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Volume 3

ANNEXE I

Justice Committee

Report on the Draft Budget 2011-12

The Committee reports to the Finance Committee as follows—

Introduction

1. This year the Justice Committee concentrated its scrutiny of the draft Budget on police spending and on community penalties, with particular reference to the planned introduction of Community Payback Orders under provisions in the Criminal Justice and Licensing (Scotland) Act. Pressure on time for scrutiny caused by the date of the UK Government’s Spending Review, and the consequent later than usual publication by the Scottish Government of the draft Budget, meant that evidence had to be taken in a shorter period than previously.

2. Those invited to submit evidence also had less time to prepare than would normally be the case. Nevertheless, the Committee received written evidence from Police Boards, the Association of Chief Police Officers in Scotland (ACPOS), the Scottish Prison Service (SPS), the Prison Officers Association (POA), the Chief Fire Officers Association Scotland (CFOAS) and the Fire Brigades Union Scotland (FBUS).

3. Oral evidence, which was also constrained by the timetable, was provided by Kenny MacAskill MSP (Cabinet Secretary for Justice) and Mr Christie Smith from the Scottish Government Safer Communities Directorate, Bill Skelly (Her Majesty’s Inspector of Constabulary for Scotland) and representatives from ACPOS, the Association of Scottish Police Superintendents (ASPS), the Scottish Police Federation (SPF), COSLA, the Association of Directors of Social Work (ADSW), Community Justice Authorities (CJAs), the Scottish Police Services Authority (SPSA), and Unison.

Overview

4. The UK Spending Review covered the four year period 2011-12 to 2014-15, with a planned real terms cut in the overall Scottish resource budget of 6.8% by the end of the period and 38.4% in capital. The Scottish Government decided, however, to publish spending plans only for 2011-12, the first year340. However, since the Committee began taking evidence, the Scottish Government has agreed to produce indicative spending plans up to 2015.

5. Spending within the Justice portfolio is planned to decrease from £1,435.0million in 2010-11 to £1,267.5 million in 2011-12, a reduction of 11.7% in cash terms. In real terms the reduction is 13.3%.341 This is more than double the average real terms reduction in the Departmental Expenditure Limit (DEL) of 6.0% for all portfolios.

6. Although the scale of decrease is affected by a real terms cut in prisons capital expenditure of nearly 66%, the planned real terms reduction in resource spending of 6.3% is also substantially higher than the all-portfolio resource average of 3.9%.

7. In cash terms, spending by the Crown Office and Procurator Fiscal Service (COPFS) is planned to decrease from £118.2 million in 2010-11 to £108.2 million in 2011-12, a reduction of 8.5%. The real terms reduction is 10.2%. As with the Justice portfolio, capital spending by COPFS (although much smaller than that of the SPS) is also planned to fall substantially, with a real terms reduction of almost 64%.

8. These figures do not include a number of grants provided to local authorities to support justice-related services, as the Local Government settlement has not yet been agreed by individual authorities. Local authorities have been offered a reduction in Government resource support of 2.6% provided they agree to ensure delivery of key Government policies, including the maintenance throughout 2011-12 of the total number of police officers at 1,000 more than were in post in early May 2007 when the current administration took office. If they do not agree, the reduction in support would be 6.4%.

Police

9. The figure upon which the police numbers commitment is based is given as 17,234. According to ACPOS there were 17,383 police officers (FTE) in post at mid-November 2010, which means that numbers could fall by almost 150 and the commitment would still be fulfilled. There is no figure in the draft Budget for the amount of police grant to local authorities in 2011-12, because, as the Committee was told in evidence, this would only be determined in the light of the final agreed Local Government settlement. If all local authorities agree to the deal on offer from the Scottish Government, the figure would, according to the evidence given, be 2.6% less than in 2010-11.

10. The Committee noted that, although planned expenditure on the Police Central Government line within the portfolio was to be reduced by 12.9% in real terms, a figure of £33 million was again being provided to meet the cost of the 1,000 additional officers. Although this is the same cash figure as in 2010-11, the Committee was told in evidence by Mr Smith from the Scottish Government Safer Communities Directorate that it was expected to be sufficient as the cost in the current year was slightly lower than that, and that the effects of the final year of the police pay award for the 1,000 extra officers would be small. The Committee notes, however, that the current police pay award covers the period up to August 2011 and that this therefore will be a further budgetary pressure.

11. In its written evidence, ACPOS noted that the Local Government settlement on offer was an improvement on the planning assumptions to which police authorities had been working, but that balancing force budgets would nevertheless be challenging. The impact of the third year of the 3-year pay award for officers and police support staff, plus increments, would add over 3% to costs, which taken together with the real terms effect of the 2.6% cash reduction would, according to ACPOS, mean savings of around 6% would be required.342

12. In written evidence, Lothian and Borders Police Board said it considered maintaining frontline police officer numbers as a main priority and expected to hold them at Scottish Government target levels343. The Strathclyde Police Authority stated that it would make “every effort” to maintain frontline services and officer numbers in 2011-12, subject to confirmation of the Authority’s budget in the light of the Local Government settlement.344 The Dumfries and Galloway Police Authority did not commit in its written evidence to maintaining police officer numbers but drew attention to particular pressures around ports policing and to options for savings.345 The Northern Police Board said that its overriding strategic priority was to maintain police numbers at the highest affordable level, but noted that despite efficiency savings and being well prepared for future challenges, it would be increasingly difficult to maintain the Force Police Officer strength at existing numbers.346 The Grampian Police Board noted that current Grampian numbers were some 70 officers above the 2007 baseline, and considered it unrealistic to assume that it could maintain current police numbers.347

13. In oral evidence, Doug Cross, on behalf of ACPOS, stated that since officer numbers had to be maintained, in effect 6% savings would have to be found from about a third of forces’ spending, equivalent to a cut of 18% from that part of the budget.348 The Chief Constable of Lothian and Borders Police, Mr David Strang, confirmed that if forces were required to maintain police officer numbers at a minimum of 17,234 they would do so but—

“as a consequence, the 2.6 per cent cash reduction, which is actually a 5 to 6 per cent real-terms reduction, will need to fall elsewhere in police budgets through efficiency savings, shared services and reduction in police support staff numbers.”349

14. It was not possible to say precisely how many support staff posts might be at risk, or to be specific about which posts were most likely to be dispensed with, but the clear message from police representatives was that there would be an impact on support staff numbers. In response to questions Mr Doug Cross confirmed on behalf of ACPOS that—

“It is not unfair to assume a reduction of 1,200 in support staff, although that figure is higher than we anticipate at the moment.”350

15. The Committee noted that there had already been a reduction in support staff numbers but was concerned to establish where cuts might fall, and whether as a consequence police officers might have to be taken away from frontline duties to backfill civilian posts. Chief Constable Strang was clear that a further reduction in support staff numbers was inevitable if police officer numbers had to be maintained. He did however want to make a distinction between those support staff who had contact with the public and who provided front-line services, such as station assistants, those fielding telephone calls, or custody officers, and those who performed back-office functions, such as finance, human resources and procurement. He was unable to provide a broad breakdown of the percentage of support staff who had contact with the public and provided frontline services as against those engaged in administrative or corporate duties in the back office. He pointed out that this was also complicated by difficulties of definition.

16. Chief Constable Strang acknowledged the monies allocated to policing—

“There has been greater investment in policing over the past three or four years, and that has led to a better policing service, greater engagement with communities and better outcomes. I would prefer that level of funding to remain and for chief constables to retain their flexibility. However, as has been said, if the money is conditional on the number of police officers being maintained, we have no option, and we will maintain that number.”351

Mr Strang continued—

“Our first consideration will be to examine whether we can reduce the number of back-office staff or do certain things more efficiently. Those will be the areas in which, in the first instance, we will seek to reduce spend. However, I cannot deny that, ultimately, we might have to reduce police staff and take an officer off the street to do their work, in order to maintain police officer numbers. However, that would be our last resort, not our first”.352

17. Mr Bill Skelly, Her Majesty’s Inspector of Constabulary for Scotland, shared concerns about how officers would be deployed in the future given the need to make savings in revenue budgets. In his view—

“The number of police officers who must then backfill non-priority posts should be as low as possible—the aim would be zero, but I accept that the reality of the situation is that payroll must be reduced and that in the short term some police officers will have to backfill posts”.353

18. Mr Skelly did not consider that cuts in support staff would compromise public safety. He did however have concerns about the effects on the police estate of the reduced availability of capital in coming years.

19. Overall, the evidence to the Committee suggested that, even with the best efforts, savings on the scale required could not be found simply from back-office activities. These areas had been mined for efficiencies already and it was MrCross’ view, on behalf of ACPOS, that there was not a huge amount of fat left. He therefore did not expect significant savings to come from the back-office functions. Savings were still being made through improved procurement, but according to Mr Cross the real savings would come in operational shared services as opposed to the back-office. He said—

“We will look last at front-line staff, whether they be front-line police or police staff in front-line roles, whose absence would result in police officers being taken off front-line duties.”354

20. But it was possible that, rather than greater efficiencies being made, resulting in lower costs, fewer things would be done. Mr Cross stated—

“Over the coming years, as the financial position gets tighter, we may have to accept a reduced service in some areas … there may need to be a recognition that forces cannot cover all areas and that, consequently, there must be reductions.”355

21. Dave Watson, Scottish organiser, policy, for Unison, agreed that cuts would essentially fall on police civilian staff. He considered that the number might be in the order of 1,100 but this was not yet clear, and he hoped that it would be a lot fewer than 1,000. He noted that the position would vary force by force, as support staff to police officer ratios varied. Mr Watson felt that—

“a short-sighted view has been taken of the modern police force, which is made up of police officers and civilian staff, who have a range of cost-effective and specialist roles. Many police boards have reported that they will have to backfill many of the civilian posts with police officers, and that is certainly our view. That means that although, politically, the targets may well be met, officers will not be on the streets.”356

22. Like Mr Cross, Mr Watson did not consider that there was sufficient scope to make savings only in back office functions—

“There is no swathe of administrative back-office people that could somehow achieve the cuts at the level that has been discussed.”357

23. Chief Superintendent David O'Connor for the Association of Scottish Police Superintendents supported the drive to retain officer numbers, but told the Committee—

“… we must ensure that there is a balance between front-line operational policing and the structure that is needed to support the front line. At times it is easy to regard the front line as the visible aspect of policing, but that can be a narrow and simplistic view.”358

24. On the other hand, Mr Calum Steele, on behalf of the Scottish Police Federation, did not believe that every job being done by a member of support staff was essential. In his view—

“If we take support staff out of some roles, some things will not get done, but if we take police officers off the street, policing will not get done. What is important is how that balance is managed.”359

25. In relation to the Scottish Police Services Authority (SPSA) and its role as a shared service provider to the police, the Committee sought assurance about its capacity to respond to recent criticisms by the Auditor General, not least in relation to ICT provision for police forces. Noting that the SPSA was still a relatively new organisation and that it faced the challenge of bringing convergence to a number of disparate ICT systems, Mr Strang thought that mechanisms had been put in place to ensure that the SPSA was better aware of the demands of the eight forces across the range of services that they provided.

26. Ms Andrea Quinn, Chief Executive of the SPSA, pointed out that she would not normally have confirmation of the budget until January 2011 but that a cut of 11% was a possibility. This would present a challenge—

“It is possible that we will maintain services while reducing costs in the future, but there is not a bottomless pit.”360

27. Nevertheless, the Authority had been able to make efficiency savings and maintain services, and would continue to do so. Process change and streamlining were being pursued and voluntary redundancy would be used to reduce staff posts. A Transformation Board was leading on responding to both the Auditor General’s report and a Scottish Government Review and close attention was being paid to establishing customer needs.

28. The Cabinet Secretary for Justice, did not deny that there had been problems with the SPSA over ICT provision, but confirmed that the SPSA was working on the issue and remained the organisation that was best placed to deliver what was required.

29. The Committee was keen to explore with the Cabinet Secretary his understanding of the likely impact on police support staff of the budget proposals combined with the commitment to maintain police officer numbers. The Committee was concerned that the Cabinet Secretary did not offer any information as to what effect there would be on support staff numbers and the Committee could not understand how the Scottish Government could form a view on the implications of its policy without such information at a strategic level. Mr MacAskill stated that the suggestions of substantial redundancies among such staff were based on budget forecasts which overstated the size of the cuts, while Mr Smith (Scottish Government Safer Communities Directorate) considered that inflationary pressures on costs would be eased by the planned pay freeze and that the real terms reduction in budgets would be nearer 4.5% than the 6% suggested by ACPOS.

30. The Cabinet Secretary conceded that he did not know what effect there would be on what he called “the back office”, noting that staff deployment was a matter for Chief Constables and that it would not be constitutionally appropriate for him to have a view. He did however—

“not anticipate that officers whom we view as being front-line officers, and whom ACPOS welcomes as such, will be redeployed willy-nilly into back-office services”.361

31. Mr MacAskill did not consider that there would be a need for compulsory redundancies among support staff. While he did not rule out voluntary redundancies as functions were streamlined, he believed that once budgets were revisited and finalised the consequences of the tighter budgets would be less than had been forecast—

“We believe that, once the budgets are number crunched once again … matters will be considerably lessened”.362

32. Mr Smith confirmed that 3% efficiency savings were not additional to the draft Budget proposals and that they had already been taken into account in the proposed spending allocations. In relation to the police, Mr Smith said that in the light of work undertaken through the Scottish Policing Board—

“police forces have said that they can save £10 million next year through better management of overtime. They are also planning to save £9 million through better management of non-people costs, such as estate, fleet and utilities costs, and the total housing allowance to be paid next year will reduce by £1 million. All that adds up to £20 million, which is about 2 per cent of police force funding to start with, and it is an example of the kind of things that police forces will be doing to meet next year’s efficiency target.”363

Police spend – conclusions

33. The Committee appreciates that until all local authorities have decided on their response to the Scottish Government’s offer in relation to the Local Government settlement it will not be possible to guarantee that police officer numbers will be maintained at the target level of 17,234, 1,000 more than the figure for May 2007. Nevertheless, Chief Constable Strang, in acknowledging that there had been a commitment to maintain police officer numbers at the target number of 17,234, said “if we are required to maintain police officer numbers, that will happen”. The Committee welcomes the commitment made by ACPOS to maintain numbers, despite the pressures on budgets which would still result. The Committee also welcomes police forces’ continued efforts to find efficiency savings, among other things through sharing more services. The Committee moreover looks forward to the SPSA playing a positive role in improving efficiency as it responds to the criticisms it has faced, and urges the Scottish Government to ensure that it is adequately resourced for that task.

34. The Committee notes that the effect of the Scottish Government’s commitment to the 1,000 extra police officers may have364 significant implications for the level of police support staff and for the ability to deploy police officers in frontline duties. The Committee is concerned at the effect of the budget on police support staff. While at this stage it is difficult to calculate precise numbers, the weight of evidence from witnesses other than the Cabinet Secretary was that there could be an impact – possibly of the order of 1,100 to 1,200 staff – which would clearly affect civilian posts which had contact with the public and supported frontline services as well as those in administrative back-office roles. The Committee is concerned that this would result in the backfilling of support posts with police officers, the potential effect of which would be to reduce rather than maintain the number of officers in frontline and community roles, but the Committee notes the evidence of Chief Constable Strang, on behalf of ACPOS, that such action would be a last resort.365 While welcoming the Scottish Government’s continuation of the funding for the additional 1,000 police officers, the Committee is not convinced that current plans fully take into account the close operational dependency of frontline services on support staff, or the balance that needs to be maintained and seeks assurances in that regard. The Committee encourages the Scottish Government to engage closely with police authorities to consider how to reduce to a minimum the loss of support posts which would require backfilling by police officers, so as to avoid undermining the effectiveness of the funding available to maintain officer numbers and undoing the efficiencies in the use of resources achieved by forces through civilianisation in recent years.366

Community sentences

35. The proposed budget for Community Justice Services in 2011-12 is £30.3 million, a small cash increase of £0.2 million compared with 2010-11.367 The Scottish Government has maintained within the Offender Services budget the £6 million previously provided for community service and the Community Payback Order (CPO).368 The draft Budget does not contain any indication of how much money will be provided for Criminal Justice Social Work in 2011-12, as, like police grant, this is dependent on local authorities’ responses to the Local Government settlement on offer.

36. The Committee wished to determine whether those with responsibility for the administration of community disposals considered that the budget would provide for effective community services and for the successful introduction of the CPO in early 2011. Bailie Helen Wright, Chair of the CJA Conveners Group, said that CJAs had signed up to the new CPO and would make it work, but noted that in certain areas some CJAs might have serious problems with the budget.369

37. Mr Sandy Riddell, chair of the Criminal Justice Standing Committee of the Association of Directors of Social Work (ADSW) thought that the budget allocation was positive in many respects, considering the difficult financial climate. However ADSW had concerns about potential pressures, noting that there had been an increase of approximately 4% in the workload for criminal justice social work over the past five years, with no inflationary increase in non-core funding.

38. Mr Riddell also had wider concerns—

“For CPOs to have a real impact, it will be important that everyone plays their part. … When agencies try to square difficult financial circles, they tend to try to do that in isolation rather than in partnership. The crucial point is that a range of services that provide placements and additional support to try to turn offenders' lives around will all feel the need to pull back on budgets, so the financial position could cause a cumulative effect that will have an unfortunate outcome.”370

39. For Mr Riddell the question was whether the complementary but supporting services would still be there to enable interventions that were appropriate and tailored to the offender's needs, that took place at the right time, as quickly as possible and with the maximum effect, and that might reduce the cycle of reoffending.

40. Mr Jim Hunter, Chief Officer of North Strathclyde CJA, welcomed the settlement, saying—

“The budget settlement that we received was far better than we had hoped for. Most community justice authorities and local authorities in Scotland had expected and been planning for a substantial cut in the budget, so the settlement was welcome.”

41. What was unknown was by how much the number of community sentences would increase. Mr Hunter told the Committee—

“If the increase is significant, we might well struggle to fund CPOs properly, but if it is within the 10 per cent range set out in the financial memorandum to the Criminal Justice and Licensing (Scotland) Bill, we should be able to fund them within existing resources.”371

42. Mr Hunter also pointed out that there was a real-terms reduction in the budget which would challenge not only CJAs but also local authority partners and the third sector organisations which would support the implementation of CPOs. However, he stated—

“Within the partnerships, the eight CJAs will review existing budget allocations and projects with a view to redirecting funds towards CPOs where possible. That process is under way in my authority, and so far we have identified two significant projects where we can divert resources from the existing budget to the CPO budget to help local authorities.”372

43. In response to the Committee’s previously expressed concern that CPOs need to be adequately resourced if they are to be successful, Mr Riddell said that a number of developments were being progressed involving CJAs, the ADSW, COSLA and the Scottish Government, which it was hoped would release some capacity in existing finances. An example was new criminal justice social inquiry reports which would be much shortened for more minor cases, and would release time to deal with more complex cases. However, there were other issues which would create an additional workload, and intensive resourcing was already required to support the process of working with other agencies on the more robust risk assessment for higher-tariff offenders.

44. Ms Gillian Little, Chief Officer of the Glasgow CJA said that there was an issue with capacity, and the pressures that partners, such as health services, would also face. She noted however that in planning for the CPO, local authorities were looking at their internal structures. In Glasgow structural change would streamline management processes thus enabling more staff to be focused on delivering supervision and services to courts. Ms Little agreed with Mr Hunter that changes and savings generated from reviewing services would go some way towards having the capacity to meet a 10 per cent increase in orders.

45. Mr Riddell echoed this and again stressed the key role played by partner agencies, pointing out that over the years, a range of extremely good services had been developed both with statutory partners and the voluntary sector. He repeated his concerns about the impact of budget restrictions on them—

“As I have said already, there are concerns about the ability of those organisations—or some of them, at least—to continue, because funding does not simply come from criminal justice, social work or community justice authorities; it comes from a variety of sources, many of which are beginning to feel the financial squeeze, so being able to sustain, plan and manage those services in the medium to longer term is very challenging.”373

46. Responding to a question on the impact on staff of budget restrictions and the restructuring and streamlining of processes Mr Hunter said that when services were reviewed and restructured everything would be done to avoid compulsory redundancies. He expected that there would be opportunities to save money through natural wastage and staff turnover during the three years.

47. Mr Watson expressed his concern that, while Unison agreed with the policy aim of reducing the use of short-term prison sentences in favour of effective community sentences, it needed to be properly resourced. He said that staff on the ground were stretched and could not deliver some of the rehabilitation services that were an essential feature of community service. Mr Watson stated—

“Work on community payback orders will replace some work that is being done at the moment, but it is inevitable that their introduction will increase the demand on criminal justice social work at a time when, although the central budget is largely standstill … local authorities face real-terms cuts of 6 per cent. It is not realistic to expect criminal justice social work, and the other local authority services on which it relies, not to be affected by those cuts.”374

48. He did however consider that a commitment to no compulsory redundancies was the right approach and could deliver effective organisational change. Like other witnesses Mr Watson considered it important to recognise that other services in social work, health etc were key to the delivery of an effective criminal justice social work role.

49. Mr Jon Harris, Strategic Director of the Convention of Scottish Local Authorities saw the main pressures as being longer term ones relating to increasing demand for services: if this was not tackled the pressure will grow year on year. Mr Harris considered that a 4 year budget settlement would have been more helpful in that regard, but indicated that some financial modelling of the increase in demand had been carried out. Some work was being done on services for older people, reoffending etc which would not yield results in the next year but in the longer term, and the work would provide certainty about the direction of travel. In the current year, the main effort had been on reducing the size of the workforce and looking at freezing pay. Like Mr Watson, Mr Harris said that COSLA would prefer voluntary redundancy, but that it had not ruled out enforcing redundancy—

“Compulsory redundancies are still on the table, in the event that they have to be made. Our member councils have not said that they would not use that option.”375

50. On the question of funding community sentences, the Cabinet Secretary referred to the difficult financial circumstances in which the Scottish Government found itself. He said that the Scottish Government had sought to protect community sentences as best it could because it remained one of its priorities. Mr MacAskill did not accept that CPOs were underfunded—

“We have heard from Jim Hunter, the Chief Officer of North Strathclyde Community Justice Authority, who gave evidence to the committee that the budget is manageable. We have had supporting comments from Helen Wright, the Tayside CJA convener … We have increased the budget to date by £6 million. We are looking to maintain the budget—indeed, I think that there is a nominal increase in it. We believe that that is capable of delivering. We have discussed the matter with the principal stakeholders, such as the Association of Directors of Social Work, the CJAs, the Chief Officer in North Strathclyde and the convener in Tayside … They are satisfied that they will be able to manage.”376

51. Mr MacAskill also said—

“The £6 million has been put in to allow the transition. As we have discussed with the ADSW and CJA conveners, at times it is not all about the money, but about how matters are structured and operate ... We put in the additional £6 million to allow those charged with the responsibility of dealing with community service and community payback to ramp up, and they have done so. Equally, they are working on the basis of how they, like those in every other walk of life in Scotland, can be more efficient. We have had discussions with those on the front line who are charged with the responsibility of chairing or convening and they are satisfied that they will be able to deal with matters.”377

Funding for community sentences – conclusions

52. The Committee is impressed by the positive attitude demonstrated by witnesses representing Local Government, CJAs and Social Work to working constructively to make community sentences effective and to ensuring, in particular, the success of CPOs. The Committee notes that the inclusion of £6 million across the previous two years to eliminate a backlog means that the on-going budget had risen in real terms.378 The Committee is pleased to note that restructuring and service streamlining are expected to enable the available funding to go further than might otherwise have been possible.

53. The Committee agrees that staff will however be stretched and acknowledges the contribution made by other agencies, such as health services, to the delivery of community services. The Committee also acknowledges that reductions in other agencies’ revenue streams could have an impact on delivery on the ground. The Committee notes that this may be a particular issue for some voluntary sector organisations. The Committee notes the point made by some witnesses that usage of the CPO might vary from one CJA to another, and considers that this should be monitored. The Committee urges the Scottish Government to consider whether there is sufficient flexibility in funding arrangements to allow money for CPOs to be switched among CJAs to any “hotspots” which may arise. The Committee is concerned that the level of funding in the draft Budget may not be adequate to support the increase in CPOs and would wish to see appropriate monitoring and evaluation of CPOs to inform funding decisions.

Scottish Prison Service

54. In the time available it was not possible to take oral evidence from the SPS, but the Chief Executive, Mr John Ewing, provided a written submission. The draft Budget provides £365.5 million for prisons in 2011-12 compared with £469.9 million in 2010-11, a cash reduction of £104.4 million, which represents a real terms cut of 23.7%. The main burden of the cut falls on the capital budget which is reduced by almost £90 million, a real terms cut of nearly two-thirds. Current expenditure by the SPS is planned to fall by 6.3% in real terms.

55. The Scottish Government states in the draft Budget document that the reduction in current expenditure includes £5 million of efficiency savings and a transfer of money to the NHS to cover the cost of its taking over responsibility for healthcare during 2011. The draft Budget refers also to the SPS completing the construction of the new Low Moss Prison in 2011-12 and taking forward the final phase of the redevelopment of HMP Shotts.379

56. In his written evidence the Chief Executive of the SPS stated that the draft Budget for 2011-12 would be challenging but achievable. He noted that £10 million of the reduction in current spending was due to the transfer of responsibility for prisoner healthcare to the NHS from 1 November 2011. He also noted that the SPS would seek to maintain current levels of service, including prisoner programmes, and that all SPS activities would be examined to identify scope for efficiency savings. Mr Ewing confirmed that the capital budget would allow the completion of Low Moss and the Shotts redevelopment works, and that preparations for the opening of Low Moss in 2012 were under way. 380

57. In written evidence the POA welcomed the Scottish Government’s approach to compulsory redundancies and undertook to engage with the SPS on flexible working provided that it did not adversely affect the safety of its members. The POA expressed concern however about the impact on staff morale of the proposed public sector wage freeze, and the potential knock-on effects on staff-prisoner relationships. The POA drew attention to the SPS’ impressive record on efficiency savings, but could not say where future efficiencies would be found. It outlined a number of areas which it would seek to address, from officer grading to management allowances. 381

58. The Cabinet Secretary in oral evidence accepted that the proposed SPS Budget was challenging but having seen the submission to the Committee from the Chief Executive of the Scottish Prison Service, it was clear to him that the Service could manage with what was proposed. Mr MacAskill was unable to say what the Chief Executive meant by the “improved utilisation of the prison estate” as that was an operational matter for the Chief Executive which he would require to discuss. On the questions of whether any prisons would close during 2011-12, the Cabinet Secretary said—

“No decision has been made on any aspect of the estate at present. All press stories in this regard are pure speculation. I will discuss matters with those charged with responsibility for the estate and those who do an excellent job serving within it.”382

59. Notwithstanding the statement made by the Cabinet Secretary, the Scottish Prison Service has subsequently announced a consultation on the proposal to close Noranside.

60. The Cabinet Secretary was also reluctant to say how many additional staff would be required for Low Moss, stating that this was an operational matter for the Chief Executive and much would depend on whether the new prison opened in phases or not. Mr MacAskill said—

“I think that it is expected that it will be spring or May 2012 before it opens. To some extent, the consequences of it opening are for a future budget”383

Prisons funding – conclusions

61. The Committee is aware that the Scottish Prison Service has an excellent track record in delivering efficiency savings in recent years but suggests that the current budget proposals for 2011-12 will be very challenging. While the Committee accepts that the full year running costs of the new Low Moss prison are largely a matter for a future budget round, it notes that there is a lack of clarity, both in the draft Budget and in the Cabinet Secretary’s evidence, as to what is being done to assess the need for potential redeployment of prison staff in the later part of 2011-12 in readiness for the prison opening in spring 2012.384

62. However the Committee is aware from its previous enquiries that, where prisons are overcrowded, no significant revenue savings can be made until prisoner numbers are reduced below design capacity. The Committee is frankly surprised that the Cabinet Secretary has produced a budget involving a substantial fall in prisons revenue funding without being able to tell the Committee if the Budget implies the closure of one or more prisons. The Committee request the Cabinet Secretary to provide more detailed information to them as to the extent to which the budget is dependent on the closure of current prisons or of parts of prisons.

63. The Committee recognises that with the completion of a significant number of major capital renewal and refurbishment projects over a number of years, the case for maintaining the prisons capital budget at previous levels is difficult to make. It also accepts that provision for the new HMP Grampian if it were to go ahead as still planned, is for a subsequent budget. But it also considers that, although prisoner numbers were currently “flatlining”, the lack of clarity about what constituted “improved utilisation of the prison estate” and uncertainty about the future size of the prisons estate were unhelpful in the context of judging how well prepared the SPS was for the projected future growth in prisoner numbers.

Other issues

64. The Cabinet Secretary confirmed that the reference in the draft Budget to some projects in the Justice estate being delayed was to the consequences of the reduction of almost 50% in the Courts capital line. Mr Christie Smith explained the progress being made on the completion of the crime campus at Gartcosh, and stated that there was sufficient capital provision in the budget to take the project forward to its planned completion in 2013-14.

65. Mr MacAskill indicated, in response to the Committee’s concern that Scottish funding for Criminal Injuries Compensation was to be reduced by almost 11% in real terms, that a review of the scheme was being carried out by the UK Government. However he also stated that there “is no change in the level of payments to individuals or victims or to the eligibility criteria.”385

66. As regards the planned 10% real terms reduction in the budget for Legal Aid, the Cabinet Secretary said that the Scottish Government’s priorities were policing, community sentences and investing capital in Gartcosh and Low Moss. He stated—

“Choices must be made, and we do not have a budget for everything. We will ensure that those who need to access justice have it, but some hard decisions will have to be made. The Public Defence Solicitors Office will probably have to be expanded and enhanced, and we will talk to the Law Society of Scotland …. I have made it clear that we have to make changes in order to be able to keep within budget.”386

67. Mr MacAskill reassured the Committee that in order to effect a saving in the budget it was not the intention to withdraw legal aid from Justice of the Peace courts or from summary criminal proceedings. The Scottish Government was simply considering the fairest way of paying out from what was a limited budget.

68. As noted at the beginning of this report, written evidence was also provided to the Committee by the CFOAS, and the FBUS. In its submission CFOAS said it did not expect to see frontline fire service staffing affected by the proposed 2.6% reduction in Local Government support, as proposed by the Scottish Government, though budgets had still to be set by individual authorities. It did not expect operational effectiveness to be compromised.387 The FBUS took a different view. While it regarded the frontline as essentially the emergency response part of the service, it noted that it could not function effectively without appropriate back up and support.388

Other issues – conclusion

69. In the time available the Committee was not able to question the Cabinet Secretary on the effects of the proposed real terms budget cut of over 13% in Scottish Resilience but was grateful for the views of CFOAS and FBUS, which it has noted. The Committee also noted the information provided by the Cabinet Secretary and Mr Smith on Gartcosh and criminal injuries compensation. The Committee welcomed Mr MacAskill’s assurances as to the Scottish Government’s approach to obtaining savings in legal aid.389

70. The Committee does not wish to make any alternative spending proposals within this portfolio but draws its conclusions to the attention of the Cabinet Secretary for Justice and the Finance Committee.

71. The Committee welcomes the intention of the Scottish Government to provide 4 year indicative budget figures, including for the Justice portfolio. It considers that such forward information will assist Scottish Government departments, police forces, SPS, CJAs and other agencies to plan more satisfactorily and sustainably over such a period.390

EXTRACTS FROM THE MINUTES OF THE JUSTICE COMMITTEE

18th Meeting, 2010 (Session 3), Tuesday 1 June 2010

Work programme (in private): The Committee considered its work programme and noted the implications of the various items of business liable to be referred to it. […] The Committee agreed to seek the appointment of an adviser to assist with budget scrutiny in the autumn, and to concentrate its scrutiny on funding for community sentences, police funding and the potential for greater joint working and shared use of resources by the police and other services.

24th Meeting, 2010 (Session 3), Tuesday 14 September 2010

Budget process 2011-12 – appointment of adviser (in private): The Committee agreed a preferred candidate for appointment as adviser for its scrutiny of the Scottish Government's draft budget 2011-12.

28th Meeting, 2010 (Session 3), Tuesday 26 October 2010

Draft Budget Scrutiny 2011-12 (in private): The Committee agreed whom to invite to give evidence on the Scottish Government's Draft Budget 2011-12.

32nd Meeting, 2010 (Session 3), Tuesday 23 November 2010

Decisions on taking business in private: The Committee agreed to take item3 in private and also to consider in private at future meetings the main themes arising from written and oral evidence received on its Draft Budget Scrutiny 2011-12.

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

Chief Constable David Strang, Executive Vice President, and Doug Cross, Chair of Finance Management Business Area, Association of Chief Police Officers in Scotland;

Calum Steele, General Secretary, Scottish Police Federation;

Chief Superintendent David O'Connor, National President, Association of Scottish Police Superintendents;

Sandy Riddell, Chair, Criminal Justice Standing Committee, Association of Directors of Social Work;

Bailie Helen Wright, Chair, Community Justice Authorities Conveners Group;

Jim Hunter, Chief Officer, North Strathclyde Community Justice Authority;

Gillian Little, Chief Officer, Glasgow Community Justice Authority.

