission is provided as supplementary evidence.

Is HIE’s range of support under threat?

162. HIE spoke of a range of ways in which it enables its budget to go further. An estimated £7 is levered from other sources as a result of each £1 spent by HIE. HIE witnesses spoke of their intention that “over the coming years, we should be able to replace every £1 million reduction in our grant in aid from the Scottish Government with at least £1 million from sources that are beyond Scotland and which we would not otherwise have tapped into”.148

163. In the past, HIE has supported large community land buy-out projects, with the potential to transform communities. Concern exists that this type of large-scale support can no longer be offered in a time of reducing resources.

164. HIE produced a map which illustrated the geographic coverage of projects in the region.149 Willy Roe argued that HIE had a role to “promote and float” projects by supporting a small number, demonstrating success, then pushing out into the independent sector. He spoke of the high levels of commitment often found within geographically remote communities and the ability to empower communities by supporting them to a stage where they receive revenue from, for example, a renewable energy asset. Willy Roe also spoke of his wish to see, in the future, such projects contribute to “a pool of investment that essentially contributes back to the organisation that helped them to succeed, in order for it to enable the next communities to succeed enable others to go down the same route.”150

Priorities for additional resources

165. Were HIE to have access to additional funds, its priorities would be to focus on the needs of the Moray area and accelerate enabling projects in the areas of superfast broadband and renewable energy.151 Alex Paterson described his vision for the area—

“there are two labels that I want the Highlands and Islands to acquire over the next few years: first, Europe's marine renewable energy capital and secondly, Europe's most digital region.”152

Moray

166. The Moray economy will suffer as a result of the withdrawal of the Ministry of Defence from the Kinloss base. HIE plan to diversify the local economy and stressed the importance of rapid action to ensure that the assets at Kinloss are redeployed before they undergo any depreciation. Witnesses pointed out that tourism is underdeveloped in the Moray area.

Scottish Development International

167. Scottish Enterprise’s submission to the Committee recorded that Scottish Development International’s budget will decrease but that the decrease had been minimised in view of the importance of supporting overseas business development by Scottish companies. It was, however, difficult for the committee to assess this as spending on SDI is not a specific line in the SE budget but is spread over various headings.

168. Brian Ashcroft said in evidence “I see SDI as a critical part of our development effort, because we need to continue to attract inward investment and promote exports”.153 Witnesses from SE spoke of their desire to invest more in internationalisation, in order to stimulate and export-led recovery.

169. The Committee notes that the post of Chief Executive of SDI has now been filled as of 16 December 2010 through the appointment of Anne MacColl who has been filling the post as acting chief executive officer following that of her colleague, David Smith, who previously held this position on an interim basis. The Committee wishes the new incumbent every success in the role and reiterates the view expressed in its inquiry on international trade that SDI performs a very valuable function and that the post of its chief executive is critical to that function. However, the Committee has been frustrated with the delays in the recruitment process, due in part to alterations made by the Scottish Government to the job specification, and regrets the lack of transparency concerning the appointment process and changes to the job specification. The Committee will be writing to the Scottish Government on this matter.

Tourism

The draft budget

170. The Draft Budget 2011-12 states that “the Budget allows VisitScotland to market Scotland as a tourism destination overseas and in UK domestic markets”154 According to our adviser, the reduction in VisitScotland’s budget amounts to 9.1%. Witnesses put the figure at 7.5%, which adjusted for one-off project funding.

171. Iain Herbert stressed the importance of support for marketing, highlighting the opportunity for Scotland to “present itself in a joined-up way and market itself heavily in the domestic market next year”.155 He emphasised the potential contribution tourism could make to economic recovery, pointing out that a greater proportion of revenue from tourism remains in the domestic economy than with other commercial sectors.156

VisitScotland

172. Mike Cantlay claimed that “if successful, Scottish tourism will earn £11 billion for the Scottish economy next year and support 270,000 jobs and that therefore “We believe that investment in tourism is the best single investment that Scotland can make right now”.157

173. Malcolm Roughead said that VisitScotland’s budget reduction was at the lower end of the scenarios for which it had been planning and referred to the reviews undertaken by VisitScotland to identify efficiency savings which would be ploughed back into “high-yield marketing expenditure”,158 yet VisitScotland’s submission still reveals a small reduction in expenditure on marketing between 2010-11 (£47.5 million forecast outturn) and 2011-12 (£41.78 million indicative resource allocation).

174. Malcolm Roughhead spoke of the need to enhance the marketing budget by drawing in partners in the private sector and said that there were efficiencies to be made through greater use of digital media and partnership with, for example, VisitBritain. He also stressed the importance of finding a balance between existing and emerging markets and said “We have to be fleet of foot and look at where the opportunities are so that we can re-profile as and when required”.159 Iain Herbert spoke of the opportunities in tourism in the coming year and called upon VisitScotland to focus on direct front-line marketing.160

175. Ken Neilson said that, as proportion of the agency’s budget, spend on marketing would be maintained at the same level. He said that, by spending the money in different ways, and spending les in other areas “we think that even with that reduced amount of money we will still be able to do the things that we would like to do”.161

176. In contrast with their evidence to the Committee during the Budget Strategy Phase earlier this year,162 Malcolm Roughead stated that resources for Quality Assurance (QA) work would be protected and outlined VisitScotland’s aspirations to mainstream the parallel green QA scheme. The current QA scheme runs a deficit and it is planned to reduce this to zero within the next two years.163

177. The planned reduction in VisitBritain’s budget has the potential to impact negatively on VisitScotland’s delivery of marketing – “we depend on it for reach”. Clarity on how VisitBritain plans to refocus its priorities has not yet emerged. Malcolm Roughead estimated that it would cost VisitScotland approximately £1 million per annum to replace the areas of activity it currently discharges through VisitBritain.164

178. VisitScotland’s revenue generation will reduce as a result of local authorities’ plans to reduce expenditure on information centre provision and marketing activity. Malcolm Roughead explained that VisitScotland would accelerate its plans to share premises for its information centres in order to offset this and spoke of the future revenue potential of its centres.165

179. Recent awards gained by places such as Shetland and Skye were cited as “valuable tools that allow us to reach greater audiences” although issues over capacity and accessibility were raised.166

180. With regard to the domestic market, Mike Cantlay said: “One of the challenges that we face involves how our customers in Scotland perceive us” and also stressed the potential which exists for more recreation and its ability to spread demand outwith the peak seasons.167 Malcolm Roughead reported that visits within Scotland by those living in Scotland were up 16% in the first 6 months of 2010, which demonstrated that “the staycation effect it there to be seen” and “the biggest bang for our buck is definitely the domestic market”. Recent research by Deloitte had shown that the day trip market has a value of £6.8 billion in Scotland per annum. Mike Cantlay described the work of EventScotland in attracting major events which would further exploit Scotland’s market position.168

181. Witnesses described the partnership work with private industry which VisitScotland uses to extend its reach and stretch its resources. These ranged from airlines to well known brands in the food and drink sector.169 Malcolm Roughead added that “our mantra is that tourism is everyone's business: it touches every facet of Scottish society, it is tangible and visible, and people can benefit from it”.170

182. The committee is concerned that the budget to support this vital sector of the Scottish Economy continues to receive year on year cuts and considers that the uncertainties over long term funding of VisitScotland provides a poor framework for the development of the sector.

Scottish Investment Bank

183. Witnesses from Scottish Enterprise outlined recent progress with the Scottish Investment Bank (SIB), which was first announced in April 2009. The Scottish Loan Fund would be funded from a combination of £50 million of public sector money and up to £50 million of private sector funds and a fund manager would be appointed within the next two months. The fund would be in a position to lend within two months, and progress had been made with building up a demand pipeline.171 The Cabinet Secretary confirmed this position and stated that the Scottish Loan Fund will be fully operational by January 2011.172

184. CBI welcomed the Scottish Loan Fund, saying that it “could play a useful role in filling a gap in the supply of finance that has been holding businesses back. In particular, we support the focus on exporters since it is these companies who will offer us the best chance of a return to sustainable growth.”173

185. Stephen Boyd called for the money which is currently used to pay for the small business bonus scheme to be transferred to the SIB.174

The voluntary sector and social economy

186. The Committee heard that the contribution to the economy made by the voluntary sector runs into billions of pounds.175 The Draft Budget 2011-12 details plans to reduce the budget for the third sector from £35.5 million in the current year, to £27 million in 2011-12.176

187. Volunteer Development Scotland (VDS) wrote that “the decision by the Scottish Government to present a one-year budget does create operational difficulties for VDS in common with other voluntary sector organisations”.177 The Scottish Council for Voluntary Organisations urged the Scottish Government to outline plans for the remainder of the 3 year Comprehensive Spending Review period, so that organisations can better plan future delivery.178

188. The Scottish Council for Voluntary Organisations (SCVO) welcomed the commitment throughout the budget to more central involvement of the third sector in public service redesign and urged “the government to reallocate any available underspend that will undoubtedly arise from delays in their proposed large-scale infrastructure projects, to third sector development and support in Scotland”.179

Conclusions and recommendations

Background

189. The key decision within Draft Budget 2011-12 has been to protect spending on health. The reduction in Scotland’s overall budget has therefore been felt more acutely in other areas of expenditure.

Summary - will the Draft Budget 2011-12 support economic recovery?

190. The Committee recognises the challenges facing the Government in handling unprecedented budget cuts. However, it considers that insufficient priority has been given to sustaining the growth of the economy in setting budget priorities. Decisions to ring fence and protect certain areas of social spending have reduced the scope for manoeuvre.

191. Investment in education, skills, infrastructure and regeneration are all potentially supportive of economic growth. These areas have all been subject to reductions in support within the draft budget and the Committee therefore concludes that this budget is not best geared to promote economic growth.

192. The heavy cuts in the capital budget are especially harmful to growth. The Committee regrets the slowness of the progress in developing use of the Non Profit Distributing Model to fund investment in Scotland’s infrastructure and urges renewed efforts to develop alternative mechanisms to support capital spending.

193. The Committee notes the Government’s commitment to the National Renewables Infrastructure Fund but is unclear as to how much additional investment this will deliver to projects in 2011-12. The Committee calls for a more transparent statement as to the scale of spending under the fund and the implications for other programmes should demand on the fund exceed budget.

194. The Committee considers that the reduction in the resources available to support sustainable economic growth will hinder economic recovery and longer term growth. The scale of the reduction is exacerbated by the even deeper cuts in programmes which complement the work of the agencies and which have been made with little clarity as to the implications or rationale.

195. While the Committee recognises that indicative spending proposals will be produced in January 2011 for the remainder of the CSR period, the one year budget and lack of guidance on forward funding has left the Enterprises Agencies and VisitScotland in a difficult position with regard to strategic planning – to the detriment of economic recovery.

196. The Committee notes the Cabinet Secretary’s previous commitment to providing level four budget figures in sufficient time to allow full scrutiny of the next budget. However, as with previous years, this level of data has come far too late in the process which has hindered the Committee’s ability to conduct effective scrutiny.

Conclusions and recommendations in full

197. While the Committee appreciate the cross-cutting nature of spending on renewable energy, it considers that expenditure plans relating to renewable energy could be presented in a more coherent way, to assist scrutiny.

198. The Committee notes the legal requirement for all projects which have reached the OJEU (Official Journal of the European Union) stage of procurement to be made public and concludes that their absence from the New Deals web site reveals the fact that none of the projects listed on page 42 of the Draft Budget 2011-12 document are yet at this stage

199. The Committee regrets the long delays in bringing these valuable projects forward – delays which amount to three years in the lifetime of this Parliament.

200. The Committee welcomes the fact that steps have been taken by the Scottish government to make use of resource DEL monies to support capital investment but is concerned that more progress has not been made in bringing projects forward. The Committee also regrets that the ability of those within the industry to undertake long-term planning is hindered by the absence of indicative spending proposals beyond one year and the uncertainty surrounding the timing of the £2.5 billion of additional programmes.

201. The Committee specifically regrets the lack of progress with capital infrastructure projects for education, health and justice and the slow progress on transport infrastructure.

202. The Committee regrets the lack of discussion within the Draft Budget documents regarding the development of a sustainable and coherent policy on public sector pay.

203. The Committee asks the Scottish Government to set out in more detail its intentions with regard to public sector pay bill and what sums may be expected to be released for other expenditure as a result.

204. The Committee regrets the lack of clarity within the budget documents over what, if any, sums are expected to be released as a result of the planned 3% efficiencies.

205. The Committee are aware of the concerns which will be felt among business owners regarding poundage rate parity for non-domestic rates and the maintenance of a level playing field with competitors in the rest of the UK.

206. There appears to be a disparity between the statement in the draft budget on the increase in business rates for large retailers that the new rate supplement will support town centres and the Cabinet Secretary’s admission that large retailers in town centres will be subject to the supplement. Greater clarity is required on the question of whether this policy will survive a legal challenge.

207. The Committee considers that the rate of decline in HIE’s budget, presents a risk to the delivery of large transformational projects and to renewable projects in the Highlands and Islands region.

208. The Committee notes the substantial discrepancy between the £17 million which was indicated as expected expenditure under NRIF in 2011-12 on page 94 of the Draft Budget 2011-12 and the £8.5 million currently earmarked within Scottish Enterprise’s budget for 2011-12. It was also noted by the Committee that HIE has no budget at all for NRIF spending which is thus entirely dependent on Scottish Enterprise. The Committee did not receive a satisfactory explanation for this anomaly.

209. The Committee concludes that, given the fact that NRIF monies will come from within Scottish Enterprise’s budget and that this budget has been reduced, the NRIF does not represent a net increase in resources for economic development investment by the Scottish Government, rather it is a re-prioritising exercise.

210. The Committee notes that the post of Chief Executive of SDI has now been filled as of 16 December 2010 through the appointment of Anne MacColl who has been filling the post as acting chief executive officer following that of her colleague, David Smith, who previously held this position on an interim basis. The Committee wishes the new incumbent every success in the role and reiterates the view expressed in its inquiry on international trade that SDI performs a very valuable function and that the post of its chief executive is critical to that function. However, the Committee has been frustrated with the delays in the recruitment process, due in part to alterations made by the Scottish Government to the job specification, and regrets the lack of transparency concerning the recruitment process and the changes to the job specification. The Committee will be writing to the Scottish Government on this matter.

211. The Committee is concerned that the budget to support the vital tourism sector of the Scottish Economy continues to receive year on year cuts and considers that the uncertainties over long term funding of VisitScotland provides an poor framework for the development of the sector.

EXTRACTS FROM THE MINUTES OF THE ECONOMY, ENERGY AND TOURISM COMMITTEE

31st Meeting, 2010 (Session 3) Wednesday 17 November 2010

Draft Budget Scrutiny 2011-12 (in private): The Committee agreed its approach to the scrutiny of the Scottish Government's Draft Budget 2011-12.

32nd Meeting, 2010 (Session 3) Wednesday 24 November 2010

Draft Budget Scrutiny 2011-12: The Committee took evidence on the Scottish Government's Draft Budget 2011-12 from—

Professor Brian Ashcroft, Policy Director, University of Strathclyde;

Alf Young, Freelance Journalist;

Jenny Stewart, Partner and Head of Infrastructure and Government - Scotland, KPMG LLP;

Stephen Boyd, Assistant Secretary, Scottish Trades Union Congress;

Michael Levack, Chief Executive, Scottish Building Federation;

Iain Herbert, Chief Executive, Scottish Tourism Forum;

David Lonsdale, Assistant Director, CBI;

Graham Bell, Policy and Public Relations Executive, Scottish Chambers of Commerce;

Norman Kerr, Director, Energy Action Scotland;

Mark Ruskell, Director of Communications, Scottish Renewables;

Elizabeth Leighton, Senior Policy Officer, WWF Scotland.

33rd Meeting, 2010 (Session 3) Wednesday 1 December 2010

Draft Budget Scrutiny 2011-12: The Committee took evidence on the Scottish Government's Draft Budget 2011-12 from—

Crawford Gillies, Chairman, Iain Scott, Chief Finance Officer, and Julian Taylor, Director of Strategy and Economics, Scottish Enterprise;

Alex Paterson, Chief Executive, William Roe, Chair, and Forbes Duthie, Director of Finance & Corporate Services, Highlands and Islands Enterprise;

Malcolm Roughead, Chief Executive, Dr Mike Cantlay, Chairman, and Ken Neilson, Director of Corporate Services, VisitScotland.

34th Meeting, 2010 (Session 3) Wednesday 8 December 2010

Draft Budget Scrutiny 2011-12: The Committee took evidence on the Scottish Government's Draft Budget 2011-12 from—

John Swinney MSP, Cabinet Secretary for Finance and Sustainable Growth, David Wilson, Director of Energy, and David Dow, Finance Team Leader, Scottish Government.

Draft Budget Scrutiny 2011-12: The Committee considered the evidence heard so far and its approach to its draft report to the Finance Committee on the Scottish Government's Draft Budget 2011-12.

35th Meeting, 2010 (Session 3) Wednesday 15 December 2010

Draft Budget Scrutiny 2011-12 (in private): The Committee considered a draft report to the Finance Committee on the Scottish Government's Draft Budget 2011-12.

36th Meeting, 2010 (Session 3) Wednesday 22 December 2010

Draft Budget Scrutiny 2011-12 (in private): The Committee amended and agreed its report to the Finance Committee on the Scottish Government's Draft Budget 2011-12.

ANNEXE E

Education, Lifelong Learning and Culture Committee

Report on the Scottish Government's draft budget 2011-12

The Committee reports to the Finance Committee as follows—

introduction

1. The Committee considered and agreed its approach to scrutinising the elements of the Scottish Government’s draft budget for 2011-12 that fall within its remit during consideration of its future work programme at its meeting on 22 September 2010. The Committee considered its approach in more detail at its meeting on 10 November 2010.

2. Earlier in the year, the Committee had carried out a scoping exercise on local government funding of education and children’s services. During this exercise, the Committee took evidence from Scottish Government officials and Audit Scotland and visited four local authorities to hold informal meetings on budget issues with senior officials and frontline education and children’s services managers. This work was carried out partly as an alternative to the Budget Strategy Phase that had been proposed by the Finance Committee. Members agreed to use the experience of the scoping exercise to support the scrutiny work that they would carry out following the publication of the draft budget.

3. The Committee also agreed to write to the chief executives of all 32 local authorities and COSLA, before the announcement of the spending review and the publication of the draft budget, to ask what preparations they were making to support their councils’ budget setting. Replies were received from 21 councils and these are published on the Committee’s web pages.180

4. Following the announcement of the UK spending review on 20 October 2010, the Scottish Government published its draft budget 2011-12 on 17 November 2010. As a result of this later-than-normal publication, the time available for budget scrutiny by subject committees has been constrained. In view of the limited amount of time available because of the later publication and the Committee’s other workload, members decided to restrict evidence-taking on the 2011-12 draft budget to oral evidence from the Cabinet Secretary for Education and Lifelong Learning and the Minister for Culture and External Affairs and written evidence from key stakeholders in the lifelong learning and culture fields. The Committee therefore wrote to the following organisations––

Further and higher education organisations

  • Scottish Funding Council
  • Universities Scotland
  • Scotland’s Colleges
  • STUC

Culture organisations

  • Creative Scotland
  • Cultural collections
  • National Galleries of Scotland
  • National Museums Scotland
  • National Library of Scotland
  • National performing companies
  • National Theatre of Scotland
  • Royal Scottish National Orchestra
  • Scottish Chamber Orchestra
  • Scottish Ballet
  • Scottish Opera
  • Historic Scotland
  • National Archives of Scotland
  • Bòrd na Gàidhlig

5. Fourteen replies were received. These are contained Annexe N.

6. On 1 December 2010, the Committee took evidence from Michael Russell MSP, Cabinet Secretary for Education and Lifelong Learning, Colin MacLean, Director for Learning, Andrew Scott, Director for Lifelong Learning, and Sarah Smith, Director for Children, Young People and Social Care, Scottish Government. The Committee also took evidence on the same day from Fiona Hyslop MSP, Minister for Culture and External Affairs, David Seers, Team Leader, Cultural Excellence Branch, and Wendy Wilkinson, Deputy Director for Culture, Scottish Government, and Linda Ellison, Director of Finance, Historic Scotland.

7. In addition to the draft budget documents, the Scottish Government provided level 4 figures to support committee’s consideration of the draft budget. These are published on the Scottish Parliament’s Financial Scrutiny Unit web pages.181

8. The remainder of the report sets out the budget context and the Committee’s comments on the Scottish Government’s draft budget.

context

9. According to the briefing paper produced by Professor David Bell, the Finance Committee’s budget adviser, the 2011-12 draft budget was the “most difficult since devolution”. The paper went on to note that the Scottish budget was contracting because of the “very large cuts in UK public spending being imposed by the coalition government”, which were in themselves partly reflecting an increasing structural deficit in the UK, but were “mainly a response to the world wide financial collapse in 2007 and 2008, which led to a very significant drop in tax revenues.”

10. The Committee notes that the impact of the cuts in UK public spending is a 2.3% real terms cut in the Scottish block grant in the current financial year and expected cuts of 6.3% in 2011-12 and 5% in 2012-13.

11. Professor Bell’s paper went on to explain that, while Scotland’s resource budget had largely been protected by the decision to protect the NHS in England and the Barnett consequential of this decision, the situation for capital was different, with capital spending allocations in real terms set to decline by 38% by 2014-15. According to Professor Bell’s paper, this reduction was largely driven by the Barnett consequential of the decisions to drastically cut back capital spending on social housing and on schools in England.

12. The Committee notes that, overall, this is a very difficult and challenging spending environment. However, the Committee also notes that education has been disproportionately affected in the draft budget. While the average real terms reduction across the Scottish budget has been 6.3%, Education and Lifelong Learning is facing average budget reductions of 10.3% for 2011-12.

Culture

13. Culture and Gaelic, Historic Scotland and the National Archives of Scotland are part of the First Minister’s portfolio. The First Minister's portfolio includes responsibility for enhancing the quality of life for Scotland's communities through maximising access to high quality cultural events and opportunities, promoting Gaelic, promoting, protecting and providing access to Scotland's historic environment and promoting, protecting and providing access to Scotland’s documentary heritage.

14. The Committee notes that there are a number of positive elements in the draft budget, including the maintenance of the Youth Music Initiative and the Scottish Government’s commitment to retain free access to museums and galleries. However, the Committee does have a number of concerns about the overall impact of the budget on the culture sector.

15. The priorities for the First Minister's portfolio in 2011-12 include maintaining cultural and heritage assets and widening access to these, and promotion of Scotland on the world stage. The draft budget sets out that these priorities will be met by maintaining the Edinburgh Festivals Expo fund and the international touring fund for the national performing companies, encouraging the cultural collections and the national performing companies to “work collectively” to ensure all parts of Scotland experience the companies’ cultural output. Historic Scotland will “re-focus” its work to maximise the impact on protecting and promoting Scotland’s built environment (with resultant cost reductions). Creative Scotland’s core funding is to be protected, while the ring-fenced funding for Arts and Business will be maintained, in order to help maximise private sector investment in the arts. The portfolio capital budget will be used to contribute to the development of the V&A at Dundee Project, the redevelopment of the Glasgow Theatre Royal and the Glasgow Royal Concert Hall and the major events and themed years budget will be utilised to fund Creative Scotland Focus Themed Years.

16. The Scottish Government intends to spend £255m (cash terms) in 2011-12 on the priorities of the First Minister’s portfolio. In real terms, the First Minister’s portfolio spending plans for 2011-12 show a decline of £29.5m (10.5%) on the 2010-11 budget figure to £250.5m. Within the First Minister’s portfolio, there is a real-terms reduction for the culture and Gaelic budget heading by £22.6m (a decline of 11.6%) to £171.6m.

17. The Committee notes that the impact of the budget reductions on jobs across the arts and culture sector remains unclear. Asked what she considered the impact on jobs would be, the Minister for Culture and External Affairs (“the Minister”) responded—

“One of the pressures that we face is the fact that we work with a number of independent organisations—the companies and collections—a lot of whose expenditure is on staff, so we are conscious of the impact of the budget on staffing. That is partly why, instead of carrying out the cuts that the Westminster Government required last year, we deferred them until 2011-12 to give more time for planning. A number of the organisations have embarked on either voluntary severance or early retirement schemes. You will have heard the Cabinet Secretary for Finance and Sustainable Growth talk about the Government's desire to be flexible in relation to future working practices so that—if we can come to agreement with the unions on this—we can continue with a policy of no compulsory redundancies in the organisations for which we are responsible. That is a huge comparative advantage for workers in Scotland over workers in, for example, England; however, it will take everybody working together to deliver that.

Currently, the references to support in the 2011-12 budget are to a number of schemes where there are planned reductions through early retirement and voluntary severance. I think that the number of posts involved is 33 for Historic Scotland, and other numbers are given across the piece. You must remember that these are small organisations, so the numbers in our portfolio will be lower than those some of the bigger portfolios such as health and education. That is a strong commitment, but it is a difficult one to fulfil.

The workforce is looking to us for stability for their families and their income. There is the consequence of a pay freeze, which is difficult for everyone, but it means that people are in jobs and can maintain the stability of their families and their spending in local communities. The situation is challenging, but that is where we are. We are conscious of the fact that there will be pressure on organisations.”182

18. The Minister was also asked whether the capital funds being provided to support projects in Glasgow and Dundee were being taken away from funds previously allocated to other culture bodies. She responded—

“No. We are funding a number of major capital projects that will come on stream this year: the Royal Museum of Scotland in Chambers Street in Edinburgh; the Scottish national portrait gallery; the Stirling castle palace project—with Historic Scotland; and the Burns centre. The funding for new projects, such as those in Glasgow and, in particular, the project in Dundee, is possible because the funding for a number of other projects comes to an end before 2011-12.”183

Creative Scotland

19. The Committee noted that, although Creative Scotland had inherited the budgets of the Scottish Arts Council and Scottish Screen and the Scottish Government had protected Creative Scotland’s core funding, its budget had declined by 11.8% decline overall since the previous year. The Committee also noted media reports that the restructuring required following the establishment of Creative Scotland had already saved £720,000 a year.

