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VOLUME 2: REPORTS FROM OTHER COMMITTEES AND THE SCOTTISH COMMISSION FOR PUBLIC AUDIT1

CONTENTS

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

Finance Committee – 1st Report, 2008 (Session 3) – Annexe D

Report to the Finance Committee on Stage 2 of the 2008-09
Draft Budget

The Committee reports to the Finance Committee as follows—

Background

1. This report considers the components of the Finance and Sustainable Growth portfolio in the Draft Budget 2008-09 which fall within the remit of the Economy, Energy and Tourism Committee, as well as how the Draft Budget contributes to the Scottish Government’s “Purpose” of increasing sustainable economic growth.2

2. To assist with its understanding of the implications of the draft budget proposed by the Scottish Government, the Economy, Energy and Tourism Committee took oral evidence from the following—

  • Jack Perry, Chief Executive, Hugh Hall, Chief Financial Officer, and Andrew Downie, Finance Director, Group Operations, Scottish Enterprise;
  • Sandy Cumming, Chief Executive, Forbes Duthie, Director of Corporate Services, and Sandy Brady, Director of Strategy, Highlands and Islands Enterprise;
  • Philip Riddle, Chief Executive, and Riddell Graham, Director of Strategy, Partnership and Communications, VisitScotland;
  • Councillor Alison Hay, Regeneration and Sustainable Development Spokesperson, James Fowlie, Team Leader, Environment and Regeneration, Barbara Lindsay, Strategic Director, Convention of Scottish Local Authorities, and David Valentine, Head of Economic Development, Angus Council and representative of SOLACE and SLAED; and
  • John Swinney MSP, Cabinet Secretary for Finance and Sustainable Growth, Jim Mather MSP, Minister for Enterprise, Energy and Tourism, Chris McCrone, Finance Team Leader, Finance Directorate, and Graeme Dickson, Director, Enterprise, Energy and Tourism, Scottish Government.

3. In addition, the Committee also received written evidence from Scottish Enterprise, Highlands and Islands Enterprise, VisitScotland, Scottish Renewables and the Scottish Sustainable Energy Foundation.3

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

Budget scrutiny process

Availability of data

5. The Scottish Government’s Scottish Budget Spending Review document was published on 14 November 2007. The document included the Scottish Government’s proposed spending for the Spending Review period, as well as the Draft Budget for 2008-09. During its scrutiny, the Committee considered the Draft Budget for 2008-09 as well as planned spending for 2009-10 and 2010-11.

6. The information in the Draft Budget 2008-09 was presented in accordance with the portfolios of the Scottish Government’s Cabinet Secretaries and therefore reflected the new structure of the Scottish Government’s Directorates General. The Committee, therefore, only examined spending proposals for components of the Finance and Sustainable Growth portfolio.

7. The Cabinet Secretary for Finance and Sustainable growth emphasised the tight timetable that the Scottish Government had worked to—

“The budget was announced on 14 November, four and a half weeks after the information on the headline budget numbers was provided to the [Scottish] Government by HM Treasury. We turned around a headline budget for the Scottish Government within four and a half weeks.”4

8. The Cabinet Secretary also stressed that the Scottish Government had worked to protect the period available for Parliamentary scrutiny, arguing—

“the Government in Scotland has worked expeditiously to ensure that Parliament has a budget to consider. In particular, the parliamentary committees have two months to consider the contents of the budget, as they had under previous arrangements, which I have protected through the timetable by which I have supplied information to Parliament.”5

9. The majority of the figures presented in the Scottish Budget Spending Review 2007 document were available only as cash figures, with the exception of annex C which applies a GDP deflator of 2.7% to the Total Managed Expenditure by portfolio. As this information was only applied to the Directorate General portfolio headings, the Committee’s budget adviser applied the same deflator to a number of other budget headings.6 This provided the Committee with a more detailed understanding of the effect, in real-terms, on a range of budget lines within the Finance and Sustainable Development portfolio of the Scottish Government.

10. Additionally, the Scottish Government’s Draft Budget only presents spending totals for key areas and bodies. The allocations for the three main Non-Departmental Public Bodies (NDPBs) covered by the Committee’s remit – Scottish Enterprise, Highlands and Islands Enterprise and VisitScotland – are only expressed in terms of the total resource budget totals, with no breakdown provided to indicate strategic spending priorities. Moreover, the totals presented do not take account of the reform of the enterprise networks, announced by the Cabinet Secretary for Finance and Sustainable Growth on 26 September 2007. This reform will involve the transfer of core activities from both Scottish Enterprise and Highlands and Islands Enterprise to Skills Development Scotland Ltd. (the new skills agency) and the transfer of the Business Gateway service and the local regeneration functions to local authorities. It also promotes the co-location of enterprise agency personnel with either local authorities or VisitScotland, as well as the establishment of a network finance centre and a network human resources centre for the enterprise agencies. Therefore, although significant changes are expected to the final operating budgets available to the enterprise agencies, there is no detail in the Draft Budget on the final budgets that will be available to Scottish Enterprise and Highlands and Islands Enterprise, nor how these budgets will be broken down according to the organisations’ main functions.

11. With the objective of obtaining more detailed figures, the Convener of the Economy, Energy and Tourism Committee wrote to the Cabinet Secretary for Finance and Sustainable Growth on 7 November 2007 seeking information on more detailed expenditure in relation to the budget headings for Scottish Enterprise, Highlands and Islands Enterprise and VisitScotland in order that the Committee could examine the budgets allocated to areas of strategic spend and to administrative costs.7 Further information on spending under the energy and climate change budget line and the third sector budget line was also requested.