Draft Budget Scrutiny 2011-12 (in private): The Committee considered the main themes arising from the oral evidence heard earlier in the meeting.

34th Meeting, 2010 (Session 3), Tuesday 30 November 2010

Decisions on taking business in private: The Committee agreed to consider a draft report on the Scottish Government’s Draft Budget 2011-12, and its work programme, in private at future meetings.

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

Jon Harris, Strategic Director, COSLA;

Andrea Quinn, Chief Executive Officer, Scottish Police Services Authority;

Bill Skelly, Her Majesty's Inspector of Constabulary for Scotland;

Dave Watson, Scottish Organiser (Policy), Unison;

Kenny MacAskill MSP, Cabinet Secretary for Justice;

Christie Smith, Head of Police Division, Safer Communities, Scottish Government.

Draft Budget Scrutiny 2011-12 (in private): The Committee considered the main themes arising from the oral evidence heard earlier in the meeting.

36th Meeting, 2010 (Session 3), Tuesday 14 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. Various changes were agreed to and the Committee agreed to consider a revised draft at its next meeting.

37th Meeting, 2010 (Session 3), Tuesday 21 December 2010

Draft Budget Scrutiny 2011-12 (in private): The Committee considered a revised draft report to the Finance Committee on the Scottish Government's Draft Budget 2011-12. Various proposed changes were decided upon, 10 by division. The report was then agreed to.

ANNEXE J

Local Government and Communities Committee

Report to the Finance Committee on Scotland’s Spending Plans and Draft Budget 2011-12

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

introduction

1. The Scottish Government’s draft budget, Scotland’s Spending Plans and Draft Budget 2011-12, was published on 17 November 2010.

2. The Local Government and Communities Committee agreed at its meeting of 26 May 2010 to focus its scrutiny of the draft budget 2011-12 on the local government part of the Committee’s remit, including equal pay. It also agreed to hold three evidence sessions in advance of the draft budget 2011-12 being published by the Scottish Government due to the limited amount of time available to take formal evidence following the publication of the Budget.

3. The Committee issued a call for written evidence on the draft Budget. It received 20 responses, which are available on the Committee’s web page.391 The Committee would like to thank all of those who submitted written evidence.

4. The Committee also wrote to all individual local authorities in Scotland asking a series of specific questions about the implications of the anticipated reductions in spending. The purpose of this exercise was to allow the Committee to have as full a picture as possible of individual local authority finances before it started taking formal evidence on the draft budget 2011-12. The Committee would like to thank the 19 local authorities that responded to the Committee’s specific request for information. The Committee is disappointed that the other local authorities did not respond to the request for information. The responses of the nineteen local authorities that did respond are available on the Committee’s web page.392

5. The Committee took oral evidence from the following witnesses—

8th September - Independent Budget Review

Crawford Beveridge CBE, Chair, and Sir Neil McIntosh CBE, Member, Independent Budget Review Panel.

27th October

Alastair MacNish OBE;

John McLaren, Centre for Public Policy for Regions;

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

Jenny Stewart, Partner, KPMG.

3rd November – Directors of Finance

Alan Puckrin, Chief Financial Officer, Inverclyde Council;

Ian Lorimer, Head of Finance, Angus Council;

Lynn Brown, Executive Director of Financial Services, Glasgow City Council.

24th November

John Downie, Director of Public Affairs, Scottish Council for Voluntary Organisations;

Annie Gunner Logan, Director, Community Care Providers Scotland;

Douglas Sinclair, Chair, Consumer Focus Scotland;

David Dorward, Chief Executive, Dundee City Council, Society of Local Authority Chief Executives;

Fiona Farmer, Scottish Regional Secretary, Unite;

Douglas Black, Regional Organiser and Secretary, Local Government Service Group, UNISON;

Alex McLuckie, Senior Organiser, GMB Scotland;

Joe Di Paola, Head of the Employers Organisation, COSLA.

1 December

John Swinney MSP, Cabinet Secretary for Finance and Sustainable Growth, David Henderson, Head of Local Government Division, Scottish Government, Graham Owenson, Team Leader, Local Government Finance, Scottish Government

6. The Committee would like to thank all of the witnesses who gave oral evidence.

7. The Committee would also like to thank its adviser, Jo Armstrong of the Centre for Public Policy for Regions (CPPR), for her support and advice throughout the budget scrutiny process.

8. This report is compose of the following key sections—

  • The Budgetary Settlement
  • The UK Spending Review and Direct Budgetary Consequences for Local Government
  • The Local Government, Housing and Regeneration and Equalities and Social Inclusion Budgets
  • The Local Government Budget 2011-12
  • The Impact and Management of Declining Budgets
  • Conclusions and Recommendations

Unprecedented times” – the budgetary settlement

The Independent Budget Review Panel

9. The Committee heard evidence from the Independent Budget Review (IBR) Panel in early September 2010. The Independent Budget Review Panel was established by the Scottish Government in February 2010 with the remit to review public expenditure in Scotland in order to inform public and Parliamentary debate, in advance of the autumn Comprehensive Spending Review about the challenges and choices that will exist in a significantly constrained public spending environment and to ensure that priorities could be established.393 The report of Scotland’s Independent Budget Review Panel was published on 29 July 2010.

10. In evidence to the Committee, Sir Neil MacIntosh set out the likely context for local government in relation to public spending. He stated—

“From a local government point of view, there have been cuts before, way back, but not in the past 10 years. There has not been a situation in which there has not been growth generally; however, even over the past number of years, there have been cuts in services and efficiency savings. This is a much bigger situation”.

11. He also emphasised the importance for local government of knowing exactly what the scale of the budgetary reductions would be in order to be able to plan and consider the impact of the reduction in resources—

“[I]t is important to note exactly what the figures are that we are working with. In a local government setting, it is important to know the overall scale of the reduction that will be required and whether council tax resources will or will not be available in the coming year. It is also important for councils to know what they will be able to achieve through early work and contingency planning, looking at how they can hold numbers and restrain growth, and what will still need to be found…. it is important to look at what the impacts will be in a variety of settings, such as rural communities and city-centre communities.”394

12. The Independent Budget Review report made a number of recommendations that were relevant to local government, predominantly around workforce planning, the council tax, efficiency savings, reviewing universal services and charging, and moving towards a more outcomes-based approach to public service management. COSLA particularly welcomed the IBR’s recommendations relating to the council tax freeze and universal services. It expressed disappointment as to the extent to which the Scottish Government had taken the IBR’s recommendations on board—

“We had hoped that the findings of the Independent Budget Review would have played a greater part in informing the Government’s approach to the financial challenges ahead, however instead we are disappointed that many of the more fundamental findings have been brushed aside by the Government.”

13. Some of the Independent Budget Review Panel recommendations are considered at later stages of this report where they are relevant to strategies for managing the declining budget.

14. The Scottish Government response to the recommendations that the Independent Review Panel made that are relevant to Local Government are shown below:

IBR Recommendation Description of IBR recommendation Draft Budget 2011-12 response
Protected Budgets Do not protect ‘whole segments’ of the budget (e.g. health) based on scrutiny and comparative prioritisation in the allocation of resources Health element of health and well-being ‘protected’
Council Tax Freeze Consider the option of discontinuing the current council tax freeze, which does not appear sustainable in the projected economic environment Ruled out. A Council Tax freeze is to be continued in 2011-12 (subject to the agreement of individual local authorities)
Efficiency Programme Revise current approach of Efficiency Programme to allow efficiency savings to be retained and recycled with a view to reducing future budget allocations across the public sector. Future annual efficiency targets to be no less than 2% per annum. Efficiency target of 3% in 2011-12. No specific target set in relation to local government however local government TME reduced by 3.7% in 2011-12.
Public Bodies Scottish Government and Parliament should consider using the provisions of the Public Services Reform (Scotland) Act 2010 to reduce the number of public bodies No specific proposals in the Draft Budget
Pay restraint measures Range of options for a pay freeze outlined Pay freeze for all public sector workers directly responsible to the Scottish Government (not including local government) earning more than £21,000 (with continued progression payments); those earning less than £21,000 to receive a minimum of £250
Recruitment freeze Immediate implementation of a recruitment freeze across the public sector Recruitment freeze in place across many local authorities
Universal Benefits (Free school meals) Scottish Government / Parliament to consider undertaking immediate work to review whether all free or subsidised universal services should be retained in their current form. Ruled out.
Income generation Scottish Government should encourage all public sector bodies to examine the potential for additional income generation by reviewing the level of charges within their scope or by introducing new charges Local authorities generally reviewing their charging structures.
Free personal and nursing care for the elderly Early action to review eligibility criteria for free personal and nursing care Ruled out.
Outcomes Need to move towards a more outcomes-based approach to public service management and to improve the quality, availability and application of evaluation, monitoring and reporting data and information in relation to outcomes Continued commitment to Single Outcome Agreements in agreement between Scottish Government and COSLA Leadership

15. The Committee notes that the recommendations made by the Independent Budget Review Panel have been partially adopted by the Scottish Government, with some deferred and others ruled out.

The UK Comprehensive Spending Review and the Scottish budgetary settlement

16. The UK Comprehensive Spending Review was announced on 20 October 2010 and included UK budgets for the period 2011-2015. The baseline used by the Treasury was £28.2bn as it had removed the Scottish share of the £6bn cuts announced in the UK Emergency Budget from 2010-11, which had been deferred by the Scottish Government. This baseline also excludes any end-year flexibility support, a source of finance that has supported the Scottish budget in each of the last 3 years.

17. The reduction in the total Scottish Departmental Expenditure Limits (DEL) for 2011-12 is £900m if the Treasury’s baseline is used, whereas it is £1.2bn if the Scottish Government’s baseline is used. Over the period from 2011-12 to 2014-15, the reduction in total DEL is 10.8% in real terms based on the Treasury figures (which breaks down to a reduction of 6.8% in Scottish Resource DEL and 38.4% in Scottish Capital DEL). The Scottish Government calculates that the reduction in total DEL is 11.3% in real terms (8.6% in Scottish Resource DEL and 36.5% in Scottish Capital DEL).

18. In evidence to the Committee, the Cabinet Secretary set out the scale of the impact of the UK Spending review on the Scottish budget—

“Over the next four years, the Scottish budget will fall by £3.3 billion in real terms, which is an 11 per cent [real terms] cut, and our capital budget will fall by £1.2 billion in real terms, or 36 per cent. The largest annual reduction takes place in 2011-12; the Scottish budget is due to reduce next year by £1.8 billion, or 6.3 per cent in real terms. Our capital budget will be hit the hardest; it will fall by more than a quarter.”395

19. Fraser McKinlay, of Audit Scotland, provided his view of the implications of the UK Comprehensive Spending Review for Scotland in oral evidence to the Committee—

“The word "unprecedented" has been used a lot over the past wee while. However, some of the numbers and the analysis that came out after last week's announcement, after a period of real-terms growth in Scotland for quite a long time, showed that councils and other public bodies are looking at an extended period of budgetary decline, which is a whole new ball game. The Auditor General recently described it as being like going from fifth gear to reverse gear without slowing down, and that is probably how it will feel for many people in the public sector, and in councils in particular.”396

Scotland’s Spending Plans and Draft Budget 2011-12

20. The Scottish Government published “Scotland’s Spending Plans and Draft Budget 2011-12” on 17 November 2010.397 In the foreword to the document, 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.”398 The foreword also continues to position the budget in the context of the Scottish Government’s Purpose, stating that, “It is a Budget anchored in delivering the Scottish Government’s Purpose of creating a more successful country, with opportunities for all of Scotland to flourish, through increasing sustainable economic growth, particularly in the low carbon economy.”

21. According to “Scotland’s Spending Plans and Draft Budget 2011-12”, the overall Scottish Departmental Expenditure Limit (DEL) will decrease by 6% in real terms in 2011-12 in comparison to the previous year, with a 3.9% real-terms reduction in DEL Resource and a 22.3% real-terms reduction in DEL Capital.

22. The section later in this report on the local government, housing and regeneration and equalities and social inclusion budgets sets out the budget in more detail for the budget lines within the Committee’s remit.

A one-year budget

23. While the UK Government published a Spending Review covering the period until 2014-15, the Scottish Government only published a draft budget for the period 2011-12. The Cabinet Secretary for Finance and Sustainable Growth informed the Committee that, “For many of the reasons that are associated with the challenges of the longer-term position, the Government has established the Christie commission, which will review and make recommendations on the delivery of public services in Scotland.”399

24. In a statement to Parliament on future budget planning assumptions on 8 December 2010, the Cabinet Secretary for Finance and Sustainable Growth confirmed that the Scottish Government would publish “illustrative figures for the years up to 2014-15.”400 The Committee believes that this may help to address some of the concerns expressed by witnesses.

25. Since the publication of the draft budget 2011-12, HM Treasury has increased the GDP deflator for 2010-11 and 2011-12 to 3.1% and 2.5% respectively. The Committee notes that this will increase the real terms budget reductions for the figures contained in the draft budget 2011-12.

26. The implications of a one-year budget emerged from the evidence heard by the Committee and the issue is discussed later in this report.

The Commission on Public Services

27. On 19 November 2010, the First Minister announced the establishment of a Commission to examine how Scotland’s public services can be delivered in future to secure improved outcomes for communities across the country. In light of the “severity and scale” of the cuts, the Commission will be charged with examining “various options for reform whilst retaining the social democratic ethos of our public service delivery in Scotland.”401 The Commission will be chaired by Dr Campbell Christie CBE, the former General Secretary of the STUC. The Commission is invited to report with recommendations by the end of June 2011. The Commission on Public Services is considered in more detail later in this report.

THE UK SPENDING REVIEW AND DIRECT BUDGETARY CONSEQUENTIALs FOR LOCAL GOVERNMENT

28. The UK Spending Review included a number of direct budgetary consequentials that will impact on local authorities in Scotland. These included changes to council tax benefit, changes to the carbon reduction commitment regime, a reduction of 10% in the housing benefit administration grant and an immediate increase of 0.87% in Public Works Loan Board interest rates to 1% above the gilts rate. In addition to their impact on local authorities, these budgetary consequentials will also impact on the housing sector as a whole, including housing associations and private landlords.

29. At the time of the Committee’s consideration of the draft budget, it was unclear as to the exact costs or timing of these changes, particularly those relating to welfare benefits. The Committee therefore notes that the impact of these consequentials may not be fully felt in the 2011-12 budgetary year. Despite the lack of clarity on the costs and timing of these consequentials, some of the witnesses did try to quantify the impact of these budgetary consequentials in oral evidence to the Committee. Alan Puckrin set out the impact of three of these consequentials for local authorities in general, and estimated that the financial cost to Inverclyde Council would be more than £1m per annum, which would equate to 3% of the Council’s turnover. Given that Inverclyde is a relatively small council it should be assumed that the cost for larger councils might be significant. The three areas outlined by Alan Puckrin were—

“The first is a reduction in welfare funding by the Department for Work and Pensions. There has been an indication that the administration grant for housing benefit will be reduced by 25 or 26 per cent over the next four years. It has been confirmed that the amount of subsidy that is given for temporary accommodation will also be reduced, which will impact on councils as they will have to meet the shortfall. Further, there is the 10 per cent reduction in council tax benefit that it was announced will take place from 2013-14. We are still awaiting further details on that.”

“Secondly, outwith the welfare reforms, there has been an announcement in respect of the carbon reduction commitment. The intention had been that there would be a recycling scheme for carbon reduction, but now the indication is that there will be a £12 per tonne cost to councils, and the recycling scheme will not exist anymore. For a council the size of Inverclyde, that will equate to an annual cost of about £300,000—I should point out that Inverclyde accounts for about 2 per cent of the Scottish local government budget.

“Thirdly, there are increases in borrowing rates as a result of the decision to increase the cost of borrowing from the Public Works Loan Board. That effectively adds 0.9 per cent across the scale on to the costs of borrowing from the board, which equates to a minimum increase of 20 per cent if councils borrow from it.”402

30. Lynn Brown of Glasgow City Council expressed concern about both the cost of the carbon reduction commitment, which Glasgow City Council had estimated would cost about £1.8m, and about council tax collection where she considered the Council would be hit significantly.

31. In relation to the increase in the uplift for the Public Works Loan Board (PWLB), Jenny Stewart of KPMG stated that, “It is simply an incentive not to engage in any capital expenditure or borrowing, but it makes the option appraisal on whether to use external finance or the PWLB more in favour of external finance.”403 David Dorward, of SOLACE, commented on the 1% increase in the cost of PWLB borrowing in the following terms “There has also been a 1 per cent increase in the Public Works Loan Board rate, which will have a marginal effect in 2011-12 but will increase the cost of our borrowing in the longer term. With every passing year, those increased finance charges will have an effect on our revenue budget, but I believe that the effect in 2011-12 will be minimal”.

32. An increase to 1% in the interest rate for PWLB funding equates to a cost of £10,000 for every £1m borrowed. This could have a particular impact on the refinancing of loans, depending on the original interest rate, as well as reducing the incentives to take out PWLB loans. This effectively makes what had been one of the cheapest forms of borrowing more expensive for local authorities and those reliant on PWLB borrowing.

33. In 2008-09, total Scottish local authority borrowing totalled £6,424m. The table below details PWLB debt by local authority for that year.

Table 2 – Public Works Loan Board Debt, 2008-09
Local Authority £’000’s
Aberdeen 327,634
Aberdeenshire 204,090
Angus 120,721
Argyll & Bute 98,066
Clackmannanshire 95,704
Dumfries & Galloway 135,581
Dundee 262,794
East Ayrshire 135,230
East Dunbartonshire 398,520
East Lothian 0
East Renfrewshire 71,417
Edinburgh 853,129
Falkirk 104,130
Fife 248,108
Glasgow 885,968
Highland 389,851
Inverclyde 65,782
Midlothian 0
Moray 104,771
North Ayrshire 0
North Lanarkshire 296,107
Perth & Kinross 127,079
Renfrewshire 223,957
Scottish Borders 0
South Ayrshire 143,733
South Lanarkshire 562,839
Stirling 121,866
West Dunbartonshire 137,355
West Lothian 166,296
Eilean Siar 143,329
Orkney 0
Shetland 0
Scotland 6,424,057
Source: CIPFA “Capital Expenditure and Treasury Management Statistics 2008-09” p.101

34. The Committee notes that local authorities may also have private sector debt obligations and that therefore, there is considerable variation in the additional borrowing capacity that Scottish local authorities have.

35. The Committee is concerned by the additional costs that local authorities will have to bear as a result of changes to council tax benefit, changes to the carbon reduction commitment regime, a reduction of 10% in the housing benefit administration grant and increase of 0.87% to 1% for interest rates for loans from the Public Works Loans Board. While the final cost of these changes is not known in detail, the Committee notes that individual local authorities and SOLACE have identified these changes as additional pressures which will have an effect on local authorities, and over which they have no effective control. This simply reinforces the need for greater flexibility, efficiencies and service redesign to ensure all who are in need still get access to affordable, quality services.

THE LOCAL GOVERNMENT, HOUSING AND REGENERATION AND EQUALITIES AND SOCIAL INCLUSION BUDGETS

Local Government

36. In the “Scotland’s Spending Plans and Draft Budget 2011-12”, the local government spend as a proportion of Scottish Government spend remains fixed at the same level as 2010-11 at 34.5%. Local Government Total Managed Expenditure (TME) will decrease from £11,986.3m in 2010-11 to £11,548.0m in 2011-12 or by 3.7%% in cash terms and 5.5% in real terms. The local government portfolio resource grant will decrease by 4.4% in cash terms and 6.2% in real terms. However this reduction is offset by an increase in non-domestic rates and other Annually Managed Expenditure (AME) grants of 5.0% in cash terms (3.0% in real terms). Local government resource allocation, that is resource grants and non-domestic rates, is therefore planned to decline by an average of 2.6% in cash terms in 2011-12.

37. In line with other portfolios in the draft budget 2011-12, the most significant reduction is to capital spending. Local authority capital allocations will decline by -18% in cash terms and 19.5% in real terms, lower that the Scottish Government’s overall real terms cut in DEL capital of 22.3%.

38. Although the local government settlement is falling by an average of 2.6% in 2011-12, as chart 1 illustrates, adjusting for inflation takes spending levels back to approximately 2005-06 levels.

Chart 1: Local Government settlement 2005-06 to 2011-12, £ billion

Sources:
Scotland’s Spending Plans and Draft Budget 2011-12: Annex D,
http://www.scotland.gov.uk/Publications/2010/11/17091127/19

Notes: Real £s have been derived using the GDP deflator, 2009-10 =100.

39. The Committee notes that there is some debate over the figures relating to the local government and housing and regeneration settlement.

40. Commenting on the local government settlement in relation to the budget as a whole, the Cabinet Secretary for Finance and Sustainable Growth said, “[W]e proposed an approach to local government finance that involves a much smaller fall than the average across non-protected areas of the Scottish Government's budget.”404 He further elaborated on the context of the local government settlement, stating—

“In each of the past three years we have increased local government's share of the Scottish budget. For 2011-12, we have maintained the 2010-11 share, at 34.5 per cent of the Scottish total. That share equates to a much lower cut than for the rest of the Scottish budget. While the health budget rose slightly, the resource settlement that we have offered local government has been cut by 2.6 per cent in comparison with 2010-11. That compares with an average reduction of 6.4 per cent across all other portfolios.”405

41. In written evidence to the Committee, COSLA estimated the scale of the financial challenge that local authorities would face both as a result of reductions in the budgetary settlement for Scotland and the increasing pressures on local authority resources. COSLA stated, “In our substantive financial modelling work we have identified a funding gap for Local Government of close to £4bn over the next six years which is driven partly by the reduction in resources but more importantly by increasing demand for our services, particularly for social care.”406

42. Table 1 shows level 3 spending in cash terms for the local government portfolio and table 2 shows the level 3 spending in real terms for the local government portfolio based on the figures contained in “Scotland’s Spending Plans and Draft Budget 2011-12”.

Table 1: Local Government Portfolio: Level 3 Spending in Cash Terms, £m407

 

2010-11 Budget 2011-12
Draft Budget
Annual Change
£m
Annual Change
%
General Resource Grants 8,742.3 8,354.7 -387.6 -4.4%
Non-Domestic Rates (NDR) and other AME Grants 2,076.3 2,179.5 103.2 5.0%
Support for Capital 843.2 691.8 -151.4 -18.0%
Total Local Government Portfolio 11,661.8 11,226.0 -435.8 -3.7%
Other Local Government 324.5 322.0 -2.5 -0.8%
Total Support for Local Authorities 11,986.3 11,548.0 -438.3 -3.7%
Of which:        
DEL Resource 9,066.8 8,676.7 -390.1 -4.3%
DEL Capital 843.2 691.8 -151.4 -18.0%
AME 2,076.3 2,179.5 103.2 5.0%

43.

Table 2: Local Government Portfolio: Level 3 Spending in Real Terms, £m

 

2010-11 Budget 2011-12 Draft Budget Annual Change £m Annual Change %
General Resource Grants 8,742.3 8,198.9 -543.4 -6.2%
Non-Domestic Rates (NDR) and other AME Grants 2,076.3 2,138.9 62.6 3.0%
Support for Capital 843.2 678.9 -164.3 -19.5%
Total Local Government portfolio 11,661.8 11,016.7 -645.1 -5.5%
Other Local Government 324.5 316.0 -8.5 -2.6%
Total Support for Local Authorities 11,986.3 11,332.7 -653.6 -5.5%
of which:        
DEL Resource 9,066.8 8,514.9 -551.9 -6.1%
DEL Capital 843.2 678.9 -164.3 -19.5%
AME 2,076.3 2,138.9 62.6 3.0

44. The Scottish Government asserts that the local government settlement presented in “Scotland’s Spending Plans and Draft Budget 2011-12” is a relatively favourable outcome for local authorities. However, the basis for calculating the local government figures has been questioned, notably in a paper published by the Centre for Public Policy for Regions (CPPR).408 It states that in a budget the size of the Scottish Government’s the figures quoted can, and will be, open to interpretation.

45. Firstly, the CPPR calculates that the cash reduction in local government spending both in terms of TME and DEL is -3.7%, compared to a Scottish TME reduction of 3.2% and a Scottish total DEL reduction of 4.2%. It therefore considers that “it can be plausibly argued that the local government settlement is both better and worse than the Scottish average.”409

46. Secondly, the CPPR further points out that if the 2010-11 capital DEL underspend carried forward into 2011-12 is excluded, then the Scottish DEL capital reduction is 23.6% as opposed to -20.8%.

47. Finally, in estimating local government's share of the budget (a key success measure of the COSLA agreement), CPPR states both the importance of the £100 million carryforward and whether of not local government's share is quoted to one or more decimal points.

48. Local Government's overall share of the total Scottish budget as measured by TME has fallen marginally between 2010-11 and 2011-12, that is from 34.5% to 34.3%. Had they retained their 2010-11 share, local authorities would collectively have expected to receive an additional £52.5 million. However, if the £100 million carry forward is excluded from the 2011-12 settlement then the local government share of Scottish TME in 2011-12 rises to 34.45% (i.e., up from the actual 34.35%). This means the local government settlement would have been £34.5 million higher (had local government received 34.45% as opposed to the 34.35% it did).The relevance of this "larger share" for 2011-12 is misleading as first, the £100 million is being carried forward to be spent in 2011-12 and secondly, LG's share of the revised 2010-11 total TME (i.e., excluding the £100 million) is actually higher again, at 34.6%.

49. When questioned by the Committee as to whether the proposed 2.6% DEL Resource cash reduction for local authorities would reduce the incentive for them to move more quickly to make the savings, the Cabinet Secretary responded—

“I do not think so, for this reason. Mr Morgan is right—the reduction in the revenue budget for local government is 2.6 per cent while for most other areas of Government, excluding health, it is 6.4 per cent; statistically, therefore, the local government settlement is more generous than has been offered in other areas of Government—but local government is wrestling with a number of increased demands on its services. The burden—no, that is the wrong word—the implications of demography and the consequent requirements for services to be delivered for individuals in society increase the commitments that are required from local authorities. Therefore, although the cash provision may be reducing at a less significant rate than it is in other areas of the public sector, the demands on local government for the provision of essential services continue to increase significantly. In that context, the local authority community still has the incentive and impetus that is required to address the issues of shared services that Mr Morgan has raised.”410

50. The CPPR also indicated that on the basis of the published data provided in the Scottish budget documents it is not possible to verify the 6.4% average resource DEL cut being delivered across all other, non-protected resource budgets for 2011-12. Since this is the benchmark reduction for local authorities who choose not to accept the Scottish Government and COSLA agreement, greater transparency in how it has been derived is still required.

51. The proportionately lower cut in the local government settlement has been possible because non-domestic rates income is set to rise 3% in real terms and the ring-fenced grants have not been cut by as much (having been cut by only 0.8%). Level 4 data is needed to understand exactly which budget lines are being affected and by how much.

52. The non-domestic rates income is being boosted by an extra levy on large, retail properties according to the rateable value of those properties, which the Cabinet Secretary stated was estimated to raise £30 million. If the total non-domestic rates income raised is lower than projected then it is the Scottish Government and not Scotland's local authorities that will carry this non-payment risk.

53. Finally, the implementation of the non-domestic rates levy operates differently to the small business relief scheme. The relief available for small businesses is available only for those where their aggregate rateable value across all business units is below the eligible threshold. However, the extra non-domestic rates levy will be charged on a unit by unit basis, ie, some large retailers with a smaller shop unit(s) in a geographical area will not pay the extra levy if the unit falls below the threshold even though in aggregate the organisation may well exceed the threshold.

54. The Cabinet Secretary acknowledged that the small business relief scheme operated on an aggregated basis but said this was because “the scheme is what it says on the tin – it is for small businesses. If a business has a chain of stores, it is not exactly a small business.”411

55. The secondary legislation for both this new scheme and the small business relief scheme has been laid before Parliament and the Committee will be considering it in due course.

56. The 2011-12 settlement is in line with the local government's 2005-06 settlement level, once adjusted for inflation. Notwithstanding this funding level, rising demand and increased user expectations mean measures both to reduce demand and increase efficiency are now even more important if vulnerable groups and those in most need are to continue to get adequate, affordable levels of service.

57. The Committee accepts that assuming all local authorities sign-up to the Scottish Government and COSLA Leadership agreement, their average budget settlement is marginally better than the Scottish average (assuming the Scottish average is based on a DEL and not a TME basis, even though the local government settlement includes non-domestic rates income, which is AME and not DEL). The 2011-12 budget allocations has favoured local government over a number of other budget areas such as Rural Affairs, Justice and Education and the capital cut has been less than the Scottish average.

The Housing and Regeneration and the Equalities and Social Inclusion budgets

58. Although the Committee decided to focus its scrutiny on the Local Government side of its remit in its consideration of the draft budget 2011-12, it also received written evidence on other budget portfolios within its remit.

59. Tables 3 and 4 show the level 3 figures for the Housing and Regeneration portfolio in cash and real terms respectively. There are decreases in all elements of the Housing and Regeneration budget, with a 19% decrease in cash terms from 2010-11. Capital spend decreases by 25.3%.

60. Level 4 data is needed to understand fully the implication of these budgetary changes. The Finance Committee has consistently argued that level 4 figures should be published electronically soon after the publication of the Draft Budget 2011-12. The Scottish Government’s response has been that such figures can be requested by subject committees and by the Parliament’s Financial Scrutiny Unit. The Committee understands that the Financial Scrutiny Unit has requested level 4 figures but that they have not yet been provided for the Housing and Regeneration budget.

61. The Scottish social housing budget in 2010-11 and 2011-12 will also have benefited from some housing associations drawing down private finance to "front-fund" their new build programme. They, and their lenders, will be expecting to receive grant to allow them to repay this front-funding. This means there is a percentage of the 2011-12 housing budget that is already, in effect spent. Figures from the Scottish Government suggest that this front-funding obligation is £114.4 million, or 43% of the 2011-12 budget allocation. As a consequence, additional new social housing via such grants will be limited to whatever can be levered in from the remainder, i.e., £154.1 million.

Table 3: Housing and Regeneration: Level 3 Spending in Cash Terms, £m412

 

2010-11 Budget 2011-12 Draft Budget Annual Change £m Annual Change%
Supporting Economic Growth / Housing Supply (1) 280.3 268.5 -11.8 -4.2%
Supporting Sustainability (2) 104.6 83.9 -20.7 -19.8%
Supporting Transitions (3) 77.4 57.2 -20.2 -26.1%
Scottish Housing Regulator 4.7 4.2 -0.5 -10.6%
Less Income 20.0 20.0 0.0 0.0%
Non Recurring Budget Consequentials (4) 41 - -41 -100%
Total 488.0 393.8 -94.2 -19.3%
Of which:        
DEL Resource 167.0 153.9 -13.1 -7.8%
DEL Capital 321.0 239.9 -81.1 -25.3%

Table 4: Housing and Regeneration: Level 3 Spending in RealTerms (2010-11 prices), £m

 

2010-11 Budget 2011-12 Draft Budget Annual Change £m Annual Change %
Supporting Economic Growth / Housing Supply 280.3 263.5 -16.8 -6.0%
Supporting Sustainability 104.6 82.3 -22.3 -21.3%
Supporting transitions 77.4 56.1 -21.3 -27.5%
Scottish Housing Regulator 4.7 4.1 -0.6 -12.3%
Less Income 20.0 19.6 0.4 -1.9%
Non Recurring Budget Consequentials 41 - -41 -100%
Total 488.0 388.00 -100 -20.5%
Of which:        
DEL Resource 167.0 151.03 -16 -9.6%
DEL Capital 321.0 235.43 -85.57 -26.7

62. In written evidence to the Committee, the Scottish Federation of Housing Associations argued that when the accelerated expenditure investment from 2010-11 is taken into account, the fall in housing and regeneration budget is over 30%. It indicates that the SFHA, the Chartered Institute of Housing and Shelter are all of the view that “as the total cut in capital expenditure in the 2011-12 Budget is 25%, affordable housing is therefore taking an undue share of the cuts.”413

63. The SFHA also commented that it was “usual practice for the affordable housing sector to see spending plans from the Scottish Government for the coming years, to allow associations to plan.”414 It therefore asked “to see these plans in the coming weeks in order to assist our members’ ability to plan at this critical juncture.”415

64. In supplementary written evidence to the Committee, the Cabinet Secretary stated that the “budget figures demonstrate our commitment to affordable housing supply and economic growth, for which the budget falls by only 4.2% cash.”416 He also set out the reductions in the housing and regeneration (HAR) budget in more detail—

“The Housing and Regeneration (HAR) 2011-12 budget is down by 19.3% in cash terms compared to 2010-11 while, at 25%, the HAR capital reduction is in line with that which applied across the Scottish Government’s capital budget as a whole. After adjusting for the one off £41m budget increase in 2010-11, the housing and regeneration budgets fall by 11.9% cash in 2011-12, with a capital reduction of just over 14%.”417

65. The Committee recognises that the housing and regeneration budget has suffered because it relates primarily to capital expenditure. The Committee is concerned that these cuts will have an impact on the ability of local authorities to meet key targets, notably the 2012 homelessness commitment, the 2016 fuel poverty target and the target for the social rented sector to meet the Scottish Housing Quality Standard by 2015.

