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SP Paper 635 FI/S3/11/R6

6th Report, 2011 (Session 3)

Annual report 2010-11

Remit and membership

Remit:

1. The remit of the Finance Committee is to consider and report on-

(a) any report or other document laid before the Parliament by members of the Scottish Executive containing proposals for, or budgets of, public expenditure or proposals for the making of a tax-varying resolution, taking into account any report or recommendations concerning such documents made to them by any other committee with power to consider such documents or any part of them;

(b) any report made by a committee setting out proposals concerning public expenditure;

(c) Budget Bills; and

(d) any other matter relating to or affecting the expenditure of the Scottish Administration or other expenditure payable out of the Scottish Consolidated Fund.

2. The Committee may also consider and, where it sees fit, report to the Parliament on the timetable for the Stages of Budget Bills and on the handling of financial business.

3. In these Rules, "public expenditure" means expenditure of the Scottish Administration, other expenditure payable out of the Scottish Consolidated Fund and any other expenditure met out of taxes, charges and other public revenue.

(Standing Orders of the Scottish Parliament, Rule 6.6)

Membership:

Derek Brownlee
Malcolm Chisholm
Linda Fabiani
Joe Fitzpatrick
Tom McCabe (Deputy Convener)
Jeremy Purvis
Andrew Welsh (Convener)
David Whitton

Committee Clerking Team:

Clerk to the Committee
Jim Johnston

Senior Assistant Clerk
Terry Shevlin

Assistant Clerk
Allan Campbell

Committee Assistant
Jennifer Bell

Annual report 2010-11

The Committee reports to the Parliament as follows—

Introduction

1. This report covers the work of the Finance Committee during the Parliamentary year from 9 May 2010 to 22 March 2011. The Committee has had a busy work programme in the fourth year of the third parliamentary session. The Committee’s main area of work is the annual budget process. In addition to its budget scrutiny, the Committee has carried out major inquiries into preventative spending and the Scottish Variable Rate of Income Tax and considered 17 financial memoranda of bills.

Inquiries and Reports

Budget Strategy Phase

2. The principal role of the Finance Committee is to lead the Parliament’s response to the Scottish Government’s spending proposals through the annual budget process. In advance of its scrutiny of the Draft Budget the Committee carried out a major inquiry into efficient public services as part of the Budget Strategy Phase. The Committee took evidence from a wide range of witnesses including public bodies, expert advisers, academics and funding organisations.

3. The Committee’s report was published on 9 June 2010. The report called on publicly funded bodies, the Scottish Government and parliamentary committees to show greater leadership, by discussing in more open and realistic terms the impact of the cuts and how they can be dealt with. The Committee also asked the Scottish Government to explore in more detail the principles that would inform its future spending proposals.

Scrutiny of Scotland’s Spending Plans and Draft Budget 2011-12

4. In preparation for its formal budget scrutiny, the Committee took evidence from members of the Independent Budget Review and from Rt. Hon. Danny Alexander MP, Chief Secretary to the Treasury. In addition, the Committee held a joint seminar with the David Hume institute.

5. As part of its scrutiny of Scotland’s Spending Plans and Draft Budget 2011-12, the Committee took evidence from a panel of Scottish public finance experts and from John Swinney MSP, Cabinet Secretary for Finance and Sustainable Growth.

6. In order to continue its aim of gauging local views on the budget, the Committee planned to hold an external meeting in Carnoustie on 6 December 2011, to take evidence from the Cabinet Secretary for Finance and Sustainable Growth. Unfortunately due to the adverse weather conditions experienced in December 2010, the Committee was forced to cancel its planned meeting.

7. The Committee’s report on the Draft Budget was published on 20 January 2011. The Committee asked the government to respond to the view that the primary aim of its Draft Budget for 2011-12 is the protection of public services, rather than its stated core purpose of increasing sustainable economic growth. The Committee also made a number of recommendations in relation to the Government’s strategic priorities and asked the Government to explain why its strategic priorities have changed and what impact this would have on increasing sustainable economic growth.

Inquiry into preventative spending

8. During the budget strategy phase, the Committee discussed the merit of public bodies spending more money on trying to prevent, rather than deal with, negative social outcomes. It was within this context that the Committee launched a major inquiry into preventative spending examining the issue in-depth and across a range of public spending areas. The Committee took evidence from a wide range of witnesses including expert advisers and academics, public bodies and voluntary organisations.

9. The Committee considers that the current, reactive approach to public spending is unsustainable and that there must be a shift away from reacting to crises to a greater focus on prevention and early intervention. The Committee’s report, which was published in January 2011, demonstrated a clear political consensus for a more preventative approach and investment in the Early Years as one that could deliver clear social and economic benefits across Scotland.

10. There is a need for a sustained political commitment to preventative spending over the longer term and the Committee considers that the next Scottish Parliament and Scottish Government must provide the leadership required to make this shift.

Scottish Variable Rate of Income Tax inquiry

11. The Committee completed an inquiry on the issues around the Scottish Variable Rate of Income Tax in February 2011. The Committee considered the substance, context and decisions of the Scottish Government relating to the Scottish Parliament’s revenue raising powers through the Scottish Variable Rate (SVR). The Committee made a number of recommendations including that any decisions that could further affect the next Parliament’s ability to exercise its SVR powers should be agreed by parliament. The Committee also recommended that its successor committee considers what information relating to the SVR should be included in a revised written agreement on the budget process between the Finance Committee and the Scottish Government.

Bills

12. The Committee has continued to apply its three-level system for scrutinising financial memoranda of Bills. Level 1 involves sending a standard questionnaire to affected bodies and any responses received are passed directly to the lead committee considering the bill. This is completed in advance of the lead committee’s evidence session with the relevant minister at Stage 1. Level 2 involves taking written evidence from affected bodies and oral evidence from the Scottish Government and then produces a report to the lead committee which is issued in advance of evidence from the relevant minister. Level 3 involves the same steps as level 2, plus oral evidence from affected bodies then produces its report to the lead committee. This year, 13 financial memoranda have been scrutinised at level 1 and 4 at level 2.

Subordinate Legislation

13. The Committee has considered and reported on four affirmative Scottish Statutory Instruments and also considered three negative instruments.

Innovations

14. The Committee held a joint seminar with the David Hume Institute in advance of the Committee’s formal scrutiny of the Draft Budget 2011-12 which was very useful in setting the context for the Committee’s budget scrutiny.

15. The Committee held a conference in the chamber of the Scottish Parliament in order to consider the findings and conclusions of its report on preventative spending and the Scottish Government’s response. The event was attended by over 90 senior public figures and the lively debate helped to inform the Committee’s legacy paper.

Equalities

16. In its preparatory work for the external meeting in Carnoustie the Committee sought to ensure that the venue was fully accessible.

17. In its inquiry into the efficient delivery of public services the Committee included specific equalities issues in its call for evidence. The Committee also considered equalities issues in its scrutiny of the Draft Budget 2011-12 and regularly considers written and oral evidence from equalities groups as part of its inquiry work.

Meetings

18. During the parliamentary year, the Committee met 27 times. Of these meetings, 12 were held entirely in public, 9 were held partly in private and 6 were held totally in private. The purpose of the majority of private items was to consider Committee reports.

19. All Committee meetings were held in Edinburgh.