20. The Committee notes that, although core funding has been protected in the proposed budget, Creative Scotland will face a funding cut of 11.8%. The Committee is concerned over Creative Scotland’s continuing ability to provide grant aid to many arts and culture organisations.

21. In its response to the Committee’s call for evidence, Creative Scotland stated that, “in the current economic climate this [the budget allocation] is a welcome expression of confidence in the contribution that the arts, screen and creative industries will make to securing Scotland’s future success”, although it also noted that its parent organisations had been operating on standstill budgets for a number of years.

22. The Committee questioned the Minister on the impact of the budget reduction to be experienced by Creative Scotland. The Minister said—

“It is important to remember that the setting up of Creative Scotland delivered efficiencies. We expect Creative Scotland to do more, particularly with the creative industries and in relation to the youth music initiative—I mentioned the funding for that, and there is lottery funding, too. We are confident that there is an opportunity to set a new model for funding going forward.”184

23. The Committee also noted the Minister’s plans for Creative Scotland themed years, including “active Scotland,” in the build-up to the Olympic Games in London.

24. The Committee also questioned Creative Scotland’s Chief Executive, Andrew Dixon, on budget matters during general questioning on Creative Scotland at its meeting on 15 December 2010. Mr Dixon explained that Creative Scotland had three levels of support to arts and culture organisations and individuals. There was a commitment, entered into by the organisations that Creative Scotland had replaced (the Scottish Arts Council and Scottish Screen), to support 52 “foundation organisations” for five years, up to 2012. Additionally, “flexibly funded organisations” had received, in June 2010, a funding commitment up to April 2013. Mr Dixon indicated that these were “fairly heavy commitments”, amounting to a total of £26m of the Creative Scotland budget.

25. Mr Dixon went on to explain that, in addition to the foundation organisations, there was project investment in events, festivals, artists, the residencies programme and other areas. He told the Committee that Creative Scotland was trying to build flexibility into that area, using lottery funding where possible to add value. He stated that Creative Scotland could not provide on-going revenue funding using lottery funding, nor could it replace cuts in Government funding, so the organisation had to be “quite careful” about where it applied its resources.

26. Mr Dixon concluded—

“At the moment, I would not say that any particular strand or organisations will lose out. However, lots of people have had commitments in the past, and we cannot sustain the full range of organisations in Scotland; we would rather invest in strength and in maintaining a good base.

Creative Scotland tries to take an holistic look at the cultural ecology. We want to consider the career ladders of artists moving up and through different organisations. How many theatre companies do we need? Where are the gaps? Do we have a theatre company that deals with Scots and Gaelic? Do we have enough theatre companies that work with children and young people? We will take a series of reviews, looking at particular sectors, and they will inform how we make our decisions in the future.”185

27. The Committee notes that the impact of the reductions in Creative Scotland’s budget on jobs and grants remains unclear. The Committee acknowledges that the funding commitments made to foundation organisations till 2012, and to flexibly funded organisations until 2013, will provide a welcome degree of funding stability to these organisations. Notwithstanding this, however, the Committee remains concerned over the possible disproportionate impact on the other arts organisations and on its continuing ability to support the full range of arts and culture organisations.

Cultural collections and national performing companies

28. The draft budget proposes a real-terms decline of £11.9m (13.6%) for the budget allocated to cultural collections to £75.6m.

29. The draft budget does not include any further information on how the funds are distributed between the three institutions which are termed the cultural collections (the National Archives of Scotland, National Museums Scotland and the National Library of Scotland), but the level 4 figures, subsequently provided by the Scottish Government, show the breakdown in more detail. The Minister told the Committee—

“Their budgets will be reduced, but that reduction is less than the overall average reduction in my budget. In my introductory remarks, I said that there would be a 6.7 per cent reduction in the culture and Gaelic budget. The reduction for the National Galleries of Scotland, the National Museums Scotland, the National Library of Scotland and the Royal Commission on the Ancient and Historical Monuments of Scotland is around 4 per cent.”186

30. Under the draft budget, the national performing companies can expect a decline of funding of £1.9m in real terms (7.1%) to £24.1m. The Scottish Government intends to continue the international touring fund (£0.35m) so that the national performing companies can perform outside Scotland. It is not clear whether this is a separate funding line or is contained in their £24.6m (cash terms).

31. The draft budget does not include any further information on how the planned funds will be distributed between the five national performing companies, although the replies received from those performing companies that responded to the Committee’s letter spelled out in more detail the level of budget reduction expected in each performing company and cultural collection and the impact it would be likely to cause.

32. The responses received from the national performing companies and cultural collections were mixed. The National Theatre of Scotland recognised that this was a “more favourable settlement” than had been possible in other parts of the public sector, the Scottish Chamber Orchestra noted that the reduction of almost 4% in its budget, while “disappointing”, was “better” news than it had “feared”, while Scottish Opera was “very relieved” that the Minister had been able to keep the cuts to Scottish Opera “as low as 3.9%”. On the other hand, the National Galleries of Scotland stated that the Scottish Government pay policy was going to add approximately 3% to its pay bill and would “threaten to undermine a carefully balanced pay and reward system”. The National Library of Scotland argued that the reduction in excess of 75% in its purchase grant could only have an “extremely detrimental effect” on its “successful transformation into a truly national resource”. Similarly, the National Museums of Scotland stated that the reduction of over 50% in its acquisitions budget would severely curtail its ability to grow its collections and restrict the opportunities to secure objects of national and international importance for the nation.

33. A number of the submissions from the sector, including those from Scottish Opera, the National Museums of Scotland and the National Galleries of Scotland, indicated that the organisation in question would be likely to experience problems in relation to further planning as a result of the decision to bring forward a one-year budget.

34. In respect of the impact of the budget on the cultural collections, the Minister told the Committee that she thought that the reduction was “less than they expected”, but went on to say that that “did not necessarily mean” that they did not have a “difficult thing to deal with”. The Minister went on to reiterate that a key priority for the Scottish Government was that free public access to the collections should continue.

35. The Minister commented on the impact of the budget and the flexibility that would need to be used by the organisations in planning their budgets. She stated—

“Capital pressures are a big constraint. In my introductory remarks, I mentioned that the collections will have to consider the balance and importance of capital for general maintenance and capital for acquisitions, for example. We will have discussions with each of the organisations on their priorities. We have identified capital that will help with collection and storage for the organisations, which are vital parts of what they need to do.”187

36. In the draft budget, the Scottish Government writes that, although it plans to make reductions to the budgets for the collections and companies, it will be encouraging them to “work collectively” to ensure all parts of Scotland experience their cultural output.

37. The Committee asked the Minister for more detailed information on how she expected the cultural collection organisations and the national performing companies to work collectively. The Minister told the Committee—

“I know that the National Galleries of Scotland and the Scottish Chamber Orchestra work together on education projects in Scotland. Internationally, both the National Galleries of Scotland and the Scottish Chamber Orchestra were in Atlanta in North America quite recently. One thing that we hope to do is co-ordinate international activities a lot better. We want to anticipate where organisations will go in their schedules and consider whether we can support them through Scottish Government, Scottish Development International or VisitScotland activities to promote Scotland. There are many international opportunities.”188

38. The Minister went on to mention the collaborative possibilities with regard to where and when the national companies perform.

39. The Committee notes that the reductions in the revenue budgets for the cultural collections and performing companies are lower than expected. Nevertheless, the Committee remains concerned about the impact of the overall 13.6% reduction in budgets, particularly in relation to acquisitions budgets in the National Library of Scotland and the National Galleries of Scotland.

Gaelic

40. The budget for Gaelic is planned to be decreased by £1.8m to £19.9m in real terms. The Scottish Government expects these funds to support MG ALBA, to extend Gaelic education provision and to support Bòrd na Gàidhlig with the implementation of Gaelic plans.

41. The Committee received a written submission from Bòrd Na Gàidhlig. The Bòrd stated—

“in general terms a 5.7% cut will mean we will be looking for some savings in our admin costs but the bulk of that level of cut will need to come from development work. Obviously, we will maintain focus on priorities as agreed in plans approved by Ministers, but at a time when we are looking for growth in numbers of Gaelic speakers a cut in funding is an unwelcome blow.”189

42. The Committee invited the Minister to discuss the Scottish Government support for BBC Alba. The Minister stated—

“... the jobs that it has provided have had an important impact on a rural island economy. Members who were involved in our recent debates will be aware that about 25 per cent of independent production was generated by commissions from BBC Alba. Although it takes the biggest amount in the Gaelic budget, we have tried to protect it for all the reasons that I have just given.”190

43. As regards the prospects of BBC Alba being carried on Freeview, the Minister said—

“I would love to be able to tell you when we will get news from the BBC trust about BBC Alba going on Freeview. The Scottish Government has consistently and persistently made representations on the issue. We understand that the costs would be borne by the BBC. It would cost only a small amount if BBC Alba time-shared with radio services, so it is not a cost issue. It is just a policy decision, and we encourage the BBC trust to make that decision as soon as it can—and to make it in favour of Freeview, because that would open up a great opportunity. BBC Alba has been very successful to date. It is a good example of new television working successfully and responding to people's culture and interests. A large number of Scots cannot currently get BBC Alba and, as you know, there is a real demand for it.”191

44. After the conclusion of evidence-taking by the Committee, the BBC Trust announced, on 21 December 2010, that BBC Alba would be carried on Freeview. The Committee welcomes this decision by the BBC Trust.

Executive agencies

45. Historic Scotland and the National Archives of Scotland are executive agencies in the First Minister’s portfolio. In real terms, Historic Scotland will receive £46.1m, a decline on last year’s budget of £3.2m, while the National Archives of Scotland will receive £8.7m, a decline from the 2010-11 budget of £1.4m.

46. The Committee notes that, at the Scottish Government’s request, the General Register Office for Scotland (GROS), the National Archives of Scotland (NAS) and the Registers of Scotland (RoS) undertook a review to explore ways of working together more closely, and the potential for amalgamation.

47. Following the review, the Scottish Government has decided that GROS (currently funded by the finance and sustainable growth portfolio) and NAS will be amalgamated and will work together to maximise savings from shared services. Ministers believe that this will further reduce the number of public bodies, and should improve service to customers and build on existing joint work.

48. The Committee asked the Minister about the Historic Scotland’s reorganisation activities over the past year. The Minister advised the Committee—

“The organisation is also delivering a saving in management costs by reducing the number and levels of management while protecting front-line services. It is filling only business-critical posts. Again, like a number of other organisations, Historic Scotland used the last year to help prepare for the years ahead. It has already delivered more than £350,000 of savings in staffing costs. That will help to meet the costs of, for example, early leavers.”192

49. The Committee also asked about the proposed merger between Historic Scotland and NAS. The Minister told the Committee that the target date for full amalgamation was April 2012, and went on to set out the efficiency savings that the merger would bring—

“Most of the efficiency savings will come from senior management, finance, information security management and IT services, and the actual amounts will be in the budget that is provided. All organisations, including the National Archives of Scotland, will receive reductions in their budgets; the NAS is receiving a 4 per cent reduction over the year. Those of you who are familiar with bringing together organisations will know that we will not necessarily save money in 2011-12, although we will do so going forward. The amalgamation is going ahead with a reduction in the National Archives of Scotland's budget of 4 per cent in 2011-12. That is not counting the reduction in the GROS budget, which is currently sitting with Jim Mather's budget.”193

50. The Committee received a submission from Historic Scotland. It stated that although the 7% cut presented the agency with a “significant challenge”, it had been planning for an overall 10% cut and using that process for reviewing “the priorities for spending going forward”. It therefore believed that it would be able to manage the reduction in funding while protecting its frontline services.

51. Notwithstanding the comments of Historic Scotland, the Committee is sympathetic to the challenges facing the executive agencies in the culture portfolio in managing these budget reductions.

52. Overall, the Committee understands that, across the sector, there is an evident level of pragmatism and individuals and organisations are being creative in meeting the challenges brought by the cuts. The Committee recognises that these challenges will be significant ones, which will not be easily overcome.

Education and Lifelong Learning

53. The education and lifelong learning budget funds central activities in relation to the education of children and young people under the Scottish Government Learning and Children, Young People and Social Care directorates. The Lifelong Learning budget includes funding for the Student Awards Agency for Scotland (SAAS) and “other lifelong learning” but by far the most significant sum is provided for the support of the Scottish Funding Council (SFC), which exists to support the further education colleges and higher education institutions.

54. The draft budget states that the year-on-year real-terms cut in cash terms on budgets is £211m (an 8.5% reduction) on resource and £69m (a 30% reduction) on capital.

55. In his opening remarks to the Committee when he gave evidence on 1 December 2010, the Cabinet Secretary remarked—

“In my portfolio, as in all portfolios, tough decisions have had to be taken. However, with a limited pot, we have worked with our partners to ensure that the portfolio protects front-line services and jobs and continues to make education accessible to all. In many circumstances, I am asking people to do the same for less. I am conscious of the fact that I am asking that and I am grateful that so many are rising to that challenge. We remain committed to giving every child the best start in life, raising standards in teaching and learning, providing strong and better learning opportunities for school leavers, protecting access to education based on the ability to learn and not the ability to pay, and supporting skills development that benefits current and future workforces.”194

Student Award Agency for Scotland

56. The draft budget documents propose that the SAAS overall budget will fall from £534.6m in 2010-11 to £516.6m in 2011-12, a fall of £18m, or 3.4% in cash terms.

57. At level 4, the SAAS budget line for tuition fee payments made to institutions and grants/bursaries made to students will fall by £14m or 4.5% in cash terms, from £313.6m in 2010-11 to £299.6m in financial year 2011-12 (line 6 in level 4 budget table).

58. The budget for tuition fee payments made to institutions for part-time students remains static at £13m in 2011-12 (line 7 in level 4 budget table), as do “widening access funds”, which are the discretionary funds that institutions receive to assist students in financial difficulty. The budget for access funds also remains static in cash terms at £18.8m in 2011-12 (line 8 in level 4 budget table).

59. The Scottish Government prioritised protecting grants in cash terms that support part-time provision and access, in its ministerial letter of guidance to the SFC on 17 November 2010. It also stated that the SFC should ask the HE sector to “take a significantly increased proportion of their students on a fees only-basis in 2011-12, in light of the sustained high demand and the tight financial environment”.

60. The Committee asked the Cabinet Secretary why both the SAAS budget line for tuition fee payments made to institutions and grants and bursaries made to students had fallen by £14m for the 2011-12 financial year (FY), when the draft budget document and ministerial guidance stated that student maintenance support and student numbers would be maintained at current levels. He responded—

“There is one material change of which you will be aware. I have, reluctantly, decided to transfer the travel costs that students can recoup from grant to loan. There are no travel costs payable south of the border. That will result in a very small increased payback from students. It has been necessary to look at every single item, and that is one item that I decided that we had to and should change.

On the other hand, I have given a guarantee to students that their student support will not be affected. Indeed, in the education maintenance allowance we have been able to maintain something that has been virtually abolished elsewhere. I think that we have done as much as we can by students this year. Of course, the issue of student support will also be part of the green paper.”195

61. The Committee also received a technical explanation in relation to the budget aspects of this decision from Scottish Government officials—

“The total SAAS funding will fall by £18m, from £534.6 m to £516.6m. That amount of £18m comprises two things. First, there is a £4m reduction in something called annually managed expenditure—a series of essentially technical charges that are calculated for us by the Office for National Statistics and the Treasury. The other, more substantial change is a reduction of £14m in our departmental expenditure limit budget. That change comes about substantially because we are moving from a system of grants for travel expenses to increases in student loans. What scores in the budget is a reduction of £20m brought about by the fact that we are paying only the resource accounting and budgeting charge on the new loan provision. In fact, we have reduced the DEL budget by only £14m. The reason for that is that we have more higher national diploma students than we had previously, and they attract a higher rate of student support. We are also attracting students who score better in the means test than previously. That is a consequence of the recession—people are poorer than they were, so they are qualifying for more student support.”196

62. The Committee notes the explanation provided by the Cabinet Secretary and his officials and recognises that this reduction is below the average for education and lifelong learning.

Scottish Funding Council

63. Table 9.06 in the draft budget document provides level 3 figures for the SFC budget. The SFC’s total budget has fallen by £215.8m or 12.1% in cash terms, from £1,786.1m in 2010-11 to £1,570.3m in 2011-12.

64. The Committee received submissions from the SFC, Universities Scotland and Scotland’s Colleges. The submission from Universities Scotland set out more detail about the strategic plans set out by the Cabinet Secretary in his letter of ministerial guidance to the sector. In respect of the organisation itself, the submission noted that it would “need to make savings to its running costs and adapt its operations to the new environment.” It has already reorganised its structure and developed ways of working more flexibly. It also had planned to reduce its office space by a third and move to full open-plan office layout for all staff.

Further education colleges

65. The SFC’s budget for current funding for further education colleges will fall from £578.2m to £544.7m in 2011-12 FY, a fall of £33.5m or 5.8% in cash terms.

66. The Scottish Government outlined its priorities for 2011-12 FY for the SFC and the further education sector, in a letter of ministerial guidance to the SFC on 17 November 2010 (as well as in the draft budget document). These included maintaining the volume of activity at the sector's current target level, protecting in cash terms the student support budgets, continuing and accelerating progress with the SFC’s support on collaboration, mergers and efficiencies, focusing college activity with school pupils on S3 to S6 pupils in pursuit of the entitlements of the Senior Phase of the Curriculum for Excellence (including qualifications), prioritising young people aged 16-24 wishing to study at college and delivering qualifications that develop the skills and capabilities required for entry to and progress in the labour market. The Committee notes that “maintaining the volume of activity at the sector’s current level” means, in practical terms, maintaining student numbers in the further education sector at their current level.

67. Scotland’s Colleges made a submission to the Committee in which it said that it was pleased that, although different figures were available for the planned overall cut in the in the SFC allocation, it was clear that it would be less than the possible 16% that had been speculated upon in earlier discussions and in a conference speech by Mark Batho, SFC Chief Executive. Scotland’s Colleges also welcomed that educational maintenance allowances were to be maintained for school pupils and college students in Scotland, unlike in England.

68. The Committee asked the Cabinet Secretary whether the Ministerial guidance to the SFC would mean that college funding for school-college partnership activity would be likely to be substantially reduced and whether local authorities would be required to provide additional funding for this activity to make up for the reduction in college funding. In response, he explained—

“School-college partnerships are valuable, but there has been an element of double funding in those partnerships whereby funding has gone to schools and to colleges essentially for the same number of young people. We have tried to strip that out in the budget. It is always necessary to keep looking at budgets and find out whether we can do that. I suspect that, regrettably, there will be a reduction in some school-college partnerships simply because of the financial pressure, but many will be retained, and we are keen to ensure that they are retained.”197

69. In response to a question about the specific ways in which the SFC could provide increased ‘leeway’ for individual colleges in 2011-12 academic year (AY) and what changes or support would be required from the SFC, to allow colleges to introduce more efficient methods of teaching, Scottish Government officials stated—

“The college principals have recently been working with Russel Griggs on how they might arrange their activities more efficiently in the future. They have been talking to us about it and have been talking among themselves about it. It is a continual topic for debate among them now. They believe that, by collaboration, they can organise their activities more efficiently than they do at present. Indeed, when we spoke to them during the period prior to the budget about how they might maintain student numbers, they were confident that they could improve their efficiency in that regard.”198

Higher education institutions

70. The SFC budget for current funding for higher education institutions will fall by £63.1m, from £989.3m in 2010-11 to £926.2m in 2011-12, a reduction of 6.4% in cash terms (line 27 in level 4 budget table).

71. The Scottish Government outlined its priorities for 2011-12 FY for the higher education sector in a letter of ministerial guidance to the SFC on 17 November 2010. These priorities included protecting the research excellence grant budget in cash terms, maintaining student numbers at current levels, protecting as far as possible the unit of resource for funded places, asking the HE sector to take a significantly increased proportion of its students on a ‘fees only’ basis in 2011-12, protecting grants to support access and part-time provision in cash terms, reducing funding for other horizon fund initiatives (“repurposing” these funds to create a ‘spend to save’ fund to support strategic change, so the sector can deliver more for less), keeping initial teacher education intake numbers constant for 2011-12, working with schools, colleges and universities to increase articulation and entry with advanced standing, increasing the impact of the HE sector’s research on economic development in Scotland and continuing progress with collaboration, possible mergers and efficiencies by the sector.

72. The SFC allocates the current budget to further and higher education institutions on an academic-year basis, and academic year 2011-12 crosses two financial years (2011-12 and 2012-13).

73. Universities Scotland, in its submission to the Committee, commented that, “in a context where cuts of 16% were under public discussion, this settlement has protected the sector from deeper and more damaging cuts.” However, it went on to state—

“... this is not a sustainable settlement for the sector and not something universities can live with beyond one year. Continued funding at this level will seriously damage the sector’s economic, cultural and social contributions to Scotland including; an aggregate impact estimated to be between £4 to £6bn the output of highly skilled graduates, world-leading research which draws industry investment from elsewhere and the economic gains made through knowledge exchange.”

74. The Committee asked the Cabinet Secretary about the implications for HEIs of a one-year budget. The Cabinet Secretary told the Committee that, although the issue of a three-year budget was above his “pay grade”, there would be regular dialogue between his officials and colleges and universities about the academic year budgeting. He added––

“... clearly, the tap will not be turned off at an arbitrary date, and it would be wrong to suggest otherwise.”199

75. The Committee also asked the Cabinet Secretary what Horizon Fund initiatives would be likely to be cut as a result of ‘repurposing’ these funds for ‘spend to save’ initiatives. In reply, the Cabinet Secretary indicated—

“The horizon fund has been a very useful innovation but, as the university sector faces up to the changes, which are not simply budget-driven changes but changes that are taking place in the definition of what the state's responsibility is in higher education—at least, south of the border, although I do not think that our definition needs to change—there will be a need for universities in particular to change. Part of the horizon fund needs to be refocused to allow that type of change to take place, and that is what we have said to the Scottish funding council.”200

76. In relation to capital funding, individual budget lines for further education colleges and higher education institutions in 2011-12 have been merged since the 2010-11 budget. Total capital for the further and higher education sectors falls from £209.2m in 2010-11 to £91m in 2011-12, a decrease of 56.5% in cash terms (line 26 in level 4 budget table). The letter of ministerial guidance to the SFC does not provide any direction on how this capital funding should be prioritised between the two sectors, but states that capital investments should be made in line with the Scottish Government’s purpose of sustainable economic growth, and that a more targeted approach should be developed by the SFC to address the maintenance requirements of both sectors, based on need.

77. The Committee asked the Cabinet Secretary why these two budget lines had been merged and how capital funding would be prioritised between the further and higher education sectors. The Cabinet Secretary responded—

“There is a severe reduction in capital, which is much more severe than anybody expected, and it will cause real problems. I am happy to pay tribute to the previous Administration and the current Administration for the investment that they have made in the college and university sectors, but that … is about to be reduced.

“The two lines were merged to ensure that reducing sums of money could be used as effectively as possible. That was an administrative decision, which will not, I think, have a major effect”201

78. The Committee also asked the Cabinet Secretary to comment on the impact on capital investment project planning in colleges and HEIs in the light of the Scottish Government’s decision to bring forward a one-year budget.

79. The Cabinet Secretary told the Committee that he thought that the commitments that had already been entered into would be honoured but acknowledged that the question arose for the colleges that had not yet submitted their final business cases or had them approved.202

80. Scottish Government officials elaborated—

“It is likely that the funding council will also have to make difficult choices around which projects to continue with next year that have not yet started. I am thinking of projects such as the refurbishment of the Kydd building at the University of Abertay Dundee, issues around the Heriot-Watt University estate and the refurbishment of the library at the University of Stirling. All those things have to be considered afresh.”203

81. The Committee noted the Cabinet Secretary’s and his officials’ comments on the likely impact of the reductions in capital budget on the investment programme for colleges and universities.

82. The Committee notes that, since it carried out its budget scrutiny, the financial environment has changed. Some of the evidence received by the Committee was provided before the budget announcement and was therefore based on speculation. The Committee notes, nevertheless, that the budget, if passed, will create pressure points, particularly the reductions in capital expenditure and the increase in fully funded places. The Committee also notes the publication by the Scottish Government of the green paper setting out a range of options for the future funding of higher education in Scotland.

Other lifelong learning budget

83. The total budget for other lifelong learning is falling overall by 12% (£33.4m) from £277.9m in 2010-11 to £244.5m in 2011-12. The majority of this reduction is accounted for by a fall in the budget for Skills Development Scotland (SDS) and funding for “employability for young people”.

84. The SDS budget for delivering national training programmes is falling by £21m, or 10.4% (cash terms), from £202.1m in 2010-11 FY to £181.1m in 2011-12 (line 31 in level 4 budget table). This budget line pays for delivery of national training programmes such as Modern Apprenticeships, Training for Work and Get Ready for Work, as well as the Scottish Government’s PACE service and SDS careers advice and guidance service.

85. The budget at level 4 for employability for young people is falling by 12.9% or £6.3m, from £49m in 2010-11 to £42.7m in 2011-12 (lines 56 to 61 level 4 budget table). Funding for Education Maintenance Allowances remains static at £31.6m (line 60). However, funding to support the delivery of ‘6+ Learning Choices is falling from £5m in 2010-11 to £2.8m in 2011-12, a fall of 44% in cash terms (line 57).

86. In the draft budget, the Scottish Government describes its priorities for the other lifelong learning budget as being “to protect and improve the support available to the unemployed and young people, built on 34,500 new training opportunities”.