66. Tables 5 and 6 set out the level 2 figures for the Equalities and Social Inclusion budget line in cash and real terms. The overall budget remains the same in cash terms, but decreases by £0.5m in real terms, a percentage reduction of 1.9%. Again, level 4 data is necessary to understand exactly how the budget lines have been affected.

Table 5 : Regeneration, Equalities and Social Inclusion: Level 2 Spending in Cash Terms, £m

 

2010-11 Budget 2011-12 Draft Budget Annual Change £m Annual Change %
Promoting Social Inclusion 7.2 7.2 - -
Promoting Equality 20.3 20.3 - -
Total 27.5 27.5 - -

Table 6: Regeneration, Equalities and Social Inclusion: Level 2 Spending in Real Terms (2010-2011 prices), £m

2010-11 Budget 2011-12 Draft Budget Annual Change £m Annual Change %
Promoting Social Inclusion 7.2 7.1 -0.1 -1.9%
Promoting Equality 20.3 19.9 -0.4 -1.9%
Total 27.5 27 -0.5 -1.9%

THE LOCAL GOVERNMENT BUDGET 2011-12

Scottish Government and COSLA Leadership agreement

67. In evidence to the Committee, COSLA acknowledged the reduction that local authorities would face in their budgets for 2011-12—

“It is clear to us that the measures that we have discussed with the Government will mean a drop of 2.6 per cent in cash terms in the revenue funding to local authorities compared with 2010-11 figures. The comparison figure is the average cut in revenue budget for all other non-protected public services, which we reckon will be 6.4 per cent. The total of £11.5 billion equates to a 2.6 per cent cut—there is no dubiety about that—and the comparison figure is 6.4 per cent.”

68. The letter to the Leaders of all Scottish local authorities from the Cabinet Secretary for Finance and Sustainable Growth and the President of COSLA sets out the terms of the agreement—

“The Scottish Government’s position is that it will not be possible for authorities to select elements of the package, including elements of the funding on offer. The Scottish Government is therefore asking each local Leader to write to the Scottish Government, by 21 December 2010, to indicate whether or not you agree to the full package on these terms. If you do not, the revenue funding available to your council would be reduced, not by 2.6%, but by 6.4% (which, across the whole of local government, would be worth £426 million in 2011-12).”418

69. The Committee notes that 32 Scottish local authorities accepted the Scottish Government and COLSA Leadership agreement.

70. In evidence to the Committee, the Cabinet Secretary indicated that “COSLA's leadership has accepted that the offer represents the best that could be achieved for local government in Scotland.” He also explained the background to, and the conditions of, the agreement with the COSLA Leadership—

“The Government engaged in substantial discussion with the political group leaders of the Convention of Scottish Local Authorities during the summer and autumn, and we reached an agreement with the COSLA leadership. That is the subject of a joint letter that I issued with the president of COSLA to the leaders of Scotland's 32 local authorities, which contained the details of the Government's proposals.

“Councils have been asked to indicate by 21 December whether they wish to take up the proposals that the Government and COSLA's political group leaders have set out. We have said in the proposal that if local authorities decide not to participate in the agreement, the alternative is that their budget will reduce not by 2.6 per cent on average but by 6.4 per cent, which is the average across other areas in the Government.”419

71. The commitments included in the Scottish Government and COSLA Leadership agreement were the result of negotiations between the two parties. The majority of them restate commitments that were included in the 2007 Concordat between the Scottish Government and COSLA. The package of commitments that local authorities have been asked to sign up to are—

To remain committed to the delivery of the current Single Outcome Agreements, the 3 jointly agreed social strategies and the Curriculum for Excellence.

  • To a council tax freeze for 2011-12.
  • To police officers being maintained at least 17,234 throughout 2011-12.
  • To maintain the pupil-teacher ratio in P1-P3, the crucial early years of primary school.
  • To protect the number of teacher posts as far as possible in order to secure:
    • o places for all probationers who require a place under the induction scheme in August 2011;
    • o Sufficient teaching posts available for all probationers who achieve Standard for Full Registration in summer 2011 (i.e. successfully complete their probation); and
    • o A reduction in the total number of unemployed teachers.
  • To an independently chaired review of all aspects of the McCrone Agreement, to report by June 2011 with the clear intention that its recommendations should be available for implementation before August 2012.
  • To continue to deliver the shared Scottish Government/COSLA commitments on Free Personal Care, for which payments will be uprated in 2011-12.
  • To continue to work with the Scottish Government towards implementation of the Carers and Young Carers Strategy at local level, including the maintenance of an extra 10,000 weeks respite provision.420

72. The Cabinet Secretary for Finance and Sustainable Growth argued that he had taken the most constructive approach possible to local government funding—

“I have done the most constructive thing that I can do; I have given local government a settlement that, relatively speaking, is much better than most areas of the Scottish Government have received. Local authorities have at their disposal the largest sum of money that I can possibly allocate in the spending round so that they can properly and effectively remunerate their staff and address the issues that you have raised relating to people with low incomes.”421

73. SOLACE said that the agreement between the Scottish Government and COSLA provided a better outcome for local authorities than had been anticipated—

“One of the benefits that we saw in the settlement was that local government's share was protected. There was a fear before the settlement was made that health would somehow be protected at the expense of all other elements of the public sector, including local government, so the cuts to local government could have been greater than 2.6 per cent. That is a general point about the protection of local government services. To some extent, that has happened.”422

74. A key element of the agreement between the Scottish Government and COSLA was to continue to freeze the council tax.

75. In the written submission that COSLA made to the Committee before the publication of the draft budget 2011-12, COSLA stated—

“Whilst the Government has signalled a wish to continue with a freeze for 2011/12, COSLA’s position is that only individual Councils can decide whether to apply a freeze. With the scale of cuts anticipated the option to increase Council Tax does give us flexibility. However we have indicated to Ministers that Local Government may be able to freeze Council Tax for a further year but we can only do so if the conditions are right. The conditions would include that there are sufficient resources to cover the freeze, that there is clarity over longer term funding and that Government is willing to support flexibility in other ways and not to undermine local democratic decisions in other ways.”423

76. COSLA stated in oral evidence to the Committee, “We entered discussions with the Scottish Government with our eyes wide open about what it wanted, part of which was a continuation of the council tax freeze.”424 In relation to the council tax, the Independent Budget Review had recommended that the Scottish Government and Parliament should consider the option of discontinuing the current council tax freeze, which it considered did not appear to be sustainable in the projected economic environment.425 In evidence to the Committee, Sir Neil McIntosh elaborated on the IBR’s view—

“The underlying principle of the council tax is that local authorities are accountable for money that they raise from those within the community who vote for them and that they are responsible for spending that money in their own ways. I understand all the reasons why a freeze in the council tax would be attractive when the resources to do it are available, but I would think that, at present, the tax is a perfectly reasonable way of letting local authorities get on with addressing their local priorities and justifying what they do while, at the same time, easing the Scottish Government's financial pressure and enabling us to apply the money to other pressured areas or needs.”426

77. In evidence to the Committee, UNISON referred specifically to the element of the Scottish Government and COSLA Leadership agreement that required local authorities to agree to a further year of a council tax freeze, arguing that there was little alternative for local authorities but to accept the Scottish Government’s offer—

“The question was whether the council tax freeze is sustainable. The answer is probably no. In the current situation, we have said that councils have been presented with Hobson's choice. If they do not accept the council tax freeze and a cut of 2.6 per cent, they must accept a cut of 6.4 per cent, with the possible consequence that they would have to raise council tax by anything between 15 and 18 per cent to bridge the gap, which would be a suicidal option for many authorities.”427

78. Under the agreement, local authorities will again receive £70m compensation for freezing the Council Tax, thus making the council tax freeze fully funded. SOLACE recognised that this was an incentive to agree to a freeze in Council Tax oral evidence to the Committee—

“Over the past three years the council tax freeze has been universal. The reason is fairly simple: the £70million grant was enough of an incentive to have a council tax freeze.”428

79. The council tax has now been frozen by local authorities for the previous three years at a cost to the Scottish Government of £420m. Should local authorities agree to the Scottish Government and COSLA agreement then the cost to the Scottish Government of the council tax freeze over the period 2008-09 to 2011-12 will be £700m i.e. £420m for the period 2008-09 to 2010-11 and a further £280m in 2011-12.

80. UNISON asserted that the council tax freeze disproportionately hit low-income households , arguing—

“Under the freeze, a band H house saves on average £441 per year, whereas a band A house saves £147 per year. That saving is disproportionate.”

81. COSLA emphasised that the council tax freeze was only one element of the whole package and that it was up to the elected representatives of individual local authorities to decide whether to accept the overall agreement—

“The council tax freeze proposal was part of hard-fought negotiations, and it is now part of a much bigger package that is out to councils for their individual determination. They must write back formally to John Swinney and say what they are prepared or not prepared to do in that context. I make no apology for saying that they are the people—the elected people—who should be doing that and taking those decisions. In just about every authority in Scotland—bar three—there are political coalitions in which the councils require to take a decision that they can defend in terms of where they are going with the council tax.”429

82. The cost of the various elements of the agreement between the Scottish Government and COSLA was also brought up in evidence. It emerged following questioning by the Committee that there had not been any detailed calculation of the various elements of the agreement.

83. When questioned by the Committee as to whether there was a correlation between the sum of £426m – that is, the difference between an average 2.6% and a 6.4% reduction – and the commitments contained within the agreement, COSLA stated that “the price of the agreement to deliver the commitments is £426 million”. SOLACE clarified its understand of the situation, saying—

“The 6.4 per cent is the average cut in the public sector, and that is how the figure was arrived at. I do not believe that the conditions that were put in were costed to equate to that figure of £426 million; it just happens to be the average cut that the rest of the public sector is getting.”430

84. When questioned by the Committee on the track record of local authorities in delivering the concordat commitments, COSLA defended the achievements of local authorities and emphasised that the Scottish Government had confidence in local authorities—

“The Government seems to have confidence in local authorities, or it would not have offered another deal. An offer lies on the table, which our councils will pick up—or not, as the case may be….different authorities delivered at different levels on different parts of the concordat. If anyone told me that the playing field remained level over the past three years, I would say that they were living on a different planet. The reduction in council budgets and the tightening financial constraints were occasioned in the main by the credit crunch and the banking collapse, which were no fault of any local authority. We think that our authorities have done pretty well to continue to deliver as much as they could of the bargain that they struck.”431

85. With the significant reduction in the ring-fencing of the local government settlement, the ability to monitor the achievement of outcomes rests in the main on the local authorities Single Outcome Agreements. However, the success of these was an issue stressed by Alastair McNish —

“The concordat and single outcome agreements were innovative, but they have been a singular failure—outcomes are not being achieved. Everybody has signed up, but for whatever reason the outcomes are not being achieved. I could not agree more that the approach should be outcome based rather than input based, but single outcome agreements are all over the place. From that point of view, the concordat has not fulfilled its intention.”432

86. The Committee calls on the Scottish Government to provide more information on how the commitments within the Scottish Government and COSLA Leadership agreement will impact on the existing Single Outcome Agreements and, more importantly, how the delivery of these commitments by local authorities will subsequently be monitored.

87. The Committee is not convinced, on the basis of the previous delivery record of local authorities on the specific set of commitments contained within the original Concordat, that these new commitments will be delivered within the timescale of the 2011-12 budget. In particular, the Committee calls for in-year monitoring of these commitments and reporting on progress within 2011-12. Furthermore, the Committee calls on the Scottish Government to explain how it will hold local authorities to account if they fail to deliver these commitments.

Budgetary Planning

A one-year budget

88. The implications of a one-year budget for planning purposes in the context of known further reductions in the Scottish budget were discussed in both oral and written evidence.

89. COSLA set out its view on having only a one-year budget as opposed to a longer-term spending review—

“This is a fundamental concern for Local Government which needs greater certainty over the longer term and we had no reason to expect anything other than a four year spending review following the UK Comprehensive Spending Review. This puts Scottish Local Government at a disadvantage compared with other parts of the UK where Councils will be able to plan ahead knowing the resources which will be available to them. Instead Local Government will have to wait another year for the Commission on Public Sector Reform set up by the Government to feed back its findings.”433

90. In oral evidence, COSLA indicated that local government could not, and would not, operate on the basis of a one-year budget and that it would therefore plan ahead by extrapolating from the amounts of money that local government had received historically.

91. SOLACE explained that local authority planning is conducted on a three-year basis and that local authorities would continue to plan, drawing on the settlement resulting from the UK Comprehensive Spending Review—

“We will continue to plan on that basis even though the deal is only for one year. We cannot take our eye off the ball given the difficult financial years that we anticipate from 2012-13 onwards. While much of the focus is on the financial position in 2011-12 and the significant cuts that we will have to make in that year, we now know, having had the settlement announcement of last week, that our revenue and capital planning will continue as it has been for the past eight or nine months on a much longer timescale. Implementing some of the service redesign and savings that we have to deliver over the next three years will take a significant amount of planning and consultation with the trade unions and so forth.”434

92. SOLACE also stated that “there needs to be a comprehensive spending review in autumn 2011.”435

93. The evidence submitted by individual local authorities indicated that they were planning for the longer term, with budgets in place for 2-4 years. Directors of Finance who gave evidence to the Committee also stated that they would plan for the future drawing on the information that was available. For example, Ian Lorimer of Angus Council said—

“We have a four-year budget projection so we will be using that to inform our future position. The more certainty that we have on future grant allocations, the better the situation from a financial planning point of view. In the absence of anything else, we will work on the basis of our own figures. That will help us to make decisions on workforce planning and workforce reductions.”436

94. The Committee recognises from the evidence that it has received from individual local authorities that many of them have undertaken planning for the financial pressures which they anticipate in the next three or four years. However, the Committee considers that more certainty about the challenges that they face would allow them to develop longer term plans for service delivery. The Scottish Government’s commitment to publish illustrative figures may be helpful in this respect.

95. Community Care Providers Scotland (CCPS) suggested that for third sector organisations providing services on a contractual basis to local authorities, a one-year budget would pose the greatest problem in terms of commissioning—

“On one-year budgeting, in practice a lot of third sector organisations in our field live from year to year in any case. Contracts might be for longer periods than that, but there is always a period of contract and price review year on year. However, one-year budgeting will make it very difficult for local authorities to plan ahead in relation to commissioning, which will affect us.”437

96. SCVO expressed a concern about the impact of a one-year budget on third sector organisations–

“A very welcome thread that says that we want the third sector to do more is embedded in the draft budget, but a one-year budget is an immediate barrier to that as it does not enable organisations in the third sector to think very clearly about the future, because they are concerned about their survival next year.”438

97. One particular challenge posed by one-year budgeting was identified as the potential for action being taken by local authorities to meet the initial cuts, but not a more strategic approach to the reduction in budgets in the UK Spending Review period. Douglas Sinclair of Consumer Focus Scotland warned—

“[T]he danger is that the public sector will just get through this year by reducing head count. I would like to see more evidence of fundamental service redesign. The danger is that, in four years' time, we will see the public sector reduced but not necessarily reformed. There is huge scope for getting better value out of the resource that we have. The debate has to be about that just as much as it is about cuts.”439

98. With these severe budget pressures, the Committee echoes the concerns of a number of those giving evidence that a one-year budget should not delay or inhibit the service redesign that is needed across Scotland's local authorities.

99. The Committee nevertheless recognises that 14 of the 19 local authorities which submitted written evidence indicated that they were planning beyond 2011-12.

Future pressures

100. COSLA estimated that local authorities were facing a funding gap of £4bn in the coming years as a result of declining financial resources and the increasing demands on council services.440 It identified demand pressures in the future as having a greater impact than the reduction in resources. It argued that “the focus therefore needs to be on how we can take demand out of the system as far as possible and that this requires a more fundamental review of the services we provide.” COSLA believed that future demand pressures raised fundamental questions relating to the services that local authorities and the wider public sector could provide in the future. In particular, COSLA questions the extent to which services should be universal or targeted in the future when the demand on many services was becoming more pressured due to demographic trends such as an ageing population. COSLA also believed it was necessary “promote a more radical debate about the responsibility of the state, individual and community” in the provision of services. COSLA also suggested that resources should be used “differently by engendering transformational change now through early intervention which diminishes the need for reactive services in years to come.”441

101. SOLACE estimated that 50% of the funding gap faced by local authorities was a result of increased demand on services such as social care, children's services and education services. SOLACE asserted that in the last three years, efficiency savings had been used to meet the increased pressure on services, particularly in social work and education services.

102. Other witnesses also identified the pressures that would arise for local authorities from increasing demands on the services that they provide. Alastair McNish stated—

“The obvious pressure is the increase in the elderly population. Each authority must make assumptions about the additional cost from that. We then go on to the integration of services and joint working with health and social care services. That is vital, whatever solution is achieved in local government.”442

103. Jenny Stewart of KPMG recognised that there were pressures, but also pointed out that—

“There are pushes and pulls in different directions, and although the situation is serious it is important not to forget that other things can help, such as productivity improvements, changed ways of working and technology. There are positive forces as well as pressures.”

104. Audit Scotland also acknowledged that local authorities faced significant pressures, and highlighted a particular concern in relation to capital investment. It stated—

“Considering the amount of money that is required for physical assets, estates, roads and other issues, it is difficult to see how councils will be able to fund that investment. In the long run, it could be problematic if they do not get the investment that they need. There is a difficult circle for councils to square, and I am sure that they will be working very hard on it over the next few months. “443

105. The Committee recognises the increasing pressure that will be placed on local authority services in the future as the demand for services increases, notably as a result of demographic trends. It acknowledges the call made by COSLA for a fundamental assessment of the role of the public sector in delivering services and the degree to which local authorities should continue to provide services on a universal basis.

106. The Committee considers that it is vital the future Scottish Government and the Scottish Parliament and its committees are engaged in a discussion on these elements of the future of public services following the publication of the Christie Commission report in June 2011.

Equal pay

107. A continuing pressure on local authorities in the coming years will be the settlement of equal pay claims. The Committee has closely followed the issue of equal pay and single status agreements during the course of session three of the Parliament and, as noted earlier, agreed that its scrutiny of the budget for 2011-12 should include an updated assessment of the financial pressures that local authorities continue to face in settling claims. In its letter to local authorities, the Committee asked them to estimate the likely future costs of equal pay settlements. In their responses, many local authorities indicated that due to the ongoing legal situation in relation to claims, that they could not provide this information.

108. Audit Scotland provided the Committee with a provisional estimate of the costs to date of equal pay claims and the likely future costs based on an assessment of local authority accounts for the financial year ending in March 2010. It calculated that equal pay had already cost local authorities approximately £420m and that local authorities estimated that the future costs would be in the region of £180m. However, Audit Scotland made the proviso that—

“Our work checks that each council has taken reasonable steps to estimate its potential liability, but our experience of equal pay is that liability is dependent on individual cases and, as long as there are cases going through the system, there is always a risk that the number might change.”444

109. In oral evidence to the Committee, COSLA expressed confidence in local authorities having the financial resources to deal with the outstanding equal pay claims. It said—

“There is money in the system. There is a scheme in place to assist councils in coping with the impact by spreading costs associated with equal pay over more than one year.”445

110. The Committee also questioned Directors of Finance on where individual councils stood in relation to negotiations on claims and the extent to which individual councils had settled claims. Lynn Brown of Glasgow City Council emphasised that “Equal pay is in the legal arena and councils' balance sheets will have a contingent liability for it until the cases have finished going through the courts.”446 The Directors of Finance also stressed that the auditors were paying particular attention to the provisions made by local authorities to settle claims and argued that as the single status agreements bedded in there would be a diminution in the number of claims.

111. The trade unions provided evidence that the pace of settling claims was still slow. Alex McLuckie of GMB Scotland said—

“From the trade union point of view, we are beginning to see some councils settling, but I think that it is more a trickle than a flood. The issue has been kicking about for a few years now—certainly we have been here on a number of occasions talking about the logjam. I am heartened to see that there is money in the system...If the money is in the system, it would be very helpful if we could turn that trickle into a flood and get the issue of equal pay in local government dealt with. A cost is still there for the councils, but if it is dealt with and got out of the way, that is one less worry for them and our members will receive payment for their inequality of treatment in the past.”447

112. As stated in its report on equal pay in 2009, the Committee is firmly of the view that the relevant parties should enter into urgent discussions with a view to settling cases that are considered to be “strong”, thereby reducing the number of cases within the tribunal system. For those cases which remain in the tribunal system, all parties should comply with whatever requests are made of them by the Tribunal Service to ensure that the cases can be dealt with as swiftly as possible.

113. It is evident that settlement of equal pay cases will be a significant financial pressure on local government resources and as budgets become more constrained, there is an even greater risk that local authorities will find it difficult to meet their liabilities without there being a significant impact on those budgets. Therefore, it is imperative that settlements are reached sooner rather than later so that the scale of liabilities can be made clearer.

FUTURE PUBLIC SECTOR REFORM: THE CHRISTIE COMMISSION

114. The need for fundamental public sector reform was a key theme that emerged from the evidence in relation to budgetary planning. The Independent Budget Review panel emphasised that a clear message had emerged from its consultation that there was a need for more than a “salami-slicing sharp cut for a year or two" and that there should be a focus on “a range of matters such as re-enablement—a term that is used in social work; the early years; prevention rather than institutionalisation; and support in the community.”448 Sir Neil MacIntosh of the IBR also stated that—

“It is also important to look ahead to the shape of services and to local government and public service structures and to have a template towards which people can work. Within that, we must work together more and more to address the issues that will come along the track. The big issue is not simply a shortage of resources but a potentially massive increase in needs, if they are addressed in the same way in 10 years' time as they are today. The emphasis must shift.”449

115. Community Care Providers Scotland also warned against short-termism—

“To return to what I said about short-termism, if we need to save money, we need to save it now, and the obvious thing to do is to start cutting budgets. The whole-system approach that we have discussed is absolutely key. That goes back to what I said about activity in one area that is funded by one budget accruing savings for another budget somewhere else. There is a huge barrier there.”450

116. The SCVO expressed a concern about how reform and cultural change could be promoted in the public sector. It argued that the Scottish Government had tried to drive through reform and change by partnership and encouragement, “but that has patently not worked over the past few years.”451 The SCVO therefore perceived a greater role for government, arguing it is “for the Scottish Government to give them much heavier direction and to tell them to change.”452 The SCVO warned against protectionism and concluded–

“Public services have an opportunity to reform. It would have been better to do that in the good times, but we must do it now. A real cultural change is needed.”453

117. In evidence to the Committee, Alastair MacNish called for political leadership in the reform of the public sector and stressed the role that the Scottish Parliament should play in that reform, saying, “The Parliament must be brave in the decisions that it makes during the next few months and years, regardless of who is in power.”454 He identified a number of areas which could be reformed, including the number of police forces and fire services and the sharing of services such as road maintenance, waste management and back-room functions. He also suggested that there should be “15 councils, 12 of them mainland councils”, noting—

“Only the Parliament can make that change. The argument will be that boundary changes are complicated. However, they are not nearly as complicated as they were in the previous reorganisation, because the boundaries now exist. If you remember, we had district and regional councils, but they are now all gone and there are 32 councils. The boundaries only need tweaked in certain areas—not many—to give us single councils for regions such as Ayrshire.”455

118. Following the publication of the budget and the announcement of the establishment of the Commission on Public Sector Reform, the discussion in the area of public sector reform moved to focus on what the Commission could achieve.

119. As noted above, the Public Services Commission, chaired by Dr Campbell Christie OBE, was established by the Scottish Government shortly after the publication of the budget with a reporting timetable of June 2011. The Commission's full remit is as follows:

Facing the most serious budget reductions for at least a generation, there is an urgent need to ensure the sustainability of Scotland's public services. At the same time we must continue to improve outcomes for the people of Scotland: by driving up the quality of services (so the average meet the standards of the best); and by redesigning services around the needs of citizens, tackling the underlying causes of those needs as well as the symptoms.

We are ambitious for Scotland's public services and wish to take them from good to excellent in every facet and in every place. We have a vision of Scotland's public services that:

  • are innovative, seamless and responsive, designed around users' needs, continuously improving
  • are democratically accountable to the people of Scotland at both national and local levels
  • are delivered in partnership, involving local communities, their democratic representatives, and the third sector
  • tackle causes as well as symptoms
  • support a fair and equal society
  • protect the most vulnerable in our society
  • are person-centred, reliable and consistent
  • are easy to navigate and access
  • are appropriate to local circumstances, without inexplicable variation
  • are designed and delivered close to the customer wherever possible, always high quality
  • respond effectively to increasing demographic pressures
  • include accessible digital services, that are easy to use and meet current best practice in the digital economy
  • have governance structures that are accountable, transparent, cost-effective, streamlined and efficient

The Commission is therefore asked to identify the opportunities and obstacles that will help or hinder progress towards this vision and make recommendations for change that will deliver us to our destination. In particular the Commission is asked to:

  • address the role of public services in improving outcomes, what impact they make, and whether this can be done more effectively
  • examine structures, functions and roles, to improve the quality of public service delivery and reduce demand through, for example, early intervention
  • consider the role of a public service ethos, along with cultural change, engaging public sector workers, users and stakeholders

The Commission should take a long term view and not be constrained by the current pattern of public service delivery, but should recognise the importance of local communities and the geography and ethos of Scotland as well as the significant direct and indirect contribution the delivery of public services make to Scotland's economy.

It should have clear regard to joint work already underway to take forward the increasing integration of health and social care and to develop sustainable police and fire services for the future. Updates on work in both areas are expected to be available to the Commission in good time for it to take into account in its recommendations.456

120. In evidence to the Committee, the Cabinet Secretary for Finance and Sustainable Growth confirmed that he expected the Christie Commission to be able to deliver its report by June 2011 and expanded on the Scottish Government’s rationale for establishing the Committee—

“The point of the Government's commitment to the Christie commission is that we acknowledge that we face a number of years of financial challenge, so the recommendations and proposals that emerge from the commission will be fundamental to informing the medium-term debate. I do not think that we will need to take all the actions immediately, because there will be a period over which we will have to realign and redeploy public expenditure to meet the much-diminished public spending envelope.”457

121. There was some concern among witnesses as to the scale of the task facing the Christie Commission and the amount of time that it had to deliver its report. For example, Douglas Sinclair of Consumer Focus Scotland stated—

“My observation on the Christie commission is that, given the scale of the task, it has an incredibly short timescale in which to deliver a redesign of Scotland's public services. Those of you who can remember the Wheatley commission will know how long that took to deal with the first major review of local government. I have a concern about the ability to do the job within the timescale.”458

122. Consumer Focus Scotland also raised the issue of reforming public services in a period of budgetary reduction—

“We all recognise that, in Scotland, we are managing fragmentation, wasting resources, confusing accountability and protecting too many institutions. If we had a blank sheet of paper, we would not design what we currently have. When times were good, a few years ago, that was the time to reorganise the public sector. It is difficult to do that now because any reorganisation will have substantial costs.”459

123. The Cabinet Secretary for Finance and Sustainable Growth rejected the assumption that public sector reform and service redesign required additional funding. He stated—

“I do not subscribe to the view that you get change only if you spend money. There are plenty of examples of services being redesigned and outcomes being improved while money is saved. If we accept the premise that we get redesign only by spending money, we will have to accept that redesign cannot be delivered in the forthcoming period—it just cannot be done.”460

124. Unite the Union stressed the importance of engaging with the unions and stakeholders at the initial stages—

“There is a view that we have yet to start this redesign and restructuring process, but it is already going on. We do have questions about the commission, including on the remit—what is included and what is excluded—and the cost. We know the cost of bringing in consultants to produce reports, which has happened in many areas of the public sector, including local government. At the end of the day, many such reports are not even implemented. In many instances, if there had been direct engagement with the unions and stakeholders at the initial stages, we might have had a better outcome.”461

125. In response to questioning by the Committee, the Cabinet Secretary confirmed that—

“There are excellent examples of service design, including in my constituency, where employees in the local authority or the health and education sectors have come up with good initiatives, which did not have to wait for a senior manager with a clipboard to come along and decide on. The more such initiatives we have the better, and the more we will have a basis for redesigning public services. There should be every opportunity for the Christie commission to be able to capture such material and input in its dialogue with wider Scotland.”462

126. The publication of the Christie Commission’s report will take place after a new Scottish Government is formed following the May 2011 Scottish Parliament elections. As Consumer Focus Scotland observed, “At the end of the day, the independent budget review and the Christie commission can only make recommendations; it is up to the Government or Parliament to decide whether to accept them.”463 The Cabinet Secretary considered that following publication of the report, “a range of measures can be taken forward over the short term, but some measures will require to be taken forward over the medium term.”464

127. The Committee is of the view that the Commission on Public Sector Reform has an exceptionally challenging task ahead of it in terms of fulfilling its remit and reporting by June 2011, particularly if it is making recommendations for structural reform as well as recommendations for the realignment of budgets. The Committee is also keen to understand what secretarial and executive support the Commission will have to allow it to arrive at concrete recommendations for the Scottish Government's budgetary allocations for 2012-13 to 2014-15.

128. The Committee considers that the Commission on Public Sector Reform’s report will represent only a first step towards any major reform of public services in Scotland. The Scottish Government formed after the May 2011 will need to consider which of the Christie Commission’s recommendations it will take forward. However, the Committee considers that it is unlikely that there is sufficient time for the report to have a significant impact on the 2012-13 budget.

129. The Committee also considers that the Scottish Parliament should be given the opportunity to consider and debate the recommendations made in the Commission on Public Sector Reform report.

130. The Committee is concerned that not only will it be challenging to make recommendations for structural reform and service redesign within the reporting period, it is also questionable as to how quickly any such recommendations can be implemented. To illustrate this, the Committee notes that it is over a year since Sir John Arbuthnott produced his report on Clyde Valley Review of Joint Working and Shared Services and it would appear that very little progress has made in implementing his recommendations. The Committee is not, therefore, optimistic that public sector reform will be driven in the short term by the recommendations of the Commission on Public Sector Reform rather than the more immediate imperative of budgetary reductions.

Impact and management of declining budgets

131. In the context of the UK Spending Review, the Scottish budgetary settlement and the draft budget for 2011-12, much of the evidence heard and received by the Committee related to the impact of the declining budgets for local authorities and the strategies that they could deploy to deal with the declining budget. This section deals with the areas where budgetary reductions can be achieved.

Efficiency savings

132. The draft budget 2011-12 anticipates the continuation of an efficiency savings programme across Scotland's public sector.465 Local authorities are not exempt and will be required to deliver 3% efficiency savings in 2011-12. The issue of efficiency savings was one that the Independent Budget Review Panel considered in its report, recommending that the current approach of the Efficiency Programme which allows efficiency savings to be retained and recycled with a view to reducing future budget allocations across the public sector to incorporate an assumed annual efficiency saving should be revised and that, in future, annual efficiency targets should be no less that 2 per cent per annum. In evidence to the Committee, Sir Neil McIntosh explained this recommendation further—

“In a setting here bodies are not facing major cuts, efficiency savings and recycling—looking to improve services by achieving savings—are a proper approach to take. It is easier to claim savings in such a setting than to produce hard cash reductions. That is the difference. We have therefore said that recycling should not be a feature of the assumptions that are being made that any savings should be directed towards addressing the required cuts. We have also said that there should be an assumption of at least 2 per cent across the piece.”466

133. In evidence to the Committee, SOLACE confirmed the increase in the requirement for efficiency savings by local authorities and that these could be recycled across other local authority services—

“The cash-releasing savings were part of the settlement. Previously, an assumption was made that local authorities would have 2 per cent efficiencies when the grant settlement was determined. That is unlike the situation with the current settlement, whereby efficiencies of 3 per cent have been assumed but not top-sliced off the grant settlement. If we make efficiencies of 3 per cent, we will use that money to make savings or to redesign services. There is a distinction between that arrangement and how grant was calculated previously, when an assumption that 2 per cent efficiencies would be achieved was made when the grant was distributed.”467

134. COSLA set out the record of local authorities in achieving efficiency savings in the past, but warned that the capacity for making continuing efficiencies was reducing—

“Local Government is ahead of the game when it comes to tackling efficiency and has consistently exceeded targets. Between 2005/06 and 2009/10, Local Government reported efficiencies of £1,033m against a Scottish Government target for the four years of £676m. Local Government has prioritised this area but that does mean the capacity for making future efficiencies is reducing and the financial gap going forward cannot be addressed by efficiencies alone.”468

135. Evidence received from individual local authorities provided examples of the efficiencies that had been pursued to date. These included changes in the way that services such as refuse collection were operated, asset and property management (typically the reduction in the number and the relocation of offices), the use of procurement consortia and Procurement Scotland to make procurement savings, the rationalisation of internal processes and the centralisations of resources and functions.