12. The Cabinet Secretary subsequently provided a breakdown of expenditure for the enterprise agencies on the basis of three sub-categories: current funding, net investment funding and administration. He also suggested that the Committee request more detailed information on proposed expenditure in particular areas from Scottish Enterprise and Highlands and Islands Enterprise directly. The Cabinet Secretary’s response emphasised that previous budget headings for these NDPBs had not allowed outturn expenditure to be monitored because it did not reflect the way in which these bodies controlled their expenditure. He indicated that in future, the Scottish Government’s monitoring of the resource budget would be in three areas: capital income and expenditure, operational expenditure and management and administration expenditure. The Cabinet Secretary also provided more detail on how the budgets for energy and climate change and third sector development would be used.

13. Consequently, a more detailed breakdown of budgetary expenditure was requested from Scottish Enterprise, Highlands and Islands Enterprise and VisitScotland. These NDPBs had, in the past, provided the Committee’s predecessor in session 2 with more detailed expenditure (to level 4) to facilitate that Committee’s scrutiny of the budget. Only VisitScotland was able to provide a further breakdown in its written evidence that it submitted to the Committee. In oral evidence to the Committee, Jack Perry – Chief Executive of Scottish Enterprise – explained that “in view of our timetable, providing such a breakdown would be desperately difficult.” He further elaborated—

“Currently we are trying to engineer profound reforms to the entire network. In addition, we have just been given our budget, and we are working through what it means for our operating plan, the efficiency savings that we can realise and the transfers that have not yet been agreed. We are trying to come up with a balanced budget within the timeframe that we have talked about, which goes beyond your timeframe for scrutinising the budget.”8

14. Highlands and Islands Enterprise also indicated that it too was unable to provide more detail at this stage. Sandy Cumming, Chief Executive of Highlands and Islands Enterprise said—

“We are constructing the new organisation with three particular thrusts. Therefore, going forward, we will not have the breakdown, but we must identify very quickly the amount of money that, on a budgeting basis, we intend to invest in those three areas, which are high-growth businesses, strengthening local communities and improving regional competitiveness.”9

15. Due to the ongoing negotiations concerning the transfer of activities to Skills Development Scotland Ltd. and the local authorities, none of the witnesses – including the Cabinet Secretary – was able to provide a final figure for the monetary value of the various activities to be transferred or explain how the continuity of service would be delivered and guaranteed for these transferred activities.

16. The lack of disaggregated data for Scottish Enterprise and Highlands and Islands Enterprise budgets restricted the Committee’s capacity to reach an informed view on either the implications of the budgetary cuts for these bodies or the transfer of activities to Skills Development Scotland Ltd. or to the local authorities.

17. The majority of the Committee10 recognises the relatively tight timetable in which the Scottish Government had to provide information to the Parliament as part of this year’s budget process. Nevertheless, the majority of the Committee is of the view that the information provided in the budget was insufficient for the purpose of parliamentary scrutiny. This was further compounded by the lack of clarity on the resource implications of the reforms to the enterprise networks and the transfer of activities to Skills Development Scotland Ltd. and to the local authorities.

18. Furthermore, in written evidence, neither Scottish Enterprise nor Highlands and Islands Enterprise was able to provide the Committee with any disaggregated data, even as estimates, which would allow the Committee to arrive at an informed opinion on the impact of the budgetary cuts on the ability of these bodies to deliver their core functions of promoting enterprise development and economic growth in Scotland. The Committee commends Highlands and Islands Enterprise, however, for its more constructive approach in oral evidence when it did provide more detail on how its budget would be affected by proposed transfers to Skills Development Scotland Ltd and local authorities and how it planned to adapt its strategic priorities in the new budgetary context.

19. In addition, the figures presented in the Draft Budget Spending Review 2007 document were only provided in cash terms, not in real terms. The Committee was therefore obliged to use its own resources to establish basic information such as the real term figures for key budget lines over the Spending Review period.

20. The Committee calls on the Scottish Government, Scottish Enterprise and Highlands and Islands Enterprise to provide the Committee with more detailed disaggregated data as soon as it becomes available and to ensure that more detailed figures are provided in future budget documents. This will allow the Committee to take a more informed view on the use of public money and how it will contribute to the achievement of the Scottish Government’s Purpose.

21. The Committee notes that such information, should it be provided, will be received after the Committee is required to complete its scrutiny of the draft budget. Whilst regrettable, the Committee recognises that this is a consequence of the tight timetable for the Spending Review and the ongoing reform of the enterprise agencies and VisitScotland proposed by the Scottish Government. However, this information should be improved in future years from the perspective of allowing proper parliamentary scrutiny.

The Committee’s scrutiny of the Draft Budget 2008-09

22. The Finance Committee issued guidance for subject committees on the Draft Budget 2008-09. The Finance Committee invited the subject committees to consider three main areas in its guidance. These were:

  • targets set for the subject committee’s areas of interest and whether Ministerial priorities have been reflected in spending decisions;
  • subject committees’ views and comments on plans for making efficiencies within the appropriate portfolio; and
  • any alternative spending proposals which the subject committee wished to propose within the appropriate portfolio (although any such changes should be kept within the overall spending limit set by the Draft Budget and therefore, any proposed increases should be offset by proposals for decreases elsewhere).

23. The Economy, Energy and Tourism Committee’s consideration of the Draft Budget 2008-09 focused on two areas:

i. The Committee considered how the Draft Budget and Spending Review would contribute to the Scottish Government’s Purpose of focusing government and public services on creating a more successful country, with opportunities for all of Scotland to flourish, through increasing economic sustainable growth. This was examined in light of the two principal objectives set out in the Scottish Government’s economic strategy: to raise Scotland’s GDP growth rate to the UK level by 2011 and to match the GDP growth rate of the small independent European Union countries by 2017.

ii. The Committee examined the specific elements of the Finance and Sustainable Growth portfolio which fell within the remit of the Committee.