87. The Committee asked the Cabinet Secretary which national training programmes would be affected by this 10.4% cash reduction in SDS training budget in 2011-12 and whether there would there be a reduction in the number of places available on national training programmes, in particular to modern apprenticeships, in comparison to 2010-11. The Cabinet Secretary responded—

“SDS has still to conclude the exact numbers that it can and will deliver. However, I made it clear in my opening remarks and in answering earlier questions that I am ambitious and I expect SDS to be ambitious. At present, we are looking at a total of 34,500 training places. There will continue to be a demand and we will try to meet it. The agreement that we made with the principals of universities and colleges makes a commitment to retaining a number of places. I expect SDS to work hard to maintain the number of training places. The Committee also asked how the support available to the unemployed and young people would be ‘protected and improved’, and the skills agenda progressed given the combined effects of the budgets for SDS and the colleges being reduced.”204

88. Scottish Government officials added that this year's training offer includes 5,000 flexible training opportunities and help for the unemployed including 14,500 opportunities through Training for Work and Get Ready for Work and that they hoped that those could be continued for the foreseeable future.

89. The Committee noted the budget commitments in respect of skills development and support for unemployed people in re-entering the job market.

90. The Committee notes the Cabinet Secretary’s expectations in relation to SDS. However, members remain concerned over the challenges of youth unemployment.

Schools and children’s services

91. The learning budget (table 9.02 in budget documents) is proposed to increase by 22% in real terms, due almost entirely to the provision for schools capital (see school buildings below). Children, young people and social care (Table 9.03 in budget documents) is reduced in real terms by 3.4%. At level 4, there are reductions for most lines across all of schools and children’s services. Some notable exceptions to this are an increase in schools capital to cover Scottish Schools for the Future and projects in Western Isles and Orkney (line 76 in level 4 tables), a new £5m voluntary sector fund for early intervention in the early years (line 124 in level 4 tables), increased support for Children’s Hearings panels, including the cost of the new body, Children’s Hearings Scotland (line114 in level 4 tables), increased budget for health and wellbeing initiatives in the curriculum (line 83 in level 4 tables) and increased funding for qualifications development for Curriculum for Excellence (CfE) (line 98 in level 4 tables).

Curriculum for excellence

92. The national continuing professional development (CPD) team and school leadership projects are cut from £3.6m to £1.2m. The Committee asked the Cabinet Secretary how crucial the CPD budget line was as regards the quality of CPD and school leadership in Scotland. The Cabinet Secretary responded—

“The cut relates to the money given to the universities as compensation for the cut in teacher training places. We have had to remove that money; after all, you cannot go on paying people compensation every year and we have certainly not been able to do so this year.”205

93. The Cabinet Secretary went on to explain that CPD sat within “a whole range of budgets and activity”. In relation to CfE, he told the Committee that CPD was now moving from “intensive investment in the first stage” to investment in qualifications, but that CPD was being protected and was taking place. He concluded—

“Sometimes CPD is misunderstood as resource and help that need to be bought in from elsewhere, whereas it can be as simple as creating space and time to ensure that reflective practice takes place, that people learn from their experiences and that one school helps another, which in itself is a very big issue that we are keen to take forward. We have looked at CPD very closely and have concluded that it is a dynamic process. Yes, there are resource issues, but it will continue in an effective manner.”206

94. The budgets for eco-schools and parental involvement (£0.8m total) have been moved into the global citizens budget. The global citizen’s and general curriculum budgets both support a wide range of subject based CfE work including history, social subjects, global citizenship, modern languages, environmental and sustainable development, science, technology, arts/creativity, Gaelic and innovative practice. Together these budget lines have decreased from £8.6m to £5m (see lines 78, 82, 84 and 85 in level 4 budget table). However, there is increased funding for health and well-being curriculum development, which has increased from £1.5m to £2m (line 83). Health and well-being includes nutrition, physical activity, outdoor learning, substance misuse, sexual health and relationships education.

95. The Committee recognises that, in its budget scrutiny, it has been considering only the centralised, national budgets which form only a small percentage of the overall spend in relation to schools and children’s services, with the majority of the spend being the responsibility of local government. The Committee fully supports Curriculum for Excellence but notes ongoing concerns in relation to its implementation. However, the Committee acknowledges that the complexities of the budget relationships between central and local government funding of national initiatives make it very difficult to track expenditure on specific aspects like Curriculum for Excellence.

Public bodies

96. The budget for the Scottish Qualifications Agency (SQA) has been reduced from £8.3m to £5.3m (line 99 in level 4 budget table). However, the budget for qualifications development has increased by nearly the same amount (from £10.3m to £12.9m – line 98). The new and revised qualifications in CfE will require significant development work.

97. The Committee also noted that the pay budget for HMIE had dropped from £12m to £10.5m (line 109 in level 4 budget table). Members asked the Cabinet Secretary whether this would imply staff reductions at HMIE and Scottish Government officials told the Committee—

“There are two factors in that. One is that one of the child protection inspection teams is moving from HMIE to another agency, which is being set up, and the funding for that team is moving with it. That accounts for part of the reduction—the funding is just moving elsewhere in Government. Secondly, there is a reduction in overall inspection activity in line with other scrutiny bodies.”207

98. The Committee also noted the reduction in the Scottish Children’s Reporters Administration (SCRA) budget, £23m to £21.9m (line 113 in level 4 budget table).The Committee asked the Cabinet Secretary whether, given the changes to children’s hearings, there were likely to be increased cost pressures for the SCRA. The Cabinet Secretary responded—

“No, it is perfectly manageable. Again, it is a case of doing as much for less. I have been assured by the SCRA and its effective leadership that the organisation will work as hard as ever, and those people have a great commitment to what they do.”208

Frontline services

99. The budget for behaviour relationships and engagement is to reduce from £1.2m to £1m (line 92). This supports projects related to anti-bullying and promoting positive behaviour.

100. The budget for the additional support needs (ASN) tribunals, advocacy service and independent adjudicators has dropped from £0.7m to £0.4m (line 91). The 2009 Act, which extends the remit of the tribunals, has just come into force and the Government has recently established a national advocacy service.

101. The budget for child protection has fallen from £2.3m to £1.3m. This funds projects related to child protection including front line projects relating to children affected by parental substance misuse (line 128).

102. The Committee noted these budget reductions and asked whether they meant that front line services, particularly in relation to child protection, would be cut. Scottish Government officials responded—

“The child protection budget line refers to the small budget that we hold at the centre. The budget that local authorities, health boards and the police spend on child protection is far bigger than the central budget and is not directly affected by it.

We are seeing a reduction in the budget line for next year because we are completing one major project: the development of the new guidance on child protection, in which we have managed to embed the getting it right for every child principles. That is one major product that we planned to complete, and will have completed, by the beginning of the next financial year. The other main reason why we can reduce the child protection budget line is because in the past two years we have provided start-up funding to the centre of child protection expertise in Stirling—the multi-agency resource service, or MARS—and we do not need to provide such intensive funding for future years.”209

103. The Committee also noted that a number of budget lines relating to young offenders had been reduced. High risk and transitions, secure care and alternatives and preventing offending by young people budgets include programmes on alternatives to custody, improving the secure estate and alternatives to the secure estate and delivering better outcomes for children involved in or at risk of offending. In total, these budgets have been reduced from £7.2m to £5m (lines 135 to 138).

104. The Committee asked whether this represented a lower ministerial priority for these areas. The Committee also asked whether this was considered as part of the early intervention agenda or if that focus on early intervention was in the early years only. In response, Scottish Government officials told the Committee—

“We deliberately talk about early years and early intervention, and we see early intervention as broader than early years. It is about intervening as soon as we possibly can. In that situation, the budgets are directed towards pilots of working with young people—often older young people—on diversions from crime and offending behaviour. Some of the committee might be aware of the whole system's approach in Grampian, where, since May, we have been looking at care and diversions from offending for older children. That has managed to reduce referrals to the children's reporter by 50 per cent.

In each of the budget lines, we are working with a range of delivery partners and trying to pilot and share learning about different approaches. We have been able to make reductions in the lines for next year because a number of the pilots are coming to an end at the end of this year. Ministers might decide that they want to do further work on some of those pilots and carry on with them in different ways or different areas.”210

105. Finally, the Committee noted that the unified voluntary sector fund had increased from £7m to £12m as a result of the establishment of a new fund for early years and early intervention (line 124). Asked why the fund had increased so substantially and to provide more details on the type of work that would be funded and how long that funding might last, Scottish Government officials told the Committee—

“The title of the level 4 budget is part of the problem. The unified voluntary sector fund will stay level at £7m next year; we have rolled over the funding. However, because we did not have a separate line for it, we have put into that line the new money—the £5m—that we are providing for the early years early intervention fund. For future reference, we will separate out those two funds to make it clearer for the committee. It was because the early intervention fund was a new thing that we put the additional £5m in that line.”211

School buildings

106. The Committee noted that the schools capital budget included £20m for Schools for the Future, £22m for Orkney schools and £19m for Western Isles schools212 (line 76 in level 4 budget table). The Committee also noted that future not for profit distribution (NPD) schools projects within the Scottish Schools for the Future programme would be developed, with a capital value of between £400m and £500m (page 42).

107. The Committee asked the Cabinet Secretary whether the £20m for Schools for the Future was in respect of the schools that have already been announced, when will the remaining schools would be announced and whether a particular NPD scheme would be used for future projects. The Cabinet Secretary told the Committee—

“… we need to consider our criteria more carefully for the remaining schools, which are likely to be in the non-profit distribution model from now on. I have said … that in deciding on what happens next we will try to roll up from the bottom in terms of the schools that are in the worst condition. By and large, that has been happening, but because of the geographical issue that we are trying to address it might not have had quite as much focus as it should have done. There are no category D secondary schools left in Scotland, but there are two category C schools with some D characteristics, so we have to look at those. There is a range of category D primary schools, not all of which will remain open because I know that where local authorities have big capital issues they are considering whether to keep such schools open. My thinking will be driven towards those schools in the worst condition in Scotland and I hope to be able to say something about that shortly—at the turn of the year or early next year.”213

108. Asked about the type of NPD that would be used in future school building programmes, the Cabinet Secretary told the Committee—

“The Cabinet Secretary for Finance and Sustainable Growth will bring forward those details as required. He will want to make sure that the scheme that is used is cost effective and does not, in any sense, repeat the errors of the past.”214

109. The Committee notes the potential impact of reductions in Scottish Government grant to local authorities and the likely effects of these on local government spending on schools buildings and generally on education and children’s services.

EXTRACTS FROM MINUTES OF THE EDUCATION, LIFELONG LEARNING AND CULTURE COMMITTEE

29th Meeting, 2010 (Session 3), Wednesday 10 November 2010

Decision on taking business in private: The Committee agreed to take item 5 in private.

Draft Budget Scrutiny 2011-12 (in private): The Committee considered and agreed its approach to the scrutiny of the Scottish Government's Draft Budget 2011-12.

32nd Meeting, 2010 (Session 3), Wednesday 1 December 2010

Draft Budget Scrutiny 2011-12: The Committee took evidence on the Scottish Government's Draft Budget 2011-12 from—

Fiona Hyslop MSP, Minister for Culture and External Affairs, David Seers, Team Leader, Cultural Excellence Branch, and Wendy Wilkinson, Deputy Director for Culture, Scottish Government;

Linda Ellison, Director of Finance, Historic Scotland;

Michael Russell MSP, Cabinet Secretary for Education and Lifelong Learning, Colin MacLean, Director for Learning, Andrew Scott, Director for Lifelong Learning, and Sarah Smith, Director for Children, Young People and Social Care, Scottish Government.

Decision on taking business in private: The Committee agreed to consider its draft report on the Draft Budget 2011-12 in private at future meetings.

34th Meeting, 2010 (Session 3), Wednesday 15 December 2010

Draft Budget Scrutiny 2011-12 (in private): The Committee agreed to defer its consideration of a draft report to the Finance Committee on the Scottish Government's Draft Budget 2011-12 to its next meeting.

35th Meeting, 2010 (Session 3), Wednesday 22 December 2010

Draft Budget Scrutiny 2011-12 (in private): The Committee considered a draft report to the Finance Committee on the Scottish Government's Draft Budget 2011-12. Subject to a number of minor changes, the report was agreed to.

ANNEXE F

Equal Opportunities Committee

Report on the Scottish Government's Draft Budget 2011-12

The Committee reports to the Finance Committee and to the Parliament as follows—

Introduction

1. Since its report to the Finance Committee on the Scottish Government Draft Budget 2010-11, the Equal Opportunities Committee has continued to consider budgetary implication for equalities. In this regard, and in advance of its scrutiny of the Scottish Government’s Draft Budget 2011-12, the Committee took oral evidence at the strategic Budget Strategy Phase of the budget process on 23 March, 20 April and 4 May 2010 and sent a report to the Finance Committee.215 It also took evidence on the Independent Budget Review on 26 October 2010 following publication of a report by the Review Panel.216 This consideration has helped inform the Committee’s approach to its scrutiny of the Draft Budget.

2. The timetable for consideration of the Draft Budget by the Committee has been curtailed this year as this was not published by the Scottish Government until 17 November 2010. This was as a consequence of the UK Comprehensive Spending Review not being published until 20 October 2010.

3. On 30 November 2010, the Committee took oral evidence from two panels of witnesses on the Draft Budget 2011-12. The first panel, which consisted of representatives from Audit Scotland and the Scottish Women’s Budget Group, gave evidence on how equality considerations have featured throughout the budget process from a compliance, scrutiny and support perspective; while the second panel consisting of representatives from the Society of Local Authority Chief Executives (SOLACE), the Association of Chief Officers of Scottish Voluntary Services (ACOSVO) and the Scottish Women’s Budget Group gave evidence on the equality impact of spending allocations outlined in the Draft Budget with specific reference to jobs, services and local communities. As a result of adverse weather conditions, the Equalities and Human Rights Commission Scotland (EHRC) and the Improvement Service were not able to participate at the meeting, however both subsequently submitted written comments and these are included in the Annexe.

4. Finally, the Committee took oral evidence from John Swinney MSP, the Cabinet Secretary for Finance and Sustainable Growth on 7 December 2010.

5. Written submissions were also received from the STUC and the Scottish Women’s Convention and a joint submission was received from the Princess Royal Trust for Carers, the Coalition of Carers in Scotland and Carers Scotland.

6. The Committee would like to thank all those who provided oral and written evidence.

BACKGROUND

Budget Strategy Phase

7. As noted above, the Committee contributed to the work of the Finance Committee at the strategic Budget Strategy Phase. The Committee focused on exploring how to ensure that the provision of public services, aimed at equality groups, is adequately maintained during a period of constrained public expenditure, with a particular focus on possible solutions and strategies to address the difficulties of maintaining services within the context of reduced resources. In this regard, the Committee took oral evidence from —

  • Audit Scotland
  • Equalities and Human Rights Commission
  • STUC
  • Scottish Women’s Budget Group
  • Association of Chief Officers of Scottish Voluntary Organisations
  • COSLA
  • The Improvement Service
  • NHS Health Scotland
  • Scottish Disability Equality Forum
  • SOLACE
  • Scottish Government.

8. In its report to the Finance Committee, the Committee expressed concern about the lack of meaningful equalities data available to inform the budget process. It heard evidence that pointed to cuts in public spending not necessarily being the only way to address some of the wider economic difficulties being faced. The Committee also noted the wider social benefits that equalities spending brings and it highlighted the positive benefits of longer term planning and of early interventions where action now can have a positive impact later.

9. A consistent set of concerns raised throughout the Committee’s work at the strategic Budget Strategy Phase related to the potential impact that a prolonged spending squeeze will have on services and projects directed at more ‘vulnerable groups’ within Scottish society. The Committee did express concern that budget allocations with a significant equalities dimension can be viewed as easy targets when cuts have to be identified, and that unintended consequences can arise when equalities expenditure is cut.

10. The Committee therefore remains mindful of how public bodies will continue to prioritise an overall equalities agenda, within the context of reduced resources. There is a need for ‘constructive engagement’ and strong leadership across all of Scotland’s public bodies in ensuring equality considerations are viewed as complementary, as opposed to contrary, to goals related more directly to economic efficiency.

Independent Budget Review

11. On 3 February 2010, the Scottish Government commissioned the Independent Budget Review (IBR) to conduct a review of public expenditure in Scotland. The members of the Review Panel were Crawford W. Beveridge CBE (Chair), Sir Neil McIntosh CBE and Robert Wilson. The Panel’s report was published on 29 July 2010 and set out a series of options for delivering public services within a significantly constrained public expenditure environment.217

12. The Committee wrote to the Chair of the Review Panel asking how an overall equalities perspective informed, and subsequently influenced, the recommendations contained within the final report. This would allow the Committee to consider how an overall commitment to the promotion of equality is reflected in the Scottish Government’s spending plans.

13. In his written response to the Committee, Crawford Beveridge outlined a series of examples of how the Panel sought to address equalities issues. He also indicated that whilst the Panel’s remit did not include a specific reference to an overall equalities agenda, they were asked to take into account “the importance of protecting the most vulnerable in our society alongside a very broad range of other factors, including the implications of universal service provision, efficiency and value for money, stimulating the economy, demography and climate change”.218

14. In terms of how the use of Equality Impact Assessments (EqIA) informed the approach of the panel and its recommendations, Mr Beveridge indicated that the Review was a high level, strategic review, which “presented a menu of high level options from which the Scottish Government and others could choose when determining how to balance their budgets in the short to medium term.” He added that all necessary impact assessments, pre-expenditure analysis and detailed modeling would be undertaken by budget holders, including the Scottish Government. He considered that it would neither have been appropriate nor practical for the Panel itself to commission EqIA of other detailed impact assessments of what were essentially only outline proposals.

15. On 26 October 2010, the Committee held an evidence session on the IBR where it took oral evidence from—

  • Peter Hunter, Regional Organiser, Unison Scotland;
  • Morag Gillespie, Research Fellow, Scottish Poverty Information Unit: and
  • Dr Marsha Scott, Principal Officer in Health, Policy and Planning at West Lothian Council.

16. In discussion, a number of issues arose which helped inform the Committee’s consideration of the Draft Budget 2011-12. For example, witnesses highlighted the need for policies and the Budget to be equality impact assessed. There was concern however about the general quality of EqIAs and the process involved in carrying them out. The evidence presented indicated that EqIA’s are often conducted after the event, viewed as a tick box exercise as opposed to an intrinsic part of the planning and decision-making process.

17. There were also concerns expressed about the drive for efficiency savings and the potential for unintended consequences arising from this – the example provided to the Committee was where a local authority could perhaps make a saving by cutting down on the amount of salt available for gritting, but an unintended consequence could be the impact of this on the NHS, through the costs associated with more Accident and Emergency admissions due to more people presenting with injuries sustained from slipping on ice. The Committee heard therefore that if the only driver is efficiency savings, and the consequences are not thought through, the costs can be greater.219

18. The Committee also discussed the benefits of preventative spending; the impact on Scotland of welfare changes made by the UK Government; the continuing problem of unequal pay for women; and the exclusion from the labour market of young people and those returning to the labour market, particularly women.

19. The Committee was also told about the importance of both early years services, and care services which will be crucial especially in the longer term as a result of Scotland’s ageing population. In particular, attention was drawn to evidence highlighting that investing in the care sector has wider macroeconomic benefits in terms of creating jobs and providing an economic basis for supporting resilience in local communities. Thus, in considering longer term impacts, there is a need to view the care sector from an investment perspective as opposed to a near exclusive focus on managing service cuts.

20. On a similar note, the Committee heard of the less direct consequences associated with a shift from universal provision to more targeting/means testing, both in terms of reduced take up rates and greater administrative costs. Within the context of prolonged budget cuts, the greater resources required for management and delivery must be considered in terms of the impact on access to services for those most in need and the resources subsequently available for the services in question.

Legal challenge to the UK Emergency Budget 2010

21. The Committee notes that the Fawcett Society filed papers with the High Court in August 2010 as the Society believed that the UK Government did not assess the impact of the measures outlined in its Emergency Budget in June 2010 on equality between men and women, as required by section 76a of the Sex Discrimination Act 1975.

22. The Committee sought further details from the Society of its legal challenge who, in its response, said—

“Despite credible evidence that the Budget will indeed have a disproportionate and deleterious impact on women and women’s equality, the Society is mounting a legal challenge on a procedural basis – i.e. on the basis the Government did not follow legally required processes when drawing up the Budget, not the impact of the Budget and Budget measures per se.”220

23. On 6 December 2010, a High Court Judge refused the Society permission to challenge the legality of the Emergency Budget and to seek Judicial Review. He ruled that there had been too long a delay in the court application and there was “no prospect” of a court declaring the Budget unlawful. He ruled that the UK Government had been entitled to argue that gender impact assessments could not have been carried out usefully at an early stage in many areas. In two areas (public sector pay freeze and benefits cuts), the UK Government conceded that there should have been early assessments and had expressed regret and taken action.

Conclusions

24. The Committee considers that the Fawcett challenge has served to reinforce the need for effective equality impact analysis throughout the policy making process, particularly within the context of an overall commitment to equality mainstreaming. In this respect, the Committee will follow with interest, and it encourages the Finance Committee to do likewise, the progress of the formal independent assessment, currently being conducted by the Equality and Human Rights Commission, under section 31 of the 2006 Equality Act, into the extent to which the UK Treasury considered the impact on protected groups of decisions contained in the UK Comprehensive Spending Review.221

The UK Comprehensive Spending Review and the Scottish Budget

25. The UK Emergency Budget was published on 22nd June 2010, six weeks after the election of the new coalition Government; and the UK Comprehensive Spending Review (CSR) was published on 20 October 2010. The Scottish Draft Budget 2011-12 was subsequently published on 17 November 2010.

26. In considering the Draft Budget from an equalities perspective, the Committee notes that the budget process and subsequent decisions have been framed within the context of a combination of a financial downturn and a change of administration at a UK level for the first time since devolution.

27. The UK Emergency Budget set out the UK Government’s intention to reduce the public sector deficit by a series of wide-ranging and extensive public spending cuts. A significant element of the cuts is a series of measures intended to reduce the welfare benefits bill. The Committee recognises that, although the tax and benefit systems remain reserved matters, the impact of the proposals both in terms of access to, and levels of, benefits will be felt by the most vulnerable members of Scottish communities.

28. The impact of the UK CSR on the Scottish Budget, as calculated by the Scottish Government, is highlighted in the table below:222

£bn 2010-11 (baseline) 2011-12 2012-13 2013-14 2014-15 Change 2010-2015
Total DEL (cash) 29.2 27.9 28.3 28.2 28.4 -0.8
% change in DEL (cash)   -4.5 1.4 -0.4 0.7 -2.7
Total DEL (real) 29.2 27.4 27.2 26.4 25.9 -3.3
% change in DEL (real)   -6.2 -0.7 -2.9 -1.9 -11.3

29. As a result of the spending cuts announced in the UK Emergency Budget and the CSR, the Scottish Government has forecast that it could take until 2025-26 for the Scottish Budget to return to 2009-10 levels in real terms. The implication is a cumulative real terms loss of approximately £39 billion over a 16 year period, as detailed in the chart below which is contained in the Draft Budget document:223

APPROACH TO SCRUTINY

Equality Statement

30. In September 2009, the Scottish Government published an Equality Statement supporting the Draft Budget 2010-11. In the Statement, the Scottish Government highlighted both previous and planned action to ensure that public expenditure has contributed to greater equality. In its report to the Finance Committee on that Draft Budget, the Committee called for “a more detailed Equality Statement to be published annually and for equality impact assessments to be a strategic part of the Scottish Government’s budget development and single outcome agreement.”224

31. The Cabinet Secretary for Finance and Sustainable Growth (“the Cabinet Secretary”), has also, on a number of occasions, stated the Scottish Government’s commitment to build upon the work undertaken to produce the 2009 Equality Statement and to ensure equality considerations remain central in informing public spending decisions, particularly within a context of constrained resources—

“The Scottish Government does not believe that compliance with equality legislation will constrain its choices in setting the 2011-12 budget. We fully acknowledge the challenge in reducing spending to balance a smaller budget, but it is equally important that fairness is put at the heart of the decisions required to meet this challenge. The public sector equality duties provide us with a framework within which to make fair and informed choices. We are also building on the work done in producing the Equality Budget Statement on the 2010-11 draft budget as part of our preparation for the forthcoming spending review and budget. This includes seeking the advice of the Equality and Budget Advisory Group on these issues. This advice, as well as the report of the Independent Budget Review, will inform our budget proposals this year and into the future.”225

Equalities impact

32. As noted above, the impact of the UK CSR is a prolonged period of real terms reductions, indicating a very different financial environment to that forecast and planned for in the Scottish Budget Spending Review 2007. In considering the possible impact of both the nature and scale of required public sector spending cuts, the Committee considered some key statistics relating to the Scottish labour market.

33. The following table, from the Annual Population Survey, shows the profile of employment rates of selected groups in Scotland and indicates that—

  • Males have higher employment rates than females.
  • Younger people (16-24) have lower employment rates than older groups.
  • People with disabilities and those from ethnic minorities have lower than average employment rates.226

34. In terms of unemployment, the following table, from the same survey, shows that—

  • The unemployment rate for males is higher than for females.
  • The unemployment rate for younger people is much higher than for older groups.
  • People with disabilities and ethnic minority groups have higher unemployment rates than the Scottish average.

35. With specific reference to employment in the public sector, and identifying the impact on vulnerable groups, the Committee also embarked on the scrutiny process with the following in mind:

  • The Scottish public sector accounts for 25% of all employment, compared with a 21% figure for the UK.
  • There are nearly twice as many women as men working in the Scottish public sector (65% versus 35%).
  • Local government represents 53% of the total public sector and women make up 67% of the local government workforce.
  • Women make up 89% of the total health and social care sector in Scotland.
  • In 2009, 46.8% of all public sector employees in Scotland earned less than £21,000 per annum.
  • 52% of total public expenditure is attributable to staff costs.227

36. However, the Committee acknowledges that the changing landscape for Scotland’s public sector will have wider impacts than those narrowly related to its workforce. Given the nature of goods and services provided largely in the public sector, the impact of cuts on service users is of equal concern to the Committee. In considering the wider impact, the Committee noted a number of key findings from the Scottish Government’s study on the impact of the current recession on specific groups—

“This recession threatens to deepen existing inequalities, further distance certain individuals and groups from opportunity and prosperity, and even create new inequality as differential impacts take hold.