136. In oral evidence to the Committee, COSLA elaborated on its position in relation to efficiency savings, emphasising that, “The situation has got so much worse that we cannot rely on efficiency savings to close the funding gap.” SOLACE reinforced the point concerning the difficulty in continuing to achieve efficiency savings—

“The tighter the budgets get and the higher the reduction in anticipated funding from the Scottish Government, the more difficult it becomes to make those efficiency savings and keep them going on a cumulative basis. ... Although the efficiencies that we have made to date were achievable, we cannot hope to keep finding those efficiency savings over and over again.”469

137. The Committee accepts that should Scotland's local authorities deliver 3% efficiency savings next year they will help fill any emerging funding gap.

138. The Committee considers that it is not clear what measures exist to ensure initiatives aimed at delivering efficiencies do not actually result in service cuts, either in the quantity or quality of services provided. As noted in the Committee’s Local Government Finance Inquiry Report, each individual local authority publishes an annual efficiency statement and that is made available for audit. It would appear that to date, that no independent audit of reported local authority efficiency savings has ever been undertaken. The Committee therefore reiterates its concern that local authority reporting of efficiencies is currently based on self-certifying responses by local authorities. The Committee therefore recommends that local authority efficiency savings are subject to independent audit from 2011-12 onwards.

Shared services

139. The slow progress made by local authorities in sharing services emerged in evidence. Alastair MacNish referred to the lack of significant progress made in implementing the Arbuthnott report (The Clyde Valley Review of Joint Working and Shared Services). He commented—

“Sir John Arbuthnott produced an excellent report for the eight councils in the Clyde valley, in which he considered the sharing of services such as road maintenance, waste management and back-room functions. However, the sharing of services is not taking off. There are one or two good examples, but by and large local authorities are playing at it and the shared services agenda has stalled, for whatever reason. I can come up with examples of where it is working, but given what is required nothing seems to be moving forward and major decisions are not being taken across the board.”470

140. Lynn Brown of Glasgow City Council provided more detail on the progress made in the Clyde valley, noting that four workstreams - social transport; waste management; social care; and support services, which includes transaction-based activity such as income collection – had been identified and that business case were being produced. However, she was not aware of any decisions having been made about the business cases as yet.471

141. Alan Puckrin of Inverclyde Council emphasised that “there is a strong argument around resilience for sharing services” but also indicated that “by their nature such services have small employee numbers, so the potential savings are small.” He illustrated the limitations of the gains that could be achieved by sharing services, saying—

“In Inverclyde, the total cost of our finance service, which includes revenues and benefits and our IT, HR, legal and policy services, comes to £8 million. We are looking at a funding gap of £30 million during the next three years. Like the pay freeze, sharing services will not be a panacea. Even if someone took over all Inverclyde's finance services without having to employ a single extra person or incur a penny in costs, we would save less than a third of the funding gap that we face during the next three years. Sharing services is potentially part of the solution, but it is not the main part.”472

142. Ian Lorimer of Angus Council, told the Committee about the potential to share services on a Tayside-wide basis in areas such as education support and specialist services and the possibility of sharing accommodation with the police, fire and health services as well as other local authorities. All of these initiatives would save resources.

143. As it stated in its Local Government Finance Inquiry report, the Committee recognises that increasing the pace of change in relation to service redesign during a recession is a challenging task facing local government and that earlier progress in this area, during the relatively benign financial environment in previous years, would have been beneficial. However, the Committee considers it essential that increasing the pace of change in delivering shared services is essential if local government is to successfully meet the challenges of the changing nature of public sector finances.

144. While the Committee recognises that sharing services can contribute to savings, it considers that the scale of those savings can only contribute to a limited extent in addressing the funding gap that local authorities will face in the coming years.

Workforce and pay policy

145. Workforce and pay policy was identified by the Independent Budget Review Panel as a key where savings could be made. In evidence to the Committee, Crawford Beveridge acknowledged that it was “one of the more difficult parts of the report and we spent an enormous amount of time on it.”473 He explained why the panel had made recommendations in this area—

“It became obvious to us that, even with reasonable assumptions about efficiency and with changes to some policies, such as the universal policies that we talk about in one part of the report, we just cannot get to a big enough number to make that £1.7 billion reduction. That is largely because, as you know, the pay bill is a huge part of the budget—it is about 60 per cent of the Government's overall budget. We cannot achieve the reduction without doing something about that. Even if we took the most draconian measures to restrain pay that we talk about in the report, we still cannot quite get there without reducing the size of the workforce.”474

146. The IBR also recommended pay restraint and outlined a range of options for a pay freeze. Local authority workers (excluding chief officer grades) have already had a 0.65% pay deal imposed for 2010-11 followed by a pay freeze for 2011-12 and 2012-13.

147. It was clear to the Committee from the evidence that it received from individual local authorities that the majority of them were planning for a reduction in workforce in the coming years, whether this was managed by a recruitment freeze, seeking reductions in hours from employees, career breaks, early retirement schemes and voluntary redundancy schemes. While local authorities could not put an exact figure on the percentage reduction in their workforce, there was an anticipation that it would be in the region of 10%. COSLA stated in evidence to the Committee that it was “still trying to avoid compulsory redundancies”.475 It also indicated that—

“[W]e are concerned to keep enough people in jobs in local authorities to ensure that we can deliver the services. We are having to match carefully the service delivery and the workforce numbers, and we must be clever about transformational change if possible to ensure that we deliver services more efficiently.”476

148. While SOLACE and COSLA were both cautious about the accuracy of any estimates concerning workforce reduction at this point in time, Douglas Black of UNISON estimated that it could be in the region of 30-40,000 jobs.

149. The scale of such a reduction in the local authority workforce inevitably entails significant costs. SOLACE stated—

“It is difficult to envisage how 30,000 to 40,000 job losses would be achieved through voluntary redundancy. We are talking about the long term, not just one year. Each year the opportunity for voluntary redundancy reduces, and the reality is that we get closer and closer to a compulsory redundancy horizon.

“The cost to local government at this point with a voluntary scheme in 2011-12 is probably containable, but we need the power to borrow on a voluntary scheme in order to carry it on for a few more years. There comes a point at which service redesign is inevitable because of the number of staff that are going. As we state in the SOLACE submission, we are trying at every turn to avoid compulsory redundancies.”477

150. COSLA confirmed that it would seek to secure borrowing capacity from the Scottish Government to spread the cost of redundancy payments in the same way as it had secured funding for equal pay. Alex McLuckie of GMB Scotland welcomed this—

“I agree that if funding was in place to keep the voluntary option attractive, employers might be in a better position to achieve the goal without going down the compulsory redundancy route. Although the employers are being a bit coy, I think that it will be very difficult for us to meet the current situation without compulsory redundancies. Anything that could help us to avoid going down that route would be very much appreciated.”478

151. The trade unions indicated that the tightening of local authority financial resources meant that local authorities were less able to offer attractive voluntary packages to staff and that this might therefore result in local authorities having to resort to compulsory redundancies. Douglas Black of Unison said that, “Most authorities in Scotland are considering some type of retirement or severance scheme that will be attractive to their workforce.”479 However, he also stated that the “early retirement or severance schemes are no longer attractive to people” and questioned whether local authorities would achieve the workforce reduction that they hoped for through these schemes.

152. Fiona Farmer of Unite expressed a concern about voluntary schemes Although she did not have figures, she stated that information from the union’s local representatives suggested that when voluntary packages are offered, it is more likely that applications from lower paid workers will be accepted because it costs less.

153. David Dorward disputed this, stating this was not his experience in Dundee City Council. He also asserted that it did not necessarily cost less money overall because there is also a lower saving to the authority.

154. The trade unions also expressed a concern that there was a perception that the Scottish Government’s commitment to no compulsory redundancies applied to local government. Douglas Black of Unison stated—

“Although there is a feeling that the no compulsory redundancies statement applies across the public sector, that is not the case. That statement does not necessarily transfer down to local government. I would be interested to hear the employers' view about sitting around the table with the trade unions and coming to a no compulsory redundancy agreement that would apply in all 32 local authorities. I would also be interested to engage with the employers about pay restraint and pay freezes. The cabinet secretary has said that there will be a £250 payment for those earning up to £21,000 a year, but that does not apply automatically in local government. We would certainly be interested in engaging with the employers on that.”480

155. In evidence to the Committee, SOLACE indicated that the majority of local authorities were of the view that they could manage 2011-12 without compulsory redundancies. However, it reiterated its hope that there would be a spending review in 2011 as, “There is no doubt that it is easier to do workforce planning and so on when we are looking at a much longer horizon than simply one year.”481 SOLACE also confirmed that the local authorities were not committed by the statement that the Cabinet Secretary for Finance and Sustainable Growth had made on compulsory redundancies.

156. In addition to the reduction in local authority employees, it was also recognised that service providers would have to reduce workforce numbers as a result of reductions in budgets. Community Care Providers Scotland indicated that local authorities were asking its members to take cuts of between 4-5% and 20%. The impact of this might be felt both in redundancies or in some providers leaving the sector. CCPS stated that around 50% of third sector providers in social care and support had already implemented pay freezes in the last three years and 82% had been unable to award a full cost-of-living increase in pay in line with inflation.482

157. The trade unions also referred to the Scottish Government’s public sector pay policy which applies to civil servants and public sector staff in the Scottish Government, associated departments, NPDBs, public corporations and nationalised industries. It also applies to NHS Executive and Senior Managers. This policy does not apply to employees in local authorities. The policy for 2011-12 would institute a freeze on basic pay for one year, but with a minimum payment of £250 per annum for employees earning less than £21,000 per annum. Additionally, the policy introduces a Scottish Living Wage of £7.15 per hour. Unite stated that,If local government was to implement the deal whereby those earning less than £21,000 were paid an annual rise of £250, that would affect 65 per cent of local government workers in Scotland. That shows the extent of low pay in local government in Scotland.”

158. This figure was disputed by David Dorward, representing SOLACE who stated that analysis of his own authority suggested a figure of less than 5%.

159. COSLA undertook a survey in March 2010 to find out how many staff earned less than £21,000 (in terms of headcount, rather than on a full-time equivalent basis) and 23 authorities responded. Those responses showed that 66% of staff earned less than £21,000 which equated to approximately 106,000 staff in those authorities. However as this information was not provided on a full-time equivalent basis, a number of these employees may be part-time. However, there is no breakdown between full and part-time staff.

160. In supplementary evidence, the Cabinet Secretary confirmed that, in relation to staff who are covered by the Scottish Government’s public sector pay policy, 76,500 earn less than £21,000 per annum. This, again, is on headcount and not on a full-time equivalent basis. However, the Cabinet Secretary also confirmed that 6,150 earn less that the proposed Scottish Living Wage of £7.15 per hour.

161. In evidence to the Committee, the Cabinet Secretary confirmed that—

“[L]ocal authorities are responsible for their own pay settlements. The pay policy that I set out applies to a broad range of public sector organisations, but it expressly does not apply to local authorities, which are responsible for their own pay settlements. Clearly, it is a matter for local government to decide exactly what to do in pay settlements.”483

162. He also emphasised that, “In all my discussions with local government, I have detected absolutely no enthusiasm, desire or priority to deploy compulsory redundancies.” He also indicated that he would be meeting with COSLA and the STUC to pursue his commitment to “encourage all public authorities to take the same approach that the Government proposes to take on compulsory redundancies.”484

163. The Committee is concerned that figures could not be obtained for the number of full time equivalent posts in local authorities for which employees earned less than £21,000 a year in Scotland. It notes that the Scottish Government provided information on the number of employees earning less than £7.15 per hour which gives a clearer picture of low pay in those parts of the public sector covered by the Scottish Public Sector Pay Policy. Until such figures are known for local authorities, it is extremely difficult to ascertain the scale of the problem in terms of low pay. The Committee therefore asks the Scottish Government to work with COSLA to encourage local authorities to produce the same information as soon as possible.

164. The Committee welcomes the Scottish Government’s commitment to protect the lowest paid. However, it is concerned that the pay freeze being applied in Scotland's local authorities leaves the lowest paid disproportionately affected with no floor on the pay rate to which it applies and no commitment to the introduction of the living wage. This could result in a wider gulf between the lowest paid employees covered by the Scottish Government’s public sector pay policy on the one hand and those of local authorities on the other. The Committee notes the Cabinet Secretary’s statement that he is encouraging public sector bodies to adopt the principles in the Scottish Government’s pay policy and that he continues to have discussions with COSLA and the STUC on this and a number of other issues. The Committee therefore believes it is essential further work is undertaken to assess the costs with a view to implementing the same protection for the lower paid in local authorities.

Service delivery

Impact on the third sector

165. In its scrutiny of the budget, the Committee explored both the impact of the draft budget on the third sector and the potential for the third sector and private sector bodies to have a greater role in the delivery of services.

166. Sir Neil McIntosh of the Independent Budget Review Panel explained the role that it had believed the third sector could fulfil in the context of a period of budgetary decline—

“We have identified what we believe should be a mainstream role for the voluntary sector—and the private sector, where possible—in the delivery of those services. There is also a need to consider how the voluntary sector can develop in order to take that work forward...The voluntary sector will have a critical role to play in addressing growing public needs in a situation in which resources cannot grow to the same extent.”485

167. The SCVO made a case for the role that the third sector could play in the delivery of services in the future, pointing out that it was “an effective, high-quality solution and that opening up the potential of the third sector would enable us to deliver some of the stuff in the independent budget review group's report, as well as other things.

168. CPPS stressed that its key relationship was with local authorities as these are the main funding agencies for CCPS’s members and that “when it comes to hard-line funding decisions at the front end, where third sector organisations are involved, we are still seeing the sharp end of some of that”.486 CPPS indicated that a key concern was “”whether local authorities see the third sector generally, and our members in particular, as a problem to be managed, or whether they share our view that, in the wider context of public sector cuts, we are part of the solution, given that the work that we are involved in is arguably about preventing escalation of need and escalation of cost further down the line.”487

169. CCPS also presented evidence to the Committee which indicated that while there was a mixed picture in relation to budgetary reductions. It indicated that while some organisations were “working positively with local authorities to take up some of the redesign opportunities”, there were others that would not continue to operate in an environment in which they were asked to deliver the same services for less.

170. CCPS warned that—

“[O]rganisations will either pack it in, with their services being taken back in-house, or they will simply be driven out of the market. At a time when we are trying to increase choice and give people more control over who they want to provide services, it will be a disaster if high-quality service providers exit the market. Much depends not only on the way in which local authorities handle the cuts with third sector providers but, as I have said before, on whether the value of the third sector's contribution to the wider public sector budget is recognised.”488

Service redesign

171. CCPS perceived service redesign as a more constructive approach to the provision of services in the context of with reducing budgets. It stated that, “If our starting point is to ask whether we can achieve better outcomes, personalise services and be more creative with the budget, there is a very good chance that that approach will save money, because all the things that we want to do, including building resilience and independence, promoting self-help and increasing well-being, will have an effect on the demand for public services.”489 However, CCPS were concerned that the focus would be on the need to save money rather that reducing demand for services.

172. Consumer Focus Scotland emphasised the importance of putting the consumer at the centre of service delivery as opposed to an emphasis on the one type of provider over another —

“First, we should ask whether there is a need for a service; if there is, we should then specify the outcomes that we want from it; and finally we should find out who is best able to provide it in terms of quality and cost. There should be no presumption that the service will be delivered in-house, by an external provider or by the voluntary sector, and we should be able to prove transparently that our decision represents best value. I do not think that there is an awful lot of that going on; instead, there is a lot of protectionism.”490

173. The importance of focusing on achieving outcomes and providing valuable services to those who needed them was stressed by CCPS. SCVO stated that it considered that the work of Community Planning Partnerships needed to be developed further, particularly in terms of involving client groups and achieving outcomes—

“At the moment local authorities are, if I can paraphrase, talking a great game on reform but introducing very little real reform and doing little thinking about how they involve what we refer to as the client group—the service users—and service providers, whether voluntary sector or private sector, and about how we make the services more efficient and more effective. They are not thinking about outcomes.”491

174. SCVO called for greater Government direction in promoting partnership and preventative approaches. It argued that—

“[T]there has not been enough of a direct steer from the Scottish Government telling us that that is the approach that we must take. The Scottish Government has been too hands-off in that respect; it must get a bit heavier with local authorities to drive through the change agenda, because I do not think that they will do it on their own.”492

Productivity

175. Jenny Stewart of KPMG made a case for improvements in productivity and efficiency in public services. She provided evidence to the Committee on the variations in the cost of providing services such as council tax collection across the 32 local authorities in Scotland and estimated that improvements in productivity could reap savings for local authorities. She stressed that before cutting front-line services, it was important for a council to “ensure that its management structures are as lean as possible, that its procurement practices are best in class and that it is using its assets as best as possible and has disposed of any surplus assets.” 493

176. Much of the debate around the reduction in budgets has focused on the need to protect front-line services. However, the evidence heard by the Committee suggested that there was fairly limited potential for major savings to made in this respect, partly because local authorities had already made progress in merging back-office functions and partly because the size of back-office functions was relatively small compared to front-line services.

177. Alastair MacNish estimated that the potential for significant savings in back-office functions was limited. He observed that—

“We spend £18 billion gross per annum. Roughly 10 per cent of that—£1.8 billion—is back-room expenditure alone. If there were a 60 per cent cut in the number of councils and we took only a third of that, the saving would be £400 million to £500 million.”494

The Change Fund

178. There is an allocation of £70m in the draft budget for a Change Fund to support the shift in the balance of care from institutional care to community care. Community Care Providers Scotland expressed the hope that—

“[A]t least some of that money will come to the third sector so that it can do some of the lower-level, upstream support. It will be completely up to health boards how they spend that resource, but the positive thing about it is that the third sector will need to sign off on the plans locally. That is very positive. Seventy million quid is not a huge amount, but it is something. We are interested in how that will be followed up in terms of accountability and monitoring, because in the past change funds tended to disappear into plugging gaps. We are really keen that that does not happen this time.”495

179. SCVO confirmed that it had had a number of discussions with health departments on total place-type initiatives and pooled budgets, but that—

“A number of local authorities and health boards have told us that they cannot do pooled budgets—we totally disbelieve them, but never mind. The problem with a change fund is that it is a bit of a compromise position on the attempt to drive through the change that we all want. In the present context, we would probably welcome it as a step forward, but it is a bit of a compromise, because local authorities and health boards are putting up barriers to really driving through radical change through total place initiatives and pooled budgets.”496

180. The Cabinet Secretary for Finance and Sustainable Growth explained that “The change fund within the health and social care field is designed to get us to a position in which we do not have to spend as much money on acute services as we are currently spending because we can redeploy expenditure into community care and deliver better outcomes.”497

181. The Committee acknowledges that the third sector delivers important services, often very efficiently, and recognises that the third sector is concerned that it may come under significant pressure in the coming years due to the budgetary constraints faced by local authorities. The Committee is cognisant that for many local authorities it may be easier to cut the budgets for contracted services, rather than in-house services, and is therefore of the view that qualitative criteria and the needs of the user must be taken into consideration by local authorities in assessing how budgets should be allocated.

182. The Committee calls on the Christie Commission to give particular consideration to the third sector in its deliberations

183. The Committee calls on local authorities to review the role of partnership structures, notably the Community Planning Partnerships, in order to ensure that they can contribute to service redesign and are engaged on opportunities to share budgets.

184. The Committee believes that the variations in the costs for providing services across local authorities demonstrates the potential for savings through improvements in productivity that bring the local authorities with higher service costs closer to the average cost. It calls on the Accounts Commission to reinforce the importance of processes and infrastructure for the delivery of efficient services through its best-value audits.

185. The Committee also recommends that appropriate data is collected to enable comparison across local authorities in terms of service provision. At present, the Committee considers that much of the performance data collected by the Accounts Commission does not assist in this process.

186. The Committee clearly would wish that the Change Fund should be beneficial and realised as soon as possible. It believes that the progress in promoting a shift in the balance of care needs to be closely monitored in order that the Scottish Government can intervene to promote progress if it is slow or the partners concerns are not working together effectively.

Charging for services

187. The Independent Budget Review panel suggested that there needed to be reconsideration of the provision of a range of universal services. In particular, the Independent Budget Review report recommended that all free of subsidised services should be reviewed. In particular, the IBR focused upon concessionary travel, free personal and nursing care, prescription charges, eye examinations, free school meals and tuition fees.

188. In evidence to the Committee, Sir Neil McIntosh stated that in relation to universal services, “we are posing the question whether those people who might be able to pay for some services that are currently delivered free could be asked to do so, if it helps to protect and provide for the generality of the services that are currently available.”498 However, he also warned that, “It would be wrong to assume that there is a major pot of gold to be gained from charging for local government services” and emphasised that the “danger of raising charges is that we start to exclude people from services”.499

189. The evidence collected by the Committee provided evidence of individual councils beginning to consider increases in the cost of services. Glasgow City Council indicated that while its charges had historically been very low in comparison to other councils, Councillors were considering options in relation to charging. However, Lynn Brown observed that “the impact on the service or the customer could be disproportionate in relation to the amount that we would need to raise to close the gap.”500 With regard to our budget, the impact of a charge is one area that all the elected members examine closely. We look at how we compare to neighbouring authorities—such as the two Lanarkshires—and to other cities, and we consider what the impact would be. There is no straight answer across the board, but that is the approach that we are taking.

190. Inverclyde Council indicated that it was budgeting on the basis of a 2.5% increase in fees and charges across the board, which it had calculated would raise about £160,000; equivalent to approximately 0.5% of council tax revenue.

191. The Committee recognises from the evidence that it has received, notably from individual local authorities, that in the context of reducing budgets, many of them are deciding to increase or introduce charges for services which is one of the few mechanisms to offset the reduction in income that is still available to them. The Committee recognises that there is a danger that where neighbouring local authorities take different approaches to charging there may be a public feeling in some areas that there is a “postcode lottery” in relation to charging. The Committee considers that it is vital that any changes in charging for services should be transparent and reflect the cost of provision, rather than being seen as a method of increasing revenues.

Capital spending and the use of reserves

192. As noted earlier in this report, the reduction in capital budgets in the draft budget is more significant than in the resource budget. SOLACE considered that while the cut might have less of an impact in 2011-12, the effects would be felt in the longer term, not only in relation to the maintenance and development of capital infrastructure, but also in local economies due to the impact on the construction sector—

“The cut, as we understand it, is 17.9 to 18 per cent. That cut might have limited effect in 2011-12 because, by its very nature, capital involves long-term planning. My fear is about what effect that cut will have in the longer term if it continues at that level or worsens. Councils will certainly have to review their capital plans given the reduction in the grant, although the grant figure is not the sole source of funding for our capital programmes. We have prudential borrowing and we can use capital receipts, although we are all having to revise downwards our capital receipt estimates in light of the current financial position and our ability to sell surplus land or buildings.”501

193. John McLaren of the CPPR observed that the scale of the cuts to capital spend were significant and identified some of the potential consequences—

“Under the devolved system, resource can be moved into capital, so we could move some money in that way, but that does not tend to happen. ..Quite a big issue is whether to maintain the quality of existing infrastructure and capital assets or to have new build—whether to keep up maintenance of existing roads, hospitals and schools rather than build new roads, bridges and schools, for example. The question is whether to maintain the integrity of what councils have rather than invest in new build. Perhaps a choice exists in the short run between doing new things and keeping what councils have.”502

194. In response to questioning by the Committee, SOLACE indicated that it was not aware of any discussions between the Scottish Government, COSLA and individual local authorities as to managing the decline in capital spend, although COSLA indicated that it had established an infrastructure task group in 2010.

195. Evidence from local authorities reflected the decline in value of assets due to the wider economic situation, with local authorities recognising that sales might either not be possible or that the level of receipt from a sale would not justify selling the asset in the near future.

196. Audit Scotland observed that local authorities were beginning to move away from using capital receipts and were instead using other funding models to allow them to invest in capital. It indicated that it would monitor this trend closely—

“We are going to be interested in different funding models in the next wee while. Over the past few years, the levels of borrowing in councils have increased, particularly in the past couple of years as capital receipts have reduced. Councils have not been able to sell as much land and as many buildings, which are obviously an important source of funding. Borrowing is going up, and we are seeing increasingly innovative and novel ways of finding money to invest in capital. From an accounting point of view, we will keep a close eye over the next year or two on the risks and governance issues associated with some councils.”503

197. In terms of council reserves, Audit Scotland’s analysis of local authorities’ reserves suggested that the general funds in 2009-10 had increased by about £64million or 11 per cent, with the total figure now being £642. Audit Scotland suggested “It might well be that councils have been prudent in the past 12 months or so in order to help them to prepare for what is coming down the track.”504

198. Alastair MacNish cautioned against the use of reserves, stating that “The problem with using a reserve is that it is a one-off; it solves a short-term problem, but the long-term problems still exist.”505 Jenny Stewart of KPMG observed that local authorities that had built up reserves should not be penalised by their reserves being taken into account in terms of income received—

“If local authorities have built up reserves—I refer to the point on the rainy day position—I would not want them to be penalised for doing that. If they have been prudent and built up reserves to deal with the rainy day, no one should say, "Well, you've got good reserves, so you'll get less money next year than council X, which has fewer reserves." We should reward prudence.”506

199. The Committee recognises the dilemma faced by local authorities in terms of the use of any existing reserves that they have. While the budgetary situation that local authorities will face in coming years is extremely challenging, the exhaustion of existing reserves would make it difficult for a local authority to deal with one-off or unforeseen costs such as a flood.

200. The Committee also urges caution in relation to the sale of local authority assets as a short-term measure.

Increase in non-domestic rates income

201. The Cabinet Secretary for Finance and Sustainable Growth announced in his budget statement that he would increase non-domestic rates for large retail properties. In evidence to the Committee he said that he would set out the approach to this in the near future. He further explained—

“The initiative will be driven by the rateable value of particular properties in the retail sector and will apply a supplementary business rate level to the business rates that have been paid to date. That will focus on ensuring that we raise revenue by increasing business rates for large retailers.”507

202. He further explained that he would examine the current rateable value of retail properties and impose and increase above a certain level. This would raise approximately £30m and as business rates account for about 2 per cent of turnover of the retailers concerned that the cost would be “at the periphery of the cost base of many of the organisations”.508 represent although million.

203. The Cabinet Secretary explained the reasoning behind his decision to increase non-domestic rates for this group—

“On the question of how the initiative is focused, I arrived at the judgment that, despite the economic challenges that we face, the large retail sector is still performing extremely well. There is an opportunity for us to capture additional revenue. The budget that I have to balance arises from a combination of limited opportunities to raise revenue and the need to reduce public expenditure. This measure will raise additional revenue, and it can be sustained by a sector that is performing well, despite the economic difficulties that we are facing.”509

204. In his statement to Parliament on 9 December 2010, the Cabinet Secretary announced details of the levy which will apply to larger retail properties. Finance Circular No.14/2010510 contained the following details regarding the levy:

“A new Large Retailers supplement is proposed for 2011-12. If approved by Parliament, this will increase the rates paid by the largest retail properties. The amounts will vary from an additional 2.5 p to 15p in the pound (including the 0.7p standard supplement). The supplement applies to properties with a rateable value exceeding £750,000, as shown below.

Rateable value range for large retailer supplement Supplement in the pound
More than £750,000 but not exceeding £1,000,000 2.5p
More than £1,000,000 but not exceeding £1,099,999 5p
More than £1,099,999 but not exceeding £1,265,000 10p
More than £1,265,000 but not exceeding £2,140,000 12p
More than £2,140,000 15p

205. The Committee notes the evidence on the business rates for large retail properties, but as the secondary legislation which has been laid before Parliament will be considered by the Committee, it does not wish to pre-empt the consideration of the instrument concerned by commenting on the proposal at this point.

CONCLUSIONS AND RECOMMENDATIONS

The Local Government, Housing and Regeneration and Equalities and Social Inclusion Budgets

206. The 2011-12 settlement is in line with the local government's 2005-06 settlement level, once adjusted for inflation. Notwithstanding this funding level, rising demand and increased user expectations mean measures both to reduce demand and increase efficiency are now even more important if vulnerable groups and those in most need are to continue to get adequate, affordable levels of service.

207. The Committee accepts that assuming all local authorities sign-up to the Scottish Government and COSLA Leadership agreement, their average budget settlement is marginally better than the Scottish average (assuming the Scottish average is based on a DEL and not a TME basis, even though the local government settlement includes non-domestic rates income, which is AME and not DEL). The 2011-12 budget allocations has favoured local government over a number of other budget areas such as Rural Affairs, Justice and Education and the capital cut has been less than the Scottish average.

208. The Committee recognises that the housing and regeneration budget has suffered because it relates primarily to capital expenditure. The Committee is concerned that these cuts will have an impact on the ability of local authorities to meet key targets, notably the 2012 homelessness commitment, the 2016 fuel poverty target and the target for the social rented sector to meet the Scottish Housing Quality Standard by 2015.

The Scottish Government and COSLA Leadership agreement

209. The Committee calls on the Scottish Government to provide more information on how the commitments within the Scottish Government and COSLA Leadership agreement will impact on the existing Single Outcome Agreements and, more importantly, how the delivery of these commitments by local authorities will subsequently be monitored.

210. The Committee is not convinced, on the basis of the previous delivery record of local authorities on the specific set of commitments contained within the original Concordat,, that these new commitments will be delivered within the timescale of the 2011-12 budget. In particular, the Committee calls for in-year monitoring of these commitments and reporting on progress within 2011-12. Furthermore, the Committee calls on the Scottish Government to explain how it will hold local authorities to account if they fail to deliver these commitments.

Budgetary planning

211. The Committee recognises from the evidence that it has received from individual local authorities that many of them have undertaken planning for the financial pressures which they anticipate in the next three or four years. However, the Committee considers that more certainty about the challenges that they face would allow them to develop longer term plans for service delivery. The Scottish Government’s commitment to publish illustrative figures may be helpful in this respect.

212. With these severe budget pressures, the Committee echoes the concerns of a number of those giving evidence that a one-year budget should not delay or inhibit the service redesign that is needed across Scotland's local authorities. The Committee nevertheless recognises that 14 of the 19 local authorities which submitted written evidence indicated that they were planning beyond 2011-12.

Future pressures

The Committee recognises the increasing pressure that will be placed on local authority services in the future as the demand for services increases, notably as a result of demographic trends. It acknowledges the call made by COSLA for a fundamental assessment of the role of the public sector in delivering services and the degree to which local authorities should continue to provide services on a universal basis.

213. The Committee considers that it is vital the future Scottish Government and the Scottish Parliament and its committees are engaged in a discussion on these elements of the future of public services following the publication of the Christie Commission report in June 2011.

Equal pay

214. As stated in its report on equal pay in 2009, the Committee is firmly of the view that the relevant parties should enter into urgent discussions with a view to settling cases that are considered to be “strong”, thereby reducing the number of cases within the tribunal system. For those cases which remain in the tribunal system, all parties should comply with whatever requests are made of them by the Tribunal Service to ensure that the cases can be dealt with as swiftly as possible.

215. It is evident that settlement of equal pay cases will be a significant financial pressure on local government resources and as budgets become more constrained, there is an even greater risk that local authorities will find it difficult to meet their liabilities without there being a significant impact on those budgets. Therefore, it is imperative that settlements are reached sooner rather than later so that the scale of liabilities can be made clearer.

Future public sector reform: the Christie Commission

216. The Committee is of the view that the Commission on Public Sector Reform has an exceptionally challenging task ahead of it in terms of fulfilling its remit and reporting by June 2011, particularly if it is making recommendations for structural reform as well as recommendations for the realignment of budgets. The Committee is also keen to understand what secretarial and executive support the Commission will have to allow it to arrive at concrete recommendations for the Scottish Government's budgetary allocations for 2012-13 to 2014-15.

217. The Committee considers that the Commission on Public Sector Reform’s report will represent only a first step towards any major reform of public services in Scotland. The Scottish Government formed after the May 2011 will need to consider which of the Christie Commission’s recommendations it will take forward. However, the Committee considers that it is unlikely that there is sufficient time for the report to have a significant impact on the 2012-13 budget.

218. The Committee also considers that the Scottish Parliament should be given the opportunity to consider and debate the recommendations made in the Commission on Public Sector Reform report.

219. The Committee is concerned that not only will it be challenging to make recommendations for structural reform and service redesign within the reporting period, it is also questionable as to how quickly any such recommendations can be implemented. To illustrate this, the Committee notes that it is over a year since Sir John Arbuthnott produced his report on Clyde Valley Review of Joint Working and Shared Services and it would appear that very little progress has made in implementing his recommendations. The Committee is not, therefore, optimistic that public sector reform will be driven in the short term by the recommendations of the Commission on Public Sector Reform rather than the more immediate imperative of budgetary reductions.

Impact and management of declining budgets

220. The Committee accepts that should Scotland's local authorities deliver 3% efficiency savings next year they will help fill any emerging funding gap.

221. The Committee considers that it is not clear what measures exist to ensure initiatives aimed at delivering efficiencies do not actually result in service cuts, either in the quantity or quality of services provided. As noted in the Committee’s Local Government Finance Inquiry Report, each individual local authority publishes an annual efficiency statement and that is made available for audit. It would appear that to date, that no independent audit of reported local authority efficiency savings has ever been undertaken. The Committee therefore reiterates its concern that local authority reporting of efficiencies is currently based on self-certifying responses by local authorities. The Committee therefore recommends that local authority efficiency savings are subject to independent audit from 2011-12 onwards.