24. The following sections of the report will first consider the ways in which the Draft Budget 2008-09 supports the Scottish Government’s Purpose, before examining the individual budgetary allocations relevant to the Committee’s remit in the context of the Purpose targets.

The Scottish Government’s Purpose

25. The Scottish Budget Spending Review 2007 document sets out the Scottish Government’s national performance framework. The framework has a single overarching Purpose, under which there are a number of high level Purpose targets. The Purpose targets include raising “the GDP growth rate to the UK level by 2011” and matching “the growth rate of small independent EU countries by 2017.”11 A need is also identified to focus on improving Scotland’s productivity and competitiveness, increasing labour market participation and stimulating population growth.

26. The Committee recognises the tighter budgetary settlement for the Spending Review period in comparison to previous years and that Total Managed Expenditure will rise by an average of 1.1% per annum in real terms.12 The Committee notes that four major spending areas – Rural Affairs and Environment, Justice, Health and Wellbeing and Local Government - have received planned spending increases above the budget average.13 However, the Finance and Sustainable Growth portfolio spend rises by only 0.1% per annum over the three-year Spending Review period and the Education and Lifelong Learning portfolio spend falls by an average of 0.3% per annum in real terms. The proposed Enterprise, Energy and Tourism Budget falls by 2.4% in cash terms and 9.7% in real terms between 2007-08 and 2010-11.14 The Committee also noted that there will be a sharp rise in cash terms in spending on trunk roads of 34.9% (24% in real terms) and ferries of 49% (38% in real terms). The cash figures for trunk roads and ferries in 2010-11 are £303m and £36.6m respectively.

27. In oral evidence to the Committee, the Cabinet Secretary for Finance and Sustainable Growth, emphasised how the budget as a whole contributed to the Scottish Government’s Purpose

“The last thing I want the committee to think is that the only money that we have put into economic development is what is spent on Scottish Enterprise, Highlands and Islands Enterprise and VisitScotland. Our economic interventions are much more comprehensive than that. They take into account a formidable investment programme in the transport sector over the next three years, investment in higher and further education sectors, a significant increase in the capital expenditure opportunities for local authorities throughout Scotland and the economic consequences of local authorities’ investment. They also take into account the fact that the [Scottish] Government is putting in place a significant scheme to reduce the cost of doing business for small companies. That measure will have an effect on communities in every part of Scotland and a beneficial effect on smaller companies.”15

28. The Scottish Government’s Purpose was welcomed by Scottish Enterprise as a move towards alignment—

“During the currency of this budget, Scottish Enterprise will have less than 1 per cent of the Scottish Government’s budget. We cannot be transformational on our own. We can get extremely good leverage for that money – we believe that the economic impact of what we deliver is probably about five times the amount that is put in – but even that cannot be transformational in itself if the rest of the public sector is not aligned behind growth. We welcome the move towards alignment, but a lot of hard work needs to be done to turn it into reality.”16

29. The Cabinet Secretary stressed the importance of looking more globally at the Scottish Government’s spending proposals. He emphasised that “you will find that the cost of the resource that the Government is allocating to reduce business rates outweighs the reductions in the budgets to Scottish Enterprise and Highlands and Islands Enterprise.”17 He further stated that “expenditure on the small business rates scheme in 2008-09 will be a net additional cost of £37 million, followed by £89 million in 2009-10 and £139 million in 2010-11.”18 This compares to an allocation in 2007-08 of £24 million to the existing Small Business Rate Relief scheme. In written evidence to the Committee, he provided evidence that under the Small Business Bonus Scheme, businesses with properties with a rateable value of £15,000 or less will make an average saving of £308 in 2008-09, £724 in 2009-10 and £1,002 in 2010-11.19

30. The Committee noted that the budgets for Scottish Enterprise and Highlands and Islands Enterprise would be cut over the Spending Review period, thus reducing expenditure on direct economic development activity. In comparison to the 2007-08 budget, Scottish Enterprise’s budget would be reduced in real terms by 14% over this period, and Highlands and Islands Enterprise’s budget would be reduced by 21%. As no figures were available on the respective budgets for these two bodies over the Spending Review period after (i.e. net of) the transfer of activities to Skills Development Scotland Ltd. and local authorities, the Committee was unable to ascertain how the costs of the restructuring would be apportioned between the bodies concerned.

31. In the Scottish Budget Spending Review 2007 document, the Scottish Government explains the budgetary changes to Scottish Enterprise and Highlands and Islands Enterprise, stating that the most significant changes reflect the restructuring plans “which will reduce running and salary costs over the period” and also “include a cut in direct capital funding in line with the enterprise networks’ increasing ability to fund capital projects through receipts from asset sales and collaboration with the private sector.”20 It is important to note, however, that the restructuring referred to here does not include the transfer of activities to Skills Development Scotland Ltd and of the Business Gateway and local economic development function to the local authorities.

32. In evidence to the Committee, the Cabinet Secretary for Finance and Sustainable Growth provided the following explanation as to how he had constructed the budgets for Scottish Enterprise and Highlands and Islands Enterprise—

“The construction of the budgets and the assessment of the role of the organisations is a product of their existing functions, the different functions that the Government wants them to produce and perform, and the functions that the Government no longer wants them to be involved in nor to produce and perform. Based on all those decisions, assessments are made about the likely components of the budget. All the factors that the Government took into account in assessing the role and responsibilities of the enterprise networks have consequences in terms of the construction of the budget.”21

33. The Committee concludes that the Scottish Government has determined that its Purpose of promoting sustainable economic growth can be best achieved by a different approach which includes further reductions in business rates for small businesses under the Small Business Bonus Scheme, as well as a continuing allocation of funding, albeit less than in previous years, to the enterprise agencies and local authorities to perform the function of promoting economic development.