  • In particular, young people with few skills are likely to be differentially and adversely affected by the displacement of opportunity in the course of this recession.
  • It appears that individuals and households furthest from the workplace are of low resilience in terms of financial capability and skills, and generally do not consider themselves to be 'coping well financially' either.
  • Disabled people, the low skilled and young unemployed have suffered a more substantive 'set back' in this recession, and carry fewer 'protective factors' into the future in order to reclaim ground.”228

Focus of scrutiny

37. From an equalities perspective therefore, the Committee’s approach to scrutiny this year has focused on—

  • identifying progress with regard to the Equality Budget Statement and how the work done in producing the 2010-11 Statement has been improved upon;
  • how the required budget reductions have been both informed and managed across the relevant spending portfolios by a overall commitment to ensure ‘opportunities for all of Scotland to flourish’; and
  • the potential impact of the scale and level of public spending cuts presented in the Draft Budget 2011-12 from an overall equalities perspective.229

38. The Committee considers that a combined focus on process and potential impact will draw attention to the strategic relationship between the practices and processes associated with the Draft Budget 2011-12 and a commitment to promote greater equality.

39. In emphasising the link between process and practice, the Committee has drawn upon evidence provided by the Fawcett Society. As noted above, the Committee, aware of the legal challenge mounted by the Society in relation to the UK Emergency Budget, sought further information from the Society as to the nature and status of their legal challenge. The response to the Committee highlights how compliance should be understood and actioned beyond a ‘tick box approach’—

“Case law has established that the ‘due regard’ must be had before any policy decision is made, at a level proportionate to the extent of the possible adverse impact, and in a structured, transparent and documented way…Case law confirms that having a written policy is not enough, proper compliance with the general duty involves active steps to eliminate discrimination and promote equality of opportunity.”230

40. Thus, the budget process should demonstrate an ex ante approach to incorporating equality considerations. That is, there should be ‘structured, transparent and documented’ practices demonstrating how ‘due regard’ to equality has informed, influenced and determined the spending allocations contained in the Draft Budget.

41. Furthermore, the Committee contends that progressing with an overall objective to promote greater equality is not simply a matter of compliance with the general equality duty. Evidence presented during the strategic Budget Strategy Phase and in the Committee’s scrutiny of the IBR has highlighted the unintended consequences, and subsequent costs in terms of managing greater inequalities, associated with a continual separation of economic policies directed at promoting economic growth and those policies designed primarily to ensure greater equality. Measures designed to support production, enhance national competitiveness and encourage greater labour market participation by investing in skills, training, education and new business growth, must also pay ‘due regard’ to equality impact for reasons relating to both compliance and effectiveness.

Conclusions

42. The Committee, in scrutinising the Draft Budget, looked for evidence of how equality considerations had featured throughout the budget process in a way that reflected an explicit link with the Scottish Government’s economic strategy. The Committee has thus looked for evidence in the Draft Budget of how the best use of available human resources results in a fairer society, but more importantly is a key factor in creating a more efficient and productive economy.

43. The Committee has been encouraged by the tone of the Equality Statement which said "equality considerations have underpinned our Budget. They have also helped to shape our proposals. In these tough times this is more not less important."231 However, the evidence presented to the Committee indicates that there is a lack of detail to support that tone, both in terms of data and required analysis, contained within the relevant budget documents.

44. The Committee views this as indicative of a ‘tick box’ approach and therefore asks the Scottish Government to provide it with further evidence by way of actual examples of how a commitment to equality is integral to its Economic Strategy and how it has thus informed and shaped the spending allocations detailed in the Draft Budget.

THE EQUALITY STATEMENT AND THE BUDGET PROCESS

45. The Draft Budget sets out the Scottish Government’s spending plans within the context of managing a significant reduction in the overall budget - £1.3 billion in 2011/12, indicating spending reductions over the next four years amounting to 11% in real terms and a 36% cut in the capital budget over the same period. With respect to the overall goal of promoting equality, the following quote from the Draft Budget highlights the Scottish Government’s commitments—

“In the face of deep cuts, it is a budget that works for Scotland by maintaining the resilience of our people, our households, our business and our environment. In accompanying statements we summarise how we have considered equality issues and how our plans will make a difference to the lives of people disadvantaged by discrimination and inequality.”232

46. In scrutinising the Draft Budget 2011-12, the Committee has been keen to highlight how equality focused policy commitments, and related targets, are not sufficient in themselves to bring about the desired outcomes. The Committee believes that what is also required is a transformation of the budget process in accordance with an equality mainstreaming agenda. In this respect, the Committee has sought evidence in the budget documentation that supports the claim that “equality considerations have underpinned our Budget.”233

47. In general terms, and as noted above, the Committee is of the view that there is not enough detail in the Draft Budget document itself in relation to each spending portfolio and how equality considerations have underpinned, and helped to shape, the Draft Budget. There is also an absence of what the actual consequences will be of the significant changes in resources across the range of portfolios. The Committee thus looked to the Equality Statement for the required evidence of analysis and impact assessment but remain concerned that the required detail is absent from the main budget document.

Equality Statement

48. In oral evidence, witnesses welcomed the Equality Statement.

49. Claire Monaghan of SOLACE told the Committee—

“I think that the equality statement is a huge step forward. It is the first real evidence that equalities are being systematically thought about and taken into account by every directorate in Government. It creates a framework that will enable those who will be implementing the decisions at the next level to see what the potential impacts might be.” 234

50. Pat Armstrong of ACOSVO said—

“The third sector very much welcomed the equality statement. Also, for the first time, the third sector was asked to be involved in pre-budget meetings with the Minister, so we have experienced a huge step forward. However, we wait to see what the next steps will be. The equality statement is a useful lens through which to examine the budget statement.”235

51. The STUC also welcomed the Statement in its written submission—

“We believe that this document demonstrates the Scottish Government’s desire to consider the equality implications of this difficult spending round and aims to ensure that the budget does not disproportionately affect certain groups of people or place a large burden on the most vulnerable in society.”236

52. Angela O’Hagan of the Scottish Women’s Budget Group added—

“I have to say what different creatures the budget and the accompanying equality statement are this year. They show a heightened and more developed awareness of equality and a clear commitment from the Scottish Government to improving and progressing equality analysis and embedding equality considerations. The statement that equality considerations underpin the budget holds true to the extent that that heightened awareness is very evident.”237

53. She did express some caution however—

“…there are still a number of weaknesses. What the equality statement is needs to be clear. It is not an equality impact assessment of the budget—that remains an issue on which there will continue to be high expectations externally and within the Scottish Government. Is it intended to be an equality impact assessment or to signpost the way to where equality impact assessments are happening? At the moment it is a bit of a hybrid.”238

54. Witnesses generally considered that the Equality Statement should be considered as progress in the right direction, and they acknowledged that there was still much work to be done. It was considered that the Equality Statement was indicative of a heightened awareness of how equality considerations should underpin the budget, and of an explicit acknowledgement of the differential impact of budget allocations across different groups.

55. However, it was not clear to witnesses, or to the Committee, that the Equality Statement showed how equality considerations have informed spending decisions or how any differential impacts identified have been or will be measured. In this regard, Angela O’Hagan said—

“The equalities issues are acknowledged, but have they informed decisions, or have decisions been made and the equality differential impact then acknowledged? Where is the measurement of the impact? What mitigatory action and monitoring will follow?”239

56. The narrative set out in the Equality Statement highlights the amount of work that has been done in raising awareness and acknowledging the relevance of equality considerations to the Draft Budget. However, Angela O’Hagan told the Committee that she believed in terms of evidence of equality assessment used in the Draft Budget, that the picture was mixed, adding—

“For example, it refers to the impact of spending decisions and reductions on various groups in the education and schools budget, which means that cognisance has been taken of the impact on younger people. However, the Scottish Women's Budget Group is very concerned that there has been no such analysis of the impact of the pay freeze across the public sector. Although, as the equality statement points out, women make up 64 per cent of the public sector workforce, there is no reference to how the pay freeze will affect them.”240

57. Concerns were also raised about the role of the Scottish Government’s delivery partners in assessing the impact of policies. In this regard, Fraser McKinlay, Director of Best Value and Scrutiny Improvement at Audit Scotland, told the Committee—

“It is not specific to equalities, but an issue that arises for us across the board is the information that public bodies have available to them in order to make decisions and understand their impact. For example, if they cut a certain budget, they need to understand which group or groups that will affect and in what ways. That is fundamental. In the absence of that basic information about which groups are being served and what their needs and expectations are, it is difficult to do the other bits in the [equality] duty; it is difficult to mitigate something if you do not know what it is in the first place.

That is our concern about equality issues and, for that matter, other, wider performance information that bodies are using in making what are undoubtedly unprecedented sets of decisions this time round. We have been able to survive on a 2 per cent a year efficiency target, but it feels like we are now in a very different place, which means that public bodies need to be much clearer about what their priorities are and the impact of shifting resource from one place to another. That is the part on which Audit Scotland has not seen a great deal of evidence in the past. Budgets tend to be set on an incremental basis based on what was spent last year. This time, people are having to take a much more radical look and to consider from first principles what they are spending their money on, and they are beginning to shift resources in a more meaningful way from one place to another.

We are concerned that, because of the lack of good-quality information on their service users, it is difficult for bodies fully to comply with their equality duties. I suppose that, as a public body, Audit Scotland is probably in the same boat. It is not an easy thing to do.241

58. Angela O’ Hagan also expressed concern—

“My overarching concern is how, given its emphasis on the role of delivery partners in the budget and the equality statement, the Scottish Government will get the evidence to prove that those authorities are implementing these measures and ensuring that its equality objectives, objectives with regard to national performance framework outcomes and various aspects of the strong narrative around equalities in the budget and budget documents are being achieved. Indeed, those concerns are, as Fraser McKinlay (Audit Scotland] has highlighted, shared by Audit Scotland and have been evidenced in the EHRC's recent "Counting the Cost" report, which emphasised the absence of available effective data for use. If public authorities—in this case, local authorities—are making decisions that are not fully informed, they are not making the best possible decisions and are not targeting or disbursing resources in the best possible way.”242

59. Chris Oswald, Head of Policy and Parliamentary Affairs at the EHRC, told the Committee in a written submission that—

“We believe that the current Equality Statement is a good start and certainly an improvement on last year’s analysis of the budget. However the statement at this stage only really identifies where potential negative impacts may occur. The EHRC is keen to see greater emphasis being placed on defining more closely what the negative impacts of any spending reduction may be and crucially what mitigating action the Government proposes to take.

We look forward to having sight of the full assessments of impact that each Department will now be required to undertake and particularly how the Cabinet will make an assessment of the overall impact of these combined policy proposals.

We would equally be keen to see a clearer statement from the Government on the manner in which the Budget will advance equality as set out in the General Duty of the Equality Act 2010.

Currently the budget statement is unclear about the extent to which these significant budgetary changes will be managed by public authorities. Our own work suggests that impact assessment is still not fully embedded in the workings of public authorities and that without significant guidance, encouragement and scrutiny from the Scottish Government, and indeed from Audit and Inspection bodies, the full equality implications of local decisions may not be joined up either internally by single authorities, or collectively by Community Planning Partnerships. We believe that only through taking a pro-active and assertive approach will the Scottish Government be able to demonstrate that they have complied with their own statutory duties when delivering national priorities through third parties.”243

60. Claire Monaghan of SOLACE added—

“We have to do work on equalities for legal reasons, but we know that it is absolutely the right thing to do. The hearts and minds have been won on that, but we need to ensure that the actions follow through. Part of that is about ensuring that the right tools are in place, and the best value equality impact assessment is one of those tools, although I do not underestimate how challenging it will be.”244

61. In his evidence, the Cabinet Secretary told the Committee—

“We do not design a budget then put it through the equalities assessment…

On an on-going basis, we assess whether policies and programmes satisfy the Government's objectives and Parliament's requirements in terms of the equalities agenda. In that context, we go through what I suppose would be called in the jargon an iterative process, in which we consider options and proposals to see whether they pass the test. Ultimately, we have to step back from all the provisions, which is what the budget equality statement seeks to do in giving an overview of the budget's effect at both individual programme and portfolio level and accumulated level on some of the key groups that would be affected with regard to the equalities agenda.”245

62. The Cabinet Secretary also agreed that the Equality Statement is a work in progress, however he believed that—

“We have come a significant distance in the past 12 months. If the committee had shown me the document when I was here a year ago and said, "This is the type of document you'll be producing in 12 months' time," I would have been pretty sceptical, to be honest. The document is as strong as it is because of the focused leadership that has been given on it by the equality unit in the Government, but equally because the unit has successfully evangelised with portfolios on the need for them to fulfil their obligations and duties.

The work is about ensuring not just that we have an equalities unit and a budget equality statement so that we can tick those boxes, but that portfolios are thinking about the questions when they go through their budget choices and make their budget suggestions. Portfolios had to make suggestions to me on how we could address the financial challenge that we face. Some of the suggestions that were made came with a caveat that said, "We don't like the look of this from an equalities perspective," and those options did not go forward. Essentially, the process was working, in that it was identifying those things.” 246

63. The Cabinet Secretary agreed that the Equality Statement could be further strengthened however and suggested that some further empirical analysis would help. He indicated that much of what the Government had undertaken had been “encouraged and motivated by the work of the Committee” and that the Statement is a good example of the Government learning lessons from emerging parliamentary thinking about how we can improve our processes.247 He also suggested that the Committee might wish to consider where the Statement could be improved upon and provide the Scottish Government with suggestions that might strengthen it.248

Conclusions

64. The Committee welcomes the Equality Statement and acknowledges the positive comments it received in evidence about this document. It further believes that this as a positive step forward in terms of providing an overview assessment of the equality implications of the Draft Budget. It believes much progress has been made since last year’s Statement, however it agrees with witnesses that it must continue to be improved upon.

65. The Committee welcomes the Cabinet Secretary’s acknowledgement that this is a work in progress and his kind words about the role of this Committee in encouraging an improved Statement. It also welcomes his offer to the Committee to contribute its suggestions on how the Statement can be improved upon, and the Committee will give consideration to this and make recommendations to its successor Committee.

66. The Committee acknowledges the evidence from the Cabinet Secretary that the Scottish Government does assess whether its policies and programmes satisfy its objectives and the Parliament’s requirements in terms of the equality agenda. However, the Committee remains unclear about the extent to which the Draft Budget, and the policy decisions it contains, is subject to equality impact assessment.

67. The Committee believes that much work has yet to be done to transform the budget process to ensure resource allocation decisions are informed and, if required, altered by equality considerations.

68. The Committee considers that the framework of economic analysis informing future spending plans should incorporate equality considerations, thus embedding equality within the mainstream budgetary process. The Committee will invite its successor Committee to explore this issue in more detail with the Scottish Government, with a view to the Scottish Government applying equality impact assessment to the framework of economic modelling employed in determining the relevant range of the economic forecasts that in turn inform its economic strategy.

69. The Committee notes comments made in evidence by the Cabinet Secretary about those portfolio plans that were not progressed as they were presented with a ‘caveat’ relating to equality considerations. The Committee asks the Scottish Government to provide it with examples of proposals that were put forward but which were not pursued because they raised equalities issues. This information would provide the Committee with evidence of how high level policy commitments to equality are being operationalised at a departmental level with specific reference to budget allocations.

Equality Duties and Best Value

70. The Committee is aware that the framework for public sector equality duties requires all public bodies to assess, eliminate, mitigate and monitor unequal impact across all their activities. In April 2011, the Equality Act 2010 will replace the current race, disability and gender equality duties with a single duty covering age, disability, gender, gender reassignment, pregnancy and maternity, race, religion or belief and sexual orientation.

71. Claire Monaghan of SOLACE told the Committee—

“This is a hugely challenging time. The public sector duties are relatively new and we are still getting to grips with what they mean in practice at a time of budget decisions that will have an acute impact and will change things. There is a risk of things fragmenting between those who take the budget decisions and the operational equalities officers in councils, which is why we need to bring them together and ensure that there are constant reminders at SOLACE and operational officer level about the importance of these duties, why they have to be carried out and how that can happen.”249

72. Fraser McKinlay told the Committee that Audit Scotland examine equalities in a number of ways—

“One of the main ways is through the duty of best value, which is a statutory duty on councils, although accountable officers in other parts of the public sector are required to deliver their services and run their organisations with best-value principles in mind. Equalities are among the statutory guidance characteristics and, when we carry out best-value audits of councils, we always examine equalities.”250

73. Claire Monaghan added—

“On the more general question about how equalities are taken into account, most authorities have pretty robust performance management frameworks around their SOAs, and there is an established reporting mechanism. In addition, the scrutiny function that Audit Scotland performs around best-value audits includes consideration of how developed authorities' partnership arrangements and their monitoring of SOAs are. I am pretty satisfied that the right carrots and sticks are available to get this right, but it will be a challenge”.251

74. Fraser McKinlay admitted that the current Best Value guidance needs to be refreshed in light of the new equality duties in the Equality Act 2010—

“ …we are working with a best-value framework that has been around for some time, and the new equality duties are fresh. That has moved the debate about the framework's scope and what is expected of public bodies on a bit. We are already in early discussions with colleagues in the Scottish Government about the need to refresh the best-value guidance right across the piece.”252

75. He told the Committee that Audit Scotland had produced assurance and improvement plans for the 32 councils, as a joint exercise by the main scrutiny bodies in local government: Audit Scotland, Her Majesty's Inspectorate of Education, the Social Work Inspection Agency and others. Audit Scotland also have a high-level risk assessment of how all 32 councils are responding to the equalities duties. It found however that in eight of the 32 councils, it had “real and more significant concerns about the progress that they were making on equalities, embedding equalities approaches and seeing some impact from their work in that area”.253

76. In response to this, Angela O’Hagan expressed concern that equality is still not regarded as a core aspect of governance and accountability in the functions of public authorities—

“The public sector duties are framed so as to support the promotion of equality as part of the ethos and character of the organisation. Equality should be considered in terms of the quality and appropriateness of service delivery and the maximisation of resources, and it should be a key management responsibility that is embedded in the governance of the organisation and exposed to scrutiny under accountability. Therefore, what Fraser McKinlay described is disappointing.”254

77. Fraser McKinlay added—

“In developing how we carry out our best-value audit—we now call it BV2—we have been trying, over the past 12 months, to shift towards a more partnership-based approach and to consider outcomes, as councils and their partners are now using single outcome agreements as their main delivery vehicle.

In that example, we would look to make sure that the council has understood the potential impact of its decision on its partners. We do not have the ability to go to the health board and do an audit at that stage, but we can say to the council, "In making that decision, have you understood the wider impact on your partners and on delivery of the single outcome agreement?"”255

78. In terms of refreshing the best-value framework to bring it into line with the new equality duties so that more effective analysis of spending decisions can be achieved across the public sector, the Cabinet Secretary told the Committee

“Essentially, much of that activity is concentrated on Best Value 2, which is now the focus of the Accounts Commission's activities. The Commission has shaped the Best Value 2 proposals on equality in light of our consultation and engagement with the Equality and Human Rights Commission. The Accounts Commission published findings from its Best Value 2 pathfinder audits earlier this year. Five audits were undertaken, in each of which the question was posed what progress the council had made in promoting equalities, so the Commission has incorporated into its process the need to address equalities issues.

The Accounts Commission has made it clear to the Government that it will continue to work with the Equality and Human Rights Commission to ensure that a co-ordinated approach is adopted to auditing equality.”256

Conclusions

79. The Committee recognises this is a ‘hugely challenging time’ for public bodies but also note the ‘significant concerns about progress’ expressed with regard to how those bodies have to date responded to the equalities duties. Within the context of prolonged spending cuts and a framework of compliance, scrutiny and support, the Committee will continue to monitor progress and, it particularly welcomes the proactive approach of Audit Scotland in this regard.

80. The Committee notes concerns raised in evidence about the progress that local authorities are making on equalities and embedding equalities approaches in their work. The Committee calls on local authorities to prioritise and focus explicitly in the next planning and budget phase on implementing measures designed to improve upon the approach to embedding equalities in their work, including through EqIAs. The Committee recommends that COSLA keeps it informed of the progress being made by local authorities in this regard. It also recommends that the Scottish Government should monitor progess in the context of the statutory equality duties.

81. The Committee believes that Scotland needs a more effective approach to equality mainstreaming across all public sector bodies, and this should cover issues of compliance, scrutiny and support. The Committee will invite its successor to explore these issues further and calls on other Parliamentary subject committees to do the same as part of their work.

IMPACT OF THE BUDGET ON EQUALITIES

82. The Committee sought to identify the impact of cuts, with particular reference to an overall growth strategy and in determining the nature of public service delivery and performance.

83. In terms of impact, the evidence the Committee received supported the claim that particular groups and sectors will bear the brunt of the proposed cuts. It was further highlighted in evidence that the current financial environment required longer term financial planning in order to promote the kind of service redesign required to secure 3% efficiency savings. This was proving difficult within a framework of spending plans covering one year only.

Early intervention

84. In terms of the impact of a one year budget on early intervention and longer-term planning, Claire Monaghan of SOLACE warned the Committee—

“Early intervention is not like switching on a light and then you have done it. It is the same as with equalities—a journey that will evolve over time. Early intervention requires some planning and resource transfer, which cannot be done instantly. The future jobs fund is a classic example. It was a great initiative that provided lots of good opportunities locally and nationally, but then it was suddenly withdrawn so it would be no good our planning around it. Perhaps that was not the best example, but the point is that the ability to plan for the future requires our having better information than we currently have.

I understand all the reasons why a one-year budget is being offered, such as the coming election. Given the scale of budget decline that is anticipated over the coming year, it has not left authorities in the best position, particularly given that we have local government elections in 2012. Our preference is for as many decisions as possible to be made to allow the new administrations that come in on the back of those elections to be in a positive position. The risk is that we will end up being somewhat on the back foot. Early intervention in particular requires a sustained effort, which requires reasonable vision into the future on funding and major policy initiatives.”257

85. Angela O’ Hagan of the Scottish Women’s Budget Group considered the impact and consequences of the removal of early intervention services—

“When I spoke to the Committee in the spring about the budget strategy phase, a lot of the discussion then was about displacement and the implications of cost savings or decisions on spending in one area and the consequences of that on another. As part of the Scottish Women's Budget Group, I recently co-authored a briefing for Scottish Women's Aid and Rape Crisis Scotland that looked at the economic consequences of the removal of early intervention services and the consequences elsewhere. The reduction in the housing and regeneration budget is quite significant, so what are the consequences for women and families who are moving on from refuges if there is reduced availability of housing?258

86. The longer term planning, enabled by multi-year spending reviews, is considered crucial in the strategic integration of equality consideration throughout the budget process, a view supported by Alex Neil MSP, the Minister for Housing and Communities—

“Our intention is to have another equality statement next year, but we will make a final decision once we have seen the report from EBAG next summer. I make that caveat because we would like to tie in the statement more with the three-year comprehensive spending review. As members will know, there should have been a comprehensive spending review this year, which would have covered the next three years. There has not been a CSR this year, but I hope that there will be one next year, irrespective of who wins the Westminster elections. EBAG's remit for its report next summer is to consider applying the process beyond a year-to-year basis. We want to ensure that equality is mainstreamed as far as possible in decisions about our three-year comprehensive spending plan.” 259

Conclusion

87. The Committee considered the issue of early intervention in some detail at the Budget Strategy Phase and it repeats the call it made then for the Sc ottish Government and public authorities to consider the extent to which early interventions can be made which can lead to longer term financial benefits. The Committee welcomes the inquiry that has been undertaken by the Finance Committee in relation to early intervention.

88. The Committee acknowledges the concerns expressed in evidence about the difficulties for longer term planning that have arisen as a result of having a one-year budget. However, the Committee believes that this should not prevent consideration continuing to be given by the Scottish Government to early intervention measures which may bring long term benefits.

89. In its continuing scrutiny of budgetary issues, the Committee will monitor progress being made by the Scottish Government in terms of its long term planning strategy, and how it applies early intervention measures. It will be especially mindful of this when it comes to consider the next Draft Budget which follows a multi-year spending review.

Efficiencies and service redesign

90. The Committee notes that the Draft Budget sets out the Scottish Government’s position in relation to efficiency savings—

“We are building on efficiency work that has already seen Scotland deliver £839 million in efficiency savings in 2008-09 and £1,470 million in 2009-10. This exceeded our targets by £300 million and £400 million respectively and out-performed Whitehall in each of the last two years. But we must go further. In the past, efficiencies have enabled us to improve services from the same budgets. In future, efficiencies will help to maintain services in the face of budget cuts.”260

91. In terms of being able to achieve 3% efficiency savings, Claire Monaghan of SOLACE believed that this would present a challenge but that—

“The real challenge is the extent to which authorities can continue to do things better and better. We are at the stage where we need to be doing service redesign rather than squeezing more efficiencies out of the system. There is still a bit of scope for that, but it is more or less exhausted. Service redesign gives authorities an opportunity, because if they build equality impact assessments into the process properly, they can take a step forward and ensure that the services that they deliver properly reflect every aspect of equality. That takes us back to the point about really getting into the corners of the equalities agenda rather than doing more or less what we have always done, with a few tweaks at the edges and ensuring that we tick an equalities box.