222. As it stated in its Local Government Finance Inquiry report, the Committee recognises that increasing the pace of change in relation to service redesign during a recession is a challenging task facing local government and that earlier progress in this area, during the relatively benign financial environment in previous years, would have been beneficial. However, the Committee considers it essential that increasing the pace of change in delivering shared services is essential if local government is to successfully meet the challenges of the changing nature of public sector finances.

223. While the Committee recognises that sharing services can contribute to savings, it considers that the scale of those savings can only contribute to a limited extent in addressing the funding gap that local authorities will face in the coming years.

224. The Committee is concerned that figures could not be obtained for the number of full time equivalent posts in local authorities for which employees earned less than £21,000 a year in Scotland. It notes that the Scottish Government provided information on the number of employees earning less than £7.15 per hour which gives a clearer picture of low pay in those parts of the public sector covered by the Scottish Public Sector Pay Policy. Until such figures are known for local authorities, it is extremely difficult to ascertain the scale of the problem in terms of low pay. The Committee therefore asks the Scottish Government to work with COSLA to encourage local authorities to produce the same information as soon as possible.

225. The Committee welcomes the Scottish Government’s commitment to protect the lowest paid. However, it is concerned that the pay freeze being applied in Scotland's local authorities leaves the lowest paid disproportionately affected with no floor on the pay rate to which it applies and no commitment to the introduction of the living wage. This could result in a wider gulf between the lowest paid employees covered by the Scottish Government’s public sector pay policy on the one hand and those of local authorities on the other. The Committee notes the Cabinet Secretary’s statement that he is encouraging public sector bodies to adopt the principles in the Scottish Government’s pay policy and that he continues to have discussions with COSLA and the STUC on this and a number of other issues. The Committee therefore believes it is essential further work is undertaken to assess the costs with a view to implementing the same protection for the lower paid in local authorities.

226. The Committee acknowledges that the third sector delivers important services, often very efficiently, and recognises that the third sector is concerned that it may come under significant pressure in the coming years due to the budgetary constraints faced by local authorities. The Committee is cognisant that for many local authorities it may be easier to cut the budgets for contracted services, rather than in-house services, and is therefore of the view that qualitative criteria and the needs of the user must be taken into consideration by local authorities in assessing how budgets should be allocated.

227. The Committee calls on the Christie Commission to give particular consideration to the third sector in its deliberations

228. The Committee calls on local authorities to review the role of partnership structures, notably the Community Planning Partnerships, in order to ensure that they can contribute to service redesign and are engaged on opportunities to share budgets.

229. The Committee believes that the variations in the costs for providing services across local authorities demonstrates the potential for savings through improvements in productivity that bring the local authorities with higher service costs closer to the average cost. It calls on the Accounts Commission to reinforce the importance of processes and infrastructure for the delivery of efficient services through its best-value audits.

230. The Committee also recommends that appropriate data is collected to enable comparison across local authorities in terms of service provision. At present, the Committee considers that much of the performance data collected by the Accounts Commission does not assist in this process.

231. The Committee clearly would wish that the Change Fund should be beneficial and realised as soon as possible It believes that the progress in promoting a shift in the balance of care needs to be closely monitored in order that the Scottish Government can intervene to promote progress if it is slow or the partners concerns are not working together effectively.

232. The Committee recognises from the evidence that it has received, notably from individual local authorities, that in the context of reducing budgets, many of them are deciding to increase or introduce charges for services which is one of the few mechanisms to offset the reduction in income that is still available to them. The Committee recognises that there is a danger that where neighbouring local authorities take different approaches to charging there may be a public feeling in some areas that there is a “postcode lottery” in relation to charging. The Committee considers that it is vital that any changes in charging for services should be transparent and reflect the cost of provision, rather than being seen as a method of increasing revenues.

233. The Committee recognises the dilemma faced by local authorities in terms of the use of any existing reserves that they have. While the budgetary situation that local authorities will face in coming years is extremely challenging, the exhaustion of existing reserves would make it difficult for a local authority to deal with one-off or unforeseen costs such as a flood.

234. The Committee also urges caution in relation to the sale of local authority assets as a short-term measure.

EXTRACTS FROM THE MINUTES OF THE LOCAL GOVERNMENT AND COMMUNITIES COMMITTEE

16th Meeting, 2010 (Session 3), Wednesday 26 May 2010

3. Decision on taking business in private: The Committee agreed to take item 6 in private. The Committee also agreed to consider a paper on Equal Pay in Local Government in private at a future meeting.

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

The Committee agreed:

  • that the focus of its budget scrutiny should be on the local government side of the Committee's remit including equal pay;
  • in principle to invite a member of the Independent Budget Review group to give evidence to the Committee as part of its preparatory work;
  • to appoint a budget adviser;
  • the remit and person specification for the post of budget adviser, and
  • to consider in private a list of candidates at a future meeting.

18th Meeting, 2010 (Session 3), Wednesday 23 June 2010

Draft Budget Scrutiny 2011-12 - appointment of adviser (in private): The Committee considered a list of candidates for the post of budget adviser to the Committee and agreed a preferred candidate for the post.

19th Meeting, 2010 (Session 3), Wednesday 8 September 2010

Draft Budget Scrutiny 2011-12: The Committee took evidence on the Independent Budget Review from—

Crawford Beveridge CBE, Chair, and Sir Neil McIntosh CBE, Member, Independent Budget Review Panel.

20th Meeting, 2010 (Session 3), Wednesday 15 September 2010

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

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

24th Meeting, 2010 (Session 3), Wednesday 27 October 2010

1. Decision on taking business in private: The Committee agreed to take item 4 in private. The Committee also agreed to consider the evidence heard and its draft reports on the Private Rented Housing (Scotland) Bill, Local Electoral Administration (Scotland) Bill and the Draft Budget 2011-12 in private at future meetings.

2. Draft Budget Scrutiny 2011-12: The Committee took evidence in a roundtable discussion from—

Alastair MacNish OBE;

John McLaren, Centre for Public Policy for Regions;

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

Jenny Stewart, Partner, KPMG.

4. Draft Budget Scrutiny 2011-12 (in private): The Committee considered the main themes arising from the evidence heard to date.

25th Meeting, 2010 (Session 3), Wednesday 3 November 2010

Draft Budget Scrutiny 2011-12: The Committee took evidence from—

Alan Puckrin, Chief Financial Officer, Inverclyde Council;

Ian Lorimer, Head of Finance, Angus Council;

Lynn Brown, Executive Director of Financial Services, Glasgow City Council.

Draft Budget Scrutiny 2011-12 (in private): The Committee considered the main themes arising from the evidence heard to date.

28th 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—

John Downie, Director of Public Affairs, Scottish Council for Voluntary Organisations;

Annie Gunner Logan, Director, Community Care Providers Scotland;

Douglas Sinclair, Chair, Consumer Focus Scotland;

David Dorward, Chief Executive, Dundee City Council, Society of Local Authority Chief Executives;

Fiona Farmer, Scottish Regional Secretary, Unite;

Douglas Black, Regional Organiser and Secretary, Local Government Service Group, UNISON;

Alex McLuckie, Senior Organiser, GMB Scotland;

Joe Di Paola, Head of the Employers Organisation, COSLA.

Draft Budget Scrutiny 2011-12 (in private): The Committee considered the main themes arising from the evidence heard to date.

29th 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—

John Swinney MSP, Cabinet Secretary for Finance and Sustainable Growth, David Henderson, Head of Local Government Division, and Graham Owenson, Team Leader, Local Government - Finance, Scottish Government.

Draft Budget Scrutiny 2011-12 (in private): The Committee considered the main themes arising from the evidence heard to date.

30th Meeting, 2010 (Session 3), Wednesday 8 December 2010

Draft Budget Scrutiny 2011-12 (in private): The Committee considered the main themes arising for its draft report.

31st 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.

32nd Meeting, 2010 (Session 3), Wednesday 22 December 2010

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

ANNEXE K

Rural Affairs and Environment Committee

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

The Committee reports to the Finance Committee as follows—

1. In this report, the Rural Affairs and Environment Committee comments on those aspects of the Scottish Government’s Draft Budget 2011-12 that relate to its remit.

2. The Committee has been assisted in its scrutiny by its budget adviser, Jan Polley, and extends its thanks to her for her valuable assistance.

introduction

Approach

3. The Scottish Government’s Draft Budget 2011-12 was published slightly later than previous years, due to the delay in the publication of the UK Government’s comprehensive spending review. This has further limited the amount of time available to committees in the Scottish Parliament to scrutinise budgets in their respective areas.

4. The Committee agreed to hold two evidence sessions on the Draft Budget, before agreeing its report to the Finance Committee. The Committee agreed to first take evidence from a panel of stakeholders, followed by evidence from the Cabinet Secretary for Rural Affairs and the Environment and his officials.

Evidence

5. The Committee took evidence on 24 November 2010 from Scottish Natural Heritage (SNH), the Scottish Environmental Protection Agency (SEPA), the National Farmers Union Scotland (NFUS), Scottish Environment Link (SE Link) and the Macaulay Land Use Research Institute (MLURI).

6. On 1 December 2010 the Committee took evidence from Richard Lochhead MSP, Cabinet Secretary for Rural Affairs and the Environment, together with Scottish Government officials, Paul Gray, Director General, Rural Affairs, Environment and Services; Mike Neilson, Director, Marine Scotland; David Barnes, Deputy Director, Rural and Environment Directorate; and Ross Scott, Finance Team Leader, Rural Affairs and Environment. Paul Smith, Head of Corporate Services, Forestry Commission Scotland, was also part of the panel.

7. The Committee received five written submissions, from SE Link, the Confederation of Forest Industries (ConFor), COSLA, the Royal Society for the Protection on Birds (RSPB) and the Scottish Agricultural College (SAC).

overview of rural affairs and environment draft budget

8. The Rural Affairs and Environment (RAE) draft budget 2011-12 of £539m drops by 9% from its total of £594m in 2010-11. This is similar to the reduction experienced by most other portfolios in the Scottish Government’s draft budget (with the exception of health). The overall drop of 9% in the RAE budget is split between a 7% reduction in its resource budget and a 29% drop in available capital expenditure in 2011-12. Again, this mirrors the pattern of change in the Scottish Government’s draft budget as a whole.

PORTFOLIO ANALYSIS

9. The RAE draft budget is disaggregated to Level 2 in Table 1. The figures shown in this table cover both resource and capital budgets.

TABLE 1   Total DEL £m  
  2010/11 2011/12 Change % change
Total 594.4 539.4 -55 -9%
EU support and related services (incl. SRDP) 155.9 138.2 -17.7 -11%
Research, analysis & other services 95.7 82 -13.7 -14%
Marine and fisheries 66.7 61.3 -5.4 -8%
Environmental and rural services 196.1 186.4 -9.7 -5%
Forestry Commission 55.1 47.7 -7.4 -13%
Forest Enterprise 24.9 23.8 -1.1 -4%

EU support and related services

10. This area of activity will see one of the largest reductions in funding in 2011-12. In addition to a £17.7m drop in Scottish Government funding, it will also see a £24.6m fall in funding provided by the European Union (EU).

EU funding

11. The Cabinet Secretary for Rural Affairs and Environment told the Committee that the fall in EU funding relates to spend on the Scottish Rural Development Programme (SRDP). He explained that it is caused by the fact that EU funding of the SRDP must be match funded 50:50 in 2011-12 by Scottish Government funding. As the latter will fall by nearly £25m in 2011-12, there must be a commensurate reduction in EU funding that can be levered into the Scottish budget.511

12. In response to several questions from Committee members, the Cabinet Secretary confirmed his commitment to ensuring that all the EU funding available to Scotland during the lifetime of the SRDP 2007-13 is accessed. He did however acknowledge that, while his officials will be looking at ways of increasing EU funding over the next 12 months, future budget pressures on the amount the Scottish Government spends on the SRDP over the next few years will have a knock-on effect on the level of EU funding that can be accessed.

13. The Committee recognises that the Scottish Government has only recently gained European Commission agreement to increasing the level of co-financing for all grants so that 50% of the total payment will come from EU funds in future. The Committee also acknowledges that while the current SRDP runs from 2007 to 2013, member states can take a further two years to pay out on grants approved (a system known as N+2).

14. The Committee notes with concern however that, to date, only €143.8m of EU funds has been spent out of a total available to Scotland of €679m. Two thirds of this total was top sliced from the Single Farm Payment due to farmers in Scotland and the Committee believes it must be used to benefit Scotland’s rural areas. The remainder is provided from the central European Agricultural Fund for Rural Development and experience in the past suggests that failure to use it could reduce the amount of European money available to Scotland in future, thus disadvantaging the country in the longer term.

15. The Committee recommends to the Finance Committee that it urges the Scottish Government to allocate sufficient domestic funds to ensure all of the European funding available under the Scottish Rural Development Programme is accessed in the period 2011-15.

Certainty in grant applications

16. Jim McLaren, President of the NFUS, told the Committee of his concern about the number of short notice changes that have been made to the administration of the SRDP—

“I urge the Government to give people long-term signals, whatever it does. Let us not have a situation in which people find in the midst of their applications for schemes that the goalposts have shifted […]”.512

17. The Cabinet Secretary acknowledged this had been a problem in the past, explaining that the rules governing the SRDP, the need to predict grant uptake levels and the complexity of the schemes administration, made it hard to avoid changes. He did, however, say that his officials would try to ensure that there was adequate notice of changes to the schemes in future.

18. The Committee accepts the complexity of the administration of the SRDP but believes that every effort must be made to give grant applicants sufficient notice of scheme changes so that they can plan their businesses with certainty and stability, especially in this period of economic difficulty. The Committee therefore recommends to the Finance Committee that it urge the Scottish Government to re-evaluate the monitoring and review systems used to predict future spend in the SRDP, learning lessons from the recent problems to ensure that the systems provide adequate early warning of changes required in future.

New entrants

19. One aspect of the SRDP is support to those entering the farming sector for the first time. Barriers to entry are considerable in this sector and the Committee has taken a keen interest in helping new entrants. Information provided by the Scottish Government shows that £826,000 has been approved in grants to help new entrants with interest rate relief under the SRDP.513 In addition, new entrants are entitled to a slightly higher rate of payment for many other schemes within the SRDP. In total, £13.5m has been approved in grants to new entrants since 2008.

20. The Cabinet Secretary explained that he planned to introduce another grant specifically for new entrants so that Scotland would now be using the full range of tools available in the Rural Development Regulation. He also undertook to use the forthcoming negotiations to reform the Common Agricultural Policy to press for a wider definition of a new entrant, to allow those over the age of 40 to be included.

21. The Committee recommends to the Finance Committee that it ask the Scottish Government to do what it can to ensure that the next reform of the Common Agricultural Policy includes changes to the definition of new entrants to farming so that those over 40 years of age can access the appropriate financial support.

Research, Analysis and Other Services

22. The 14% reduction in the 2011-12 budget for research, analysis and other services is made up of a 9% (£8.7m) reduction in resource funding and a 64% (£9m) fall in capital funding. The Level 3 breakdown is shown in Table 2. Scottish Government officials explained that most of the reduction in capital funding arose from the cancellation of a plan to replace the glasshouses in the Royal Botanic Gardens Edinburgh and a small grant to assist with the forthcoming merger of two research institutes.

TABLE 2 Total DEL £m

 

2010/11 2011/12 Change % change

 

       
Research Total 95.7 82 -13.7 -14%
Programmes of Research 74.5 62.7 -11.8 -16%
Royal Botanic Garden Edinburgh 11.3 11.9 0.6 5%
Contract Research Fund 8.4 5.9 -2.5 -30%
Economic and Other Surveys 1.5 1.5 0 0%

Resource budgets

23. The Cabinet Secretary said that the 9% drop in resource funding would be concentrated in the contract research fund because this focussed on ad hoc commissioning of research and that—

“We have gone out of our way to prioritise our main research providers and their budgets. Although the budgets will be flat—there is no increase as such—we have protected them.”514

24. While the overall resource expenditure on the science base would be maintained in 2011-12, the Committee was told that 15% of that funding, which had previously gone directly to the Scottish research institutes, would be held back. Research institutes would be invited to bid for some of it on a competitive basis and the rest would be used to set up three new centres of expertise – which would comprise the research institutes and universities.

25. The Committee explored whether this top slicing would cause problems for the sector. In evidence given to the Committee on 24 November 2010, Professor Richard Aspinall, Chief Executive of MLURI, explained that—

“We have had some assurances from the chief science advisers at RERAD [the Scottish Government’s Rural and Environment Research and Analysis Directorate] that we can hope to get access to that same level of funding through the competitive mechanism that surrounds the centres of expertise and strategic partnerships. We have been working on the basis that we will have flattened level funding for the year, through the mechanisms that are in the budget. Although the situation is competitive and opens up new areas of work that we have bid for in a different way, with university partners, we hope and expect that we will manage to achieve flat funding […].”515

26. Professor Aspinall also explained that the research institutes are aiming to access other sources of research funding—

“Except in specific circumstances, the institutes are not able to compete for funding from the Natural Environment Research Council or the Biotechnology Sciences Research Council, which are the two big research councils for food security and living with environmental change – those are the two main programmes. RERAD has managed to get us a capacity to bid, and we are now bidding to the research councils for funding in food security and environmental change […] RERAD supplied some funds to those programmes as a match. For every £1 that it put in, we can get £2 back.”516

27. Given the current financial climate, the Committee particularly welcomes research institutes looking to access other sources of funding if that offers an opportunity to leverage in extra funding to the Scottish research base.

Marine and fisheries

28. The Committee has expressed its concern in the past at the lack of quality research into some seafish stocks, particularly in waters to the west of Scotland, where little data is collected by the other EU member states. It therefore explored with the Cabinet Secretary whether the proposed 10% reduction in Marine Scotland’s budget in 2011-12 would adversely impact on Scotland’s ability to improve the standard of research in this important area. In response the Cabinet Secretary accepted the need to plug gaps in our scientific knowledge and explained that the budget cuts should result in a change in the way the science is gathered, not in a lower level of scientific research. He expected more emphasis to be put on working with the industry to gather scientific data and working with scientists in other countries.517

29. The Committee recognises the high quality work done by Marine Scotland scientists and others to provide fisheries data within tight constraints, particularly in west of Scotland waters. These constraints look likely to increase in future. The Committee observes that it will be a challenge to Marine Scotland to find increasingly ‘smart’ ways to make resources go further and observes that there may be increased potential to work with industry to obtain data.

Environmental and rural services

30. This Level 2 budget heading covers a wide range of activity and encapsulates two previously separate budgets. Some of the Level 3 information has also been aggregated compared with the previous budget. Some of the Committee’s questioning was therefore devoted to understanding the funding of previously separate budget lines. The Level 3 information provided for 2011-12 is shown in Table 3.

TABLE 3 Total DEL £m

 

2010/11 2011/12 Change % change

 

       
Environmental & Rural Total 196.1 186.4 -9.7 -5%
Scottish Natural Heritage 67.9 60.7 -7.2 -11%
National Parks 12.5 12.4 -0.1 -1%
Natural Resources 0.3 0.3 0 0%
Scottish Environment Protection Agency 44.3 39.4 -4.9 -11%
Zero Waste 24.4 26.4 2 8%
Natural Assets & Flooding 6.9 5.7 -1.2 -17%
Sustainable Action Fund 15.3 15.3 0 0%
Crofting Assistance 5.5 6.8 1.3 24%
Rural Cohesion 1 0.8 -0.2 -20%
Agricultural & Horticultural Advice & Support 5.1 4.1 -1 -20%
Veterinary Surveillance 4.8 5.2 0.4 8%
Animal Health 1.2 1.2 0 0%
Food Industry Support 2 3.9 1.9 95%
Private Water 4.5 3.8 -0.7 -16%
Drinking Water Quality Regulator 0.4 0.4 0 0%

Scottish Natural Heritage and Scottish Environment Protection Agency

31. Together, SNH and SEPA account for approximately 60% of the environmental and rural services budget. Both organisations told the Committee that they would be able to find the 11% savings required of them in 2011-12 although with a differing position on whether this would entail service cuts or not.

32. Ian Jardine, Chief Executive of SNH, told the Committee—

“[…] two things will be necessary in SNH’s budget next year: efficiencies and cuts. Part of my job is to maximise efficiencies so that we minimise cuts. SNH has managed to deliver its efficiency targets to date. We expect to deliver more through efficiencies over the next year. At the moment I cannot give you an absolute target […].”518

33. John Ford, Director of Finance and Corporate Services at SEPA, explained in the same evidence session—

“The intention is to deliver our outcomes and objectives with a lower cost base by focusing on a more risk-based approach to regulation and ensuring that our associated scrutiny is in line with that […].”519

34. Mr Ford went on to confirm—

“We believe that there will be enough funding in the budget that has been allocated to allow us to deliver in our core areas of climate change, river basin management planning, zero waste, biodiversity and flooding […].”520

35. In response to a question from the Committee, Mr Ford added that SEPA did not envisage increasing its charges in 2011-12 although he explained that the pattern of charging may change in future years with “gainers and losers”521 as SEPA moves to a more risk based approach.

36. The Committee also explored whether the pressure for efficiencies might lead to closing rural offices, creating greater geographic centralisation, and disadvantaging rural communities. Lloyd Austin, head of conservation policy for SE LINK, suggested that rural businesses and NGOs should remain an important means of delivering public outcomes in rural areas—

“The outcome per unit of public sector money can be much higher for funding that comes through third parties, be they NGOs or private sector land managers. As we consider where priorities lie in strategically determining where to protect and where to cut, I would argue that we should consider schemes and funding streams that bring a multiplier effect through their delivery by third parties.”522

37. Both SNH and SEPA stressed that they were mindful of the importance of maintaining a geographic spread and did not see the need to centralise functions as necessarily a reason for closing any of their rural offices. Sharing local accommodation and giving responsibility for central functions to local offices were cited as examples of maintaining a more efficient country-wide network.

38. The Committee welcomes the approach of sharing local accommodation and giving responsibility for central functions to local offices as outlined by SNH and SEPA. The Committee recommends to the Finance Committee that it ask the Scottish Government to ensure that all directorates and public bodies are mindful of the need to maintain the geographic spread of public sector employment and activity while delivering the required budget cuts in 2011-12 and beyond, in order to maintain employment and economic activity in rural areas.

Zero waste

39. The Committee received written evidence from COSLA seeking clarification on how the additional £2m allocated to this budget line in 2011-12 will be spent and whether local authorities will have access to it. COSLA also drew attention to a recent report written for the Scottish Government, Meeting Scotland’s Zero Waste Targets523 which makes clear that the existing infrastructure, before the forthcoming cuts in capital expenditure, is insufficient to meet Scotland’s 2025 zero waste targets.

40. The Cabinet Secretary said his recent discussions with COSLA representatives suggested they were more confident of meeting the 2025 targets than their submission suggested. He agreed, however, that the targets are challenging and said that local authorities will need to be prepared to explore all possible means of achieving them, including exploring how the latest technology could make previously unpalatable options more feasible.

41. He also drew the Committee’s attention to the recent work of the Scottish Futures Trust exploring alternative ways of funding infrastructure projects. He believed that a number of these would become available in the foreseeable future.

42. The Committee remains concerned that Scotland will need to maintain a significant level of capital investment throughout this period of budget constraint if it is to meet its 2025 zero waste targets. It further notes that this pressure on resources will also apply to the cost of expanding waste recycling systems and encouraging people and businesses to produce less waste in the first place.

43. The Committee recommends to the Finance Committee that it asks the Scottish Government to continue to explore how this level of investment can be maintained and how it will ensure that less waste, including commercial and industrial waste, is produced. The Committee also asks the Finance Committee to urge the Scottish Government to monitor those local authorities that are not currently meeting targets on waste reduction and report back to the relevant committee on all these matters during 2011.

Veterinary surveillance

44. The SAC said in its written evidence that, while the veterinary surveillance budget line as a whole was due to increase slightly in 2011-12, the SAC budget for veterinary surveillance had been cut in practice by something in the region of £0.5m. Jim McLaren, President of the NFUS raised the same issue. Both challenged the appropriateness of this change before the publication of the conclusions of an independent review into the future of veterinary surveillance in Scotland.

45. The Cabinet Secretary explained that this independent review, chaired by John Kinnaird, had been delayed and was due to report in early 2011. He acknowledged that the timing of the budget cuts were not perfect and that decisions on the use of the 2011-12 budget would need to await the results of the review, but stressed the importance of ensuring that the network of surveillance laboratories in Scotland provided value for money in the 21st century.524

Animal health

46. Jim McLaren, of the NFUS, also raised with the Committee the delay in an agreement being reached between the UK and Scottish governments over the distribution of the UK animal health and welfare budget. This Committee heard evidence on this same issue during last year’s budget scrutiny process and is concerned that no agreement has yet been reached. It is particularly concerned that the impact of the UK Government’s comprehensive spending review on the overall budget for the Department for Environment, Food and Rural Affairs (DEFRA) is now likely to have an adverse effect on the money available to Scotland.

47. The Cabinet Secretary acknowledged the delay in reaching agreement on the transfer of this budget but said he had received an assurance from ministers in DEFRA that they wish to have an agreement by the end of this financial year. He explained that the negotiations are complex especially over the extent to which Scotland would have access to additional Treasury funds in the event of a major disease outbreak akin to foot and mouth disease in 2001. DEFRA officials have suggested that as the Treasury did not provide additional funding during the last outbreak of foot and mouth disease in 2007, there is no likelihood of such funding in future. The Cabinet Secretary explained that it was also proving difficult to agree figures on how much of the existing budget is allocated to, or spent, in Scotland.

48. This Committee shares the Cabinet Secretary’s wish that the issue of the distribution of the UK animal health and welfare budget should be finalised before the end of this financial year in a fair and equitable manner. It takes the view however that the final agreement must not rule out the possibility of Scotland receiving contingency funding from Treasury in the event of a major animal disease outbreak in future. The Committee is strongly of the view that the outbreak of foot and mouth disease in 2007 does not set a precedent as calls on the contingency fund are, by their nature, dependent on the circumstances of the time. The Committee accepts that such future funding would depend on the circumstances at that time and would be the subject of discussions between the UK and Scottish Governments but believes that such a possibility must remain open. To do otherwise would leave Scotland liable for the cost of any major animal disease outbreak in 2011-12 and beyond, irrespective of whether Treasury provides additional funding to DEFRA in England.

49. The Committee wishes to draw this potentially significant issue to the attention of the Finance Committee and asks that it recommend to the Scottish Government that every effort is made to resolve these negotiations with DEFRA in a manner which gives Scotland continued access to Treasury contingency funds in future.

Forestry Commission and Forest Enterprise

50. The Forestry Commission Scottish budget will fall by £7.4m (13%) in 2011-12 but this will be more than offset by a significant increase in funding from the European Union of £11.9m in 2011-12. The latter will be used to increase the woodland grants available as part of the SRDP by one third from £27m in 2010-11 to £36m in 2011-12.

51. CONFOR welcomed this substantial increase but warned that it may not be enough to ensure Scotland meets its target of planting 10,000 hectares of trees each year if recipients believe the additional funding will not be sustained.

52. There will also be reductions of £2.5m in the Forestry Commission budget to reflect the scaling down of two grant schemes - Timberlink and Timber Care. The Cabinet Secretary explained that the Forestry Commission believed demand for the grant schemes, which include payments to help move large lorries away from roads in small rural communities, is starting to tail away. After being pressed by the Committee, the Cabinet Secretary did agree, however, that expenditure would be kept under review in the light of demand as the year progresses.

Capital receipts

53. An overarching issue that was brought to the attention of the Committee was the extent to which those parts of the Scottish Government which generate capital receipts by disposing of capital assets can reinvest that money in their own area. The Committee noted that, within the Rural Affairs and Environment portfolio, the Forestry Commission and Forest Enterprise have that right while others, such as SNH, do not.

54. Evidence from the Cabinet Secretary and his officials indicated that decisions on whether capital receipts can be reinvested are taken on a case by case basis centrally within Scottish Government.

55. The Committee recognises that it will not always be appropriate for capital receipts to be invested in the area that has generated them, and that market conditions will not always be conducive to selling off public assets. The Committee takes the view, however, that further thought should be given to whether the current rules should be adjusted in this period of low capital budgets to maximise the incentive for public bodies to identify assets that can be disposed of. This is particularly important when it is remembered that capital budgets could be constrained for many years to come.

56. The Committee recommends to the Finance Committee that it seek to explore with the Scottish Government what changes could be made to the rules governing capital receipts to provide incentives to public bodies to dispose of capital assets in return for increased capital budgets.

EXTRACTS FROM THE MINUTES OF THE RURAL AFFAIRS AND ENVIRONMENT COMMITTEE

25th Meeting, 2010 (Session 3), Wednesday 17 November 2010

Budget Process 2011-12 (in private): The Committee considered its approach to the Scottish Government's draft budget proposals 2011-12.

26th 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—

Jim McLaren, President, National Farmers Union Scotland;

John Ford, Director of Finance & Corporate Services, SEPA;

Lloyd Austin, Head of Conservation Policy, Scottish Environment LINK;

Professor Richard Aspinall, Chief Executive, Macaulay Land Use Research Institute;

Ian Jardine, Chief Executive, Scottish Natural Heritage.

John Scott declared an interest as a farmer.

Draft Budget Scrutiny 2011-12 (in private): The Committee reviewed the evidence heard earlier in the meeting on the Scottish Government's Draft Budget 2011-12.

27th Meeting, 2010 (Session 3), Wednesday 1 December 2010

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

Richard Lochhead MSP, Cabinet Secretary for Rural Affairs and the Environment, Paul Gray, Director General, Rural Affairs, Environment and Services, Mike Neilson, Director, Marine Scotland, David Barnes, Deputy Director, Rural and Environment Directorate, and Ross Scott, Finance Team Leader, Rural Affairs and Environment, Scottish Government;

Paul Smith, Head of Corporate Services, Forestry Commission Scotland.

Draft Budget Scrutiny 2011-12 (in private): The Committee considered the evidence heard earlier in the meeting.

29th 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 budget proposals 2011-12.

30th Meeting, 2010 (Session 3), Wednesday 22 December 2010

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

ANNEXE L

Transport, Infrastructure and Climate Change Committee

Report on Scottish Government Draft Budget 2011-12

The Committee reports to the Finance Committee as follows—

Introduction

1. The Scottish Government’s Draft Budget 2011-12 was published on 17 November 2010, and was accompanied by a carbon assessment of the budget, and other related documents.

2. The role of the Transport, Infrastructure and Climate Change Committee is to consider and report on the Draft Budget 2011-12 to the Finance Committee.

3. The Draft Budget 2011-12 was published later than in previous years, due to the timing of the announcement of the UK Comprehensive Spending Review. This meant that this Committee had little over a month in which to report to the Finance Committee, which imposed some restrictions on the scope of the Committee’s scrutiny.

4. The Committee held an evidence session with the following panel of individuals with expertise in the fields of transport and climate change on 30 November 2010—

  • Professor Iain Docherty, Professor of Public Policy and Governance, University of Glasgow;
  • Dr Andy Kerr, Director of Scottish Alliance for Geoscience, Environment and Society, University of Edinburgh;
  • Professor Tom Rye, School of Engineering and the Built Environment, Napier University Transport Research Institute; and
  • Dr Dan Barlow, Head of Policy, WWF Scotland.

5. The Committee then took evidence from John Swinney MSP, the Cabinet Secretary for Finance and Sustainable Growth, on 7 December 2010, who was accompanied by supporting officials including the Chief Executive of Transport Scotland, David Middleton and Bob Irvine, Deputy Director, Scottish Water Division, Scottish Government.

6. The Committee also issued a call for written views on the Draft Budget 2011-12, and received 22 responses, which can be found online.525 Professor David Gray of Robert Gordon University, who was unable to attend the evidence session on 30 November 2010, provided written comments to the Committee.526

7. The Committee is grateful to all those individuals and organisations who provided written and oral evidence, within the tight timescales imposed by the budget process this year.

Adviser

8. The Committee agreed that Ian Thomson of the Department of Finance and Accounting of the University of Strathclyde should be appointed as the Committee’s adviser.

Context

9. The overall context of this year’s budget scrutiny is of one of a real terms cut in Scotland’s total Departmental Expenditure Limit (DEL) between 2010-11 and 2011-12, the first reduction since devolution. The decrease is 5.0% according to the Treasury presentation of the figures, and 6.2% according to the Scottish Government.

10. It is of particular note that as part of the total DEL reduction, the Scottish Government will see a significant real terms fall in its total capital DEL of 27.8% according to the Treasury presentation (24.2% according to the Scottish Government). The Scottish Government plans to carry forward £100m from 2010-11 to 2011-12 in order to supplement capital spending in 2011-12. This will be achieved via an underspend of the 2010-11 budget.

11. As this is a one year budget, it is difficult to comment on the medium/long term impacts of the UK Government’s Comprehensive Spending Review. Proposed budget changes have not been evenly spread over the different ministerial portfolios, level two and level three budget lines.