34. The Committee recognises that the Scottish Government is operating in the Spending Review period where Total Managed Expenditure will rise on average by 1.1% in real terms.

35. The Committee recognises that expenditure across budget portfolios is relevant to the achievement of the Scottish Government’s Purpose and its economic growth Purpose targets. The Budget does not, however, present any link between expenditure and outcomes, or show how any particular item of spending will lead to economic growth. With 60% allocated in block grants to NHS boards and local councils, it is not possible for the Committee to assess the economic impact of the budget as a whole.

36. The Committee notes the Scottish Government’s Purpose to increase sustainable economic growth and how it plans to achieve this through its budget proposals. The Committee supports the Scottish Government’s Purpose in this respect. However, at this stage, due to the ongoing nature of some of the proposed reforms, it is too early to say whether this budget will deliver on the Scottish Government’s Purpose.

Budgetary Allocations

37. This section of the report examines the individual budgetary allocations to the three NDPBs - Scottish Enterprise, Highlands and Islands Enterprise, VisitScotland - as well as the other budget lines for grants and programmes which fall within the remit of the Economy, Energy and Tourism Committee. It also considers the transfer of the Business Gateway function to local authorities and the implications for the continued provision of advice and support for business growth and economic development at the local level.

Scottish Enterprise

38. The budget for Scottish Enterprise was £465.1m in 2007-8. Over the three-year Spending Review period it will fall on an annual basis to £448.6m/£433.8m/£431.4m. In real terms, using a simple 2.7% deflator, the figures are £436.81m/£411.57m/£399.07m for this period. In oral evidence to the Committee, Scottish Enterprise stated “the financial settlement that we face over the next three years is extremely challenging, but that is hardly unique to us.”22 The majority of the Committee23 considered that these figures do not reflect the further reductions to Scottish Enterprise’s budget which will result from the transfer of activities to Skills Development Scotland Ltd and of the Business Gateway and local economic development function to the local authorities.

39. In oral evidence, the Cabinet Secretary for Finance and Sustainable Growth confirmed that the Scottish Government wanted Scottish Enterprise to focus “its efforts on the core function of being an enterprise development organisation that works to provide the quality support that companies require” and that he wanted “Scottish Enterprise to be fully aligned with delivering the Government’s economic strategy.”24 He further explained that he wanted “the remainder of the organisation’s function to concentrate on enterprise development, on company support and on ensuring that we can transform the prospects of companies.”25

40. In its written submission to the Committee, Scottish Enterprise stated that “given the short timescale since the announcement of the Government’s Spending Review on 14 November coupled with the impending changes to Scottish Enterprise’s responsibilities, it has not been possible to provide as much detail on SE’s budget at this stage as in previous years.”26

41. In evidence to the Committee, Jack Perry – the Chief Executive of Scottish Enterprise – further explained that it currently did not know how much its total operating budget would be, due to the ongoing negotiations on the structural changes—

“It is not in our gift when those negotiations conclude, although we have had some preliminary discussions with the Scottish Government about what the size of the transfer might be. However, we are involved in some detailed discussions on a few imponderables with regard to local regeneration and physical business infrastructure.” 27

42. Scottish Enterprise stated that if negotiations could be finalised before Christmas, then it would be in a position to put its budget and a final draft business plan and resource allocation to its board by the end of January 2008. This is after the Committee concludes its scrutiny of the Draft Budget 2008-09, which it is required to do by 21 December 2007.

43. Scottish Enterprise indicated that approximately 200 staff would leave the organisation through the voluntary severance programme and that it planned “to fund the severance programme in the current financial year with a payback period of circa 2 years”28 in order that Scottish Enterprise “could get the benefits in the three years following”.29 Jack Perry stated in oral evidence to the Committee that Scottish Enterprise had “allocated no more than £25 million” for its voluntary severance programme.30

44. The Committee explored the implications of the cuts to Scottish Enterprise’s budget in terms of its ongoing activities. Scottish Enterprise explained that it had “a commitment to realise about £10 million of efficiency savings”, but that it was unable to inform the Committee “at this stage what will be prioritised.”31

45. Scottish Enterprise confirmed that it would maintain its twelve Local Enterprise company offices, which would continue to be responsible for delivering services to customers, major projects and the initiation and identification of projects.

46. The Cabinet Secretary for Finance and Sustainable Growth, stressed the value of the reform to the enterprise network, arguing that “abolishing the local enterprise companies abolishes with them a level of bureaucracy that had to be addressed” and also there were advantages in the enterprise companies and VisitScotland “sharing the type of services it is not essential for each organisation to have in place separately and distinctively.”32 In a letter to the Committee, the Cabinet Secretary provided further detail on the activities that would no longer be necessary following the abolition of the Local Enterprise Companies (LECs), but confirmed that he was “unable to provide the committee with a specific figure at this point” for the monetary value of the savings.33

47. Scottish Enterprise clarified how savings would be made in relation to the abolition of LECs. It stated that this would represent real savings “although they will not be huge.”34 It further elaborated that as the directors of local enterprise agencies are all volunteers, “there is absolutely no cost saving in doing away with them, although we will save quite a bit of time on non-productive activities…and on the cost of servicing the statutory requirements of those companies.” It perceived a more significant saving arising from an ability to “delayer the management of the organisation – which is where the 200 redundancies largely come from – that services the local enterprise company network from Atlantic Quay.”35

48. Scottish Enterprise welcomed the opportunity to co-locate staff “where it is sensible to do so, with council economic development offices and/or VisitScotland”,36 and indicated that “once we understand the operational models, we will examine how we might co-locate with other bodies.”37

49. The Committee considers that there is a lack of clarity concerning the activities and functions to be retained by Scottish Enterprise and therefore on what Scottish Enterprise’s final operational budget will be for the next three years. The lack of information from Scottish Enterprise on the activities that will need to be adjusted to adapt to the new budget suggests that a strategic approach to the reform of Scottish Enterprise has not been fully developed and that there is scarce evidence provided by Scottish Enterprise on how it will tailor its strategic priorities over the next three years.