The challenge is the timescale over which the work will be done and the scale of the decisions that authorities will have to take in their budgets. At one level, having a one-year budget is helpful, because most authorities will have taken decisions and mapped out a plan during the year, so they know that they can deliver a legal budget for the next cycle. The real challenge is what will happen next. If we have the current scale of cuts year on year, the landscape will change fundamentally, as will the types of service that are offered, and there is a risk that we will step back on the equality agenda rather than putting it to the fore.”
261

92. Fraser McKinlay of Audit Scotland told the Committee that—

“One of the key things that we have been concerned about during best-value audits is that, although bodies have all the bits in place and they seem to be ticking a lot of the boxes, there is still not an awful lot of evidence of the impact on service delivery and service redesign, and of that being followed through.”262

93. In response to the concerns expressed, the Cabinet Secretary told the Committee that he did not agree that all efficiency savings had been squeezed out of the system—

“Efficiency savings can always be made. I do not subscribe to the view that we have reached the bottom of the barrel and scope for more savings is exhausted. There are always opportunities to find new and different ways of operating and to challenge things that we spend money on. While I have been Cabinet Secretary for Finance and Sustainable Growth, I have identified things that we should no longer spend money on because they are unjustifiable.”263

94. In terms of the challenges faced in relation to efficiency savings, the Cabinet Secretary went on to say—

“The 3 per cent efficiency savings represent a challenge, but in the current climate we must challenge the public sector in Scotland not to accept the view that we can improve services, productivity and impact only by spending more money. If we assume that we secure improvements only by spending more money, nothing will move forward in the next few years, when there will be less money around. There are always better and more effective ways of working, which can deliver more for smaller sums of money. There are numerous examples in public services of staff having a good grip on how to do that.”264

95. The Cabinet Secretary told the Committee that a process of service redesign should pay due regard to the interests of the most vulnerable people in Scotland. He added that the Scottish Government had established the Christie Commission265 to examine how Scotland's public services can be delivered in future to secure improved outcomes for communities across Scotland—

“There is a need to engage in service redesign. That is why the Government has commissioned the Christie Commission to consider the medium term. We face a financial challenge that will last for a number of years and will have to be met by redesigning public services and breaking down some of the boundaries and territoriality between public bodies. The Government's support for the work of the Christie Commission is important in that respect.

Whether meeting the challenge is more or less difficult within a one-year budget is an active question, which the Parliament has debated and considered. The Government is exploring the issue and I will give its response in due course.”266

Conclusion

96. As the Draft Budget 2011-12 has not been accompanied by a multi-year spending review, there is a danger that the drive for efficiency savings will result in a focus on the immediate gains associated with cuts in services as opposed to a longer-term strategy of transformation in the design and delivery of public services.

97. The Committee is concerned that the incentive to secure further efficiencies may impact disproportionately on the services the most vulnerable members of Scottish society rely upon heavily, and the pressure to deliver ‘short term gains’ will be at the expense of robust and transparent EqIA.

98. This serves to reinforce the recommendation made above, that all public bodies prioritise over the next planning and budget phase, a process of demonstrating progress with respect to implementing measures designed to improve upon the approach to embedding equalities in their work, including through EqIAs.

Impact on the third sector

99. According to the Draft Budget, the Finance and Sustainable Growth portfolio is ‘responsible for managing Scotland’s budget efficiently and effectively and for delivering the right mix of policies to increase sustainable growth, and that remit includes ‘promoting the growth of the third sector’.267

100. It also confirms that the budget for third sector funding reduces from £35.5 million to £27 million, however core funding has been increased from £20.7 million to £24 million. The Equality Statement highlights this increase adding that ‘the funding of the Scottish Investment Fund has been extended for a further year’ and claims that this ‘funding has supported equality broadly by growing and strengthening the capacity of the third sector to support their communities, including equality groups and by providing valued services and jobs.’268 The Committee recognises that a great deal of support to the third sector is channelled through local government funding and it is therefore mindful of the impact of a reduction in local government resources on this support.

101. The Equality Statement also highlights that two thirds of those working in a charity, voluntary organisation or trust, are women, and that there is a higher proportion of part-time posts and of disabled people employed than in the public or private sector. The conclusion drawn then is that ‘budget adjustments to support the third sector may impact upon equality groups.’

102. Within this context, the Committee explored the impact of the budget on the third sector. In particular, the Committee sought to explore how local authorities and voluntary sector partners manage and analyse any equalities impact, and how that working relationship and analysis feeds into the drawing up and assessment of single outcomes.

103. Pat Armstrong from ACOSVO told the Committee—

“I asked my members for examples of things that are happening on the ground that are impacting on equalities groups, and I got some very interesting ones. For example, a community transport project that previously received £16,000 a year to keep it running helped the most disadvantaged, elderly, housebound disabled people to attend hospital appointments and lunch groups and to go shopping. Due to a transport decision, that has been cut. However, if any of those people have to go into care, it will cost a minimum of £24,000 a year for their care. Such decisions are already impacting on the sector. The worry is that with the one-year budget, short-term decisions will be made to make savings, but there could be longer-term implications for costs.”269

104. In terms of the third sector’s role in developing Single Outcome Agreements, Pat Armstrong said—

“Quite a responsibility is left to the sector almost to beat the equalities drum and to pull the partners back to the Concordat [between the Scottish Government and local government] and the Single Outcome Agreement and ensure that what is said at strategic level is actually what is happening on the ground. Bringing the partnerships together as equals, to ensure that the voice of the diverse third sector—which is as it should be—is heard in one or two places in community planning partnerships, is quite a challenge. We have moved forward, but there is a long way to go. It is a continuing journey, and the message is mixed throughout the country.”270

105. Claire Monaghan of SOLACE added that—

“SOAs are still relatively new. The voluntary sector input to those, certainly in my own authority, is taking place at the point where our third sector has been restructuring around the coming third sector interface. That has impacted on the role of the third sector in the community planning partnership.

Our voluntary sector is represented on the community planning board, and we now have a voluntary sector compact with our third sector interface organisation, which does some shadowing work with the thematic groups that deliver the main themes of our single outcome agreement. The right structures exist, but we need to look at what is happening on the ground and the potential impacts of those behaviours.

We will not know the answer until the next round of budget setting, because the removal of the ring fencing that applies in the current financial year to the fairer Scotland funding, which has been a key mechanism for money to flow out through the community planning partnership, will mean that that money will no longer be identifiable as a line in the budget. Next year, the allocation of that money will be down completely to council budget decisions. That is right and proper in the grand scheme of things, but that is where the potential impact on the voluntary sector and the key role that it plays on the equalities agenda may play out. In a year's time, we will have a lot more evidence on how authorities have responded to the challenge of keeping the voluntary sector on board and paying attention to equalities in the SOAs.”271

106. Pat Armstrong pointed out to the Committee in connection with the care sector, which is largely populated by women, both as providers and users of services, that increasing competition for care contracts had resulted in a downward pressure on terms and conditions of employment, including the minimum wage and pension provision. She indicated that this situation would require to be monitored, particularly with reference to gender impact, as she considered that there is a push at a local level for larger contracts.272

107. The Committee explored whether, in seeking to achieve efficiency savings of 3%, the third sector's terms and conditions are not driven down because it is viewed as a ‘cheaper’ option for providing required services. A further concern raised was that the third sector could effectively be sidelined due to an inability to compete competitively with larger and more financially secure organisations.

108. In response, Claire Monaghan indicated that—

“The solution to that has to rest on the equality impact assessment carried out for councils' budget decisions. After all, organisations are responsible for ensuring that they have properly assessed the equality impact of any decisions that they make, although I have to say that I am not so naive as to think that that will happen in every case. We have to raise awareness in that respect; indeed, there might need to be some collaborative work to ensure that everyone is aware of the potential impact.”273

109. Pat Armstrong added—

“Another positive way in which these issues have been highlighted across the public sector has been through the Scottish Government Forum—or what is now called the Scottish Leaders Forum—which for the past year or two has been bringing together leaders in the public sector and the third sector. It has gone a huge way towards helping us to understand and work together on the various issues.”274

110. The Cabinet Secretary told the Committee—

“Where the third sector fits into all this is very important. As a matter of fact, the third sector budget line goes from £20.7 million this year to £24 million. Not many budget lines go up, but that one is going up quite dramatically. Why is that the case? The Government accepts that the third sector is fundamental to some of the ways of working that we want to bring about in delivering public services, so we have to support the transition to undertake that. The Government put in place the Scottish Investment Fund for the three years of the spending review. It was supposed to finish in March of next year, but I have extended it, with a more limited amount of money. Its purpose was to create more sustainable social enterprises, many of which are actively involved in a number of areas of public service delivery, so that they create a more sustainable and regenerative platform for their own business activities. Our whole approach has been to create for the third sector the opportunity to have an awful lot more muscle and to contribute an awful lot more to the process.

The final element is the Christie Commission. We have placed at the heart of its remit the importance of the role of the third sector in the delivery of public services. The third sector has a lot to contribute to the process of service redesign and the ways in which different organisations contribute different solutions to ways of working. The Christie Commission will consider carefully the perspective of the third sector.”275

Conclusions

111. The Committee welcomes the Cabinet Secretary’s comment that the Christie Commission will consider carefully the perspective of the third sector. The Committee also welcomes the budget adjustments to support the third sector, which provides evidence of the progress in making explicit the link between high level equality statements and budget allocations, and the significance of the budget in securing greater equality.

112. However, given the equalities dimension of the third sector both in terms of employment profile and the nature of services delivered, as well as being a valuable source of data and information, the Committee notes the lack of a specific equalities remit associated with the Christie Commission.

113. The Committee calls on the Scottish Government to consider widening the remit of the Christie Commission to include a specific equalities dimension.

114. The Committee considers that its future budget scrutiny work should monitor developments in the third sector, in particular the core funding support provided; and that it will recommend to its successor Committee that it evaluates the work and recommendations of the Christie Commission.

Impact of the Draft Budget on women

115. Evidence submitted to the Committee during its scrutiny at the Budget Strategy Phase and its work on the Independent Budget Review, pointed to women bearing the brunt of spending cuts arising in the Draft Budget, particularly given their role in the public sector as workers and users of services, and the expectation at that stage that the public sector would be hit hard in the Draft Budget.

116. The Committee was also aware of the Fawcett Society legal challenge to the UK Emergency Budget earlier this year where the Society considered that this would have a disproportionate impact on women.

117. The Draft Budget acknowledges that—

“Of the 1.19 million women working in Scotland, 39% are working in the public sector where they make up 64% of the workforce. While women undertake part-time work more than men 42% compared to 10% of the total workforce), in the public sector, 62% of women are working full-time. Within the female public sector workforce, 27% are in managerial and professional roles (compared with 17% in the private sector or 30% of male workers across both sectors). However, even within the public sector, women are concentrated in administrative and personal service occupations (39% combined), which are largely lower paid.”276

118. Claire Monaghan of SOLACE believed it was inevitable there would be a disproportionate impact on women because of their employment profile in the public sector—

“Traditionally, the public sector is a much more flexible employer than the private sector, in that it allows more part-time working and more job sharing et cetera. For that reason, it has a higher proportion of women in it. If a significant amount of money is taken out of the budget—as is going to happen—that will, inevitably, impact disproportionately on women. There is no immediate way around that.

The key point from a local authority perspective is that people should be aware of the impact of implementing their decisions—they should not make them blindly. We cannot erode the potential for disproportionate impacts on women, but there is debate about moving some of the hit from revenue into capital spending, which has the potential to exacerbate the situation. That is a trade-off between an economic stimulus argument that involves continuing investment in the future and the potential short-term impacts on women. Even if the number of jobs in the private sector grows, they may not exist in a form that is amenable to women who need to work part time to balance child care or other caring responsibilities.

No matter how much legislation, auditing and scrutiny we put in place around this, I do not think that it is feasible to shield people from the equalities impacts. We can only make sure that those impacts are raised to the surface and that conscious decisions are made around them.”277

119. Angela O’ Hagan of the Scottish Women’s Budget Group added that—

“The labour market will undergo significant structural change as a result of the job losses across the public sector, even though there is a strong commitment from the Government to protect front-line services. If the projected numbers of direct jobs in local authorities and public authorities go or are transferred to the third or private sectors, there will be a significant structural change affecting women's employment and employment opportunities. That raises questions about the extent to which those jobs will come back in the future, if ever. Can the private sector really pick up those jobs in any meaningful way?

I do not see the budget addressing questions around training and retraining and the much more deep-rooted questions around occupational segregation. There is reference to the creation of 34,500 training places and the on-going funding of the modern apprenticeship scheme. However, as members are aware, the Scottish Women's Budget Group and others have consistently raised concerns about the strong gender bias in the modern apprenticeship scheme. If that is left unchecked, as a recovery measure it will reinforce occupational segregation and its consequences.”278

120. In terms of the impact that public sector cuts and a pay freeze would have on women, the Cabinet Secretary told the Committee—

“I accept that there is an equality vulnerability to the £21,000 threshold—there is a fine line in this situation. The second point is that within the pay policy we have focused our activity on two measures in relation to lower-income individuals: a mandatory living wage of £7.15 an hour, a concept to which the Government has committed itself as well as the bodies that it directs, such as health boards and non-departmental public bodies; and the payment of a minimum of £250 to anyone who earns less than £21,000, which will be an important contribution to tackling the issue of low pay.

On the gender impact, 80 per cent of the national health service staff who will benefit from the living wage proposal are women. Within that policy intervention is an acknowledgement of clear support for women. The way in which the Government works with its employees is designed to develop a range of different interventions on awareness raising, employee benefits, flexible working and other measures that will be more suitable for women and people with disabilities within the workforce.

The other point about the pay policy is that it involves sacrifice on the part of members of staff; I freely acknowledge that. However, the Government's intention is explicit, and we accepted the thoughtful analysis of the independent budget review, which essentially said that every pound spent on a pay rise means a pound less for employing someone. That might be a rather blunt way of expressing the point, but it is pretty compelling.

As I have made clear publicly and to our trade union partners, the Government does not come at the budget from the perspective of wishing to reduce the size of the public sector workforce; that is not our objective. I suspect that it will happen because of the financial situation that we face, but we want to minimise public sector employment loss, and the pay freeze will protect employment in the public sector. A substantial proportion of public sector employees are women, so we want to protect that employment.”279

Occupational segregation

121. Women in the Scottish labour market continue to dominate particular sectors and occupations as previously highlighted in the statistics relating to women in the public sector. Women continue to dominate five core occupations – what the Women and Work Commission report280 refers to as the 5 C’s of caring, cashiering, catering, cleaning and clerical. The continuance of occupational segregation has important social and economic implications, not only in relation to pay inequity but also in terms of the potential cost to the Scottish economy of women not realising their full potential. Continued patterns of occupational segregation have explained the unequal nature of jobs losses amongst men and women since the start of this recession. However, their specific location within the labour market has rendered women more vulnerable to the impact of public sector spending cuts. The Scottish Government have made numerous high level commitments to tackling occupational segregation,281 but the Committee heard in evidence of a continued concern regarding the lack of progress in this area.

122. Angela O’ Hagan told the Committee—

“The Scottish Women's Budget Group wants considerably more analysis of and attention to occupational segregation. Consideration must be given to opportunities to address some of the structural inequalities in recovery plans, economic development and skills development. It is positive that the equality statement recognises that structural inequalities are a feature of our economic and social life and that dealing with that issue is a central tenet. There are policies that are apparently economic in nature but, as we know, are not equality neutral. The Government needs to consider how those policies will address structural inequalities. It needs to ensure so far as it can, either by disbursement of money or direction to public authorities, that it mitigates the effects on housing allocation and availability, housing benefit and welfare reform.”282

Equal pay

123. The Committee has had a close interest in the issue of unequal pay for women in the course of its work. For example, in its scrutiny of the Scottish Government’s Draft Budget 2010-11, the Committee considered the issue of equal pay in the NHS in Scotland;283 and in its scrutiny of the previous Draft Budget for 2009-10, it looked at the issue of equal pay in local government.284

124. The issue was also discussed with witnesses during the Committee’s scrutiny of the Independent Budget Review on 26 October, when Dr Marsha Scott of West Lothian Council told the Committee—

“The biggest liability that we face is the fact that we continue to fail to engage with women's inequality, and we will continue to pay the enormous costs that that results in unless we find some way to make it so around equal pay and around plans that focus on the most disadvantaged.”285

125. Angela O'Hagan of the Scottish Women’s Budget Group was concerned about the absence of any reference in the Draft Budget to on-going liability for equal pay and the ability of Scottish public finances to meet the current contingent liabilities. She added—

“We have been informed—as I believe the committee has—by Unison and others from the trade union movement of the number of on-going claims. Those include 35,000 claims in the employment tribunal and the new claims that are registered each month for liabilities that have been created not just through the cuts, but through some of the pay systems to which Claire Monaghan referred.

The challenges include the contingent liabilities for outstanding equal pay claims, the need for robust analysis of the implications of decisions and the need to mitigate the implications of the pay freeze. I am not a trade unionist, but it seems to me that fairly robust negotiations will be necessary on some of the specifics of the proposals for the civil service, if those are to be implemented.”286

126. Claire Monaghan of SOLACE told the Committee that equal pay had been a painful process but that progress was being made—

“Local authorities will all show you their equal pay scars. It has been an extremely challenging and painful episode. Most authorities are now coming out of it or are in the process of settling claims. The last thing that any authority or public body will ever want to do is find itself in that position again. It was a fundamentally wrong and costly exercise.

I have not seen anything to make me think that there is major potential for equal pay issues to arise, although we need to be careful around the extra payments that come on the back of the public sector pay freeze, such as the £250 for the lowest paid. We need to watch how that plays out with the different groups of affected staff, many of whom might be women. I have not seen the analysis that sits behind the issue to know the extent to which that has been taken into account. In implementing the decisions, authorities will be conscious that they must avoid any equal pay traps that they can see.”287

127. In response to these concerns, the Cabinet Secretary indicated that equal pay in local government was a matter for local government, however he admitted—

“Clearly, the issue has gone on for far too long over the past 11 years—notwithstanding the 30-year history of the issue before we got to the equal pay settlement in 1999. For it to have taken this long—as I said, even disregarding the previous 30 years—is completely unacceptable. As a consequence of it taking so long, I am sure that it has cost us more than it needed to cost us—again, I am sure that you will ask me for the evidence for that, but that is what I feel.

Local authorities have to make provision for equal pay settlements. I am advised that all local authorities now have in place a position on equal pay—they also have outstanding cases on which challenges are being made. They are required to make provision for equal pay within their finances. I have made it clear to local authorities that there are ways in which some of the costs of equal pay implementation can be capitalised and, essentially, paid off over a longer period of time.

That arrangement has been put in place by virtue of an agreement with the Treasury, and we have been able to secure that agreement in a number of cases. Essentially, I have made a standing invitation to local government, saying that I would be delighted to assist in negotiations with the Treasury in relation to anything within that field of capitalisation.”288

Conclusions

128. The Committee remains very concerned about the lack of progress on equal pay across Scotland’s public bodies in recent years and have through previous budget scrutiny highlighted the costs associated with ‘managing unequal pay’.

129. The evidence the Committee heard, indicates that women as workers, and users of essential services provided by the public sector, will bear the brunt of this recession and it acknowledges that there appears to be recognition of this in the Equality Statement.

130. However, the Committee notes that there is very little detail contained within the Draft Budget document to indicate what measures and/or resources are being targeted at mitigating the impact on women as low paid workers in the public sector beyond the £21,000 per annum threshold. The Committee also recognises that there are complex issues around identifying who will actually benefit from this measure, and therefore urges the Scottish Government to undertake a robust equality impact analysis of the measure and to publish the results of that analysis.

131. Similarly, there is a lack of detail in the Draft Budget as to how measures intended to enhance the human capital of Scotland’s workforce through investment in skills and education will tackle gender based occupational segregation and thus improve women’s position within the labour market. The Committee requests that the Scottish Government provides detail of the resources allocated to programmes focused on tackling occupational segregation and provide evidence of how the impact of the public sector pay freeze will be monitored with specific reference to the gender pay gap.

132. Given the relevance of these issues to the overarching purpose of sustainable economic growth, the Committee urges the Finance Committee, in its future budget scrutiny, to focus on issues relating to occupational segregation, public sector pay and the gender pay gap.

EXTRACTS FROM THE MINUTES OF THE EQUAL OPPORTUNITIES COMMITTEE

18th Meeting, 2010 (Session 3), Tuesday 26 October 2010

Draft Budget Scrutiny 2011-12: The Committee agreed to consider its approach to the Scottish Government's Draft Budget 2011-12 and a draft report in private at future meetings; and agreed to delegate to the Convener responsibility for arranging for the SPCB to pay, under Rule 12.4.3, any expenses of witnesses arising from the evidence sessions.

19th Meeting, 2010 (Session 3), Tuesday 9 November 2010

Draft Budget 2011-12 (in private): The Committee considered a briefing paper from its Budget Adviser and agreed its approach to the Scottish Government's Draft Budget 2011-12.

22nd Meeting, 2010 (Session 3), Tuesday 30 November 2010

Draft Budget Scrutiny 2011-12: The Committee took evidence on the Scottish Government's Draft Budget 2011-12 from-

Fraser McKinlay, Director, Best Value and Scrutiny Improvement, Audit Scotland;

Angela O'Hagan, Research Fellow, Caledonian Business School, Glasgow Caledonian University;

Claire Monaghan, Head of Policy, Performance and Communication, Society of Local Authority Chief Executives and Senior Managers;

Pat Armstrong, Executive Director, Association of Chief Officers of Scottish Voluntary Organisations.

23rd Meeting, 2010 (Session 3), Tuesday 7 December 2010

Decision on taking business in private: The Committee decided to take item 5 and consideration of its draft report on the Scottish Government's Draft Budget 2011-12, in private at future meetings.

Draft Budget 2011-12: The Committee took evidence on the Scottish Government's Draft Budget 2011-12 from—

John Swinney MSP, Cabinet Secretary for Finance and Sustainable Growth,

Yvonne Strachan, Head of Equality Unit, and;

Dr Nuala Gormley, Senior Principal Research Officer, Scottish Government.

Draft Budget 2011-12: The Committee considered evidence heard to date.

24th Meeting, 2010 (Session 3), Tuesday 21 December 2010

Draft Budget 2011-12 (in private): The Committee considered and agreed a draft report to the Finance Committee on the Scottish Government's Draft Budget 2011-12.

ANNEXE G

European and External Relations Committee

Report to the Finance Committee on the Draft Budget 2011-12

The Committee reports to the Finance Committee as follows—

Introduction

1. The Committee considered the Europe and External Affairs portfolio of the Scottish Government Draft Budget 2011-12 (“the draft budget”).

2. In the course of its scrutiny, the Committee took oral evidence from a range of Scottish stakeholders and then from the Minister for Culture and External Affairs. A list of those who gave evidence is included at the end of the report.

3. In order to assist its scrutiny, the Committee requested a detailed breakdown of expenditure in the Europe and External Affairs portfolio, totalling £16.1m289. The Minister for Culture and External Affairs helpfully provided this Level 4 data, which is also included at the end of the report.

4. The Committee is grateful to the Minister for this additional information and considers that, given the particular nature of the Level 3 data in the portfolio, the provision of this information was critical in enabling it to undertake meaningful scrutiny of the draft budget. Specifically, the Level 4 data enabled the Committee to identify expenditure across six individual items within the international relations budget line, which together accounted for £14.4m or 89 per cent of the portfolio budget.

5. The Committee considered the Europe and External Affairs expenditure under two key headings – international development and the promotion of Scotland.

International development expenditure

6. International development spending by the Scottish Government in 2011-12 is set to remain static at £9m.290 Although, in real terms this is judged to equate to a small cut of around £170,000.291

7. The draft budget reflects a more significant change, however, in that the money to be spent on Malawi is no longer to be ring-fenced. The draft budget confirms that whilst the unique relationship with Malawi will remain “a key priority” in the International Development Fund (IDF), no specific amount is guaranteed.292 This contrasts with the commitment made by the Scottish Government in the 2010-11 budget where £3m was set aside solely for Malawi.293

Key points raised in evidence

8. Whilst the Scottish Government’s IDF is a comparatively small amount in relation to overall UK expenditure – UK funding is set to increase to £11.5bn by 2014-15294 – the Committee heard evidence that reflected the positive impact and benefit derived from the IDF.

9. Rev Professor Ross, of the Scotland Malawi Partnership (SMP), considered Scotland to be an outward-looking nation and suggested that “such [international development] activity makes a very important statement about Scotland, its identity and role in the world and its values”.295 Whilst Rev Professor Ross acknowledged that there were critics, he did not think that those voices are true to what Scotland is really about or to what most Scots value. Similarly, the Network of International Development Organisations in Scotland (NIDOS) spoke of the huge amount of good will among Scots toward supporting other people who are in a worse situation than they are.296

10. NIDOS argued that the Scottish Government’s work in funding projects in Malawi had, in particular, shown that small sums of money can have wider policy impacts.297 NIDOS said that the money had brought leverage and had influenced policy change by the Malawi Government. Examples included a child nutrition project funded by the IDF which had been asked to guide the policy for child nutrition in Malawi, and a school feeding programme which had influenced the Malawi Government to look at feeding programmes in its primary schools.

11. Similarly, Dr Carbone, of the Glasgow Centre for International Development, considered that Scotland should be happy to be part of a larger project in Malawi, where growth in GDP over the past five years has averaged an impressive 7 per cent, in comparison with only 2 per cent in 2005.298

12. Part of the reason for the effectiveness of the IDF in Malawi was said to be that the funding went directly to specific organisations for specific tasks or projects and was monitored on a six-monthly basis, which minimised the opportunities for money going astray.299

13. Whilst there was agreement about the positive impact of the IDF in Malawi there were differing views on the issue of proliferation and whether the IDF was spread too thinly across too many geographical areas.

14. Rev Professor Ross considered that having a strong Malawi focus allowed the Scotland Malawi Partnership to take a long-term view and make long-term commitments, resulting in greater capacity-building.300 On that basis, he suggested that 50 per cent of the IDF (compared with approximately 33 per cent of the IDF in 2010-11) would be a suitable figure to be targeted on Malawi in the future.301

15. Dr Carbone went further and advocated that the entire IDF should be targeted at Malawi.302 He was concerned about proliferation and felt that the SG was trying to do too much with the IDF, and suggested that greater benefits would be gained from having a single geographical focus.