12. Table 1 shows that—

  • Departmental Expenditure Limit (DEL) proposed changes range from +1% to -12%;
  • resource budget range from +2% to -9%; and
  • capital budgets range from -15% to -63%.

Table 1: Overall budget changes

  DEL Resource Capital
Draft Budget 2011-12 2011-12 % change 2011-12 % change 2011-12 % change
Justice 1267.5 -12% 1196.6 -5% 70.9 -60%
Administration 236 -10% 228.5 -9% 7.5 -25%
Office of First Minister 255.1 -9% 234.6 -7% 20.5 -28%
Rural Affairs and Environment 539.4 -9% 489.8 -7% 49.6 -29%
Education and Lifelong Learning 2583.6 -8% 2319 -7% 162.1 -29%
Crown Office & Fiscal 108.2 -8% 105.5 -5% 2.7 -63%
Finance and Sustainable Growth 5449.6 -4% 1364.5 -7% 854.7 -15%
Local Government 11226 -4% 8354.7 -4% 691.8 -18%
Scottish Parliament and Audit Scotland 95.9 -3% 93.1 -2% 2.8 -15%
Health and Wellbeing 11858.4 1% 11014.4 2% 744 -19%
  33619.7 -3% 25400.7 -2% 2606.6 -21%

13. The proposed reduction in capital budgets is particularly significant for transport, infrastructure and climate change (TICC) related expenditure as it is relatively more dependent on capital spend than other programmes. Table 2 identifies the range of capital expenditure as a % of total DEL of the key Level 2 expenditure budget lines that impact on climate change. It can be seen that a number of these budget lines are reduced well in excess of the average for the Scottish Government Draft Budget totals.

Table 2: Selected level 2 budget lines capital budgets as a % of 2011-12 DEL

  Capital as % of DEL
Motorways and Trunk Roads 61.9%
Housing and Regeneration 60.9%
Rail Services in Scotland 46.1%
Other Transport Policy, Projects and Agency Administration 34.7%
Air Services Scotland 28.3%
Enterprise, Energy and Tourism 22.6%
Ferry Services in Scotland 7.4%
Environmental and Rural Services 5.2%
Forest Enterprise 5.0%
Forestry Commission 4.2%
Concessionary Fares and Bus Services 3.7%
Water and Climate Change 0.0%
Overall Scottish Government after adjusting for AME* 9.3%
Overall Scottish Government not adjusting for AME* 7.8%

*note that none of the selected Level Two Budget Lines include AME.

14. Whilst there is a significant proposed reduction in the Scottish Budget, not all TICC related budgets have been reduced. Table 3 provides a summary of selected Level 2 proposed budget changes in relation to climate change and it can be seen that there are proposed increases in certain Level 2 and Level 3 budget lines, as well as proposed reductions. It is estimated that the TICC related budget reduction is around 12.2% compared with an overall budget reduction of 3.2%. This would suggest that transport and climate change programmes are being adversely affected by the proposed budget changes.

Table 3: TICC related Level 2 budget lines

 

DEL 2010-11 % change £m change
DEL Increase – Cash      
Ferry Services in Scotland 109 7.0% 7.1
Motorways and Trunk Roads 557.6 2.5% 13.5
Air Services Scotland 35.3 0.6% 0.2
Concessionary Fares and Bus Services 255.3 0.1% 0.2
      21.0
DEL Decrease - Cash      
Forest Enterprise 23.8 -4.4% -1.1
Environmental and Rural Services 186.4 -4.9% -9.7
Enterprise, Energy and Tourism 423.8 -5.9% -26.5
Rail Services in Scotland 779.4 -7.5% -63.4
Other Transport Policy, Projects and Agency Administration 67.1 -12.1% -9.2
Forestry Commission 47.7 -13.4% -7.4
Housing and Regeneration 393.8 -19.3% -94.2
Water and Climate Change -88 -241.9% -150.0
      -361.5

15. A further analysis was undertaken to evaluate the distribution of budget changes. A ratio has been calculated that compares the percentage of total budget reductions for each budget line with that budget line’s percentage of the Total Budget 2010-11. For example the Forestry Commission Level 2 budget reduction of £1.1m equates to 0.66% of total proposed budget reduction yet this budget line equated to 0.16% of Budget 2010-11. This means that this budget line was reduced 4.2 times more than if the reductions were evenly distributed.

16. Table 4 outlines the TICC related Level 2 budget change equity ratio, which approximates the relative severity of proposed budget changes. Any budget line with a ratio of greater than 1 can be considered a relative winner in the distribution of budget changes and those with a ratio of below 1, relative losers. Appendix 1 contains a full list of this ratio for relevant Level 3 and 4 budget lines.

Table 4: Proposed budget equity ratio for selected TICC level 2 budgets

% of 2011-12 Changes / % of 2010-11 budget
Water and Climate Change -75.3
Housing and Regeneration -6.0
Forestry Commission -4.2
Other Transport Policy, Projects and Agency Administration -3.8
Rail Services in Scotland -2.3
Enterprise, Energy and Tourism -1.8
Environmental and Rural Services -1.5
Forest Enterprise -1.4
Concessionary Fares and Bus Services 0.0
Air Services Scotland 0.2
Motorways and Trunk Roads 0.8
Ferry Services in Scotland 2.2

17. Table 4 supports the analysis from Table 3 that TICC related expenditure programmes appear to be relatively harder hit than other areas of government. This has led to concerns that this Draft Budget may fail to deliver the climate change reductions to meet the Government’s published emission reduction targets and the aspirations published in the Report on Proposals and Policies for a Low Carbon Scotland. This is discussed further later in this report.

Transport

18. In this section the Committee first considers the implications of changes to some specific budget lines within the Draft Budget 2011-12 relating to transport.

Concessionary Fares and Bus Services

Bus Service Operators Grant

19. The ‘Support for Bus Services’ budget line which provides for the Bus Service Operators Grant (BSOG) drops slightly in the Draft Budget 2011-12, from £61.0 million to £60.8 million. The total that can be paid to bus operators under the national concessionary fares scheme for elderly and disabled people is capped at £180m for 2011-12 by the National Bus Travel Concession Scheme for Older and Disabled Persons (Scotland) Amendment Order 2010. The concessionary fares budget contains an additional £5m over this amount.

20. The Committee notes that the Cabinet Secretary for Finance and Sustainable Growth told the Chamber on 18 March 2010 that the Scottish Government had “recently entered an agreement with the Confederation of Passenger Transport to increase the funding for the BSOG to £66.5 million a year”.527 The Committee questioned the Cabinet Secretary on this figure and how it related to the figures in the Draft Budget 2011-12. The Cabinet Secretary commented—

“I think that I said to the committee previously that, taking BSOG and the concessionary travel scheme together, there was a net saving to the public purse. Clearly, though, we will be happy to ensure that there is clarity about that.”528

21. The Committee wrote to the Cabinet Secretary requesting Level 4 figures for Table 7.05 in the Draft Budget 2011-12 on concessionary fares and bus services in order to obtain clarity on the level of the Bus Services Operators Grant in 2010-11 and 2011-12, and the reason why the budget for concessionary fares is £185m, when the cap on the total to be paid out to bus operators set out in regulations is £180m.

22. The Cabinet Secretary wrote to the Committee on 15 December 2010 with the following response—

“The funding available for Bus Services in Scotland in 2011/12 amounts to £60.8m which includes funding for Bus Service Operators Grant. On current mileage forecasts this should allow the Scottish Government to maintain its current rate of payment of BSOG to individual operators whilst providing a budget saving of 9.5%.

The concessionary travel funding for 2011/12 of £185m includes capped funding of £180m for the older person's and disabled scheme and also funding for specific ferry concessions under the national scheme, the young person's scheme and administration.”529

Smartcard programme

23. The Committee raised with the Cabinet Secretary the question of why the Draft Budget 2011-12 contains an allocation of £9.5m for the bus smartcard programme (an increase from £2.1 million in 2010-11) when Transport Scotland’s website suggests that “the rollout of the Smart Electronic Ticket Machines and associated equipment to over 250 bus operators and over 6300 buses was successfully completed in August 2010”.530

24. The Committee notes that an Audit Scotland report published in October 2010 entitled National concessionary travel concluded—

“There was only limited information about the cost of the scheme when the Scottish Parliament considered its introduction. While NCT [national concessionary travel] started on time, robust systems were not in place to effectively manage it or monitor its success, and the overall impact of the scheme is still not clear. There has been a four-and-a-half-year delay in rolling out the technology to support the scheme, and this is costing £42 million, against an original budget of £9 million.”531

25. The Cabinet Secretary was asked if the figure of £9.5 million represented an ‘unpleasant surprise’ and he responded “let us just say that I could have done without it”.532 He commented—

“It will definitely not appear annually. I can say that Parliament would expect to have effective and operational smart card technology to enable us to manage the concessionary travel scheme properly.”533

26. The Committee is concerned at the lack of clarity regarding the reason for spending £9.5 million on the smartcard programme, given that the rollout of the programme was reported by Transport Scotland to have been completed earlier this year. This is a significant sum of money, particularly at a time of a tight budget settlement.

27. The Committee recommends that the Scottish Government provides a full explanation of the reasons for spending £9.5 million on the smartcard programme and commits to transparency about future spending on this budget line. If it emerges that this spending was unplanned or related to problems with the practical operation of the smartcard programme, the Scottish Government should inform the Committee what action it will take to ensure that significant spending of this nature is not repeated in future years. The Scottish Government should not be required to provide an open-ended financial commitment to meet the bill for any problems which arise from smartcard technology in the future.

28. The Committee notes that it is unclear what proportion of the £9.5 million allocated to the smartcard programme the Scottish Government is firmly committed to spend in the financial year 2011-12. The Committee also notes that it may be possible for some of this spending to be deferred to future financial years. The Committee returns to this subject later in this report in the section on the Freight Facilities Grant.534

Road maintenance

29. The Committee considered the issue of road maintenance and where the balance should lie between investment in new road projects, completion of projects currently underway, and maintenance of existing infrastructure. The Draft Budget 2011-12 states—

“On transport, with a few notable exceptions such as the new Forth Crossing, on capital spend we will prioritise existing projects over new. Expenditure on maintenance of the motorway and trunk roads network has been reduced.”535

30. The Report of Scotland’s Independent Budget Review (IBR) Panel made the recommendation that where capital assets, including transport networks, are essential for public service delivery, their maintenance ought to be accorded high priority.

31. The Committee notes that the key changes in the trunk roads budget are a 73.9% real terms reduction in the Network Strengthening and Improvement budget (a fall of £41.7m in real terms). The budget for Structural Repairs has increased from £14.6 million to £29.4 million in real terms (a 101.6% increase in real terms), and the budget for Routine and Winter Maintenance has decreased from £61.6 million to £60.4 million in real terms (a 2.0% real terms decrease).

32. Professor Iain Docherty of the University of Glasgow noted—

“The budget as proposed looks reasonably sensible. The road maintenance budget, which is always an easy target for Administrations or Oppositions, has taken something of a hit […] the question is whether it is reasonably sensible come February or March at the end of another hard winter.”536

33. Professor Tom Rye of Napier University Transport Research Institute argued that “...robbing from the maintenance budget in order to pay for preparatory work on the Forth crossing seems to be rather curious”.537

34. A written submission from the Road Haulage Association commented “given the recent severe weather, together with the subsequent comments from the First Minister to prepare for more bad winters, it is imperative that these budgets are not reduced”.

35. Professor Iain Docherty made the point that there seems to have been some kind of reallocation between maintenance and improvements in the Draft Budget, and the two are treated differently in the budget, but that “it is impossible for me and, I guess, for my colleagues here to tell you the extent to which that is happening, because of the broad-brush nature of the level 3 figures in the budget”.538

36. On the issue of the priority given to road maintenance, the Cabinet Secretary for Finance and Sustainable Growth commented that “the budget document does essentially what the IBR talked about by striking a balance between the maintenance of existing infrastructure and the construction of new infrastructure”.539 He went on to say—

“We are increasing the budget line for structural repairs for example. That is one element of what the Government is bringing forward. The position on routine and winter maintenance is that the budget is essentially flat in cash terms—the budget has been maintained.”540

37. The budget document notes the Scottish Government’s intention to “utilise lower cost repairs alongside safety critical work until funding allows renewal of life expired roads and strengthening of bridges to take place”.541

38. The recent severe weather has emphasised the importance of keeping Scotland’s roads well maintained and operational. The Committee notes that some budget lines supporting spending on roads, most notably the budget for Network Strengthening and Improvement, will decrease in 2011-12. The Committee also notes that a number of the level 3 budget headings do not provide a particularly clear indication as to their contents.

39. The Committee notes there is a very real risk that cuts in maintenance could represent a false economy, with money saved in the short term by lower cost ‘patching’ repairs cancelled out by increased spending to remedy more substantial damage which emerges in future years. The Committee wishes to be reassured by the Scottish Government that the reductions in spending in road maintenance are based on actual projections of need, and will not adversely affect the operation of Scotland’s road network or lead to problems for spending on roads in the future.

40. The Committee notes the reduction in the budget line for Routine and Winter Maintenance and seeks reassurance from the Scottish Government that this level of funding will be sufficient to deliver the Scottish Government’s recently published six-point plan for dealing with severe weather conditions.

Freight Facilities Grants

41. The Committee notes that the budget does not contain any specific mention of Freight Facility Grants, which have supported the development of infrastructure which transfers freight from road haulage to rail and shipping, by helping companies invest in the facilities needed to compete in financial terms with road haulage. The Draft Budget 2011-12 sees the budget line ‘Support for Freight Industry’ reduce in cash terms from £10.3 million to £2.9 million, a decrease of 71.8%.

42. Since August 1997, 37 awards of Freight Facilities Grants, totalling £68.9 million (including funding of £10.9 million from the Department for Transport) have been made to projects in Scotland. The Freight Facilities Grants scheme is currently closed to applications for projects which will incur expenditure after 31 March 2011.

43. In evidence, Dr Dan Barlow of WWF Scotland told the Committee that 33 million lorry miles have been taken off Scottish roads since the introduction of the Freight Facilities Grant, and he commented that its removal from the Draft Budget 2011-12 was “a major concern”.542

44. Professor Tom Rye of Napier University Transport Research Institute argued—

“It is […] extremely worrying that the freight facilities grant has been withdrawn, even although there may be cases in which the grant compromises our ability to increase passenger capacity. The grant was the only financial measure in Scotland that gave an incentive to freight operators to shift from road to other modes of transport.”543

45. Concerns about cuts to the Freight Facilities Grants were highlighted in a number of written submissions, from organisations including Deltix Transport Consulting, the RMT union, Ailsa Horizons Ltd, HITRANS, Strathclyde Partnership for Transport and Highland Spring Ltd. The Rail Freight Group commented in its submission that reducing the Freight Facilities Grants “appears to be counter-intuitive in terms of carbon reduction, and also in supporting economic growth for Scottish businesses who are using, and seeking to increase, their usage of rail”. A number of submissions recommended that the Scottish Government’s position on this be reversed.

46. The Committee questioned the Cabinet Secretary for Finance and Sustainable Growth about the apparent cut in support to the freight industry in the Draft Budget 2011-12. He commented—

“Since 1 April 2007, there has been a capital budget for freight facilities grant projects of more than £40 million, but awards of freight facilities grants over that period totalled less than £8 million. In effect, we have had a budget that has been set at or about the 2010-11 level of £10.3 million, but we have not been able to spend that money on projects. In the course of the in-year changes, the money will have been reallocated and spent on other priorities. Maintaining the budget at £2.9 million allows us to continue to support 13 specific freight operation projects that are up and running.

I accept that there is a budget reduction, but it is one that recognises the fact that we have never really been able to spend that sum of money and that we have particular operational projects that will continue to be supported.”544

47. The Cabinet Secretary was asked about the suggestion that some in the freight industry had found difficulty successfully applying for Freight Facilities Grants due to the allegedly bureaucratic nature of the application process. He responded—

“The grant cannot be so bureaucratic if a range of projects have made it through and are operational; it must be possible for schemes to develop. I suspect that what might be an issue is that there are bound to be state aid questions in this area. That is why many criteria, conditions and requirements have to be satisfied to ensure that we have a compliant scheme. However, if the industry has a particular perspective on this, I would be only too happy to consider it.”545

48. The Committee is concerned that the Draft Budget 2011-12 contains a significant reduction in support for modal shift in the freight industry. The Committee is also concerned at the reported closure of the Freight Facilities Grant for expenditure which will be incurred after 31 March 2011.

49. The Committee believes is essential, in the absence of alternative approaches such as road user charging, that support is given to the freight industry to encourage modal shift from road to rail and sea, in order to meet Scotland’s transport, environmental and economic objectives. Closing the Freight Facilities Grant to new applications would seem to contradict that important policy message. The Committee notes the significant concern expressed by the freight industry about the closure of the Freight Facilities Grant to new applications.

50. The Committee recommends that the Scottish Government makes clear its position on what future support is to be given to the freight industry to encourage modal shift. The Committee recommends that the Freight Facilities Grant should continue to receive funding from the Scottish Government so that it can be kept open for new applicants in the financial year 2011-12.

51. If the Freight Facilities Grant is to be withdrawn, an alternative support mechanism must be brought forward. The Committee notes that further incentives to encourage freight modal shift are proposed in the Scottish Government’s draft Report on Proposals and Policies document and there is a need to address these issues as a matter of urgency. The Committee believes that the Scottish Government should consider the lessons from the operation of the previous Freight Facilities Grant to ensure that genuine applicants are able to access funding with a minimum of bureaucracy.

52. The Committee has considered the question of sources of funding to continue the Freight Facilities Grant, and notes that one option could be to redirect some of the money currently allocated in the Draft Budget to the bus smartcard programme. If, for example, £3.5 million of the proposed £9.5 million to be spent on the smartcard programme was deferred to the financial year 2012-13, this could be used to increase the proposed budget for support for freight industry from £2.9 million to £6.4 million to allow an increase in the Freight Facilities Grant. As discussed earlier in this report, the Committee notes that there is uncertainty as to whether such flexibility exists. However, the Committee recommends that active consideration should be given to the potential to defer some of this expenditure in order to redirect it to spending on the Freight Facilities Grant.546

Sustainable and Active Travel

53. The Draft Budget 2011-12 provides for a 16.2% real terms increase in the Support for Sustainable and Active Travel budget line, from £21.2 million to £25.1 million in cash terms. The supporting text in the budget document suggests that this increase is to support the development of a market for electric cars rather than necessarily an increase in support for walking and cycling.

Electric vehicles

54. The Draft Budget 2011-12 states that the Scottish Government will increase funding for Low Carbon Vehicles, including the development of a charging infrastructure for electric vehicles in the central belt. There is, however, a lack of clarity regarding the specific funding made available to support electric vehicles, because this is included within the overall budget line for Sustainable and Active Travel.

55. Professor Tom Rye of the Napier University Transport Research Institute told the Committee—

“We need to have more confidence about how many electric vehicles will be purchased and used and how popular they will be with the public in the timescale that we need if we really are to convert a large number of people to using alternatively fuelled vehicles, particularly electric vehicles.”547

56. Dr Dan Barlow of WWF Scotland noted that his organisation had carried out analysis which suggested that to make a significant contribution to meeting the cuts in the transport sector that are necessary to deliver the Climate Change (Scotland) Act 2009 commitments, there would need to be in the region of 300,000 electric vehicles on Scotland's roads by 2020.548

57. When asked for further information about the provision in the Draft Budget 2011-12 for the support of electric cars, the Cabinet Secretary for Finance and Sustainable Growth explained—

“[...] essentially, we are looking at how we could put in place the infrastructure that would allow a credible electric vehicle network to operate. We would do that through a pilot, to test out what the infrastructure would comprise, how the technology could be deployed and what issues its deployment would raise, and to identify what lessons needed to be learned as a result.”549

58. The Committee notes the announcement made by the UK Government on 14 December 2010 that it is supporting a new network of electric vehicle recharging points to be developed in streets, car parks and commercial retail and leisure facilities. The announcement indicates that there have been successful bidding consortia in a second phase of activity on electric vehicles being based in various locations, including Scotland.

59. The Committee wrote to the Cabinet Secretary requesting further information on what specific work on the feasibility and development of infrastructure for electric cars will be supported by this budget line and how the work being undertaken by the UK Government on electric cars will integrate with work undertaken by the Scottish Government.

60. The Cabinet Secretary provided further information in a letter to the Committee, dated 15 December 2010. The letter indicated that Transport Scotland has successfully led a Scottish consortium to become part of the UK Government's £30m 'Plugged-In Places' initiative, which provides match funding for the installation of publicly available charging points for electric vehicles on streets, in car parks and in commercial, retail and leisure facilities. The letter provided further details of this initiative and, in relation to funding, notes—

“The bid provides match funding for charging infrastructure for 2011/12 and 2012/13 from the Department for Transport's Office for Low Emission Vehicles (OLEV). The total funding from OLEV, the consortium, partners and Transport Scotland is approx. £3m.”550

Cycling, Walking and Safer Streets budget

61. The Committee notes that the future of the Cycling, Walking and Safer Streets (CWSS) budget appears to be unclear, with there being no mention of this budget line (formerly around £9 million) in the budget document.

62. A coalition of sustainable and active travel groups and non-governmental organisations551 wrote to the Committee arguing for the retention of the CWSS budget as a separate ring-fenced budget as they consider it to have been a real success in supporting the development of active travel. Their written submission states—

“Our recommendation is therefore to preserve this small but vitally important budget as a ring-fenced, secure pot of funding available to local government.”

63. This view was supported in oral evidence from Dr Dan Barlow of WWF Scotland who commented that if the CWSS budget is unavailable “we will have gone backwards in the total spending that is available to support active travel, walking and cycling”.552

64. The Cabinet Secretary for Finance and Sustainable Growth confirmed that the future of the Cycling, Walking and Safer Streets budget was the subject of negotiations between the Scottish Government and COSLA. He told the Committee—

“Those discussions are under way. We will, of course, advise the committee when they have been concluded.”553

65. The Committee wrote to the Cabinet Secretary for Finance and Sustainable Growth, requesting information on when these discussions will be concluded and details of the outcome. A letter from the Cabinet Secretary dated 15 December 2010 responded—

“As outlined in the Local Government Finance Settlement 2011-12 published on 9 December, the Cycling, Walking and Safer Streets (CWSS) grant to local authorities remains ring-fenced and will be reduced by 18%. This will allow a total of £7.458 million to be allocated in 2011-12. COSLA has been invited to respond to these provisional allocations in writing by 10 January 2011.”

66. The Committee heard some views that the overall spending on sustainable and active travel in the Draft Budget 2011-12 was insufficient when compared to budget lines for other modes of transport.

67. Dr Dan Barlow of WWF Scotland told the Committee—

“Our concern is that the active travel budget remains far too small overall. If we discount the low-carbon vehicle component, we are left with £22 million. As a proportion of the total transport budget, which is somewhere in the region of £1.5 billion or £1.6 billion, the budget line is tiny.”554

68. Professor Tom Rye of the Napier University Transport Research Institute identified what he considered to be “a disconnect between the budget and the RPP”.555 He argued that the tables contained within the RPP document that show that £207 million a year will be spent on walking and cycling over the next five or six years “is totally at odds with what we see in the budget”.556

69. Concerns about the level of funding for sustainable and active travel were also expressed in a number of written submissions. Spokes argued, for example—

“For Scotland to have a realistic hope of reaching its 2020 target, the Cycling England £10 per head figure implies a minimum ongoing annual investment of around £50m per year – compared to the current ~£20m.”

70. In written comments to the Committee, Professor David Gray of Robert Gordon University argued that “capital funding for cycle paths and associated infrastructure should be prioritised”.

71. The Cabinet Secretary for Finance and Sustainable Growth was asked if the necessary funding was in place to meet the Scottish Government’s target in the Cycling Action Plan for Scotland that, by 2020, 10 per cent of all journeys should be made by bicycle. The Cabinet Secretary replied—

“Budget decisions below the level of £25.1 million are yet to be taken. I am happy to share further details with the committee once they have been arrived at.”557

72. The Committee has consistently called for increases in the funding for sustainable and active travel in successive reports on the Scottish budget. The Committee’s report into active travel, published in March 2010 stated that it was “firmly of the view that ambitious increases in resources must be committed to enable the delivery of active travel projects if the Scottish Government’s own target [on cycling] has any chance of being realised”.558

73. The Committee notes that although the proposed funding in the Draft Budget for sustainable and active travel will increase from £21.2 million to £25.1 million, it appears that this increase is to support spending in areas other than active travel, such as infrastructure for electric cars. The Committee reiterates its call for adequate resources to be allocated to walking and cycling if ambitions in relation to active travel are to be realised. For this reason, the Committee was concerned at the possibility that the Cycling, Walking and Safer Streets funding stream may no longer be available. The Committee urges the Scottish Government to reach agreement with COSLA during discussions to preserve the ring-fencing of this budget.

Rail Services in Scotland

74. The Draft Budget 2011-12 provides for a 26.3% real terms increase in funding for Network Rail (an increase from £331m to £418m at 2010-11 prices). This is offset by the cancellation of the £20m Small Rail Programmes budget and a 70% real terms reduction in the Major Public Transport Projects budget line (a fall from £175.7m to £59.7m at 2010-11 prices).

75. The fall in the Major Public Transport Projects budget line is mainly due to the completion of the Airdrie-Bathgate Railway project. The increase in funding for Network Rail is to cover major projects, such as the Waverley Station improvements and the Edinburgh-Glasgow Improvements Programme. The Borders Railway will be funded through a Non-Profit Distributing model and as such does not show up as significant capital expenditure in the current budget documents.

76. The Committee welcomes the fact that the Scottish Government intends to keep the current cap on regulated rail fares at RPI plus 1% from 2012 onwards. The UK Government intends that the increase should be RPI plus 3%. In addition, the Scottish Government intends to keep the proportion of rail funding from fares and the taxpayer at the current levels, while the UK Government intends to increase the amount coming from fares.

77. The Cabinet Secretary for Finance and Sustainable Growth commented in evidence to the Committee—

“As the budget numbers show, the railways are expensive to run, but I think that we all appreciate that they provide a very good service on which we all depend, so we have to strike the balance between what taxpayers and individual transport users pay. Using RPI plus 1 per cent is a reasonable approach that strikes the correct balance between the two factors.”559

78. The Committee requested information on whether this RPI plus 1% increase is a requirement set out in the ScotRail franchise agreement, or whether this has been a decision taken by the Scottish Government. The Committee also requested information on what the impact would be on typical fares of an increase of RPI plus 3%.

79. The Cabinet Secretary responded in a letter dated 15 December 2010 that the price of regulated fares is controlled under the Franchise Agreement through the formula RPI+1 % with increases to these fares, in January of each year based on the July RPI of the previous year. Unregulated fares are a commercial matter for ScotRail. According to the Scottish Government, any change to fares regulation would be a contractual change to the ScotRail franchise contract. The Cabinet Secretary also provided an indication of what typical fare increases would have been, had a formula of RPI+3% been applied to fare increases.

80. The Committee also notes comments made in evidence about the costs associated with the funding of the rail industry in Scotland, compared to rail networks elsewhere. Professor Tom Rye of the Napier University Transport Research Institute noted that—

“Currently, Network Rail is being investigated by the Office of Rail Regulation in relation to its cost effectiveness. The rail regulator's initial report has found that Network Rail is 35 to 40 per cent less efficient than comparator organisations that run rail infrastructure in some continental European countries.”560

81. Professor Iain Docherty of the University of Glasgow suggested what while the railways are roughly 40 to 50 per cent more efficient than they were before privatisation in terms of the numbers of passengers and the amount of freight that they carry, they cost roughly four times as much as they did. He commented that “that does not meet any definition of productivity that I have ever read”.561

82. On the subject of efficiencies in the rail industry, the Cabinet Secretary for Finance and Sustainable Growth commented in evidence to the Committee—

“[...] we are giving great encouragement to the McNulty review that is currently looking at these questions. Just the other week, the Minister for Transport, Infrastructure and Climate Change and I met the board of the Office of Rail Regulation when it was in Glasgow, to take forward the discussion on securing more efficiency in the rail network.”562

83. The Committee notes that the subject of efficiency in the rail network, and comparisons between the experience in Scotland, the UK and Europe is an increasingly important issue, particularly in light of the significant sums of public money spent on Scotland’s railways at a time of budget reductions. This is an issue which the Committee could highlight in its legacy paper as a potential subject of inquiry for its successor committee. The Committee requests that the Scottish Government keeps this Committee informed of developments in this area.

Transport budget – future years

84. The Draft Budget 2011-12, as set out in the document published on 17 November 2010, is a one year budget, which records the Scottish Government’s spending plans for the next financial year.

85. The Scottish Association for Public Transport describes the Draft Budget 2011-12 in its written submission as “very much a holding operation until further decisions are taken after the Scottish Parliament elections in May 2011” and suggests that a longer term review is needed of transport spending over the next 3 to 5 years. This view was also expressed in written evidence from Strathclyde Partnership for Transport.

86. The Cabinet Secretary for Finance and Sustainable Growth announced in the Chamber on 8 December 2010 that—

“More information is requested about public spending options in Scotland in future years. We will therefore publish illustrative figures for the years up to 2014-15... I expect to publish the figures after the Christmas recess.”563

87. The Committee is required to report on the contents of the Draft Budget 2011-12 document as published, and so is inevitably restricted in the extent to which it can comment on trends within the budget which go beyond the 2011-12 timeframe. It is disappointing that the additional information promised by the Cabinet Secretary will not be available to inform the Committee’s budget scrutiny this year.

88. The Committee has, however, identified some issues, set out below, which emerged during evidence, which may be relevant to the scrutiny of any future multi-year transport budget. The Committee’s successor committee may wish to return to some of these issues during the scrutiny of the Scottish Government budget in future years.

Spending on the Forth Replacement Crossing

89. One important issue for the future will be monitoring the arrangements for funding the Forth Replacement Crossing project and assessing what impact this major capital spending commitment might have on other transport projects.

90. In written comments, Professor David Gray suggested that the Forth Replacement Crossing “will be achieved at the expense of other major projects in the STPR in the medium (or even long term)”. The Cabinet Secretary for Finance and Sustainable Growth acknowledged in evidence—

“I have said that there are a number of smaller schemes and road improvement projects that we would ordinarily have liked to take forward but which we will not be able to take forward as a consequence of the significant reduction in capital expenditure that we have experienced and the fact that we have to take forward major capital infrastructure projects, the largest of which is the Forth replacement crossing.”564

91. The Committee heard arguments that spending on the Forth Replacement Crossing might impact negatively on other budgets. Dr Dan Barlow of WWF Scotland posed the question “will it squeeze investment in public transport and in walking and cycling for years to come?”.565

92. The Committee, however, received support for the importance of the crossing from written submissions including the Road Haulage Association Scotland, and the Federation of Small Businesses, which noted “its pivotal importance for communities and businesses across the country”.

93. In relation to the funding mechanism for the project, the Committee raised with the Cabinet Secretary the issue of the proposed new borrowing powers for the Scottish Government in the Scotland Bill and how these might potentially be used for major infrastructure projects. He commented—

“I do not understand why, under the proposals in the bill, the borrowing provisions must take so long to be enacted; that could be done a great deal more quickly. However, the Treasury suggests that a pre-payment arrangement might put in place, by agreement between Her Majesty's Government and the Scottish Government, to manage the Forth replacement crossing. We will pursue that possibility.”566

94. The Scottish Government’s position remains that the Forth Replacement Crossing will be paid for from the Scottish Government’s capital budget.

95. The Committee notes that the Forth Replacement Crossing is a major construction project that will have a substantial impact on future transport budgets. The Committee acknowledges it is inevitable that some transport projects will not go ahead, or receive reduced funding, as a result of the funding of the Forth Replacement Crossing. It is likely that the Committee’s successor committee will want to monitor these impacts in future to ensure that the impact of the project is not disproportionate on these other transport budget lines. A second important issue to monitor will be the funding mechanism chosen to finance the project.

Funding of spending on ferry infrastructure

96. A second issue the Committee highlights as being of importance to future transport budgets is the funding of ferry infrastructure, and in particular the replacement of ferries in the Caledonian MacBrayne fleet, many of which are reaching the end of their anticipated lifespan.

97. According to the Draft Budget 2011-12, in 2011-12 the Scottish Government will “place orders for the construction of the next generation of CalMac vessels”.567

98. The Vessels and Piers budget line in the Draft Budget 2011-12 provides for loans to Caledonian Maritime Assets Ltd (CMAL) for the procurement of vessels used on the Clyde and Hebrides Ferry Services network and grants to ports (other than those owned by local authorities) for improvement works to piers and harbours that support lifeline ferry services. The Draft Budget 2011-12 indicates that investment in Vessels and Piers will fall by 46.3% in real terms, from £14.8m to £7.9m at 2010-11 prices.

99. Strathclyde Partnership for Transport commented in written evidence to the Committee—

“We are concerned that this will result in a reduction in investment in termini and associated infrastructure, much of which is in need of ongoing maintenance and, in some cases, complete renewal.”