50. The Committee is concerned by the length of time that negotiations are taking on agreeing the transfer of Scottish Enterprise activities. The Committee urges all involved to conclude the discussions as soon as possible.

51. The Committee looks forward to receiving a copy of Scottish Enterprise’s new operating plan so that it can consider the impact of the reform of the enterprise networks on Scottish Enterprise and how the latter has redefined its strategic priorities. It will also help the Committee to decide whether the abolition of Scottish Enterprise’s Local Enterprise Companies will achieve a reduction in the overall operating costs of Scottish Enterprise and whether the pursuit of co-location opportunities and the sharing of resources will allow the agency to deliver its strategic priorities more effectively, and at a lower cost.

Highlands and Islands Enterprise

52.
The Committee is aware that the cut to the budget for Highlands and Islands Enterprise is proportionately greater than the one proposed in the budget for Scottish Enterprise. In comparison to a 2007-08 figure of £103.0m, the draft budget and the plans for the remainder of the Spending Review period are £91.9m/£88.8m/£88.3m. In real terms, using a simple 2.7% deflator, the figures are £89.39m/£84.25m/£81.68m. This represents a 21% real terms reduction in Highlands and Islands budget, compared to a 14% real terms reduction for Scottish Enterprise. No explanation was offered by the Cabinet Secretary either in the budget documents or oral evidence for the higher level of the cut to HIE’s budget.

53. The Committee noted the positive comments by the Chief Executive of Highlands and Islands Enterprise about the prospect of “a period of significant change” and that he is “excited by that change and the opportunity to create an integrated regional development agency that will prove its worth in 21st century Scotland.”38

54. The budget for HIE also represents the figure before the transfer of activities to Skills Development Scotland Ltd and to local authorities. In evidence to the Committee, Sandy Cumming – the Chief Executive of HIE – was, unlike his counterparts in Scottish Enterprise, able to provide more information on the likely implications of the transfers for his organisation. He said that:

“National training programmes alone account for more than £10 million. The salaries bill and other costs related to Careers Scotland staff amount to another £4 million to £5 million. Those two figures alone produce a minimum of £15 million. Beyond that, there is a greyness about how much might have to be transferred for the business gateway and any other skills activity. We are negotiating on such matters.”39

55. However, Highlands and Islands Enterprise was unable to provide detailed disaggregated data on its budget, although it did elaborate in oral evidence on how it planned to adapt its activities to the reductions in its operating budget. In written evidence to the Committee, it noted that it “faces a significant challenge over the planning cycle of the next few months to align its activities with the strategic priorities and targets of the economic strategy and to do so with the reduced financial and staffing resources available.”40

56. HIE indicated that it planned to adapt to the budgetary cuts by focusing on three broad areas: support for high-growth business, strengthening local communities and creating the infrastructure and conditions to improve regional competitiveness. Furthermore, HIE stated that it planned to review the amount of money that it invested in property activity in the Highlands and Islands, and reduce it from £15-20m by approximately £10m annually. Given the reduced level of market failure in the Highlands and Islands, HIE considered that this role could be taken over by the private sector. HIE also stated the intention to use its resources where it could “get best value for money and the best outcomes for the Highlands and Islands” in terms of the three areas it focuses on in the future. HIE estimated the cost of Business Gateway functions to be in the region of £2 million.41 HIE confirmed to the Committee that it was pursuing co-location opportunities in order to reduce its costs further.

57. HIE anticipated that “going forward, we expect that the level of additional income that the organisation generates will be maintained at around £16.4 million.”42 HIE explained that this additional funding was derived from property sales, loan income, investment returns and European income and would be maintained at that level.

58. HIE did provide more detail to the Committee in oral evidence on the progress of implementing the enterprise networks review. HIE indicated that it had set up a joint task force with local authorities to introduce the Business Gateway model into the Highlands and Islands. HIE explained that there was still a need for clarity on whether it would have a role in workforce development and as a delivery body for the new skills agency in the north of Scotland.

59. HIE noted in written evidence to the Committee that it would be necessary to reduce the number of staff by around 50 posts and that the savings would be reinvested in HIE’s regional and local activities. Sandy Cumming, the Chief Executive of HIE stated, “We will slim down in Inverness, but I think that the cuts will be made throughout the Highlands and Islands.”43

60. The lack of available information on the implications of the transfer of activities to the new skills agency and on how HIE will allocate its budget strategically over the Spending Review period makes it difficult for the Committee to reach an informed view on the implications of the budgetary cuts to HIE and its activities.

61. The Committee is of the view that HIE, as an organisation, seems to be more advanced in planning how it will adjust its activities in the context of the budgetary cuts than Scottish Enterprise. The Committee notes Highland and Islands Enterprise’s intention to reduce its investment in property by up to £10 million per year in order to adjust to the reduced size of its budget. However, at this stage, the Committee has seen no evidence as to whether the adjustments to HIE’s property acquisitions will be sufficient to compensate for the reduction in its operating grant.