16. NIDOS, on the other hand, favoured a more diverse programme whereby the IDF was not targeted at a single nation or region, but where support was made available in several areas.303 It considered that it would be a real loss if the programme became solely a Malawi project and that the current spending of approximately £3m in Malawi was at an appropriate level. Gillian Wilson explained that NIDOS supported such a position:

“not just because my members work in different parts of the world but because of the extent of cross-fertilisation within our membership. For example, a grant was given to Concern Worldwide for the child malnutrition project in Rwanda, and a lot of the learning that developed that project came from Malawi. That can work either way. There are real benefits to having a diverse programme.”304

17. All witnesses were in agreement, however, of the importance of ring-fencing international development funding. They argued that ring-fencing resources provided much-needed predictability for international development projects and allowed for longer-term planning.305 For example, Dr Carbone considered that:

“ring fencing is essential, because aid predictability is essential for recipients. One of the complaints that recipients make all the time to international organizations is that they do not know how much they will get every year, so they cannot plan in advance.”306

18. Witnesses also agreed that, whilst long-term international development support should be the main focus of the Scottish Government’s IDF, Scotland also had a responsibility to assist the world in times of crises. There was support for the Scottish Government’s continued emergency funding for natural crises such as the recent flooding in Pakistan and earthquakes in Haiti.307 There was also agreement that such emergency support should account for a smaller proportion of the Government’s international spending than long-term development.308

19. In her evidence to the Committee, the Minister confirmed that she proposed to maintain the level of the IDF at £9m.309 The Minister highlighted that this was in the context of an overall cut in the Europe and External Affairs portfolio of 3.6 per cent and against the background of much larger cuts across the Office of the First Minister of 6.7 per cent for resource budgets and 27.6 per cent for capital budgets310.311

20. The Minister acknowledged the size of the IDF budget and stated that “the danger with a small budget is trying to do too much”312. On this basis, the Minister intended to be strategic in the use of the budget: “it is very important that we resource our relationship with Malawi properly with long-term funding”313.

21. The Minister emphasised her “solid commitment”314 to Malawi and indicated that in the past year she had spent considerably more than the £3m which had been ring-fenced – the Minister said that the figure was about £4.5m.315 For 2011-12, the Minister confirmed that over £3m was already committed to Malawi and, therefore, she did not think ring-fencing was necessary.316

22. In addition, the Minister confirmed that the Scottish Government would continue to provide support for global crises through the IDF. The Minister stated that, for the financial year 2010-11, around £800,000 had been spent on immediate humanitarian aid and assistance for Pakistan and Haiti. The Minister reflected on the suc.cess of this emergency support which had been provided directly to NGOs operating in the disaster-hit regions, and considered that in order to maintain flexibility in the budget such humanitarian aid should not be specifically earmarked.317

Promotion of Scotland expenditure

23. Within the Europe and External Affairs budget, the promotion of Scotland is taken to include the following budget lines: major events and themed years (£1.7m); international strategy (£0.43m); North American strategy (£0.455m); Fresh Talent (£1.055); Scotland’s international image (£3.330m); and European strategy (£0.13m).318 Together these budget lines equate to £7.1m, which, compared with 2010-11 figures is a cut of £0.631m (8.2 per cent).

24. Looking at the budget lines individually, expenditure for the North American strategy is the only one to have increased, which is proposed to go up by £0.045m or 11 per cent. Each of the other budget lines has been cut.

25. The £1.7m budget for major events and themed years will support the Homecoming legacy work, the Active Scotland and Creative Scotland themed years, and will include £0.25m for the Royal Military Tattoo grandstand project.319

Key points raised in evidence

26. The Committee received evidence about the range of geographical priorities covered by the International Strategy – primarily China and India – and North American Strategy budget lines, and the cash allocation for each. Paul Docherty, of the British Council Scotland, considered that the split of funding across these two budget lines, fitted extremely well with its own priorities.320 He noted that the proposed increase in spending for the North American Strategy mirrored the priorities of the British Council as this was one of the few areas of its work for which the central budget from London was also increasing.

27. Similarly, Denise Hill, from VisitScotland, expected the North American market to deliver the largest amount of traffic of international leisure and business tourism to Scotland and so was pleased with the increase in activity and support in that area.321

28. Conversely, the Royal Society of Edinburgh (RSE) highlighted the importance of the Chinese market from a science perspective and was disappointed that the budget for that was shrinking compared with North American budget which was increasing slightly. Professor Gibby explained that:

“we see the opportunity to expand engagement with China as a priority… In the past 10 years, Chinese science has had enormous investment and development and there are increasing opportunities to engage with China. For financial reasons, the partnerships that we can support are limited and constrained, so it is disappointing that the increase is in the North American arena, rather than in China, India and Pakistan.”322

29. Other evidence considered whether, in the context of the wider spending cuts, the Government’s spending on Scotland’s international image was appropriate and provided value for money. Perhaps unsurprisingly, VisitScotland considered that the work on Scotland’s international image was valuable. It suggested that this work created “strong brand headlines and messages” that helped not only Government agencies, but also Scottish businesses and individuals “to better convey the Scotland message”.323

30. VisitScotland also suggested that such spending had a multiplier effect, which was reflected by the Winter White campaign of 2009 where an investment of £1.3m generated £66m in additional income for Scotland.324

31. From its experience of Homecoming 2009, VisitScotland considered that having a strong, unifying theme that “people can pull around can be can be fantastic in terms of the buzz that you can create as well as in public relations and engagement terms”325. Denise Hill said that the two themed years of Active Scotland and Creative Scotland included strong Scottish messages that had been carried through from the legacy work on Homecoming.

32. The British Council Scotland was, however, less interested in the short-term focus of individual themed years. Paul Docherty described how the British Council’s work was orientated much more towards long-term goals, such as its work with the Kennedy Center in Washington DC to put on a series of shows taken from the Edinburgh Fringe Festival, which had taken eight years to develop.326

33. Whilst witnesses were unable to provide details of the impact of the Government’s Fresh Talent initiative, evidence highlighted the importance of engaging with students and particularly Chinese students. VisitScotland said that it was trying to develop its targeting of students who are based in Scotland, focusing on Chinese students as the biggest international group at Scotland’s universities.327

34. The RSE also focused on Chinese students as their numbers were increasing at undergraduate and postgraduate levels. However, Professor Gibby highlighted the challenge of opening up access for the Chinese to shorter training programmes in Scotland, due to difficulties in obtaining visas. Professor Gibby considered that money could usefully be allocated in this area.328

35. In her evidence to the Committee, the Minister for Culture and External Affairs provided further explanation of the proposed spending plans for the promotion of Scotland in 2011-12. The Minister suggested that the rationale behind the proposed balance of funding for activity in North America, China and India was that “our [the Scottish Government’s] activity is more established in North America than it is in China”.329

36. The Minister described that the increase in allocation for the North America Strategy budget accounted, in part, for the Government’s enhanced operations in Canada. In addition, the Minister acknowledged that there were new challenges in engaging with the Diaspora in North America and, as a result, she had sought to protect the budget for this area.330

37. In relation to the expenditure on Scotland’s international image, the Minister explained that she was “trying to be quite focused”331 in what she did with the budget. She intended to be strategic in the interventions funded by the budget and said she would work alongside VisitScotland and other international partners to ensure better co-ordination and cross-support. The Minister considered that “we get a lot for the budget that we have”332 and highlighted that it had been used to support valuable operations such as the Scottish presence at Shanghai Expo 2010, the establishment of Scotland House in Delhi during the Commonwealth Games, and the St Ninian’s day parade as part of the Papal visit to Scotland.333

38. In written evidence submitted to the Committee after the Minister’s evidence session, the Scottish Government provided details of expenditure on the Fresh Talent initiative and on the Major Events and Themed Years budget line. The Government confirmed that the funding for Fresh Talent will decrease from £1.331m in 2010-11, to £1.055m in 2011-12. The Committee also understands that of the £1.7m budgeted in 2011-12 for major events and themed years, £0.25m will be used to support the Active Scotland and Creative Scotland Years, £0.25m will be allocated to the Tattoo grandstand project, and the remaining budget of £1.2m, which has not yet been allocated, will be used to support various events/projects throughout the year.334

Conclusions and recommendations

Level 4 data

39. The Committee welcomes the co-operation of the Minister for Culture and External Affairs by providing the Level 4 data for the Europe and External Affairs portfolio. This allowed the Committee to undertake meaningful scrutiny of the international relations expenditure which otherwise would not have been possible. The Committee invites the Scottish Government to commit to provide this level of detail for future draft budgets.

Europe and External Affairs portfolio

40. In the context of significant cuts and cost savings across most portfolios, the Committee welcomes the Scottish Government’s continued support for Europe and External Affairs portfolio, which has seen a smaller than average cut.

International development expenditure

41. The Committee welcomes the continued financial support for international development. The Committee believes that Scotland has a responsibility to continue to provide assistance and support to developing nations in the interests of reducing global poverty. The Committee commends the work that the Scottish Government has done, in particular, in Malawi.

42. Whilst the Committee acknowledges the benefits that can be achieved by providing support in different geographical areas at the same time, the Committee is conscious of the small overall amount of the IDF and the need to maximise impact. The Committee is concerned about the proliferation of recipients of international development funding and the potentially limiting effect this could have on the impact of the IDF, pound for pound, in any single place. Therefore, the Committee agrees with much of the evidence that it has heard and with the Government’s position that a significant proportion of the IDF should be focused, on Malawi.

43. On this basis, the Committee recommends that a minimum level of expenditure of £3m should be set (ring fenced) for Malawi and explicitly defined in the budget for 2011-12. The Committee hopes, however, that, as indicated by the Minister, expenditure in Malawi will continue in 2011-12 to surpass this minimum level.

44. The Committee also welcomes the Scottish Government’s intention to continue to provide immediate humanitarian aid and assistance through the IDF. The Committee agrees with the Minister that, in the interests of maintaining flexibility in the use of the budget that such humanitarian aid should not be ring-fenced.

45. The Committee notes the recent publication of the Scottish Government’s South Asia Plan, which reflects a holistic approach in linking the international development objectives in South East Asia with the Government’s Plans for engagement with India and Pakistan.

Promotion of Scotland expenditure

46. The Committee acknowledges the Scottish Government’s work in engaging in North America, China and, of course, Europe.

47. With the launch of the Government’s Canada Plan, the Committee agrees that Canada offers a strong Scottish connection which could and should be strengthened. However, the Committee is mindful of the benefit that can be achieved from gaining early-mover advantage in emerging markets in areas, such as certain regions in China, where there is less competition and where Scotland can build a strong position.

48. On this basis, the Committee shares the disappointment reflected in some evidence of the Scottish Government’s increased focus on North America and decrease in expenditure in China, and India. The Committee would not wish Scotland’s links, in particular, with China, to lose momentum at what is a crucial time for building on the successes already achieved.

49. In relation to the expenditure on Scotland’s international image, the Committee welcomes the Minister’s intention to focus her expenditure and to better co-ordinate the Scottish Government’s activities with VisitScotland, Scottish Development International and other international partners. The Committee urges the Minister to employ joint-working where possible and to seek innovative ways of meeting the objectives of its international image priorities to ensure best return for its investment.

50. The Committee also considered the proposed cut in the budget for the Fresh Talent Initiative. The Committee is of the view that this has been a valuable initiative and would wish to ensure that the successes of the programme are sustained. The Committee, therefore, encourages the Minister to maintain the current level of expenditure for the Fresh Talent initiative in 2011-12.

EXTRACTS FROM THE MINUTES OF THE EUROPEAN AND EXTERNAL RELATIONS COMMITTEE

15th Meeting, 2010 (Session 3), Tuesday, 30 November 2010

2. Scrutiny of the Scottish Government Budget: The Committee took evidence from—

Dr Maurizio Carbone, Glasgow Centre for International Development, University of Glasgow;

Gillian Wilson, Co-ordinator, Network of International Development Organisations in Scotland;

Rev Prof Kenneth Ross, Chairperson, Scotland Malawi Partnership;

Paul Docherty, Director, British Council Scotland;

Prof Mary Gibby OBE FRSE, Director of Science at the Royal Botanic Garden Edinburgh, Royal Society of Edinburgh;

Denise Hill, Head of International Marketing, VisitScotland;

Leon Thompson, EventScotland Corporate Affairs Manager, VisitScotland.

8. Scottish Government Budget (in private): The Committee discussed the key points raised during the earlier evidence session.

16th Meeting, 2010 (Session 3), Tuesday, 7 December 2010

2. Scrutiny of Scottish Government Budget: The Committee took evidence from—

Fiona Hyslop MSP, Minister for Culture and External Affairs, Heather Jones, Deputy Director International Division, and Lisa Bird, Head of International Development Fund, Scottish Government.

5. Scrutiny of the Scottish Government Budget: The Committee considered the keys points raised during the earlier evidence session.

17th Meeting, 2010 (Session 3), Tuesday, 14 December 2010

6. Scrutiny of Scottish Government Budget (in private): The Committee agreed its report to the Finance Committee, subject to specified changes being made.

BUDGET FIGURES – LEVEL 4 DATA

Letter from Fiona Hyslop MSP, Minister for Culture and External Affairs—

Thank you for your letter of 15 November requesting Level 4 information on the breakdown of spending plans within this Directorate. I am happy to assist and hope the enclosed information is useful for your Committee discussion on 30 November.

Fiona Hyslop MSP

Minister for Culture and External Affairs

24 November 2010

Level 4 heading 2010-11 (latest) £m 2011-12 (planned) £m Short explanation of ‘what the money buys’
International Strategy 0.440 0.43 This budget supports engagement and collaboration with priority countries (including India and China) in areas such as; trade and investment; education and science; and tourism and culture to improve Scotland’s image abroad and directly contribute to Scotland’s economic growth.
North American Strategy 0.410 0.455 The North America Division programme budget supports the Scottish Government’s activities in the USA and Canada, which are aligned with the Government's Economic Strategy and its International Framework’s. Through delivery of its USA and forthcoming Canada Engagement Plans, North America Division Programme activity is designed to:

- bring sharper economic growth focus to the promotion of Scotland in the USA and Canada by highlighting the strength and competitiveness of Scotland's key sectors, including focussing on areas of Scottish excellence that are relevant to the USA and Canada and offer potential for mutual benefit; and

- manage Scotland's reputation as a distinctive global identity by promoting Scotland in North America as a modern, dynamic and responsible nation.

Fresh Talent 1.331 1.055 This budget funds the free Relocation Advisory Services which provides immigration advice to potential migrants and information on employing migrants to business in Scotland. Additionally the budget funds the roll out of the COSLA Migration Toolkit which allows local authorities to better plan for migration in their area and aid better integration into communities. The remaining budget funds activity to promote Scotland as a place to work, live, learn and remain – both in Scotland and internationally.
International Develop-ment 9.0 9.0 The International Development budget enables the Scottish Government to enhance Scotland's place in the world as a responsible nation as outlined in the Scottish Government's International Framework. It enhances the Scottish Government’s contribution to the global fight against poverty through activity which is clearly designed to support the achievement of the Millennium Development Goals and economic growth in developing countries.

Level 4 heading 2010-11 (latest) £m 2011-12 (planned) £m Short explanation of ‘what the money buys’
Scotland's International Image 3.587 3.330 The International Image budget line delivers a programme of work to promote Scotland internationally in support of the International Framework and wider ‘Team Scotland’ objectives. The programme of work is designed to build recognition of Scotland as an attractive place to visit, study, live, work, do business and invest. It contributes to national outcomes 1 and 13, and to the Government’s purpose of sustainable economic growth. The programme of activity includes the management of an overarching Scotland ‘brand’, which reflects what we know about Scotland’s reputation from the findings of the Nation Brands Index, and which directly underpins work by the Scottish Government and key partners to drive greater internationalisation, and to sustain and nurture Scotland’s reputation as a progressive and globally influential nation. At domestic level, activity around St Andrew’s Day, Winter Festival and the ‘Welcome to Scotland’ campaign which runs at points of entry to Scotland is contributing to progress on national indicator 45, and provides enhanced visibility and support for core campaigns such as ‘One Scotland’.
European Strategy 0.14 0.13 This budget supports the EU related work of the Scottish Government's Offices in Brussels and Edinburgh towards the objectives of the International Framework and the European Action Plan. The largest element of expenditure is in Brussels (around £90,000) to deliver the four main goals of the Scottish Government EU Office policy and cultural events programme: promoting the Government’s strategic objectives; enhancing our profile and reputation in the EU; targeting fresh and relevant audiences; and bringing influence to bear on EU policy making and policy makers. Edinburgh expenditure includes funding to support bilateral engagement e.g. with consular corps.
Major Events 1.823 1.7 To deliver the Government’s ambitions for promoting Scotland as a world class events destination and ensuring that events secure maximum economic impact and international profile for Scotland. This includes staging a second Year of Homecoming starting in 2014 the year in which the Commonwealth Games, Ryder Cup and Edinburgh Festivals will ensure Scotland is centre stage in world terms.

ANNEXE H

Health and Sport Committee

Report on the Scottish Government's Draft Budget 2011-12

The Committee reports to the Finance Committee as follows—

Background

1. The Committee considered those parts of the “Health and Wellbeing” chapter of the Scottish Government’s Scotland’s Spending Plans and Draft Budget 2011-12335 (“the draft budget”) that relate to health and sport. The Committee has no remit for the other sections of the chapter – housing and regeneration, wellbeing, the Food Standards Agency and central government grants to local authorities.

2. On 6 October 2010, the Committee agreed an alternative approach to budget scrutiny compared with previous years: rather than appointing an external expert as adviser on the budget, the Committee agreed to seek written submissions and take oral evidence from the following panel of experts—

Dr Andrew Walker, Health Economist, Robertson Centre for Biostatistics, University of Glasgow and former budget adviser to the Committee;

Professor David Bell, Professor of Economics, University of Stirling and adviser to the Finance Committee;

John McLaren, Senior Researcher, Centre for Public Policy for Regions;

Robert Wilson, member of the Independent Budget Review Panel and former partner, Deloitte Consulting.

3. The Committee also agreed then to take oral evidence from the Deputy First Minister and Cabinet Secretary for Health and Wellbeing (“the Cabinet Secretary”) and officials.

4. Owing to adverse circumstances beyond the Committee’s and witnesses’ control, it was not possible to take evidence from the expert panel as scheduled. Owing to the strict nature of the timetable for consideration of the draft budget, there was no scope to re-schedule the session. On 8 December 2010, the Committee proceeded with the evidence session, as planned, with the Cabinet Secretary.336 This session was informed by the following documents—

the SPICe briefing, Draft Budget 2011-12: Health and Sport337;

the Centre for Public Policy for Regions report, Scottish Government Budget Options Briefing Series No.3: Spending on health338;

a submission by Professor David Bell;

a submission by Dr Andrew Walker;

a submission by the Royal College of Nursing Scotland;

the Scottish Government’s response to the Committee's 8th Report, 2010 (Session 3): NHS board revenue allocations;

the Committee’s Report to the Finance Committee on the Scottish Government's Draft Budget 2010-11;

the report, Independent Budget Review – the Report of Scotland’s Independent Budget Review Panel339.

5. During the evidence session, the Cabinet Secretary committed to supply further information in writing in respect of a variety of matters. Her subsequent letter, received on 9 December 2010, is appendixed to this report together with the submissions referred to above.

Reducing administration costs

6. The Cabinet Secretary was asked about recently released figures showing an increase in NHS administration costs of £95 million between 2007 and 2010. This comprised £32m increase in hospital sector administration costs and £63m increase in community sector administration costs. The Cabinet Secretary’s letter of 9 December stated—

“Since 2007, a number of changes have been made to the way that administration costs are reported, which means that costs previously excluded, have now been added to the report and therefore figures between 2007 and 2010 are not directly comparable. For example, it was agreed that administration costs reported in note 6 of the annual accounts would be included for which brought in the following costs for the first time:

  • Administration of Board Meetings and Committees
  • Corporate Governance and Statutory Reporting
  • Health Planning, Commissioning and Performance Reporting
  • Treasury Management and Financial Planning

In the 2009-10 annual accounts of NHS Boards, the total note 6 costs for Boards included in the costs book was £86 million. In addition to these changes, some costs associated with the items below have been reclassified as administration costs

  • health promotion and health education
  • a number of other functions such as pharmacy, catering, property maintenance and transport

7. The Cabinet Secretary acknowledged that, notwithstanding the relative protection for health spending, the budgets for 2011-12 were tight and so there would be a need to channel as much of the budget as possible to front-line services. She added, however, that the distinction between front-line services and other services was often not clear – for example, much of what might be termed administration costs for the purposes of the figures quoted in the question could relate to assistance to clinicians in order to improve patients’ experience of treatment. She nonetheless expressed the Scottish Government’s commitment to minimising the expenditure on administration, giving the example of a higher rate of reduction in the proportion of staff costs for administrative posts than other categories. She also restated her aim of a 25 per cent reduction in the number of senior managers within NHS Scotland over the lifetime of the next session of the Parliament (2011-2015). In addition, she spoke of the continuing emphasis on meeting and exceeding targets for efficiency savings as something that would support the aim to reduce administration costs.

Transfers from NHS boards to local authorities

8. The findings of the Committee’s report on the draft budget 2010-11 relating to problems tracking resource transfers from NHS boards to local authorities in previous years were raised with the Cabinet Secretary. In this context, details of a £48m increase over the period 2007 to 2010 in the levels of resource transfers from health boards to local authorities were sought. The Cabinet Secretary’s letter of 9 December 2010 gave a breakdown of that figure by NHS board.

9. The Cabinet Secretary explained that part of the increase was to local authorities for free personal care for the elderly (“FPC”). She also stated that one of the features of the draft budget was a £70m change fund set aside in the health budget and intended to be a bridge towards integrated local authority and NHS funding for elderly social care in particular. She acknowledged the importance of being able to track the totality of this spending and said that the Scottish Government was striving towards clarity and transparency of spending on care, regardless of what source it came from.

10. The Cabinet Secretary undertook to provide the Committee with a full written briefing on the integrated resource network pilots undertaken by NHS boards, which, she said, were progressing well. This briefing was included in the Cabinet Secretary’s letter of 9 December 2010.

11. The Cabinet Secretary was also keen to clarify that the increase in FPC funding to local authorities was not part of the £70m change fund. She explained that the increase in FPC funding had been negotiated with local authorities separately. The purpose of the change fund, however, was to act as a catalyst to increase the pace of the redesign of community services. Finance from the change fund would be spent in line with local authority plans on improving community services, with the longer term aim of allowing disinvestment in some acute services, for example by reducing unnecessary hospital admissions. There would also be very clear governance of these arrangements.

12. The Cabinet Secretary was asked about increased shared services and collaboration in relation to the change fund and, in particular, the role that the third sector might play in service delivery. The Cabinet Secretary confirmed her intention to include the third sector and addressed this matter in her letter of 9 December 2010.

Telehealth and e-health

13. The budget for telehealth and e-health was raised with the Cabinet Secretary. It had been allocated £134m for 2010-11 but the actual spend had come out £34m lower at £100m and the allocation for 2011-12 was a further £10m lower at £90m. The Cabinet Secretary was asked what the reasons were for the underspend in 2010-11 and the reduced allocation for 2011-12. She was also asked how the Committee could track telehealth spending now that the Scottish Centre for Telehealth (“SCT”) had been integrated with NHS24.

14. In response, the Cabinet Secretary explained that it had been possible to achieve efficiencies by building on existing systems rather than creating new systems and that the Scottish Government expected to be able to continue to achieve these efficiencies in relation to its e-health objectives in the next year. She also indicated that a forthcoming ‘successor strategy’ to the e-health strategy 2008-2011 would set out the Scottish Government priorities in this area: primarily, development of the NHS clinical portal, better use of e-health for long-term conditions management, as well as looking at patient e-health, i.e. giving patients more access to their own health records. She said that the budget as set would enable the Government to progress those priorities. Finally, she added that the lower actual spend and reduced allocation were not about “reducing [the Government’s] … ambition” but about achieving the Government’s aims for less cost than had been anticipated.

NHS board allocations

Per capita spending in island NHS board areas

15. An apparent difference per capita in the budgets for NHS boards serving the western and northern isles was raised: when compared with NHS Western Isles, the budgets per capita of NHS Shetland and NHS Orkney were lower by approximately £617 and £633 respectively. The Cabinet Secretary responded that the NHS board budgets for 2010-11 were indicative and would change as final funding allocations were calculated. This would be done in accordance with the NHS resource funding formula designed to progress NHS board allocations towards parity and due to be updated later this financial year.

16. Asked whether it would be possible in the future to apply the NHS resource funding formula at an earlier stage in order to show actual rather than indicative allocations in the draft budget, the Cabinet Secretary agreed to look into whether this would be possible. She added, however, that the adjustment did not entail simply applying the NHS resource funding formula but also involved judgements to be made by the Cabinet Secretary with regard to the move to funding parity not occurring at a rate that would destabilise NHS boards for whom the move to parity involved a reduction in funding. She explained that these judgements had to be made once a final budget had been agreed, hence the practice of giving unadjusted, indicative figures in the draft budget.

17. It was added that there had also been a technical adjustment, relating to an HM Treasury change to the way in which capital charges were calculated, adding up to a total of £125m reduction across all NHS boards.

Comparability of NHS board budget information

18. The Cabinet Secretary was asked whether it would be possible to produce the budget information relating to NHS board spending – amounting to some £8.6 billion – in such a way as to better facilitate scrutiny of the figures, particularly with regard to comparing boards with each other in addition to comparing an individual board’s spending with previous years’ figures for that board.

19. The Cabinet Secretary stated that she was keen to make the information available to the Committee in a way that better facilitated scrutiny. She added that, in her view, how boards spent their allocations was subject to very close scrutiny both by the Government and by parliamentarians in relation to performance against targets.

New financial burdens

20. RCN Scotland’s submission argued that, owing to new financial burdens on NHS boards, such as funding the reduction in prescription charges, the increase in revenue allocations for 2011-12 would be closer to 1.8 per cent than 3.2 per cent. This view was put to the Cabinet Secretary.

21. The Cabinet Secretary confirmed the position on prescription charges and stated that this decision had been broadly welcomed by NHS boards as they would be able to keep and reinvest any savings that they achieved on prescription spending. She added that RCN Scotland had also deducted the £70m change fund to arrive at its figures but that this would ultimately be to NHS boards’ benefit as its purpose was to free up finance that they could then invest.