100. When questioned on this subject, the Cabinet Secretary for Finance and Sustainable Growth commented that capital expenditure will reduce by about 38% in the four years of the spending review and, as a result, “will be under enormous pressure”.568 He noted the addition of the vessel MV Finlaggan on the Islay route in 2011 and commented that “we are exploring ways of sustaining investment in the years to come”.569

101. In its Report on Ferry Services in Scotland, published in June 2008, the Committee recommended that any outcomes from the Scottish Government’s ferries review should be “underpinned by a fully co-ordinated plan for the replacement or refurbishment of vessels and any necessary upgrades to or replacement of ports infrastructure”.570 The Committee reiterates this conclusion and notes that this process will represent a major undertaking with significant cost implications.

102. The Committee notes the Scottish Government’s intention, during the next financial year, to place orders for the next generation of CalMac vessels, but provides few details on how this process will be carried out or details of the vessels to be ordered. The Committee recommends that the Scottish Government provides clarity on how its vessel replacement programme will operate and to what scale and timetable.

Report of the Independent Budget Review

103. The Committee notes that the Report of the Independent Budget Review Panel contained a number of suggestions relating to the transport budget, some of which the Scottish Government has decided not to adopt.

104. One of these was to consider the feasibility of adopting road user charging as a means to both better managing the use of the existing transport networks and financing improvements to those networks. Another suggestion was to review the eligibility criteria for the Scotland-Wide Free Bus Travel Scheme for Older and Disabled People, and to continue to work with the bus operators to manage costs in the longer term.

105. The Cabinet Secretary for Finance and Sustainable Growth told the Committee that in relation to road user charging, “the Government has not advanced any proposals for road user charging and we have no plans to do so”.571 The Cabinet Secretary also indicated that the Scottish Government had not accepted the recommendation to revisit the eligibility criteria for the concessionary travel scheme.572

106. From an equalities perspective, the concessionary travel scheme attracted some different views. Professor David Bell, the adviser to the Finance Committee, commented in a paper on the Draft Budget in a section on ‘fairness’ that the scheme predominantly benefits those living in urban areas, and as well as clearly favouring the old relative to the young. A written submission from Age Scotland strongly supported the current eligibility criteria of the concessionary travel scheme, commenting that “free local bus travel is a life line for many in later life”.573

Climate change

107. The Committee recognises that this Draft Budget was prepared in the context of severe public spending reductions imposed on the Scottish Government as a consequence of the Comprehensive Spending Review at a time of severe economic hardship. The fundamental strategic priorities of this budget are—

  • to support economic recovery and deliver our Purpose of increasing sustainable economic growth
  • to protect the public services on which people depend and which are most effective in tackling deep seated problems and delivering real benefits and better outcomes for the people of Scotland and
  • to establish a competitive advantage through the opportunities offered by taking action on climate change574

108. Witnesses welcomed the inclusion of climate change as one of the fundamental strategic priorities, but in general felt that the funding proposals in the Draft Budget fell short of the measures required to reduce the carbon emissions in line with the Scottish Government’s published carbon reduction targets. Dr Dan Barlow of WWF Scotland commented—

“I welcome the priority that the Government has attached to tackling climate change in the budget. Indeed, it is clearly identified as one of the issues that the budget needs to support. The IBR gave inadequate attention to measures supporting the development of a low-carbon economy, and I welcome the Government's identification of the budget's key role in that respect. However, it is disappointing that the budget still falls short with regard to many measures that we would like.”575

109. Despite the Carbon Assessment of draft Budget 2011-12 identifying a potential carbon saving of 0.6MT576 of carbon emission, equal to a 6.8% reduction from last year, there was consensus from the witnesses that this Draft Budget was likely to increase carbon emissions. Professor Tom Rye of Napier University Transport Research Institute commented—

“We know that various trajectories to reach our emissions targets exist—we could start with a steep downward reduction, with a shallow reduction or possibly even with an increase. My feeling is that, under the budget, we will start with a possible slight increase, if anything, which is not a great way to head downwards to our final target.”577

110. The overall assessment of the carbon impact of this budget was considered difficult to evaluate. On the one hand, there were a number of proposals identified by witnesses and submissions as supportive of reducing carbon emissions. These included—

  • general support for public transport;
  • concessionary bus travel;
  • Borders Railway project;
  • Smartcard investment;
  • funding of the renewable infrastructure plan (although it was felt that the funding was inadequate);
  • increasing the funding for Zero Waste Scotland by £2m to £26.4m;
  • Climate Challenge Fund; and
  • funding for new affordable housing.

111. However, witnesses and submissions received also identified a number of proposals that were likely to increase emissions. These included—

  • prioritising of the road network over other modes of travel;
  • funding of the Forth Replacement Crossing;
  • insufficient funds for active travel;
  • the possible removal of the ring-fenced budget for Cycling, Walking and Safer Streets;
  • inadequate funding for Cycling Action Plan;
  • closing of the Freight Facilities Grant to new applications;
  • passing enhanced climate change responsibilities onto local government at a time of reduced funding; and
  • reduction in funding for Forestry, Forestry Commission and Forest Enterprise.

112. There was also concern expressed over a lack of clarity on the funding for programmes that have considerable carbon reduction potential—

  • Home Energy Efficiency Action Plan;
  • fuel poverty alleviation;
  • Home Insulation Programme;
  • retrofitting Scotland’s hard-to-treat housing stock; and
  • active travel.

113. When the witnesses’ concerns that this Draft Budget would increase carbon emissions were put to the Cabinet Secretary for Finance and Sustainable Growth he stated that he did not agree with them.578 The Cabinet Secretary was also asked if he felt that the draft budget had prioritised other policy agendas over climate change. In his reply he indicated that he felt that this was not the case—

“I do not accept that. There are a number of different elements; I have just mentioned the rail franchise and the implications of the concessionary bus travel scheme, and we have discussed those. We have not talked about the climate challenge fund—that budget line is not under the portfolio for which I am responsible, but it is part of the climate change agenda. There was a lot of concern that the fund was going to disappear, but it is not. There are a range of different areas in which there is a strong and positive explanation of what we have been able to deliver.”579

114. In his evidence the Cabinet Secretary explained how this budget represented a balance between the three priorities identified in the Draft Budget (see earlier) and that he believed that the balance of proposals presented in the Draft Budget, in the context of competing claims, in his opinion would reduce carbon emissions. These proposals included—

  • Airdrie to Bathgate rail line;
  • support for pilot charging infrastructure for electric cars;
  • funding of the rail franchise;
  • concessionary bus travel scheme;
  • ·continued funding of the Climate Challenge Fund; and
  • encouraging energy efficiency in homes.

115. There was some agreement on the positive measures between the Cabinet Secretary and the submissions to the Committee. In relation to the measures identified by witnesses as having a negative climate change impact, the Cabinet Secretary largely explained these as part of the hard decisions resulting from the severity of the overall reductions in the Scottish Budget.

116. In his evidence, the Cabinet Secretary agreed to provide further details of the spending plans on the areas identified by the committee as lacking clarity and the Committee received a letter from the Cabinet on this subject dated 15 December 2010, which is attached to this report as an annexe.

117. Witnesses expressed the view that a number of programmes with a high ‘carbon return’ relative to expenditure had been overlooked. These proposals typically reduced carbon without major infrastructure investments, through behaviour and operational changes. One example related to reduction in rail travel time to the north of Scotland, where significant savings in time could be made for relatively small investments (between £40 million and £50 million) and about 20 to 25 minutes of that saving could be made through timetabling. Measures to reduce energy demand, particularly in domestic homes can also provide carbon reduction value for money. Dr Dan Barlow of WWF Scotland told the Committee—

“I have also looked in detail at what we need to spend to make our homes more energy efficient, so that we can cut fuel bills and emissions and eradicate fuel poverty. That area is one of the main contributors to our climate emissions in Scotland, yet the investment in energy efficiency improvements in our homes is still modest. From the way in which the budget is set out, it is hard to be certain what the implications are for the energy assistance package and home insulation scheme. There is a commitment to maintain current levels of investment, although the overall budget line I think that it is referred to as sustainable homes is reduced significantly. If we cross-reference the figures to those in the RPP for the number of homes that will have measures installed to improve their energy efficiency, then, based on our cost per property analysis, we may be seeing a decrease in the funding that is made available this year to support home insulation schemes and the energy assistance package. At this stage, it is not clear but it looks likely that the investment in home insulation will be less than it was last year.”580

118. There are a number of programmes that have the potential to deliver savings and desired social outcomes across ministerial portfolios. This Committee has previously identified the cross-portfolio economic, social and environmental gains from active travel. Dr Barlow identified similar benefits from funding home insulation programmes and home insulation programmes—

“The recent figures for fuel poverty in Scotland show that 700,000 households live in fuel poverty. We know that investment in energy efficiency is a cost effective way of cutting emissions. We also know that, for every pound that we spend on tackling fuel poverty, we save the national health service 42p.”581

119. Similar concerns were raised between the cross-cutting impacts of government expenditure on transport subsidies and land use, business re-locations and Scottish Government strategies, for example, the National Renewable Infrastructure Plan. Dr Andy Kerr of the University of Edinburgh raised the broader question, when discussing the value for money aspect of road equivalent tariffs—

“I also ask whether the tariff is being aligned with broader economic development in the north and west of Scotland. We have a huge opportunity with renewable, but are we aligning the different subsidy rates in a way that supports what we are trying to achieve with our energy infrastructure?”582

120. Witnesses concurred that the Draft Budget lacked sufficient expenditure on softer behaviour change/educational programmes that require relatively little investment but which could result in radical reductions in carbon emissions. Similar radical shifts could result from changes in the Planning Policy. Dr Dan Barlow of WWF Scotland commented—

“It is worth saying that strengthening the budget to make it much more carbon and climate friendly requires only quite modest investment. In a total budget that is in the region of £28 billion, WWF believes that an increase of only tens of millions in the sums that are invested in energy efficiency in our homes and in active travel could achieve and deliver substantial cuts in climate emissions and produce health benefits, including through greater active travel. I press the committee on that. We are looking at quite modest sums that will make a very big difference.”583

121. Professor Iain Docherty of the University of Glasgow told the Committee—

“Scottish Planning Policy influences the location, density and form of development to make access by public transport and active travel easier and reduce travel demand." I have no doubt that that is true rhetorically, but we do not have to go far outside in the real world to see that our development patterns are still fundamentally unsustainable. It would be good to start by stopping making things worse. Why are we still building out-of-town retail parks? Why are we still building car-dependent housing? Why are we still locating major public investments—which are nonetheless laudable—in the wrong places, as with our major hospitals? I echo the comment that, if we are serious about the issue, we must do something completely different that is at a level of regulatory and policy skill that has not been achieved at the UK or Scottish level.”584

122. Witnesses emphasised the importance of social and cultural measures rather than an over reliance on technical, engineering and infrastructure expenditure. Professor Iain Docherty commented—

“Planning policy is a slow-burner. Changing people's travel habits takes a long time. We replace only about 1 per cent of the built environment every year. We know all that but, equally, we could have the same conversation in 20 years' time, when we might not have replaced 20 per cent of the built environment because we did not start to do so now.”585

123. Dr Andy Kerr of the University of Edinburgh suggested that the Draft Budget did not fully address the private sector as a potential funding source and stressed the importance of leveraging in private sector investment to assist Scotland in meeting its climate change targets. This would allow the Scottish Government to bring about its desired changes in climate change emissions for a much smaller cost to the public purse and suggested a number of ways in which this could be achieved. He told the Committee—

“It is clear that delivering the radical change from internal combustion engines to electric vehicles will require public sector support of some sort. However, as with many of the big investments that are required in the built environment in Scotland that are of the order of tens of billions of pounds, the public sector cannot pay for it itself, so it needs to use its money as seeding for private investment. It is all about how we use public investment to mobilise private investment. In other words, rather than making a series of small grants, we need to leverage much bigger private investment from, for example, the electricity companies and the supermarkets, which may see a profit margin in having a charging station and building that kind of infrastructure.

We should not assume that the public purse has to deliver it all; it is very much about using public money to leverage other funds. The recognition that budget money cannot deliver the change on its own needs to permeate the budget. However, it is not clear from the budget lines exactly how the change will be delivered through engagement with the private sector to ensure that it brings the money in. What is needed is a combination of seed funding from the public sector and the frameworks around that. However, it is very difficult to pull out information on that sort of package of measures from some of the individual budget lines.”586

124. This approach was echoed by Dr Dan Barlow who welcomed the setting up of the National Renewable Infrastructure Fund but questioned the adequacy of the initial sum of £17m, given the scale of investments required.

Conclusion on the climate change impact of the budget

125. The Committee notes the different views expressed in evidence on the climate change impact of the Draft Budget 2011-12. The position of many external witnesses was that the impact of the budget would be an increase in emissions, whilst the position of the Cabinet Secretary for Finance and Sustainable Growth was that the impact would be a reduction in emissions. The Committee believes that the carbon assessment of the budget has not reached a stage where it is possible to make reliable year-to-year comparisons of the full impact of Scottish budgets on Scotland’s carbon emissions.

126. The Committee wishes to reiterate the comments made in its report at Stage 1 of the Climate Change (Scotland) Bill that strong early action is needed in order to secure the necessary reductions in greenhouse gas emissions.587 The Committee highlights below some possible policy interventions which could help deliver this early action—

  • ensure that expenditure on active travel is at least maintained at its current level or increased (as discussed earlier in this report);
  • ensure that the ring fenced budget for Cycling, Walking and Safer Streets is maintained (as discussed earlier in this report);
  • explore funding for behavioural change (from within research / public engagement / public health budgets, Centres for Environmental Excellence). The Committee is concerned that the Scottish Government has not indicated what level of funding will be available for the public engagement strategy under the Climate Change (Scotland) Act;
  • examine further potential for private sector leverage through small grants and seed funding;
  • fully explore the cross-cutting impacts on the wider strategic aims of reducing carbon emissions, starting with alignment with RPP: Low Carbon Scotland;
  • maintain or increase expenditure on home energy efficiency, home insulation and fuel poverty alleviation. The Committee notes the potential social and health benefits be gained from investing in these areas, with potential knock-on advantages for other budget lines such as the health budget. The Committee also notes that the uncertainty regarding the funding available for home insulation programmes, means that predictions as to the number of houses to benefit from these programmes lack credibility; and
  • econsider the decision to close the Freight Facilities Grant to new applications.

Carbon Assessment of the Draft Budget 2011-12

127. In its scrutiny of the 2010-11 Draft Budget, the Committee made a number of recommendations on carbon assessments of future budgets. These recommendations were intended to support the development and refinement of the carbon assessment tool in order that it positively influences future budgets. These recommendations included—

  • Scottish Government to seek independent advice and an assessment of the appropriateness and effectiveness of the methodology chosen; and
  • Scottish Government to continue its work on the refinement and implementation of methodologies to assess the carbon impact of individual policies.

128. The Scottish Government has introduced one significant change from the carbon assessment of the Draft Budget 2010-11. The methodology underpinning the carbon assessment of the Budget remains essentially the same this year as before. The one significant change to the approach is in the way that induced emissions are treated. Induced emissions are those generated by the expenditure of wages.

129. Previously, induced emissions were included as part of the impact of Scottish Government spending. The Committee and most witnesses welcomed the Scottish Government's production of the carbon assessment, but some witnesses questioned the appropriateness of the carbon assessment methods that were adopted and considered that there was a need for on-going reform in methodology.

130. Dr Andy Kerr of the University of Edinburgh told the Committee that he felt some improvement had been made to the carbon assessment methodology, and when asked to elaborate, commented—

“With the approach that was taken last year, very sweeping assumptions had to be made about some of the metrics—if £X is spent, the CO2 tonnage is a certain amount. Over the past 12 months, there has been an attempt to distinguish things much more clearly, and that has taken us a step forward. However, we do not have agreed, common metrics that different groups can accept, in the same way that there are now common metrics for the national emissions inventories, which we use for where coal or gas are burned. We do not have such agreed metrics for the supply chains or for the use of Government expenditure. A lot of work is going on in the private sector and at the Intergovernmental Panel on Climate Change to consider more common metrics that could be used in Europe, or in different countries. Those are emerging efforts, emerging tools and emerging metrics, which can be applied in Scotland, but there has not been sufficient agreement over the past 12 months on exactly how those metrics can be applied. Things have moved forward, but they have a long, long way to go.”588

131. Dr Dan Barlow told the Committee—

“The report gives us a top-level assessment of the impact on different areas of spending, so it enables us to identify which portfolios are responsible for the significant components of our climate emissions, under a limited, consumption-type model. However, it is still quite simplistic, because it attributes emission figures to broad portfolios. On transport, for example, it says that the average impact of transport per amount spent is X, so the emissions from the transport budget are Y.”589

132. One major issue was the exclusion of the expected carbon outcomes of the Scottish Government's funded policies and programmes from the carbon assessment. Witnesses identified that there were a range of carbon assessment methods that were capable of measuring these carbon impacts and that were being used by the Scottish Government and other public service organisations.

133. Whilst witnesses provided evidence that there was no generally accepted best method of carbon assessment, they did highlight the inability of a consumption based model to differentiate between expenditure on projects that had substantively different impacts on future carbon emissions, particularly in a governmental context.

134. Consumption based carbon assessments are concerned with the carbon emitted up to the point of purchase rather than the carbon emitted from their use and the outcome of their use. The witnesses expressed concern that a consumption-based approach is limited in its ability to inform policy decisions rather than assessing historic and in-house emissions after the fact. The current carbon assessment suggests that £1 spent on peatland restoration has the same climate impact as £1 spent on motorway building, and that the Scottish Public Pensions Agency has a much bigger impact in terms of emissions than the motorways and trunk roads budget, simply because it is a larger expenditure item. Witnesses suggested that they were aware of examples of how carbon assessment could be made more appropriate to the intended objectives of the Scottish Government in assessing the carbon consequences of their budget.

135. Dr Dan Barlow of WWF Scotland informed the Committee that—

“The second issue is integration with the other mechanisms that are now available. Work is under way to ensure that we understand the carbon impact of big infrastructure projects, but I understand that such individual-level assessments are based on a slightly different methodology. The RPP is based on understanding the policies and proposals that are needed to deliver our commitments under the Climate Change (Scotland) Act 2009, which are based on production emissions. At the moment, a number of different mechanisms are used. Some are based on consumption, some are based on production and some account for induced impacts, which the carbon assessment of the budget does not do at the moment. It gives figures for the impact of what we spend on transport, for example, but it does not account for what that means—the cars that will go on to the roads that we may build as a result of those spending decisions, and their impact on Scotland's long-term carbon emissions. We need a more coherent and joined-up approach that links together RPP work, individual-level assessment work and carbon budget assessment work, so that we understand consumption and production emissions.”590

136. Professor Tom Rye of the Napier University Transport Research Institute said—

“I have worked on local transport policy and I draw a slight parallel between carbon assessment and something that I did in that area. It is possible to present where we want to get to by way of scenarios of how to get there. That could be a useful thing for a carbon assessment to do. If we establish where we want to get to, there will be various ways to go there and we can ascertain how much it will cost us. That helps to inform how we get to the route that we want to take to where we want to go.”591

137. Professor Iain Docherty cautioned against an overreliance on existing forecasting models that do not reflect the realities of the behaviour and choices available to Scottish businesses and citizens—

“We need to understand what actually happens in Scotland and the choices that are made by Scottish people in ways that reflect our environment and our economy. If we can ascertain how they behave once we intervene, the forecast models might be more accurate over the medium term, and they might become more responsive to our particular situation.”592

138. Another important issue was how the carbon assessment was used in the preparation of the budget, when it was considered or whether it was an ex post evaluation after the main decisions had been taken. The Cabinet Secretary confirmed that the formal carbon assessment of the budget did take place after the Draft Budget was drawn up, however he felt that this did not fully represent how considerations of climate change emissions were incorporated into the budget setting process—

“At a technical and operational level, it is correct that we set a budget and run the calculations at the end of the process, but that is not a true account of how we actually go about the budget process. In the process, I set the three major themes of our thinking—first to promote economic recovery, secondly to protect front-line services and thirdly to support the development of a low-carbon economy—against the backdrop of which, in a very challenging public expenditure climate, my colleagues were asked to consider their proposals. As a result, the thinking on how to address carbon emissions and make more of a contribution towards tackling climate change was an implicit part of the thinking that went through the different stages of Cabinet discussion. Ultimately, a numeric calculation had to be carried out. I am not seeking to suggest anything other than that, but it is not the full picture of the process.”593

139. The Committee recognises that this is a new area of work and that there is no overnight solution. However there is a need to recognise that repeating the same consumption based approach will not give us an understanding of how the climate impact of the Scottish budget is changing over time. There was general consensus on the need for further research into the Scottish dimension of carbon assessment in terms of underlying assumptions and potential models of behaviour change.

140. The Committee also notes that the carbon assessment process, whilst taking some account of the climate change impact, does not fully and systematically consider the emission impacts of different policies and proposals. It allows for different assessment and evaluation procedures across different portfolios. Given the scale of the transformations required to meet the Climate Change targets, it is difficult to see how this combination of informal ad hoc policy and ex post carbon assessments can adequately inform the budget setting process in respect of climate change.

141. This point was accepted by the Cabinet Secretary—

“There is a legitimate point of debate about whether we have got the right balance between what £1 spent on motorways costs in terms of carbon and what £1 spent on peatland restoration costs. I accept that some of our assumptions might be a bit on the blunt side.”594

142. As discussed earlier in this report, the Committee also believes that any future carbon assessment brought forward by the Scottish Government should adopt a methodology that would enable comparisons to be made from one year to the next, to aid an understanding of how emissions from the budget are changing over time.

143. There was also an agreement to develop the carbon assessment further to incorporate impact assessments prior to arriving at the Draft Budget. The Cabinet Secretary informed the Committee—

“I have always accepted—and it has been broadly accepted—that the carbon assessment is a novel piece of work. We are probably the first Administration to try to produce such an assessment. Our researchers have done innovative work to put together a methodology that enables the assessment to be undertaken. There is always room and opportunity for us to improve our analysis and to consider other questions as a consequence. The Government would be happy to explore any thinking from the committee on the question.”595

144. He also commented—

“Are there ways in which we can interrogate the information on the basis that £1 spent on motorway building has a different carbon assessment tag from £1 spent on peatland restoration? I am happy to explore that question. Another element of the new thinking that the Government is doing is looking at the carbon impact of individual policy developments. We can arrive at a conclusion that £28 billion converts into so many tonnes of carbon emissions. I suppose that what you are also driving at, convener, is that, among policy choices, policy A might have one carbon impact and policy B another, even though they have the same cost in pounds sterling. Where we fit that into our policy-making process is an interesting area of discussion.”596

145. The Committee makes the following recommendations intended to support the development and refinement of the carbon assessment tool in order that it positively influences future budgets—

  • the Scottish Government should seek independent advice and an assessment of the appropriateness and effectiveness of the methodology chosen;
  • the Scottish Government should work with this Committee in developing and refining carbon assessment methodologies;
  • the Scottish Government should continue its work on the refinement and implementation of methodologies to assess the carbon impact of individual policies;
  • carbon impact assessment should be undertaken systematically during the budget setting process rather than ex post; and
  • there should be a move towards providing a carbon impact assessment of the Draft Budget.

Appendix 1: Level 3 budget equity ratios

Forestry Commission EU Income -60.7 Scot. Water Interest on Voted Loans 0.0
Rail Small Programmes -31.1 Forestry Commission Depreciation 0.0
Cycling Walking and Safer Streets -31.1 Energy Crop Payments 0.0
Support for Scottish Water Borrowing -31.1 Natural Resources 0.0
Road Network Strengthening & Improvement -22.8 Scottish Water Climate Change 0.0
Support for Freight Industry -22.3 Forestry Commission P, R and Admin 0.0
Major Public Transport Projects -21.7 Sustainable Action Fund 0.0
Road Capital Land and Works -21.1 Roads Depreciation 0.0
Forestry Commission Net Capital Exp -17.0 Highlands & Islands Airports 2.0
Roads Improvements -16.0 Zero Waste 2.5
Vessels and Piers -14.1 Sustainable and Active Travel 5.7
Road Equivalent Tariff -9.4 Support for Ferry Services 6.6
Supporting Transitions -8.1 Road DBFO Payments 7.4
Transport Information -7.5 Rail Infrastructure 8.9
Travel Strategy and Innovation -7.1 Forestry Commission Woodland Grants 10.2
Energy -6.2 Road Structural Repairs 32.8
Supporting Sustainability -6.2 Forth and Tay Road Bridge 34.0
Natural Assets and Flooding -5.4 Smartcard Programme 109.6
Innovation and Industries -4.8 Forth Crossing 176.2
Road Safety -4.4    
Road Other Expenditure -4.4    
Support for Air Services -4.3    
Strategic Transport Projects Review -4.1    
British Waterways Scotland -3.8    
Rail Development -3.5    
Industry and Technology Grants -3.2    
Forestry -2.6    
Forestry Commission Programme Costs -2.5    
Forest Enterprise Capital Expenditure -2.4    
Agency Administration Costs -2.0    
Rail Franchise -1.5    
Forest Enterprise Operating Costs -1.3    
Local Government -1.2    
Concessionary Fares -1.1    
Support for Bus Services -0.1    
Road Routine and Winter Maintenance -0.1    

EXTRACT FROM THE MINUTES OF THE TRANSPORT, INFRASTRUCTURE AND CLIMATE CHANGE COMMITTEE

21st Meeting, 2010 (Session 3), Tuesday 28 September 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.

22nd Meeting, 2010 (Session 3), Tuesday 5 October 2010

Draft Budget Scrutiny 2011-12 - appointment of adviser (in private): The Committee agreed a list of candidates for the post of budget adviser and agreed a ranking of candidates for the post.

24th Meeting, 2010 (Session 3), Tuesday 30 November 2010

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

Professor Iain Docherty, Professor of Public Policy and Governance, University of Glasgow;

Dr Andy Kerr, Director of Scottish Alliance for Geoscience, Environment and Society, University of Edinburgh;

Professor Tom Rye, School of Engineering and the Built Environment, Napier TRI;

Dr Dan Barlow, Head of Policy, WWF Scotland.

Draft Budget Scrutiny 2011-12 (in private): The Committee considered the evidence heard during the session.

25th Meeting, 2010 (Session 3), Tuesday 7 December 2010

Witness expenses: The Committee agreed to delegate to the Convener responsibility for arranging for the SPCB to pay, under Rule 12.4.3, any expenses of witnesses in relation to the Report on Proposals and Policies and the Draft Budget 2011-12.

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

John Swinney MSP, Cabinet Secretary for Finance and Sustainable Growth, David Middleton, Chief Executive, Transport Scotland, and Bob Irvine, Deputy Director, Scottish Water Division, Scottish Government.

Draft Budget Scrutiny 2011-12 (in private): The Committee considered the evidence heard during the session.

27th Meeting, 2010 (Session 3), Tuesday 21 December 2010

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

ANNEXE M

Scottish Commission for Public Audit

1st Report, 2010 (Session 3)

Report on Audit Scotland's Budget Proposal for 2011-12

The Commission reports to the Parliament as follows—

Introduction

1. Under section 11(9) of the Public Finance and Accountability (Scotland) Act 2000, Audit Scotland must prepare proposals for its use of resources and expenditure and send the proposals to the Scottish Commission for Public Audit, which is to examine the proposals and report to the Parliament on them.

2. The Commission took evidence on Audit Scotland’s 2011-12 budget proposal at its meeting on 17 December 2010 from Robert Black, Auditor General for Scotland (AGS) (the Accountable Officer for Audit Scotland), Russell Frith, Assistant Auditor General and Diane McGiffen, Chief Operating Officer, Audit Scotland.

3. Audit Scotland’s 2011-12 budget proposal shows that its gross administrative costs are projected to be £26,218,000. Its total income, which comes overwhelmingly from charges to audited bodies, amounts to £19,398,000. Audit Scotland is seeking parliamentary approval for total resource requirements of £7,070,000, comprising a net operating cost of £6,820,000 and £250,000 in capital. This bid represents an overall cash decrease of 3.8% compared with the approved 2010-11 budget or a real price terms reduction of 5.7%.597 The money is intended to cover the costs of audits that Audit Scotland does not charge for and the cost of performance audit work within the AGS’s remit.

4. The Commission acknowledges that Audit Scotland’s proposals reflect the broader financial pressures on the public sector and welcomes the fact that Audit Scotland has provided outline budget projections for the following three financial years. The Commission also welcomes the commitment by Audit Scotland to creating efficiencies and to reducing the cost of audit in times of financial restraint. However, it is keen to stress the ever increasing importance of rigorous independent audit of public funds at a time of budgetary restraint.

5. The Commission therefore welcomes the AGS’s commitment in oral evidence to addressing these dual challenges—

“My colleagues and I in Audit Scotland are absolutely committed to getting costs down as far as possible and as quickly as possible, but we must balance that with the need to deliver robust and independent audit and comment on significant issues.”

6. More specifically, he added that—

“… through the budget proposal, we will be able to reduce the costs of audit by 7 per cent in real terms in 2011-12 and to continue that into future years. Overall, we propose to reduce the cost of audit over the four years coming up by just under 17 per cent in real terms. That is the net cost reduction that will have to be recovered from fees and from the Parliament.”598

7. Audit Scotland’s budget proposal contains a number of other planned efficiency measures and some of these are explored in more detail below.

Commission Consideration

Pay freeze

8. Audit Scotland’s budget proposal confirms that the pay freeze introduced from April 2010 will continue for 2011-12 . However, contribution payments to staff will continue to be paid in accordance with its remuneration strategy – in 2011-12 these payments will equate to 0.84% of its total pay bill.599

9. The AGS was asked whether Audit Scotland would follow the example of other areas of the public sector in relation to senior salaries. He advised that Audit Scotland has reduced the number of assistant directors in audit services from seven to five and, with the Director Auditor General on secondment, it would be running with one director in charge of that whole area of business. When asked whether the remuneration committee would be reviewing salaries at an individual level and not just in relation to the total bill for senior level salaries, he added—

“We will certainly have very close regard to what is happening to pay policy at a senior level in Government and in the public sector more widely.”600

10. The Commission acknowledges the pay freeze and the cost savings that this will achieve and recommends that Audit Scotland’s remuneration committee reflects the same financial restraints that exist elsewhere in the public sector when determining senior level salaries.

11. Similarly, the Commission recommends that in determining the AGS’s remuneration, the SPCB applies the same principle of restraint.

Staff reductions

12. The Budget Proposal states that staff costs account for 55% of Audit Scotland’s expenditure budgets and includes an efficiency target of £1,062k, to be delivered through 17 whole time equivalents (w.t.e.) staff reductions through restructuring and a freeze in salary scale points.601

13. Audit Scotland confirmed in oral evidence that it had already achieved the target figure of 17 w.t.e. staff through a recruitment freeze in 2010-11602 and the budget proposal indicates that further reductions in 2011-12 will be achieved through natural turnover and at no additional cost.603 Going forward, Audit Scotland has committed to reducing its staff complement by a total of 42 people in the period up to 2014-15. This will be achieved through a voluntary early release scheme.

14. The Commission questioned whether staff, in anticipating the early release scheme, may delay leaving in order to benefit from an enhanced scheme. The AGS said that Audit Scotland would be—

“pitching the … scheme at a level that will be attractive enough to encourage some people who are towards the end of their careers to go, but not so attractive that people might apply for it purely because they see a financial benefit.”

15. The Commission recognises the efforts made in this area to date and that Audit Scotland has already met its target for staff reductions for 2011-12 through a freeze in staff recruitment in 2010-11.

16. Looking to the longer term, the Commission notes that Audit Scotland is taking steps to reduce staff numbers and trusts that a well managed voluntary release scheme will be key to securing further efficiencies. This is an area that the SCPA will continue to monitor going forward.

Other efficiency measures

17. Audit Scotland confirmed that its 2011/12 budget proposal had been submitted with the assumption that it would be providing the same level of activity and audit as is currently provided. It does not take into account any possible increase in the volume of work, and if there was to be reduction in the “scope of work” provided by Audit Scotland, it would have to “revisit the matter”.604

18. The AGS went into some of the measures that would ensure that the quality and effectiveness of audit will not decline, including investment in IT and staff training and development. For example—

“We have introduced a new system of electronic working papers to underpin all the audit work. That will certainly generate efficiencies, which are planned into the budget. It will also bring about enhancements in quality through the speed and focus of the work that is undertaken.605

19. Audit Scotland added—

“We are doing a range of activity on best value, but we have reduced the size and shape of the best-value audit.

“Across our performance audit work … we streamlined and restructured the group and the teams in April this year, so that we could benefit from pooling together a range of data analysis and data collection resources and skills in one place, as well as streamlining and simplifying some of that work.”606

ConclusionS and recommendation

20. The Commission welcomes Audit Scotland’s commitment to provide the same level of activity and audit within reduced resources and the efforts being taken to reduce the cost of audit and to identify further efficiencies.

21. The Commission stresses again the importance of maintaining a high quality, independent audit function in times of financial restraint. This is an area that the SCPA will continue to monitor very closely in the future.