62. By division, the Committee agreed44 that it is very concerned by the higher proportionate cut to HIE’s budget and the impact that this will have on its capacity to deliver support in the more fragile economic environment of the Highlands and Islands.

63. The Committee is also concerned by the length of time that negotiations are taking on agreeing the transfer of Highlands and Islands Enterprise activities. The Committee urges all involved to conclude the discussions as soon as possible.

64. The Committee looks forward to receiving a copy of Highlands and Islands Enterprise’s new operating plan so that it can consider the impact of the reform of the enterprise networks on the agency and how the latter has redefined its strategic priorities. It will also help the Committee to decide whether the abolition of Highlands and Islands Enterprise’s Local Enterprise Companies will achieve a reduction in the overall operating costs of the agency and whether the pursuit of co-location opportunities and the sharing of resources will allow the agency to deliver its strategic priorities more effectively, and at a lower cost.

Local authorities and the Business Gateway function

65. In his announcement on the future of the enterprise networks, made on 26 September 2007, the Cabinet Secretary for Finance and Sustainable Growth announced that in order “to create greater cohesion in the provision of local economic and enterprise development services in Scotland”45, local authorities would take over the Business Gateway function and local regeneration activity in the Scottish Enterprise area. He also committed to providing the Business Gateway service in the Highlands and Islands area. In evidence to the Committee, COSLA emphasised that this statement was the first information that they received on the transfer of activities, stating “we did not know what was going to happen until we heard the words come out of the cabinet secretary’s mouth.”46

66. In evidence to the Committee, as noted above, Scottish Enterprise and Highlands and Islands Enterprise both indicated that negotiations were ongoing as to the extent of the transfer of activities to the local authorities. COSLA confirmed this—

“We are not yet sure about the budget that will transfer to us from the enterprise networks and the changes that are about to occur as a result of the transfer of functions from the networks, so we are presently in negotiation with both sides … to enable us to take account of the budget and changes, come to a conclusion and take that conclusion to the Government as a basis for negotiation. I am not sure whether that is what you want to hear, but sums are not exactly at the forefront of our negotiations at the moment.”47

67. COSLA’s view was that the cost of the transfer of contracts for the Business Gateway for the Scottish Enterprise area was £10.5m. However, COSLA also stressed that it was—

“…a prerequisite…that we bring with the gateway contracts the central performance management unit, the responsibility for marketing – and the budget that goes with it – and the fulfilment centre. Without that, the transfer is really not a viable proposition for local authorities, because we would be nothing but a postbox. We would not be responsible for the vision or leadership and strategy.”48

68. The Cabinet Secretary for Finance and Sustainable Growth confirmed in oral evidence that negotiations were ongoing as to the eventual location of the central management function of the Business Gateway contracts, acknowledging that “there is some sense in drawing it all together within a local authority sphere; there is also a sense to keeping it within the Scottish Enterprise sphere.”49

69. COSLA also expressed its understanding that the budget for regeneration activities carried out currently by Scottish Enterprise was in the region of £100m. Furthermore, COSLA indicated that it had “been promised an open-book approach over at least five years, project by project and area by area, so we can gain an understanding and enter into a dialogue about what should be retained centrally and what should come over to local authorities.”50

70. The Committee is surprised that local authorities only became aware of the Scottish Government’s intentions to transfer a local development function to them when the Cabinet Secretary made his announcement to Parliament on 26 September 2007.

71. The Committee looks forward to being able to consider the detail of the final transfer of the Business Gateway service and regeneration functions from the enterprise agencies to the local authorities and the impact – if any – that this will have on the delivery of services at the local level.

VisitScotland

72. VisitScotland’s budget is set to increase in cash terms from a 2007-08 base of £43.8m to £47.9m/£46.8m/£46.8m over the three-year Spending Review period. In real terms, this represents a slight dip of 1.16% on the 2007-08 figure by 2010-11. The real terms figures, using a simple 2.7% deflator, are £46.54m/£44.4/£43.29m for the period. The Scottish Budget Spending Review 2007 document explains that the additional expenditure for VisitScotland includes the promotion of the Ryder Cup and maintenance of VistScotland’s capital estate.

73. VisitScotland indicated that it “was comfortable with the spending review” as “it has continued the progression of interest in and support for tourism.”51 It explained that the additional funding for the Ryder Cup was reflected in the budget for EventScotland, which would increase from £5.5m in the current budgetary year to £7m for the three years of the Spending Review period. The increase in the capital budget was to respond to the increased stock of capital assets that had resulted from the integration of the 14 area tourist boards two years ago.

74. The Committee notes the views of the Cabinet Secretary for Finance and Sustainable Growth included written evidence that VisitScotland will retain local offices “to ensure that they remain close to the customers and can deliver effective local services in partnership with local authorities and other agencies.”52

75. The Committee is of the view that the changes to the budgetary allocations to VisitScotland over the Spending Review period will be broadly neutral with a 6.8% cash increase and a 1.2% real-terms decrease in Visit Scotland’s operating budget over the Spending Review period. It also considers that opportunities to co-locate with other agencies should help to reduce operating costs.

76. The Committee’s inquiry into tourism will address areas relevant to the budgets of VisitScotland and its spending priorities.

Other budget lines

77. There are some relatively significant increases in some of the other budget lines in the Enterprise, Energy and Tourism portfolio. The energy and climate change budget increases from £19.9m in 2007-08 to £33.5m/£33m/£33m over the Spending Review period. However, as disaggregated figures have not been provided there is little in the Scottish Budget Spending Review 2007 document on how these funds will be allocated apart from an indication that it includes a contribution to the costs of the UK Committee on Climate Change and will cover the costs in 2008-09 of the consultation for the Scottish Climate Change Bill.