22. The Cabinet Secretary went on to state that, whilst the financial situation for health was challenging, it was much less so than it would have been if the Scottish Government had not decided to protect health spending. She explained that, as a result, Scottish Government expenditure on health as a proportion of the total budget would increase from 32.4 per cent to 33.9 per cent.

23. Turning to the challenges that would nonetheless arise, such as the increase in VAT, the change in national insurance thresholds and inflation in pay and supplies (especially in respect of drugs), the Cabinet Secretary stated that these had been allowed for in the increase in allocations to NHS boards. Additionally, she explained, the 3 per cent efficiency saving target set by the Scottish Government would deliver £220m, which would be available to NHS boards to reinvest in service development and redesign. While the Cabinet Secretary acknowledged that the coming financial year would not be "anything other than challenging" for NHS boards, she emphasised that the draft budget represented a “good settlement” for health.

24. It was put to the Cabinet Secretary that there was an element of dependency on measures being successful to the extent that, if the change fund and other measures did not deliver the expected returns, the simple outcome for NHS boards would indeed be an increase of 1.8 per cent rather than 3.2 per cent. The Cabinet Secretary responded that, even if that happened, a 1.8 per cent increase was not a “cut” – it was an increase and would amount to a sum in excess of £100m. She argued that, in the context of the overall Scottish budget being cut, an increase had to be seen positively.

Efficiency savings

Incentivising efficiency savings

25. The Cabinet Secretary was asked whether there was any additional scope to take into account NHS boards’ willingness to make promptly optimal efficiency savings, rather than holding onto them to count towards future years’ targets. In response, the Cabinet Secretary made the point that, whilst important, the NHS resource funding formula adjustment was “at the margins” of NHS board budgets. She explained that, whilst allocations to NHS boards were not determined by reference to the efficiency savings achieved, the Scottish Government did “performance manage” boards in relation to efficiencies. She added that there was an incentive for boards to make efficiency savings as the funds that became available as a result of those efficiencies would be retained by boards for reinvestment.

Sustaining the scope for efficiencies

26. The Cabinet Secretary was asked whether it was possible to make an assessment of an individual board’s scope for efficiency savings, with a view to setting tailored targets rather than an across-the-board target which, whilst possibly stretching for some boards, might be too easy for other boards to meet. The Cabinet Secretary conceded that there had been “relatively easy pickings” for boards in the first years of the efficient government programme as there had been much more of a focus on efficiency than there had been previously. She argued, however, that if a board had exceeded its target in one year, it did not follow that it would find it easy to do so in the following year; indeed, it might well become very much harder. She also made the point that not all boards were the same: for whatever reason, they might start from different positions and factors such as population profile might result in very different types of efficiencies being possible in different board areas. She went on to say that, in the future, efficiency savings would have to come from “much more fundamental” service redesign and reform. By way of example, she stated that £16m could be saved if emergency admissions were cut by 10 per cent; £70m could be saved if inappropriate referrals to outpatient clinics were reduced by 10 per cent; £7m could be saved if the average length of hospital stay were reduced to the mean performance level and, if all boards achieved the upper quartile performance of average length of hospital stay, £70m would be saved. For the Cabinet Secretary, these demonstrated the “fundamental relationship between efficiency and quality”.

Reductions in senior management

27. In response to a further question, the Cabinet Secretary confirmed that the target to reduce NHS senior management would be tracked separately from efficiency savings.

Role of the independent sector

28. In relation to the Cabinet Secretary’s assertion that £16m could be saved by reducing emergency admissions by 10 per cent, a question was asked about a recent claim by Scottish Care that it had 5,000 empty beds, some of which could be used for rehabilitation for people suffering from falls etc, at a fifth of the cost of the acute sector. In response, the Cabinet Secretary said that, for these savings to be made, a partnership had to work. This partnership, she said, was principally between the NHS and local authorities but also between local authorities and the independent care home sector, represented by Scottish Care, which had to work together closely to ensure that the best community care was provided. She explained that she expected these discussions to be taking place locally.

Protecting front-line services

29. With reference to a submission by Dr Andrew Walker, the Cabinet Secretary was asked about the view that the term ‘front-line services’ risked implying that anything that did not directly involve front-line care had less value. It was put to her that public health, training, research, evaluation and collecting data to monitor the performance of the NHS were all vital to the delivery of services both now and in the future yet would not be classed as ‘front-line services’. A specific example was given: the Scottish Medicines Consortium (“the SMC”), providing evidence-based advice to the NHS to ensure demonstrably good value of decisions about millions of pounds of spending on drugs and medicines by the NHS.

30. The Cabinet Secretary acknowledged the difficulty of defining ‘front-line services’ and made the point that almost any activity in the NHS contributed in one way or another to front-line services. She stated a preference for the term “point-of-care services” and cautioned that targets for efficiency savings applied to all services. She returned to the link between efficiency and quality – for example, shorter hospital stays were both more efficient and better quality.

Decision-making processes

31. Also with reference to the submission by Dr Andrew Walker, the Cabinet Secretary was asked whether decisions about how to address cost pressures on the NHS could be made using a process similar to the SMC’s methodology for new medicines. The Cabinet Secretary acknowledged that the SMC was a “huge success story” and accepted that the Scottish Government should be open to ways of improving the evidence base for other decisions that NHS boards have to take. She stated that she was willing to consider the suggestion of adopting a process similar to the SMC’s for other decisions in the NHS.

Link between the Scottish health budget and UK consequentials

32. The Cabinet Secretary was asked to confirm that the UK consequentials for the Scottish health budget were a real-terms decrease in capital of £113.5m, a real-terms decrease in revenue of £190m and a decrease to territorial and special NHS boards of £95m.

33. The Cabinet Secretary responded that this was not the case. She stated that the revenue budget saw a real-terms increase of £280m and that this represented the “totality of consequentials” flowing from UK Government budget decisions and therefore “completely fulfilled” the Scottish Government’s commitment to pass on UK consequentials in terms of the health budget.

34. The Cabinet Secretary conceded that the capital budget had been reduced, pointing out that this reduction was proportionately less than the overall Scottish Government reduction in capital budget of approximately 25 per cent. She added that this again flowed from UK Government decisions following the comprehensive spending review.

35. The Cabinet Secretary went on to argue that, taking into account the fact that the 2010-11 health budget had been artificially inflated by a one-off set-aside for pandemic flu, which was not used and was not available for any other purpose, the total health budget had been maintained in real terms. She also stated that the average unadjusted increase for territorial NHS boards was a real-terms increase of 3.2 per cent.

36. Asked for a breakdown of the UK consequentials for health, the Cabinet Secretary explained that no such breakdown existed: the Scottish Government was provided with a global figure. She stated that, as a matter of course, the Scottish Government had regard to health spending decisions by the UK Government but that, ultimately, the Scottish Government made spending decisions based on its own circumstances. She gave as an example the fact that the UK Government’s decision to allocate a “vast” amount of money to remodel completely the administration of the NHS in England would be reflected in the consequentials for the Scottish budget; she stated however that there were no similar plans for the Scottish NHS and there was, therefore, no equivalent spending decision.

pay in the health sector

Pay policy

37. With reference to a submission by Professor David Bell, it was put to the Cabinet Secretary that the gap between the average annual hospital sector salary and the average annual Scottish salary had increased from £4,343 more in the hospital sector in 2004 to £7,223 more in 2009.

38. The Cabinet Secretary responded that she could not speak to the figures put forward by Professor Bell, as she did not recognise where they were drawn from. She did point out, however, that major salary reform had taken place in the NHS between 2004 and 2009, such as new consultant contracts and the Agenda for Change, and suggested that these may have had a bearing on pay issues. She added that the hospital sector encompassed a very wide range of occupations and cautioned against using average salaries as a simple measure.

39. Asked more generally about the Scottish Government’s pay policy and the higher earners within the NHS, the Cabinet Secretary explained the Scottish Government’s expectation that the pay policy for its own employees would serve as the framework for other public sector pay settlements, such as in the NHS. She went on to state that the Government’s pay policy constituted (a) a pay freeze for all staff earning over £21,000; (b) a “living wage” of £7.15 per hour, which, she added, most NHS staff already earned; (c) a minimum increase of £250 for staff earning less than £21,000 and (d) maintaining the policy of no compulsory redundancies.

Distinction awards

40. Turning to distinction awards, the Cabinet Secretary stressed it was a merit-based, rather than bonus-based, system. She explained that distinction awards currently applied to about 3 per cent of NHS staff. She reminded the Committee of her decision to freeze the distinction award budget for 2010-11 and explained that awards freed up by retiring consultants had been available for new distinction awards. She went on to reveal that, for 2011-12, she had decided to go further and institute a freeze both on new distinction awards being given and on any increase in the value of current awards.

41. She acknowledged that there was a view in favour of the total abolition of the distinction award system but emphasised the need for the NHS in Scotland to be competitive with the other countries of the UK in relation to attracting and retaining the levels of senior consultants needed. As such, she stated that the Scottish Government was arguing for a comprehensive UK-wide reform of the distinction awards system. She stated that the Scottish Government had also frozen the discretionary points systems, operated at NHS board level.

42. Asked how the Scottish Government’s preference for the distinction awards scheme to be opened up to all NHS employees took into account whether it was in the Doctors’ and Dentists’ Review Body’s scope to do so, the Cabinet Secretary explained that the Scottish Government favoured replacing the current scheme with a different scheme open to all staff, rather than extending the current scheme. She stated that, without wishing to pre-empt the outcome of review, it would not necessarily be the case that any new system would be administered with the same arrangements as the current system. She added that any new reward scheme would need to be more cost effective than the distinction awards scheme, especially in the current financial climate.

43. The further issue of distinction awards applying for the duration of the recipient’s pension, paid long after the work leading to the award had been done, was raised. In general terms, the Cabinet Secretary agreed that the distinction awards scheme, or a new scheme, should be based on one-off lump sum payments for especially good service, rather than a recurring pensionable sum.

inequalities and public health

44. The Cabinet Secretary was asked which HEAT targets related to inequalities, how the NHS had been performing against these targets and what the impact of this draft budget on future performance was expected to be.

45. The Cabinet Secretary stated that the Scottish Government budget was equality impact-assessed for differential impact on different groups. She went on to state her view that the definition of inequality lay in quality outcomes for people, such as their health and their healthy life expectancy as well as overall life expectancy. She explained that the health improvement targets were the HEAT targets focussing on equality and supplied more information in her letter of 9 December.

46. In response to a further question, the Cabinet Secretary stated that NHS boards had lead responsibility in respect of public health and pointed out that the health improvement targets also addressed this, often linked directly to areas of deprivation. She added that NHS boards also worked closely with other key stakeholders such as local authorities, in fulfilling this duty. She gave the example of the post of Director of Public Health for NHS Greater Glasgow and Clyde, now a joint appointment between the board and Glasgow City Council in order to ensure delivery of this collective responsibility.

47. The Cabinet Secretary went on to state that the NHS in Scotland now saw its role as being as much about proactively improving the general health of the population as it was to treat illness. As a result, she said, public health improvement was “as front line” as it got.

Determining priorities

48. The Cabinet Secretary was referred to Dr Andrew Walker’s commentary on priorities and, in particular, the point that there were at least 24 of these priorities that were not easily linked to the budget—

“…with a minimum of 24 priorities, the danger for the NHS in Scotland is that when everything is a priority then nothing is a priority.”

49. The Cabinet Secretary was asked to commit to future budget documents making clear (a) the priorities for the NHS, (b) which agency took the lead responsibility, (c) where the budget for implementation was held and (d) what specific measurable and time-limited measures of progress would be used so that the Scottish Government could be held accountable.

50. The Cabinet Secretary agreed that it would be desirable for this information to be available to the Committee, whether in the draft budget itself or in another form. She added that it would not be as simple, however, as linking each budget line to a HEAT target, as several different budget lines could feed into the delivery of a single target. The Cabinet Secretary’s letter of 9 December 2010 stated—

“There is not a 1-to-1 relationship between the HEAT targets and budget lines.

The NHS and Special Health Board budget line supports delivery of all HEAT targets and accordingly we have not separately identified any component of this budget line for any specific target.

The Improvement and Support of the NHS budget line supports the delivery of HEAT targets and other priorities through a combination of improvement programmes and more tailored performance support for NHS Boards. During 2011/12, the team will deploy its resources in support of cancer and elective waiting times, access to mental health services, the NHS Efficiency & Productivity Programme and performance support to NHS boards where the need for additional support is identified or requested.”

51. The response went on to set out HEAT targets and the relevant budget lines side-by-side.

Workforce planning

52. The Cabinet Secretary was asked whether she had reflected on and arrived at a decision on the numbers of places for student nurses and midwives as well as for doctors in foundation training programmes.

53. In response, she confirmed that she would reach a decision soon, taking into account complex judgements on workforce supply and demand and the need to ensure a sufficient supply of both to meet the needs for NHS Scotland in three to five years’ time, while also ensuring there was no oversupply. She also explained that a decision was soon to be made in relation to student doctor intake numbers, with similar considerations in play, as well as work being undertaken to modernise the medical workforce. She argued that, in time, this would see a larger trained doctor workforce while doctors in training would focus on their training and not spend as much time delivering patient care.

54. A concern that there would be a reduction of 183 places in the number of student doctor places was raised with the Cabinet Secretary. She pointed out that any figures underlying such concerns were not based on decisions taken and made the assurance that steps would be taken to ensure that there would be places for all student doctors currently in training.

Capital projects

55. Asked how the Scottish Government would manage the pipeline of capital projects, given the reductions in the budget, the Cabinet Secretary acknowledged that the capital budget was undeniably reduced. Certain projects, she said, would be funded as a matter of necessity, either for essential maintenance or through being legally committed to proceed. One further project that would definitely be funded was the new Southern General Hospital in Glasgow.

56. The Cabinet Secretary went on to explain that, in coming years, revenue support would be available for projects funded on a non-profit distribution model of capital funding. This, she explained, was already to be the basis on which the Scottish Government and NHS Lothian were proceeding for the delivery of a new Sick Kids hospital in Edinburgh.

Conclusion

57. Owing to the timescales involved, the draft budget scrutiny process is wholly unsatisfactory in any year. This has been exacerbated in this year because of the Comprehensive Spending Review delaying the budget and the weather conditions that derailed the Committee’s planned programme of scrutiny. As the timetable for reporting on the budget is unacceptably short and allows no opportunity for cancelled sessions to be rescheduled, the Committee has been left with no choice but to report on the scant evidence that it has. That the Committee’s scrutiny was so easily thrown off course shows how little room for manoeuvre there is in the process.

58. For example, the planned evidence session with a panel of independent budget experts was unable to take place. Furthermore, half of the Committee’s members were prevented from attending and were therefore unable to put the questions that they had prepared for witnesses and the Cabinet Secretary. As a result, the Committee’s examination of the draft budget has this year been perfunctory: written submissions from the witnesses were taken into account but could not be tested nor expanded upon during cross-examination. The Committee believes that it has not, therefore, been able to do justice to due scrutiny of a budget of such significance. The Committee finds this to be out of keeping with the normal standards of scrutiny upheld by this parliamentary committee in relation to all of its other work.

59. In the context of the two preceding paragraphs, the Committee makes the following observations. These should not be read as conclusions—

  • Reducing administration costs, paragraph 6: the Committee still has not been given a clear account of the rise in administrative costs;
  • Transfers from NHS boards to local authorities, paragraphs 8 to 12: the Committee has received no information about whether such transfers were used for the appropriate purposes;
  • Telehealth and e-health, paragraphs 13 to 14: the Committee remains concerned about the development of these services and, for example, was unable to scrutinise adequately the telehealth budget within the budget for NHS24. Following its report, the Committee has very strong views that there should be real, meaningful and trackable progress in this area of great potential for improving services to patients.
  • Spending in island NHS board areas, paragraphs 15 to 17: the Committee does not have the information needed to clarify the significant gap in funding between the island NHS boards.

60. The Committee will return to problems around the budget scrutiny process in its legacy paper. The Committee will also write to the Standards, Procedures and Public Appointments Committee to request a radical review of the budget scrutiny process in the next parliamentary session.

Extracts from the minutes of the Health and Sport Committee

36th Meeting, 2010 (Session 3), Wednesday 8 December 2010

Draft Budget Scrutiny 2011-12: The Committee took evidence on the Scottish Government's Draft Budget 2011-12 from—

Nicola Sturgeon MSP, Cabinet Secretary for Health and Wellbeing, Derek Feeley, Acting Director-General Health and Chief Executive NHS Scotland, and John Matheson, Director of Health Finance, Scottish Government.

38th Meeting, 2010 (Session 3), Wednesday 15 December 2010

Draft Budget Scrutiny 2011-12 (in private): The Committee considered a draft report to the Finance Committee on the Scottish Government's Draft Budget 2011-12. Subject to various amendments, the report was agreed to.

Volume 1 Next

Footnotes:

1 Scottish Government, Scotland’s Spending Plans and Draft Budget 2011-12, November 2010

2 Scottish Government, Scotland’s Spending Plans and Draft Budget 2011-12, November 2010, page iv

3 SPICe Financial Scrutiny Unit Briefing number 10/80 Draft Budget 2011-12

4 Economy, Energy and Tourism Committee, Official report 1 December, col 4351

5 The Fraser of Allander Institute economic commentary Vol 34 No 2 November 2010

6 Scottish Government, Scotland’s Spending Plans and Draft Budget 2011-12, November 2010, page iv

7 Scottish Government, Scotland’s Spending Plans and Draft Budget 2011-12, November 2010 page 84

8 Scottish Government, Scotland’s Spending Plans and Draft Budget 2011-12, November 2010 page 94

9 Scottish Government, Scotland’s Spending Plans and Draft Budget 2011-12, November 2010 page 94

10 Scottish Government, Scotland’s Spending Plans and Draft Budget 2011-12, November 2010 page 94

11 Submission by VisitScotland November 2010

12 Scottish Government, Scotland’s Spending Plans and Draft Budget 2011-12, November 2010

13 Economy, Energy and Tourism Committee, Official report 24 November, col 4363

14 Economy, Energy and Tourism Committee, Official report 24 November, col 4348

15 Economy, Energy and Tourism Committee, Official report 24 November, col 4349

16 Economy, Energy and Tourism Committee, Official report 24 November, col 4349

17 Economy, Energy and Tourism Committee, Official report 24 November, col 4356

18 Economy, Energy and Tourism Committee, Official report 24 November, col 4350

19 Economy, Energy and Tourism Committee, Official report 24 November, col 4350

20 Economy, Energy and Tourism Committee, Official report 24 November, col 4361

21 Economy, Energy and Tourism Committee, Official report 24 November, col 4351

22 Economy, Energy and Tourism Committee, Official report 24 November, col 4362

23 Economy, Energy and Tourism Committee, Official report 8 December, cols 4488 and 4490

24 Economy, Energy and Tourism Committee, Official report 24 November, col 4372

26 Economy, Energy and Tourism Committee, Official report 8 December, col 4505

27 The Saltire prize is a £10 million challenge prize for advances in wave and tidal energy announced by the Scottish Government in December 2008.

28 Economy, Energy and Tourism Committee, Official report 8 December, col 4506

30 Economy, Energy and Tourism Committee, Official report 8 December, col 4507

31 Cabinet Secretary for Finance and Sustainable Growth. Letter to the Committee, 13 December 2010

32 Economy, Energy and Tourism Committee, Official report 24 November, col 4349

33 Economy, Energy and Tourism Committee, Official report 24 November, col 4349

34 Economy, Energy and Tourism Committee, Official report 24 November, col 4350

35 Economy, Energy and Tourism Committee, Official report 24 November, col 4370

37 Scottish Parliament Information Centre Financial Scrutiny Unit Briefing, Economic Indicators November 2010

38 Economy, Energy and Tourism Committee, Official report 24 November, col4351

39 Economy, Energy and Tourism Committee, Official report 24 November, col 4352

40 Economy, Energy and Tourism Committee, Official report 24 November, col 4353

41 Economy, Energy and Tourism Committee, Official report 24 November, col 4354

42 Scottish Government, Scotland’s Spending Plans and Draft Budget 2011-12, November 2010

43 Economy, Energy and Tourism Committee, Official report 24 November, col 4390

44 Economy, Energy and Tourism Committee, Official report 24 November, col 4381

45 Economy, Energy and Tourism Committee, Official report 8 December, col

46 Economy, Energy and Tourism Committee, Official report 8 December, col 4490

47 Scottish Government, Scotland’s Spending Plans and Draft Budget 2011-12, November 2010, page 42

48 Scottish Government, Scotland’s Spending Plans and Draft Budget 2011-12, November 2010, page 42

49 Economy, Energy and Tourism Committee, Official report 24 November, col 4353

50 Economy, Energy and Tourism Committee, Official report 24 November, col 4373

51 Economy, Energy and Tourism Committee, Official report 24 November, col 4375

53 Economy, Energy and Tourism Committee, Official report 8 December, col 4507-4508

54 Scottish Government, Scotland’s Spending Plans and Draft Budget 2011-12, November 2010, page 42

55 Transform Scotland, submission to the committee, November 2010

56 Economy, Energy and Tourism Committee, Official report 8 December, col

57 Cabinet Secretary for Finance and Sustainable Growth, Letter to the Committee, 13 December 2010.

58 Economy, Energy and Tourism Committee, Official report 24 November, col 4376-4377

59 Economy, Energy and Tourism Committee, Official report 24 November, col 4382-4383

60 Economy, Energy and Tourism Committee, Official report 24 November, col 4383

61 Economy, Energy and Tourism Committee, Official report 24 November, col 4355

63 Economy, Energy and Tourism Committee, Official report 24 November, col 4379

64 The Scottish Council for Voluntary Organisations, written submission to the Committee, November 2010

65 Economy, Energy and Tourism Committee, Official report 24 November, col 4380

66 Economy, Energy and Tourism Committee, Official report 24 November, col 4378

67 Scottish Government, Scotland’s Spending Plans and Draft Budget 2011-12, November 2010 page iv

68 Economy, Energy and Tourism Committee, Official report 24 November, col 4382

69 Economy, Energy and Tourism Committee, Official report 24 November, col 4389

70 Scottish Government, Scotland’s Spending Plans and Draft Budget 2011-12, November 2010 page vi

71 Economy, Energy and Tourism Committee, Official report 24 November, col 4379-4380

72 Economy, Energy and Tourism Committee, Official report 24 November, col 4380

73 Economy, Energy and Tourism Committee, Official report 24 November, col 4357 and col 4359 and col 4367

74 Scottish Government, Scotland’s Spending Plans and Draft Budget 2011-12, November 2010 page 15

75 Economy, Energy and Tourism Committee, Official report 24 November, col 4362

76 Economy, Energy and Tourism Committee, Official report 24 November, col 4372

77 The Scottish Government’s “Purpose” is defined in the introduction to the Scottish Budget Spending Review 2007, p.iv, as follows, “To focus our resources on creating a more successful country, with opportunities for all of Scotland to flourish, through increasing sustainable economic growth.”