22. The Commission notes Audit Scotland’s 2011-12 budget proposal shows total net expenditure of £26,218,000. It recommends that its request for a total resource requirement of £7,070,000 for 2011-12, to be provided from the Scottish Consolidated fund, be approved by the Parliament


Footnotes:

339 Crawford W Beveridge CBE, Sir Neil McIntosh CBE and Robert Wilson. (2010) Independent Budget Review – the Report of Scotland’s Independent Budget Review Panel. [Online] Available at www.scotland.gov.uk/Resource/Doc/919/0102410.pdf [Accessed 10December2010

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

341 SPICe Briefing 10/78: Draft Budget 2011-12: Justice, 19 November 2010.

342 Association of Chief Police Officers in Scotland. Written submission to the Justice Committee, November 2010.

343 Lothian and Borders Police Board. Written submission to the Justice Committee, November 2010.

344 Strathclyde Police Authority. Written submission to the Justice Committee, November 2010.

345 Dumfries and Galloway Police Authority. Written submission to the Justice Committee, November 2010.

346 Northern Police Board. Written submission to the Justice Committee, November 2010.

347 Grampian Joint Police Board. Written submission to the Justice Committee, November 2010.

348 Scottish Parliament Justice Committee. Official Report, 23 November 2010, Col 3812

349 Scottish Parliament Justice Committee. Official Report, 23 November 2010, Col 3808.

350 Scottish Parliament Justice Committee. Official Report, 23 November 2010, Col 3818.

351 Scottish Parliament Justice Committee. Official Report, 23 November 2010, Col 3821.

352 Scottish Parliament Justice Committee. Official Report, 23 November 2010, Col 3821.

353 Scottish Parliament Justice Committee. Official Report, 30 November 2010, Col 3866.

354 Scottish Parliament Justice Committee. Official Report, 23 November 2010, Col 3829.

355 Scottish Parliament Justice Committee. Official Report, 23 November 2010, Col 3830.

356 Scottish Parliament Justice Committee. Official Report, 30 November 2010, Col 3862.

357 Scottish Parliament Justice Committee. Official Report, 30 November 2010, Col 3869.

358 Scottish Parliament Justice Committee. Official Report, 23 November 2010, Col 3809.

359 Scottish Parliament Justice Committee. Official Report, 23 November 2010, Col 3816.

360 Scottish Parliament Justice Committee. Official Report, 30 November 2010, Col 3872.

361 Scottish Parliament Justice Committee. Official Report, 30 November 2010, Col 3886.

362 Scottish Parliament Justice Committee. Official Report, 30 November 2010, Col 3872.

363 Scottish Parliament Justice Committee. Official Report, 30 November 2010, Col 3892.

364 The words “may have” were agreed to by division: For 4 (Bill Aitken, Nigel Don, Stewart Maxwell, Dave Thompson), Against 4 (Robert Brown, Bill Butler, Cathie Craigie, James Kelly), Abstentions 0; words agreed to on casting vote.

365 James Kelly proposed moving the phrase “but the Committee notes the evidence of the Chief Constable Strang, on behalf of ACPOS, that such action would be a last resort” to earlier in the report. The proposal was disagreed to by division: For 4: Robert Brown, Bill Butler, Cathie Craigie, James Kelly), Against 4 (Bill Aitken, Nigel Don, Stewart Maxwell, Dave Thomson), Abstentions 0; proposal disagreed to on casting vote.

366 Dave Thompson proposed that the following sentence be added to the start of this paragraph: “The Committee accepts that the Scottish Government faces difficult decisions because of the cuts imposed by the UK Spending Review and welcomes the commitment to maintain 1,000 extra police officers.” This proposal was disagreed to by division: For 3 (Nigel Don, Stewart Maxwell, Dave Thompson), Against 5 (Bill Aitken, Robert Brown, Bill Butler, Cathie Craigie, James Kelly), Abstentions 0.

367 James Kelly proposed including in this sentence the phrase “representing a real terms cut of 1.2%”. The proposal was disagreed to by division: For 4 (Robert Brown, Bill Butler, Cathie Craigie, James Kelly), Against 4 (Bill Aitken, Nigel Don, Stewart Maxwell, Dave Thompson), Abstentions 0; proposal disagreed to on casting vote.

368 James Kelly proposed replacing this sentence with “As a result, no additional monies have been made available to support the increase in CPOs resulting from the introduction of the presumption against 3 month prison sentences due to be implemented from 1 February 2011”. The proposal was disagreed to by division: For 3 (Bill Butler, Cathie Craigie, James Kelly), Against 5 (Bill Aitken, Nigel Don, Stewart Maxwell, Dave Thompson), Abstentions 0.

369 This sentence was agreed to by division: For 5 (Bill Aitken, Robert Brown, Nigel Don, Stewart Maxwell, Dave Thompson), Against 3 (Bill Butler, Cathie Craigie, James Kelly), Abstentions 0.

370 Scottish Parliament Justice Committee. Official Report, 23 November 2010, Col 3835.

371 Scottish Parliament Justice Committee. Official Report, 23 November 2010, Col 3838.

372 Scottish Parliament Justice Committee. Official Report, 23 November 2010, Col 3836.

373 Scottish Parliament Justice Committee. Official Report, 23 November 2010, Col 3840.

374 Scottish Parliament Justice Committee. Official Report, 30 November 2010, Col 3878.

375 Scottish Parliament Justice Committee. Official Report, 30 November 2010, Col 3881.

376 Scottish Parliament Justice Committee. Official Report, 30 November 2010, Cols 3895-3896.

377 Scottish Parliament Justice Committee. Official Report, 30 November 2010, Col 3897

378 This sentence was agreed to by division: For 5 (Bill Aitken, Robert Brown, Nigel Don, Stewart Maxwell, Dave Thompson), Against 3 (Bill Butler, Cathie Craigie, James Kelly), Abstentions 0.

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

380 Scottish Prison Service. Written submission to the Justice Committee, November 2010.

381 Prison Officers Association. Written submission to the Justice Committee, November 2010.

382 Scottish Parliament Justice Committee. Official Report, 30 November 2010, Col 3900.

383 Scottish Parliament Justice Committee. Official Report, 30 November 2010, Col 3899.

384 This sentence was agreed to by division. For 5 (Bill Aitken, Robert Brown, Bill Butler, Cathie Craigie, James Kelly), Against 3 (Nigel Don, Stewart Maxwell, Dave Thompson), Abstentions 0.

385 Scottish Parliament Justice Committee. Official Report, 30 November 2010, Col 3905.

386 Scottish Parliament Justice Committee. Official Report, 30 November 2010, Col 3906.

387 Chief Fire Officers Association Scotland. Written submission to the Justice Committee, November 2010.

388 Fire Brigades Union Scotland. Written submission to the Justice Committee, November 2010.

389 Dave Thompson proposed including a further paragraph: “The Committee understands that there is great pressure on the Scottish Government’s budget following the cuts imposed by the UK Spending Review and that protection of the health and local government budgets has put greater pressure on the Justice budget, particularly in relation to capital. The Committee accepts that this pressure will be a challenge for budget managers in 2011-12 but accepts their assurances that the situation is manageable.” The proposal was disagreed to by division. For 3 (Nigel Don, Stewart Maxwell, Dave Thompson), Against 5 (Bill Aitken, Robert Brown, Bill Butler, Cathie Craigie, James Kelly), Abstentions 0.

390 Robert Brown proposed including a final sentence: “The Committee however regrets that such information was not provided as part of the original budget to enable the Committee to take evidence from witnesses on it and to assess any implications.” The proposal was disagreed to by division: For 4 (Robert Brown, Bill Butler, Cathie Craigie, James Kelly), Against 4 (Bill Aitken, Nigel Don, Stewart Maxwell, Dave Thompson), Abstentions 0; proposal disagreed to on casting vote.

393 The full remit of the Independent Budget Review Panel is available at—
http://www.scotland.gov.uk/About/IndependentBudgetReview/About.

394 Scottish Parliament Local Government and Communities Committee. Official Report, 8 September 2010, Col3352.

395 Scottish Parliament Local Government and Communities Committee. Official Report, 1 December 2010, Col 3879.

396 Scottish Parliament Local Government and Communities Committee. Official Report, 27 October 2010, Col 3597.

397 Scottish Government. Scotland’s Spending Plans and Draft Budget 2011-12. Available at:
http://www.scotland.gov.uk/Publications/2009/09/17093831/0 [Accessed 16 December 2010]

398 Scottish Government. Scotland’s Spending Plans and Draft Budget 2011-12. Available at:
http://www.scotland.gov.uk/Publications/2009/09/17093831/0 [Accessed 16 December 2010], p. iv.

399 Scottish Parliament Local Government and Communities Committee. Official Report, 1 December 2010, Col 3879.

400 Scottish Parliament. Official Report, 8 December 2010, Col 31284.

401 Scottish Government News Release. Available at: http://www.scotland.gov.uk/News/Releases/2010/11/19124547 [Accessed 16 December 2010].

402 Scottish Parliament Local Government and Communities Committee. Official Report, 2 November 2010, Cols 3633-4.

403 Scottish Parliament Local Government and Communities Committee. Official Report, 27 October 2010, Col 3613.

404 Scottish Parliament Local Government and Communities Committee. Official Report, 1 December 2010, Cols3879-80.

405 Scottish Parliament Local Government and Communities Committee. Official Report, 1 December 2010, Col 3880.

406 COSLA. Written submission to the Local Government and Communities Committee.

407 Scottish Parliament Information Centre. (2010) Draft Budget 2011-12: Local Government and Communities. SPICe Briefing 10-81. Available at: http://www.scottish.parliament.uk/business/research/subject/ParGov.htm
Accessed 18 December 2010].

408 Centre for Public Policy for Regions. Scottish Government’s Draft Budget 2011-12, Budget Briefing 2. Available at: http://www.cppr.ac.uk/media/media_182658_en.pdf. [Accessed 18 December 2010].

409 Centre for Public Policy for Regions. Scottish Government’s Draft Budget 2011-12, Budget Briefing 2. Available at: http://www.cppr.ac.uk/media/media_182658_en.pdf. [Accessed 18 December 2010].

410 Scottish Parliament Local Government and Communities Committee. Official Report, 1 December 2010, Col3883.

411 Scottish Parliament Local Government and Communities Committee. Official Report, 1 December 2010, Col 3899.

412 Notes:

1. In 2010-11 includes resources from previous level 3s: AHIP – Regeneration Programmes –Private Housing

2. In 2010-11 includes resources from previous level 3s: AHIP- Home Insulation – Energy Assistance Package- Private Housing

3. In 2010-11 includes resources from previous level 3s: AHIP – Wider Role –Regeneration Programmes- Community Engagement – Tackling and Preventing Homelessness – Housing Voluntary Sector Grant Scheme – Social Housing – Private Housing – Communities Analytical Services

4. In 2010-11 the Housing and Regeneration Budget received non-recurring budget consequential arising from UK budget announcements. (£31m in respect of Supporting Economic Growth/Housing Supply (Affordable Housing Investment Programme) and £10m for Supporting Sustainability (Home Insulation)

5. Transfer of Management Development Funds (i.e. housing monies to Glasgow and Edinburgh) are not included in the housing monies in Tables 5 and 6). Within the Draft Budget document these monies are included in the ‘Support for Capital’ monies within Local Government portfolio. The Cabinet Secretary, in supplementary evidence to the Committee, commented on these monies as follows:

“I can confirm that the TMDF budget will be set at £97.7 million in 2011-12, which is the same proportionate share (18 per cent) of the overall reduction to the local government capital budget in 2011-12”.

Local Government Finance Circular No.14/2010, published on 9 December 2010, details the split of these monies as being £68.1m to Glasgow and £29.6m to Edinburgh.

413 Scottish Federation of Housing Associations. Written submission to the Local Government and Communities Committee.

414 Scottish Federation of Housing Associations. Written submission to the Local Government and Communities Committee.

415 Scottish Federation of Housing Associations. Written submission to the Local Government and Communities Committee.

416 Cabinet Secretary for Finance and Sustainable Growth. Supplementary written evidence.

417 Cabinet Secretary for Finance and Sustainable Growth. Supplementary written evidence.

418 Letter from the Cabinet Secretary for Finance and Sustainable Growth and the President of COSLA to the Leaders of all Scottish local authorities, 17 November 2010. Available at: http://www.scotland.gov.uk/Resource/Doc/1070/0107976.pdf. [Accessed 18 December 2010].

419 Scottish Parliament Local Government and Communities Committee. Official Report, 1 December 2010, Col 3880.

420 Letter from the Cabinet Secretary for Finance and Sustainable Growth and the President of COSLA to the Leaders of all Scottish local authorities, 17 November 2010. Available at: http://www.scotland.gov.uk/Resource/Doc/1070/0107976.pdf. [Accessed 18 December 2010].

421 Scottish Parliament Local Government and Communities Committee, Official Report, 1 December 2010, Col 3887.

422 Scottish Parliament Local Government and Communities Committee. Official Report, 24 November 2010, Col 3844.

423 COSLA. Written submission to the Local Government and Communities Committee.

424 Scottish Parliament Local Government and Communities Committee, Official Report, 24 November 2010, Col 3824.

425 Independent Budget Review. The Report of Scotland’s Independent Budget Review Panel. Recommendation 6. Available at: http://www.scotland.gov.uk/Resource/Doc/919/0102335.pdf

426 Scottish Parliament Local Government and Communities Committee. Official Report, 8 September 2010, Col 3356.

427 Scottish Parliament Local Government and Communities Committee. Official Report, 24 November 2010, 3827.

428 Scottish Parliament Local Government and Communities Committee. Official Report, 24 November 2010, Col 3825.

429 Scottish Parliament Local Government and Communities Committee. Official Report, 24 November 2010, Col3825.

430 Scottish Parliament Local Government and Communities Committee. Official Report, 24 November 2010, Col 3835.

431 Scottish Parliament Local Government and Communities Committee. Official Report, 24 November 2010, Col 3837.

432 Scottish Parliament Local Government and Communities Committee., Official Report, 27 October 2010, Col3605.

433 COSLA. Written submission to the Local Government and Communities Committee.

434 Scottish Parliament Local Government and Communities Committee. Official Report, 24 November 2010, Col 3809.

435 Scottish Parliament Local Government and Communities Committee. Official Report, 24 November 2010, Col 3827.

436 Scottish Parliament Local Government and Communities Committee. Official Report, 3 November 2010, Col 3655.

437 Scottish Parliament Local Government and Communities Committee, Official Report, 24 November 2010, Col 3784.

438 Scottish Parliament Local Government and Communities Committee. Official Report, 24 November 2010, Col 3785.

439 Scottish Parliament Local Government and Communities Committee. Official Report, 24 November 2010, Col 3785.

440 COSLA. Written submission to the Local Government and Communities Committee.

441 COSLA. Written submission to the Local Government and Communities Committee.

442 Scottish Parliament Local Government and Communities Committee. Official Report, 8 September 2010, Col 3598.

443 Scottish Parliament Local Government and Communities Committee. Official Report, 8 September 2010, Col 3598.

444 Scottish Parliament Local Government and Communities Committee. Official Report, 27 October 2010, Col 3600.

445 Scottish Parliament Local Government and Communities Committee. Official Report, 24 November 2010, Col3848.

446 Scottish Parliament Local Government and Communities Committee. Official Report, 3 November 2010, Col3639.

447 Scottish Parliament Local Government and Communities Committee. Official Report, 24 November 2010, Col 3848.

448 Scottish Parliament Local Government and Communities Committee. Official Report, 8 September 2010, Col 3366.

449 Scottish Parliament Local Government and Communities Committee. Official Report, 8 September 2010, Col3366-7.

450 Scottish Parliament Local Government and Communities Committee. Official Report, 24 November 2010, Col 3794.

451 Scottish Parliament Local Government and Communities Committee. Official Report, 24 November 2010, Col 3801.

452 Scottish Parliament Local Government and Communities Committee. Official Report, 24 November 2010, Col 3801.

453 Scottish Parliament Local Government and Communities Committee. Official Report, 24 November 2010, Col 3801.

454 Scottish Parliament Local Government and Communities Committee. Official Report, 27 October 2010, Col 3617.

455 Scottish Parliament Local Government and Communities Committee. Official Report, 27 October 2010, Cols 3618-19.

456 Scottish Government News Release. Available at: http://www.scotland.gov.uk/News/Releases/2010/11/19124547 [last accessed 18 December 2010.

457 Scottish Parliament Local Government and Communities Committee. Official Report, 1 December 2010, Col3892.

458 Scottish Parliament Local Government and Communities Committee. Official Report, 24 November 2010, Col 3793.

459 Scottish Parliament Local Government and Communities Committee. Official Report, 24 November 2010, Col3794.

460 Scottish Parliament Local Government and Communities Committee. Official Report, 1 December 2010, Col 3895.

461 Scottish Parliament Local Government and Communities Committee. Official Report, 1 December 2010, Cols3808-9.

462 Scottish Parliament Local Government and Communities Committee. Official Report, 1 December 2010, Col 3891.

463 Scottish Parliament Local Government and Communities Committee. Official Report, 24 November 2010, Col 3793.

464 Scottish Parliament Local Government and Communities Committee. Official Report, 1 December 2010, Col 3891.

465 Scottish Government. (2010) Scotland’s Spending Plans and Draft Budget 2011-12, p.12. Available at: http://www.scotland.gov.uk/Publications/2010/11/17091127/0 [Accessed 16 December 2010].

466 Scottish Parliament Local Government and Communities Committee. Official Report, 8 September 2010, Col 3343.

467 Scottish Parliament Local Government and Communities Committee. Official Report, 24 November 2010, Col3839.

468 COLSA. Written submission to the Local Government and Communities Committee.

469 Scottish Parliament Local Government and Communities Committee. Official Report, 24 November 2010, Col3841.

470 Scottish Parliament Local Government and Communities Committee. Official Report, 24 November 2010, Col3618.

471 Scottish Parliament Local Government and Communities Committee. Official Report, 3 November 2010, Col3658.

472 Scottish Parliament Local Government and Communities Committee. Official Report, 3 November 2010, Col3659.

473 Scottish Parliament Local Government and Communities Committee. Official Report, 8 September 2010, Col3346.

474 Scottish Parliament Local Government and Communities Committee. Official Report, 8 September 2010, Col 3346.

475 Scottish Parliament Local Government and Communities Committee. Official Report, 24 November 2010, Col 3816.

476 Scottish Parliament Local Government and Communities Committee, Official Report, 24 November 2010, Col 3818.

477 Scottish Parliament Local Government and Communities Committee. Official Report, 24 November 2010, Col 3817.

478 Scottish Parliament Local Government and Communities Committee. Official Report, 24 November 2010, Col 3819.

479 Scottish Parliament Local Government and Communities Committee. Official Report, 24 November 2010, Col3820.

480 Scottish Parliament Local Government and Communities Committee. Official Report, 24 November 2010, Cols 3819-20.

481 Scottish Parliament Local Government and Communities Committee. Official Report 24 November 2010, Col 3820.

482 Scottish Parliament Local Government and Communities Committee. Official Report, 24 November 2010, Col 3791.

483 Scottish Parliament Local Government and Communities Committee. Official Report, 1 December 2010, Col 3883.

484 Scottish Parliament Local Government and Communities Committee. Official Report, 1 December 2010, Col 3886.

485 Scottish Parliament Local Government and Communities Committee. Official Report, 8 September 2010, Col 3358.

486 Scottish Parliament Local Government and Communities Committee. Official Report, 24 November 2010, Col 3789.

487 Scottish Parliament Local Government and Communities Committee. Official Report, 24 November 2010, Col 3784.

488 Scottish Parliament Local Government and Communities Committee. Official Report, 24 November 2010, Col 3799.

489 Scottish Parliament Local Government and Communities Committee. Official Report, 24 November 2010, Col 3786.

490 Scottish Parliament Local Government and Communities Committee. Official Report, 24 November 2010, Col 3799.

491 Scottish Parliament Local Government and Communities Committee. Official Report, 24 November 2010, Col 3786.

492 Scottish Parliament Local Government and Communities Committee. Official Report, 24 November 2010, Col 3786.

493 Scottish Parliament Local Government and Communities Committee. Official Report, 27 October 2010, Col 3608.

494 Scottish Parliament Local Government and Communities Committee. Official Report, 27 October 2010, Col 3618.

495 Scottish Parliament Local Government and Communities Committee. Official Report, 24 November 2010, Col 3788.

496 Scottish Parliament Local Government and Communities Committee. Official Report, 24 November 2010, Col 3788.

497 Scottish Parliament Local Government and Communities Committee. Official Report, 1 December 2010, Col 3896.

498 Scottish Parliament Local Government and Communities Committee. Official Report, 8 September 2010, Col 3362.

499 Scottish Parliament Local Government and Communities Committee. Official Report, 8 September 2010, Col 3365.

500 Scottish Parliament Local Government and Communities Committee. Official Report, 3 November 2010, Col 3664.

501 Scottish Parliament Local Government and Communities Committee. Official Report, 24 November 2010, Col 3845.

502 Scottish Parliament Local Government and Communities Committee. Official Report, 27 October 2010, Col 3612.

503 Scottish Parliament Local Government and Communities Committee, Official Report, 27 October 2010, Col 3613.

504 Scottish Parliament Local Government and Communities Committee. Official Report, 27 October 2010, Col 3601.

505 Scottish Parliament Local Government and Communities Committee. Official Report 27 October 2010, Col 3601.

506 Scottish Parliament Local Government and Communities Committee. Official Report, 27 October 2010, Col 3602.

507 Scottish Parliament Local Government and Communities Committee, Official Report, 1 December 2010, Col3898.

508 Scottish Parliament Local Government and Communities Committee. Official Report, 1 December 2010, Col3899.

509 Scottish Parliament Local Government and Communities Committee. Official Report, 1 December 2010, Col 3898.

510 Scottish Government. (2010) Finance Circular No.14/2010, p.4. Available at: http://www.scotland.gov.uk/Topics/Government/local-government/17999/LGF-Circular-14-2010
Accessed 16 December 2010].

511 Scottish Parliament Rural Affairs and Environment Committee. Official Report, 1 December 2010, Cols 3472-3473.

512 Scottish Parliament Rural Affairs and Environment Committee. Official Report, 24 November 2010, Col 3415.

513 Scottish Government. Supplementary written evidence to the Rural Affairs and Environment Committee.

514 Scottish Parliament Rural Affairs and Environment Committee. Official Report, 1 December 2010, Col 3494.

515 Scottish Parliament Rural Affairs and Environment Committee. Official Report, 24 November 2010, Col 3417.

516 Scottish Parliament Rural Affairs and Environment Committee. Official Report, 24 November 2010, Col 3400.

517 Scottish Parliament Rural Affairs and Environment Committee, Official Report, 1 December 2010, Col 3493.

518 Scottish Parliament Rural Affairs and Environment Committee. Official Report, 24 November 2010, Col 3397-3398.

519 Scottish Parliament Rural Affairs and Environment Committee. Official Report, 24 November 2010, Col 3398.

520 Scottish Parliament Rural Affairs and Environment Committee. Official Report, 24 November 2010, Col 3410.

521 Scottish Parliament Rural Affairs and Environment Committee. Official Report, 24 November 2010, Col 3402.

522 Scottish Parliament Rural Affairs and Environment Committee. Official Report, 24 November 2010, Col 3412.

523 Scottish Government (2010). Meeting Scotland’s Zero Waste Targets: Assessing the Costs Associated with New Waste Management Infrastructure. Accessible at: http://www.scotland.gov.uk/Publications/2010/05/24145920/0 [Accessed 9 December 2010].

524 Scottish Parliament Rural Affairs and Environment Committee, Official Report, 1 December 2010, Col 3468-3469.

527 Scottish Parliament. Official Report, 18 March 2010, Col 24723.

528 Scottish Parliament Transport, Infrastructure and Climate Change Committee. Official Report, 7 December 2010, Col 3499.

529 Scottish Government. Letter from the Cabinet Secretary for Finance and Sustainable Growth dated 15 December 2010.

531Audit Scotland (2010). National concessionary travel. Available at:
http://www.audit-scotland.gov.uk/docs/central/2010/nr_101007_concessionary_travel_pr.pdf

532 Scottish Parliament Transport, Infrastructure and Climate Change Committee. Official Report, 7 December 2010, Col 3499.

533 Scottish Parliament Transport, Infrastructure and Climate Change Committee. Official Report, 7 December 2010, Col 3499.

534 Rob Gibson dissents from this paragraph.

535 Scottish Government. (2010) Draft Budget 2011-12, page 16. Available at: http://www.scotland.gov.uk/Resource/Doc/331661/0107923.pdf

536 Scottish Parliament Transport, Infrastructure and Climate Change Committee. Official Report, 30 November 2010, Col 3422.

537 Scottish Parliament Transport, Infrastructure and Climate Change Committee. Official Report, 30 November 2010, Col 3422.

538 Scottish Parliament Transport, Infrastructure and Climate Change Committee. Official Report, 30 November 2010, Col 3429.

539 Scottish Parliament Transport, Infrastructure and Climate Change Committee. Official Report, 7 December 2010, Col 3494.

540 Scottish Parliament Transport, Infrastructure and Climate Change Committee. Official Report, 7 December 2010, Col 3494.

541 Scottish Government. (2010) Draft Budget 2011-12, page 99. Available at: http://www.scotland.gov.uk/Resource/Doc/331661/0107923.pdf

542 Scottish Parliament Transport, Infrastructure and Climate Change Committee. Official Report, 30 November 2010, Col 3429.

543 Scottish Parliament Transport, Infrastructure and Climate Change Committee. Official Report, 30 November 2010, Col 3430.

544 Scottish Parliament Transport, Infrastructure and Climate Change Committee. Official Report, 7 December 2010, Col 3512.

545 Scottish Parliament Transport, Infrastructure and Climate Change Committee. Official Report, 7 December 2010, Col 3513.

546 Rob Gibson dissents from this paragraph.

547 Scottish Parliament Transport, Infrastructure and Climate Change Committee. Official Report, 30 November 2010, Col 3440.

548 Scottish Parliament Transport, Infrastructure and Climate Change Committee. Official Report, 30 November 2010, Col 3440.

549 Scottish Parliament Transport, Infrastructure and Climate Change Committee. Official Report, 7 December 2010, Col 3505.

550 Scottish Government. Letter from the Cabinet Secretary for Finance and Sustainable Growth dated 15 December 2010.

551 Sustrans Scotland, Cycling Scotland, SPOKES, Transform Scotland, WWF Scotland, Ramblers Scotland, Living Streets Scotland, Paths for All Partnership, Friends of the Earth Scotland, Cyclists Touring Club Scotland and GO Bike. Written submission to the Transport, Infrastructure and Climate Change Committee.

552 Scottish Parliament Transport, Infrastructure and Climate Change Committee. Official Report, 30 November 2010, Col 3439.

553 Scottish Parliament Transport, Infrastructure and Climate Change Committee. Official Report, 7 December 2010, Col 3506.

554 Scottish Parliament Transport, Infrastructure and Climate Change Committee. Official Report, 30 November 2010, Col 3439.

555 Scottish Parliament Transport, Infrastructure and Climate Change Committee. Official Report, 30 November 2010, Col 3463.

556 Scottish Parliament Transport, Infrastructure and Climate Change Committee. Official Report, 30 November 2010, Col 3463.

557 Scottish Parliament Transport, Infrastructure and Climate Change Committee. Official Report, 7 December 2010, Col 3508.

558 Scottish Parliament Transport, Infrastructure and Climate Change Committee. 4th Report, 2010, (Session 3). Report on the Inquiry into Active Travel (SP413). Paragraph 227.

559 Scottish Parliament Transport, Infrastructure and Climate Change Committee. Official Report, 7 December 2010, Col 3508.

560 Scottish Parliament Transport, Infrastructure and Climate Change Committee. Official Report, 30 November 2010, Col 3441.

561 Scottish Parliament Transport, Infrastructure and Climate Change Committee. Official Report, 30 November 2010, Col 3442.

562 Scottish Parliament Transport, Infrastructure and Climate Change Committee. Official Report, 7 December 2010, Col 3509.

563 Scottish Parliament. Official Report, 8 December 2010, Col 31284.

564 Scottish Parliament Transport, Infrastructure and Climate Change Committee. Official Report, 7 December 2010, Col 3495.

565 Scottish Parliament Transport, Infrastructure and Climate Change Committee. Official Report, 30 November 2010, Col 3424.

566 Scottish Parliament Transport, Infrastructure and Climate Change Committee. Official Report, 7 December 2010, Col 3497.

567 Scottish Government. (2010) Draft Budget 2011-12, page 96. Available at: http://www.scotland.gov.uk/Resource/Doc/331661/0107923.pdf

568 Scottish Parliament Transport, Infrastructure and Climate Change Committee. Official Report, 7 December 2010, Col 3500.

569 Scottish Parliament Transport, Infrastructure and Climate Change Committee. Official Report, 7 December 2010, Col 3501.

570 Scottish Parliament Transport, Infrastructure and Climate Change Committee. 4th Report, 2008, (Session 3). Report on Ferry Services in Scotland (SP138). Paragraph 297.

571 Scottish Parliament Transport, Infrastructure and Climate Change Committee. Official Report, 7 December 2010, Col 3493.

572 Scottish Parliament Transport, Infrastructure and Climate Change Committee. Official Report, 7 December 2010, Col 3492.

573 Age Scotland. Written submission to the Transport, Infrastructure and Climate Change Committee.

574 Scottish Government. (2010) Draft Budget 2011-12, page 5. Available at: http://www.scotland.gov.uk/Resource/Doc/331661/0107923.pdf

575 Scottish Parliament Transport, Infrastructure and Climate Change Committee. Official Report, 30 November 2010, Col 3420.

576 Based on a consumption based carbon accounting approach which relates government expenditure purchases to carbon emissions. The appropriateness and limitations of this method will be discussed later in this report.

577 Scottish Parliament Transport, Infrastructure and Climate Change Committee. Official Report, 30 November 2010, Col 3447.

578 Scottish Parliament Transport, Infrastructure and Climate Change Committee. Official Report, 7 December 2010, Col 3509.

579 Scottish Parliament Transport, Infrastructure and Climate Change Committee. Official Report, 7 December 2010, Col 3510.

580 Scottish Parliament Transport, Infrastructure and Climate Change Committee. Official Report, 30 November 2010, Cols 3444 - 3445.

581 Scottish Parliament Transport, Infrastructure and Climate Change Committee. Official Report, 30 November 2010, Col 3445.

582 Scottish Parliament Transport, Infrastructure and Climate Change Committee. Official Report, 30 November 2010, Col 3438.

583 Scottish Parliament Transport, Infrastructure and Climate Change Committee. Official Report, 30 November 2010, Col 3445.

584 Scottish Parliament Transport, Infrastructure and Climate Change Committee. Official Report, 30 November 2010, Col 3447.

585 Scottish Parliament Transport, Infrastructure and Climate Change Committee. Official Report, 30 November 2010, Col 3447.

586 Scottish Parliament Transport, Infrastructure and Climate Change Committee. Official Report, 30 November 2010, Cols 3439 - 3440.

587 Climate Change (Scotland) Bill. Paragraph 368.

588 Scottish Parliament Transport, Infrastructure and Climate Change Committee. Official Report, 30 November 2010, Col 3451.

589 Scottish Parliament Transport, Infrastructure and Climate Change Committee. Official Report, 30 November 2010, Col 3448.

590 Scottish Parliament Transport, Infrastructure and Climate Change Committee. Official Report, 30 November 2010, Col 3449.

591 Scottish Parliament Transport, Infrastructure and Climate Change Committee. Official Report, 30 November 2010, Col 3450.

592 Scottish Parliament Transport, Infrastructure and Climate Change Committee. Official Report, 30 November 2010, Col 3450.

593 Scottish Parliament Transport, Infrastructure and Climate Change Committee. Official Report, 7 December 2010, Col 3515.

594 Scottish Parliament Transport, Infrastructure and Climate Change Committee. Official Report, 7 December 2010, Col 3517.

595 Scottish Parliament Transport, Infrastructure and Climate Change Committee. Official Report, 7 December 2010, Col 3515.

596 Scottish Parliament Transport, Infrastructure and Climate Change Committee. Official Report, 7 December 2010, Col 3517.

597 Audit Scotland Budget Proposal 2011-12 page 5. Available online at: http://www.scottish.parliament.uk/s3/committees/scpa/papers-10/scpap10-03.pdf

598 Scottish Commission for Public Audit. Official Report, 17 November 2010, Col 307.

599 Audit Scotland Budget Proposal 2011-12 pages 3 and 11.

600 Scottish Commission for Public Audit. Official Report, 17 November 2010, Col 292-293.

601 Audit Scotland Budget Proposal 2011-12 page 7.

602 Scottish Commission for Public Audit. Official Report, 17 November 2010, Col 310.

603 Audit Scotland Budget Proposal 2011-12 page 13.

604 Scottish Commission for Public Audit. Official Report, 17 November 2010, Col 312.

605 Scottish Commission for Public Audit. Official Report, 17 November 2010, Col 308.

606 Scottish Commission for Public Audit. Official Report, 17 November 2010, Col 312.