78. The Cabinet Secretary for Finance and Sustainable Growth did provide more detail in his letter to the Convener and in evidence to the Committee. He explained that “funding will be directed to energy efficiency programmes, to the development and deployment of emerging renewable technologies (e.g. marine, hydrogen), to increasing the use of forms of clean energy not currently well exploited in Scotland (e.g. biomass) and so supporting wider uptake of microgeneration.”53 In evidence to the Committee, the Cabinet Secretary further explained that spending on community and household renewables, which forms part of this budget, will be trebled to £13m annually.

79. In response to questioning by the Committee, the Cabinet Secretary confirmed, that in his view, this budget was sufficient to achieve the Government’s ambition to become a global powerhouse in renewable energy. He explained that there would also be a number of private sector interventions in this area which would contribute “formidably to the generation of new sources of power.”54

80.There is an increase in funding for Knowledge Exchange and Innovation Policy from £5.3m in 2001-08 to £8m annually over the Spending Review period, although the Committee notes that the £52million budget line for innovation and investment grants, including regional selective assistance, stands still in cash terms and therefore falls in real terms across the three years of the Spending Review.

81. European Programming Administration and Consultancies expenditure rises to an annual spend of £1.7m in comparison to £0.3m for 2007-08. The explanation provided for this increase is that it is needed, in part, to respond to the new arrangements required by the European Commission to fund the administration of the programme. It is not clear where the ‘requirement’ for consultancies arises. It is also not clear why a reduction in the number of programme management executives (that administered these EU funds) from five to two has resulted in increased costs.

82. The Third Sector Development Budget increases significantly from £15.1m in 2007-08 to £19.2m/£22.2m/£22.2m in the Spending Review period. In addition, a new Scottish Investment Fund is established to “support enterprise in the third sector by investing assets, business development and the skills of people working in the sector with funding of £4m/£10m/£16m over the Spending Review period.”55

83. The Committee also noted the following new or increased budgets:56

  • The new Saltire and Horizon prizes will cost £2m in 2008-09 and 2009-10 and £12m in 2010-11.
  • An additional £1m is provided to Business Gateway International Trade in 2008-09.
  • Funding of £13.6m/£16m/£16.2m has been allocated to establish a National Procurement Centre of Expertise and to take forward the Scottish Government’s plans for more e-procurement.
  • Funding, to the tune of £0.4m/£0.4m/£0.4m has been provided for the newly established Council of Economic Advisers, but no further detail has been provided.
  • Specific funding has been found to enhance life sciences in Dundee (£2m/£3m/£5m) although it is unclear what this will be used for and why Dundee alone seems to have been identified as the recipient of such sums.

84. The Committee welcomes the increase to the third sector development budget and looks forward to greater detail on how this money will be spent and contribute to the Purpose of promoting sustainable economic growth.

85. The Committee welcomes the allocation of money to the Saltire and Horizon prizes. It also welcomes the increased budget for the National Procurement Centre of Expertise and the support it will provide to the Scottish Government’s plans for promoting e-procurement.

86. Although the Committee welcomes the increases to the energy and climate change budget, it does not share the Cabinet Secretary’s conviction that this increased support to energy projects at these levels will be sufficient in and of itself to ensure that Scotland becomes a global powerhouse for renewable energy. This is because there are a significant number of obstacles – such as planning consent, the capacity of the national grid and grid connection charges - that still need to be overcome. This is a subject the Committee will return to in its energy inquiry in the course of 2008.

87. The Committee calls for the Scottish Government to provide more disaggregated data on the planned use of the budgets listed above. The Committee believes that this is necessary to make the budget process a transparent one and also to provide more information on policy intentions.

Additional in-year allocations

88. In evidence to the Committee, both VisitScotland and Highlands and Islands Enterprise indicated that in previous financial years they had benefited from the receipt of additional funding from end-year flexibility for specific projects. HIE confirmed that it had benefited from in-year allocations in recent years, but was uncertain as to whether such funding would be available in the future. VisitScotland confirmed that it had “received an additional £55 million over and above our core grant over the years since 2001” and confirmed that if the opportunity arose in the future it would make the case for investment in tourism.57

89. When questioned by the Committee on the future potential for additional funding to be sought by bodies such as HIE and VisitScotland, the Cabinet Secretary for Finance and Sustainable Growth stated “room would be available only in the context of in-year adjustments, for example if budget lines for other areas had not performed as expected – slippage on a capital programme is a not uncommon factor; revenue demands might not have been as great as we thought.”58

90. On the basis of the evidence provided by the Cabinet Secretary, the Committee believes that bodies such as VisitScotland and Highlands and Islands Enterprise are less likely to benefit from additional funding as the result of in-year adjustments due to the fact that the Scottish Government has over-budgeted for the 2008-09 budgetary year and the Spending Review period.

Efficiency savings

91. The Draft Budget Spending Review 2007 document states that a new Efficient Government Programme for 2008-11 “provides a new commitment to delivering 2 per cent cash-releasing efficiencies each year over the next three years.”59 It anticipated that the “majority of efficiency gains are expected to be delivered by business improvement, more effective management of public assets and the application of shared services, including improved collaborative procurement.”60

92. In oral evidence to the Committee, the Cabinet Secretary for Finance and Sustainable Growth explained that due to tighter financial climate “I have applied a much tougher level of efficiency savings than I previously envisaged applying, so that we can guarantee that greater value will be delivered from the public expenditure that we have at our disposal.”61 He also confirmed that the 2 per cent efficiency savings target would be applied to the whole budget of the NDPBs, but that they would be able to reallocate those funds within their budgets.