78 Economy, Energy and Tourism Committee, Official report 24 November, col 4362 and col 4367 and col 4387

79 Economy, Energy and Tourism Committee, Official report 24 November, col 4388

80 Economy, Energy and Tourism Committee, Official report 24 November, col 4389

81 Scottish Council for Voluntary Organisations, written submission to the Committee, November 2010

82 Economy, Energy and Tourism Committee, Official report 8 December, col 4490

83 Economy, Energy and Tourism Committee, Official report 8 December, col 4502

84 Scottish Government, Scotland’s Spending Plans and Draft Budget 2011-12, November 2010 page 15

85 Economy, Energy and Tourism Committee, Official report 24 November, col 4365

86 Written submission from CBI Scotland

87 Economy, Energy and Tourism Committee, Official report 24 November, col 4366

88 Economy, Energy and Tourism Committee, Official report 24 November, col 4374

89 The Federation of Small Businesses Submission to the Committee, November 2010

90 The Scottish Retail Consortium, submission to the Committee, December 2010

91 Economy, Energy and Tourism Committee, Official report 8 December, col

92 Scottish Parliament, Official report 9 December, col 31494

93 Scottish Parliament, Official report 8 December, col 31494

94 Economy, Energy and Tourism Committee, Official report 8 December, col 4501

95 Scottish Parliament, Official report 8 December, col 31494

96 Scottish Government, Scotland’s Spending Plans and Draft Budget 2011-12, November 2010

97 Scottish Parliament, Official report 8 December, col 31494

98 Economy, Energy and Tourism Committee, Official report 24 November, col 4384

99 Economy, Energy and Tourism Committee, Official report 24 November, col 4385

100 Economy, Energy and Tourism Committee, Official report 24 November, col 4386

101 Economy, Energy and Tourism Committee, Official report 24 December, col 4387

102 The Federation of Small Businesses (Scotland) Submission to the Committee, November 2010

103 Cabinet Secretary for Finance and Sustainable Growth Letter to the Committee 13 December 2011

104 Economy, Energy and Tourism Committee, Official report 24 November, col 4353

105 Economy, Energy and Tourism Committee, Official report 24 November, col 4355

106 Economy, Energy and Tourism Committee, Official report 24 November, col 4376

107 Economy, Energy and Tourism Committee, Official report 24 November, col 4377

108 Economy, Energy and Tourism Committee, Official report 24 November, col 4379

109 Scottish Government, Scotland’s Spending Plans and Draft Budget 2011-12, November 2010 page 94

110 Scottish Enterprise supplementary written submission to the committee December 2010

111 Economy, Energy and Tourism Committee, Official report 1 December, col 4464

112 Economy, Energy and Tourism Committee, Official report 1 December, col 4464-4465

113 Economy, Energy and Tourism Committee, Official report 24 November, col 4366

115 Scottish Enterprise submission to the committee December 2010

116 Economy, Energy and Tourism Committee, Official report 1 December, col 4432

117 Economy, Energy and Tourism Committee, Official report 8 December, col 4497

118 Economy, Energy and Tourism Committee, Official report 8 December, col 4497

119 Economy, Energy and Tourism Committee, Official report 24 November, col 4369-4370

120 Economy, Energy and Tourism Committee, Official report 24 November, col 4368

121 Economy, Energy and Tourism Committee, Official report 8 December, col 4510

122 Scottish Council for Voluntary Organisations, written submission to the Committee, November 2010

123 Scottish Government, Scotland’s Spending Plans and Draft Budget 2011-12, November 2010 page 99

124 Economy, Energy and Tourism Committee, Official report 8 December, col 4511

125 Transform Scotland, written submission to the committee, November 2010

126 Scottish Parliament Economy, Energy and Tourism Committee, Official Report, 8 December 2010, Col 4517.

127 Economy, Energy and Tourism Committee, Official report 8 December, col

128 Economy, Energy and Tourism Committee, Official report 8 December, col 4493

129 Scottish Government, Scotland’s Spending Plans and Draft Budget 2011-12, November 2010

130 Scottish Government, Scotland’s Spending Plans and Draft Budget 2011-12, November 2010, page 94

131 Economy, Energy and Tourism Committee, Official report 1 December, col 4423

132 Economy, Energy and Tourism Committee, Official report 1 December, col 4422

133 Economy, Energy and Tourism Committee, Official report 1 December, col 4425

134 Economy, Energy and Tourism Committee, Official report 1 December, col 4419-4420

135 Economy, Energy and Tourism Committee, Official report 1 December, col 4436

136 Economy, Energy and Tourism Committee, Official report 1 December, col 4433

137 Economy, Energy and Tourism Committee, Official report 1 December, col 4424

138 Economy, Energy and Tourism Committee, Official report 1 December, col 4427

139 Economy, Energy and Tourism Committee, Official report 1 December, col 4429

140 Economy, Energy and Tourism Committee, Official report 1 December, col 4434

141 Economy, Energy and Tourism Committee, Official report 1 December, col 4431

142 Scottish Enterprise supplementary written evidence the Committee, 8 December 2010

143 Economy, Energy and Tourism Committee, Official report 24 November, col 4393

144 Economy, Energy and Tourism Committee, Official report 24 November, col 4393

145 Economy, Energy and Tourism Committee, Official report 1 December, col 4440

146 Economy, Energy and Tourism Committee, Official report 1 December, col 4444

147 Economy, Energy and Tourism Committee, Official report 1 December, col 4457

148 Economy, Energy and Tourism Committee, Official report 1 December, col 4443

149 Highlands and Islands Enterprise supplementary written evidence to the committee 8 December 2010

150 Economy, Energy and Tourism Committee, Official report 1 December, col 4461

151 Economy, Energy and Tourism Committee, Official report 1 December, col 4464

152 Economy, Energy and Tourism Committee, Official report 1 December, col 4465

153 Economy, Energy and Tourism Committee, Official report 24 November, col 4364

154 Scottish Government, Scotland’s Spending Plans and Draft Budget 2011-12, November 2010, page 33

155 Economy, Energy and Tourism Committee, Official report 24 November, col 4372-4373

156 Economy, Energy and Tourism Committee, Official report 24 November, col 4381

157 Economy, Energy and Tourism Committee, Official report 1 December, col 4466

158 Economy, Energy and Tourism Committee, Official report 1 December, col 4466

159 VisitScotland, written submission to the committee, November 2010

160 Economy, Energy and Tourism Committee, Official report 24 November, col 4392

161 Economy, Energy and Tourism Committee, Official report 1 December, col 4471

162 Economy, Energy and Tourism Committee, Official report 28 April, col 3600

163 Economy, Energy and Tourism Committee, Official report 1 December, col 4471 - 4472

164 Economy, Energy and Tourism Committee, Official report 1 December, col 4469

165 Economy, Energy and Tourism Committee, Official report 1 December, col 4473

166 Economy, Energy and Tourism Committee, Official report 1 December, col 4469

167 Economy, Energy and Tourism Committee, Official report 1 December, cols 4470 and 4475

168 Economy, Energy and Tourism Committee, Official report 1 December, col 4475

169 Economy, Energy and Tourism Committee, Official report 1 December, cols 4474 and 4477

170 Economy, Energy and Tourism Committee, Official report 1 December, col 4478

171 Economy, Energy and Tourism Committee, Official report 1 December, col 4426

172 Economy, Energy and Tourism Committee, Official report 8 December, col 4498

173 CBI Scotland written submission to the committee, November 2010

174 Economy, Energy and Tourism Committee, Official report 24 November, col 4387

175 Economy, Energy and Tourism Committee, Official report 24 November, col 4365

176 Scottish Government, Scotland’s Spending Plans and Draft Budget 2011-12, November 2010, page 87

177 Volunteer Development Scotland, written submission to the committee, November 2010

178 Scottish Council for Voluntary Organisations, written submission to the Committee, November 2010

179 Scottish Council for Voluntary Organisations, written submission to the Committee, November 2010

180 Scottish Parliament Education, Lifelong Learning and Culture Committee. Local authority funding of education and children’s services. Available at: http://www.scottish.parliament.uk/s3/committees/ellc/inquiries/LocalAuthFunding/LocalAuthFunding.htm

181 Scottish Parliament Financial Scrutiny Unit. Draft Budget 2011-12 level 4 figures. Available at:
http://www.scottish.parliament.uk/business/financialscrutiny/documents/DraftBudget2011-12Level4.xls

182 Scottish Parliament Education, Lifelong Learning and Culture Committee, Official Report, 1 December 2010, Col 4398

183 Scottish Parliament Education, Lifelong Learning and Culture Committee. Official Report,1 December 2010, Col 4379.

184 Scottish Parliament Education, Lifelong Learning and Culture Committee. Official Report,1 December 2010, Cols 4380-1.

185 Scottish Parliament Education, Lifelong Learning and Culture Committee. Official Report,1 December 2010, Col 4470.

186 Scottish Parliament Education, Lifelong Learning and Culture Committee. Official Report,1 December 2010, Col 4384.

187 Scottish Parliament Education, Lifelong Learning and Culture Committee. Official Report,1 December 2010, Col 4384

188 Scottish Parliament Education, Lifelong Learning and Culture Committee. Official Report,1 December 2010, Col 4385

189 Bòrd na Gàidhlig, written submission to the Education, Lifelong Learning and Culture Committee

190 Scottish Parliament Education, Lifelong Learning and Culture Committee. Official Report,1 December 2010, Col 4387

191 Scottish Parliament Education, Lifelong Learning and Culture Committee. Official Report,1 December 2010, Col 4388

192 Scottish Parliament Education, Lifelong Learning and Culture Committee. Official Report,1 December 2010, Col 4389

193 Scottish Parliament Education, Lifelong Learning and Culture Committee. Official Report,1 December 2010, Col 4391

194 Scottish Parliament Education, Lifelong Learning and Culture Committee. Official Report,1 December 2010, Col 4403

195 Scottish Parliament Education, Lifelong Learning and Culture Committee. Official Report,1 December 2010, Col 4404

196 Scottish Parliament Education, Lifelong Learning and Culture Committee. Official Report,1 December 2010, Col 4404

197 Scottish Parliament Education, Lifelong Learning and Culture Committee. Official Report,1 December 2010, Col 4405

198 Scottish Parliament Education, Lifelong Learning and Culture Committee. Official Report,1 December 2010, Col 4406

199 Scottish Parliament Education, Lifelong Learning and Culture Committee. Official Report,1 December 2010, Col 4409

200 Scottish Parliament Education, Lifelong Learning and Culture Committee. Official Report,1 December 2010, Col 4407

201 Scottish Parliament Education, Lifelong Learning and Culture Committee. Official Report,1 December 2010, Col 4407-8

202 Scottish Parliament Education, Lifelong Learning and Culture Committee. Official Report,1 December 2010, Col 4408

203 Scottish Parliament Education, Lifelong Learning and Culture Committee. Official Report,1 December 2010, Col 4409

204 Scottish Parliament Education, Lifelong Learning and Culture Committee. Official Report,1 December 2010, Col 4410

205 Scottish Parliament Education, Lifelong Learning and Culture Committee. Official Report,1 December 2010, Col 4413

206 Scottish Parliament Education, Lifelong Learning and Culture Committee. Official Report,1 December 2010, Col 4413-4

207 Scottish Parliament Education, Lifelong Learning and Culture Committee. Official Report,1 December 2010, Col 4416

208 Scottish Parliament Education, Lifelong Learning and Culture Committee. Official Report,1 December 2010, Col 4412

209 Scottish Parliament Education, Lifelong Learning and Culture Committee. Official Report,1 December 2010, Col 4417

210 Scottish Parliament Education, Lifelong Learning and Culture Committee. Official Report,1 December 2010, Col 4421

211 Scottish Parliament Education, Lifelong Learning and Culture Committee. Official Report,1 December 2010, Col 4418

212 These two were originally PPP projects which have been re-modelled as hybrid projects. They have been in development for a number of years.

213 Scottish Parliament Education, Lifelong Learning and Culture Committee. Official Report,1 December 2010, Col 4420

214 Scottish Parliament Education, Lifelong Learning and Culture Committee. Official Report,1 December 2010, Col 4420

215 Scottish Parliament Equal Opportunities Committee. 4th Report, 2010 (Session 3). Report on the Budget Strategy Phase (SPP 455).

216 Scottish Parliament Equal Opportunities Committee. Official Report, 26 October 2010.

217 Independent Budget Review Panel. (2010) Independent Budget Review: the report of Scotland’s Independent Budget Review Panel. Available at: http://www.scotland.gov.uk/About/IndependentBudgetReview/Resources/final-report/Accessed 22 December 2010

218 Independent Budget Review Panel. Letter from Crawford W. Beveridge CBE to the Equal Opportunities Committee dated 12 October 2010.

219 Scottish Parliament Equal Opportunities Committee. Official Report, 26 October 2010. Col 2130.

220 The Fawcett Society. Letter from Ceri Goddard to the Equal Opportunities Committee dated 21 October 2010.

221 Equality and Human Rights Commission. (2010) Independent assessment. Available at: http://www.equalityhumanrights.com/news/2010/november/commission-to-assess-the-spending-reviews-compliance-with-equality-law/Accessed 17 December 2010

222 Scottish Parliament Information Centre. (2010) UK Comprehensive Spending Review: Impact on Scottish Budget. SPICe Briefing 10/67. Available at: http://www.scottish.parliament.uk/business/research/briefings-10/SB10-67.pdfAccessed 17 December 2010

223 Scottish Government. (2010) Scotland’s Spending Plans and Draft Budget 2011-12. Available at: http://www.scotland.gov.uk/Publications/2010/11/17091127/0Accessed 17 December 2010

224Scottish Parliament Equal Opportunities Committee. (2009) Report to the Finance Committee on the Scottish Government’s Draft Budget 2010-11. Available at: http://www.scottish.parliament.uk/s3/committees/finance/reports-09/fir09-07-vol2-03.htm#annf Accessed 17 December 2010

225 The Scottish Government. Letter from John Swinney MSP, Cabinet Secretary for Finance and Sustainable Growth to the Finance Committee dated 6 August 2010.

226 Economic and Social Data Service. (2010) SN 6587 - Annual Population Survey April 2009 - March 2010. Available at: http://www.esds.ac.uk/findingData/snDescription.asp?sn=6587Accessed 17 December 2010

227 Data derived from the following sources: Audit Scotland. (2009) Scotland’s Public Finances: Preparing for the future. Available at: http://www.audit-scotland.gov.uk/docs/central/2009/nr_091105_scottish_public_finances.pdf Accessed 22 December 2010

Independent Budget Review Panel. (2010) Independent Budget Review: the report of Scotland’s Independent Budget Review Panel. Available at: http://www.scotland.gov.uk/About/IndependentBudgetReview/Resources/final-report/Accessed 22 December 2010

Office for National Statistics (David Matthews). (2010) Article in the Economic and Labour Market Review: The changing face of public sector employment 1999-2009. Available at: http://www.statistics.gov.uk/elmr/07_10/downloads/ELMR_Jul10_Matthews.pdf Accessed 17 December 2010

228 Scottish Government. (2010) Coping with Change and Uncertainty: Scotland’s Equalities Groups and the Recession. Available at: http://www.scotland.gov.uk/Publications/2010/11/15095850/4 Accessed 17 December 2010

229 In particular, the Committee has drawn from the relevant statistical evidence and existing literature that indicate the vulnerability of specific groups within Scottish society.

230 The Fawcett Society. Letter from Ceri Goddard to the Equal Opportunities Committee dated 21 October 2010.

231 Scottish Government. (2010) Equality Statement Scotland’s Budget 2011-12. Available at: http://www.scotland.gov.uk/Publications/2010/11/17115419/0 Accessed 17 December 2011

232 Scottish Government. (2010) Scotland’s Spending Plans and Draft Budget 2011-12. Available at:http://www.scotland.gov.uk/Publications/2010/11/17091127/0 Accessed 17 December 2010

233 Scottish Government. (2010) Equality Statement Scotland’s Budget 2011-12. Available at: http://www.scotland.gov.uk/Publications/2010/11/17115419/0 Accessed 17 December 2011

234 Scottish Parliament Equal Opportunities Committee. Official Report, 30 November 2010. Col 2227.

235 Scottish Parliament Equal Opportunities Committee. Official Report, 30 November 2010. Col 2227.

236 STUC. Written submission to the Equal Opportunities Committee.

237 Scottish Parliament Equal Opportunities Committee. Official Report, 30 November 2010. Col. 2212.

238 Scottish Parliament Equal Opportunities Committee. Official Report, 30 November 2010. Col 2225.

239 Scottish Parliament Equal Opportunities Committee. Official Report, 30 November 2010. Col 2212.

240 Scottish Parliament Equal Opportunities Committee. Official Report, 30 November 2010. Col 2215.

241 Scottish Parliament Equal Opportunities Committee. Official Report, 30 November 2010. Col 2214.

242 Scottish Parliament Equal Opportunities Committee. Official Report, 30 November 2010. Col 2215.

243 Chris Oswald, Equalities and Human Rights Commission. Written submission to the Equal Opportunities Committee.

244 Scottish Parliament Equal Opportunities Committee. Official Report, 30 November 2010. Col 2233.

245 Scottish Parliament Equal Opportunities Committee. Official Report, 7 December 2010. Col 2258.

246 Scottish Parliament Equal Opportunities Committee. Official Report, 7 December 2010. Col 2265.

247 Scottish Parliament Equal Opportunities Committee. Official Report, 7 December 2010. Col 2252.

248 Scottish Parliament Equal Opportunities Committee. Official Report, 7 December 2010. Col 2265.

249 Scottish Parliament Equal Opportunities Committee. Official Report, 30 November 2010. Col 2235.

250 Scottish Parliament Equal Opportunities Committee. Official Report, 30 November 2010. Col 2217

251 Scottish Parliament Equal Opportunities Committee. Official Report, 30 November 2010. Col 2231.

252 Scottish Parliament Equal Opportunities Committee. Official Report, 30 November 2010. Col 2221.

253 Scottish Parliament Equal Opportunities Committee. Official Report, 30 November 2010. Col 2217.

254 Scottish Parliament Equal Opportunities Committee. Official Report, 30 November 2010. Col 2219.

255 Scottish Parliament Equal Opportunities Committee. Official Report, 30 November 2010. Col 2223.

256 Scottish Parliament Equal Opportunities Committee. Official Report, 30 November 2010. Col 2240.

257 Scottish Parliament Equal Opportunities Committee. Official Report, 30 November 2010. Col 2240.

258 Scottish Parliament Equal Opportunities Committee. Official Report, 30 November 2010. Col 2223.

259 Scottish Parliament Equal Opportunities Committee. Official Report, 26 October 2009. Col 1307.

260 Scottish Government. (2010) Scotland’s Spending Plans and Draft Budget 2011-12. Available at: http://www.scotland.gov.uk/Publications/2010/11/17091127/0 Accessed 17 December 2010

261 Scottish Parliament Equal Opportunities Committee. Official Report, 30 November 2010. Col 2232.

262 Scottish Parliament Equal Opportunities Committee. Official Report, 30 November 2010. Col 2214.

263 Scottish Parliament Equal Opportunities Committee. Official Report, 7 December 2010. Col 2263.

264 Scottish Parliament Equal Opportunities Committee. Official Report, 7 December 2010. Col 2263.

265 Scottish Government. (2010) News Release on the establishment of the Christie Commission. Available at: http://www.scotland.gov.uk/News/Releases/2010/11/19124547Accessed on 17 December 2010

266 Scottish Parliament Equal Opportunities Committee. Official Report, 7 December 2010. Col 2263.

267 Scottish Government. (2010) Scotland’s Spending Plans and Draft Budget 2011-12. Available at:http://www.scotland.gov.uk/Publications/2010/11/17091127/0 Accessed 17 December 2010

268Scottish Government. (2010) Equality Statement Scotland’s Budget 2011-12. Available at: http://www.scotland.gov.uk/Publications/2010/11/17115419/0 Accessed 17 December 2010

269 Scottish Parliament Equal Opportunities Committee. Official Report, 30 November 2010. Col 2230.

270 Scottish Parliament Equal Opportunities Committee. Official Report, 30 November 2010. Col 2230.

271 Scottish Parliament Equal Opportunities Committee. Official Report, 30 November 2010. Col 2230.

272 Scottish Parliament Equal Opportunities Committee. Official Report, 30 November 2010. Col 2229.

273 Scottish Parliament Equal Opportunities Committee. Official Report, 30 November 2010. Col 2234.

274 Scottish Parliament Equal Opportunities Committee. Official Report, 30 November 2010. Col 2234.

275 Scottish Parliament Equal Opportunities Committee. Official Report, 7 December 2010. Col 2271.

276Scottish Government. (2010) Scotland’s Spending Plans and Draft Budget 2011-12. Available at:http://www.scotland.gov.uk/Publications/2010/11/17091127/0 Accessed 17 December 2010

277 Scottish Parliament Equal Opportunities Committee. Official Report, 30 November 2010. Col 2228.

278 Scottish Parliament Equal Opportunities Committee. Official Report, 30 November 2010. Col 2227.

279 Scottish Parliament Equal Opportunities Committee. Official Report, 7 December 2010. Col 2260.

280 Women and Work Commission. (2009) Shaping a Fairer Future. Available at: http://www.equalities.gov.uk/pdf/297158_WWC_Report_acc.pdf Accessed 17 December 2010

281 In July 2009, Scottish Ministers decided that violence against women and tackling occupational segregation were priorities in working towards equality of opportunity between women and men. Progress reports can be found at: http://www.scotland.gov.uk/Topics/People/Equality/violence-women/MinisPrioGenEquReport2010Accessed 17 December 2010

282 Scottish Parliament Equal Opportunities Committee. Official Report, 30 November 2010. Col 2239.

283 Scottish Parliament Equal Opportunities Committee. (2009) Report to the Finance Committee on the Scottish Government’s Draft Budget 2010-11. Available at: http://www.scottish.parliament.uk/s3/committees/finance/reports-09/fir09-07-vol2-03.htm#annf Accessed 17 December 2010

284 Scottish Parliament Equal Opportunities Committee. (2008) Report to the Finance Committee on the Scottish Government’s Draft Budget 2009-10. Available at: http://www.scottish.parliament.uk/s3/committees/finance/reports-08/fir08-07-vol2-02.htm#annfAccessed 22 December

285 Scottish Parliament Equal Opportunities Committee. Official Report, 26 October 2010. Col 2144.

286 Scottish Parliament Equal Opportunities Committee. Official Report, 30 November 2010. Col 2237.

287 Scottish Parliament Equal Opportunities Committee. Official Report, 30 November 2010. Col 2236.

288 Scottish Parliament Equal Opportunities Committee. Official Report, 30 November 2010. Col 2262.

289 Scotland’s Spending Plans and Draft Budget 2011-12 (November 2010), Office of the First Minister (Chapter 6), Table 6.03: Europe and External Affairs, page 72. See Scottish Government website: http://www.scotland.gov.uk/Resource/Doc/331661/0107923.pdf

290 Scotland’s Spending Plans and Draft Budget 2011-12, page 73.

291 Real terms estimates are based on a Treasury deflator of 1.9% as used by the Scottish Government in the 2011-12 Draft Budget document. Deflators are revised regularly by the Treasury to help provide accurate estimates of the actual value of spend (Source: Financial Scrutiny Unit, Scottish Parliament Information Centre, Scottish Parliament).

292 Scotland’s Spending Plans and Draft Budget 2011-12, page 73.

293 Scottish Budget: Draft Budget 2010-11 (September 2009), Office of the First Minister, page 17. See Scottish Government website: http://www.scotland.gov.uk/Resource/Doc/284860/0086518.pdf.

294 UK Spending Review 2010 (October 2010), Table 2.15: Department for International Development (DFID), page 52. See HM Treasury website: http://cdn.hm-treasury.gov.uk/sr2010_completereport.pdf. The Spending Review proposed a year-on-year increase in international development spending from £7.8bn in 2010-11.

295 Scottish Parliament European and External Relations Committee. Official Report, 30 November 2010, Col 1783.

296 Scottish Parliament European and External Relations Committee. Official Report, 30 November 2010, Col 1782.

297 Scottish Parliament European and External Relations Committee. Official Report, 30 November 2010, Cols 1789-90.

298 Scottish Parliament European and External Relations Committee. Official Report, 30 November 2010, Col 1790.

299 Scottish Parliament European and External Relations Committee. Official Report, 30 November 2010, Col 1793 (NIDOS).

300 Scottish Parliament European and External Relations Committee. Official Report, 30 November 2010, Col 1785.

301 Scottish Parliament European and External Relations Committee. Official Report, 30 November 2010, Col 1797.

302 Scottish Parliament European and External Relations Committee. Official Report, 30 November 2010, Col 1784.

303 Scottish Parliament European and External Relations Committee. Official Report, 30 November 2010, Cols 1786 and 1796.

304 Scottish Parliament European and External Relations Committee. Official Report, 30 November 2010, Col 1796.

305 Scottish Parliament European and External Relations Committee. Official Report, 30 November 2010, Cols 1796 (NIDOS) and 1797 (SMP).

306 Scottish Parliament European and External Relations Committee. Official Report, 30 November 2010, Col 1795.

307 Scottish Parliament European and External Relations Committee. Official Report, 30 November 2010, Cols 1782 & 1786 (NIDOS), 1783 (Glasgow Centre for International Development) and 1783 (SMP).

308 Scottish Parliament European and External Relations Committee. Official Report, 30 November 2010, Cols 1785 (SMP) and 1786 (NIDOS).

309 Scottish Parliament European and External Relations Committee. Official Report, 7 December 2010, Col 1824.

310 For comparison purposes, the Europe and External Affairs portfolio includes resource budget only and does not include any capital spending. See Scotland’s Spending Plans and Draft Budget 2011-12, Table 6.03, page 72.

311 Scottish Parliament European and External Relations Committee. Official Report, 7 December 2010, Col 1824.

312 Scottish Parliament European and External Relations Committee. Official Report, 7 December 2010, Col 1826.

313 Scottish Parliament European and External Relations Committee. Official Report, 7 December 2010, Col 1826.

314 Scottish Parliament European and External Relations Committee. Official Report, 7 December 2010, Col 1831.

315 Scottish Parliament European and External Relations Committee. Official Report, 7 December 2010, Col 1831.

316 Scottish Parliament European and External Relations Committee. Official Report, 7 December 2010, Col 1832.

317 Scottish Parliament European and External Relations Committee. Official Report, 7 December 2010, Cols 1825-6.

318 Correspondence from Fiona Hyslop MSP, Minister for Culture and External Affairs (see end of the European and External Relations Committee report).

319 Scotland’s Spending Plans and Draft Budget 2011-12, page 73.

320 Scottish Parliament European and External Relations Committee. Official Report, 30 November 2010, Col 1799.

321 Scottish Parliament European and External Relations Committee. Official Report, 30 November 2010, Col 1800.

322 Scottish Parliament European and External Relations Committee. Official Report, 30 November 2010, Col 1799.

323 Scottish Parliament European and External Relations Committee. Official Report, 30 November 2010, Cols 1802-3.

324 Scottish Parliament European and External Relations Committee. Official Report, 30 November 2010, Col 1803.

325 Scottish Parliament European and External Relations Committee. Official Report, 30 November 2010, Col 1807-8.

326 Scottish Parliament European and External Relations Committee. Official Report, 30 November 2010, Col 1809.

327 Scottish Parliament European and External Relations Committee. Official Report, 30 November 2010, Col 1800.

328 Scottish Parliament European and External Relations Committee. Official Report, 30 November 2010, Col 1806.

329 Scottish Parliament European and External Relations Committee. Official Report, 7 December 2010, Col 1834.

330 Scottish Parliament European and External Relations Committee. Official Report, 7 December 2010, Col 1837.

331 Scottish Parliament European and External Relations Committee. Official Report, 7 December 2010, Col 1833.

332 Scottish Parliament European and External Relations Committee. Official Report, 7 December 2010, Col 1833.

333 Scottish Parliament European and External Relations Committee. Official Report, 7 December 2010, Col 1833.

334 Paper from the Scottish Government, considered by the European and External Relations Committee at its meeting on 14 December 2010. Whilst the paper was considered in private, it has been published on the Scottish Parliament’s website: http://www.scottish.parliament.uk/s3/committees/europe/documents/SGPaper_FreshTalentEtc.pdf.

335 Scottish Government (2010), Scotland’s Spending Plans and Draft Budget 2011-12. Scottish Government. Available at: www.scotland.gov.uk/Publications/2010/11/17091127/0Accessed 10 December 2010

336 Scottish Parliament Health and Sport Committee. Official Report, 8 December 2010, Cols 3779-812

337 Scottish Parliament Information Centre. (2002) Draft Budget 2011-12: Health and Sport. SPICe Briefing 10/89. Available at: www.scottish.parliament.uk/business/research/briefings-10/SB10-89.pdfAccessed 10 December 2010

338 Centre for Public Policy for Regions in association with KPMG. (2010) Scottish Government Budget Options Briefing Series No.3: Spending on health. [Online] Available at www.kpmg.co.uk/pubs/CPPR_REPORT_Accessible.pdfAccessed 10 December 2010