93. Scottish Enterprise stated that “the Spending Review settlement does present SE with some real challenges going forwards in terms of delivering its growing pipeline of projects and realising a further 2% efficiency savings.”62

94. The Committee considers that the requirement to achieve 2 per cent cash releasing efficiencies annually will represent a particular challenge for the enterprise networks over the Spending Review period. Both Scottish Enterprise and Highlands and Islands Enterprise will have to achieve these efficiency savings at the same time as financing their voluntary severance programmes and undergoing major structural reorganisation. The Committee notes the Cabinet Secretary’s explanation concerning the way that cash-releasing savings will be delivered, but considers that it is unclear how the need to achieve 2 per cent cash-releasing savings will impact on the budgets of the enterprise agencies.

Conclusions & recommendations

95. In addressing its conclusions to the Finance Committee, the Committee would also like to include comments on its capacity to scrutinise the budget on the basis of the evidence available, as well as considering the three areas identified in the Finance Committee’s guidance.

The Committee’s ability to scrutinise the Draft Budget

96. The Committee recognises the relatively tight timetable by which the Scottish Government had to provide information to Parliament as part of this year’s budget scrutiny process and the tighter budgetary settlement for the Spending Review period in comparison to previous years. However, the Committee considers that the information made available to it was insufficient to allow proper scrutiny of the Draft Budget. The Scottish Budget Draft Spending Review 2007 document only provided total budgets for the three NDPBs within the Committee’s remit and no detail on their strategic spending plans. Similarly, there was no transparent breakdown of the budgets for programmes or grants. Furthermore, the figures were all presented in cash terms, with no inclusion of real terms data beyond the portfolio headings. Despite repeated requests both to the Cabinet Secretary for Finance and Sustainable Growth and to the NDPBs concerned, the Committee was unable to obtain a meaningful set of figures which would allow it to consider fully how the Scottish Government’s plans to tackle economic growth were reflected in its spending decisions.

97. The majority of the Committee63 recognises the relatively tight timetable in which the Scottish Government had to provide information to the Parliament as part of this year’s budget process. Nevertheless, the majority of the Committee is of the view that the information provided in the budget was insufficient for the purpose of parliamentary scrutiny. This was further compounded by the lack of clarity on the resource implications of the reforms to the enterprise networks and the transfer of activities to Skills Development Scotland Ltd. and to the local authorities.

98. Furthermore, in written evidence, neither Scottish Enterprise nor Highlands and Islands Enterprise was able to provide the Committee with any disaggregated data, even as estimates, which would allow the Committee to arrive at an informed opinion on the impact of the budgetary cuts on the ability of these bodies to deliver their core functions of promoting enterprise development and economic growth in Scotland. The Committee commends Highlands and Islands Enterprise, however, for its more constructive approach in oral evidence when it did provide more detail on how its budget would be affected by proposed transfers to Skills Development Scotland Ltd and local authorities and how it planned to adapt its strategic priorities in the new budgetary context.

99. In addition, the figures presented in the Draft Budget Spending Review 2007 document were only provided in cash terms, not in real terms. The Committee was therefore obliged to use its own resources to establish basic information such as the real term figures for key budget lines over the Spending Review period.

100. The Committee calls on the Scottish Government, Scottish Enterprise and Highlands and Islands Enterprise to provide the Committee with more detailed disaggregated data as soon as it becomes available and to ensure that more detailed figures are provided in future budget documents. This will allow the Committee to take a more informed view of the use of public money and how it will contribute to the achievement of the Scottish Government’s Purpose.

101. The Committee notes that such information, should it be provided, will be received after the Committee is required to complete its scrutiny of the draft budget. Whilst regrettable, the Committee recognises that this is a consequence of the tight timetable for the Spending Review and the ongoing reform of the enterprise agencies and VisitScotland proposed by the Scottish Government. However, this information should be improved in future years from the perspective of allowing proper parliamentary scrutiny.

102. The Committee therefore recommends that the Finance Committee ask the Scottish Government to provide disaggregated data on budget line expenditure in future budgets, both in cash and real terms, including information on local authority Grant Aided Expenditure and specific grants relevant to achieving sustainable economic growth.

103. The Committee will seek an opportunity early in the New Year to scrutinise the operating plans and budgets of Scottish Enterprise and Highlands and Islands Enterprise once these have been agreed by their respective boards.

The Committee’s views on targets set for the its areas of interest and the reflection of Ministerial priorities in spending decisions

104. The Committee considered both the Scottish Government’s Purpose and the Purpose targets linked to economic growth in its consideration of the Draft Budget. The Committee recognises that spending across the budget portfolios may contribute to the Scottish Government’s Purpose.

105. The Committee notes the Scottish Government’s Purpose to increase sustainable economic growth and how it plans to achieve this through its budget proposals. The Committee supports the Scottish Government’s Purpose in this respect. However, at this stage, due to the ongoing nature of some of the proposed reforms, it is too early to say whether this budget will deliver on the Scottish Government’s Purpose.

106. The Committee concludes that the Scottish Government has determined that its Purpose of promoting sustainable economic growth can be best achieved by a different approach which includes further reductions in business rates for small businesses under the Small Business Bonus Scheme, as well as a continuing allocation of funding, albeit less than in previous years, to the enterprise agencies and local authorities to perform the function of promoting economic development.

The enterprise networks

107. A majority of the Committee64 recommends to the Finance Committee and the Scottish Government that time be set aside to permit a debate in the Chamber on a further report issued by this Committee into the final budgetary situation for the enterprise agencies and how much has been transferred to the new skills agency and to local authorities.

108. The Committee considers that there is a lack of clarity concerning the activities and functions to be retained by Scottish Enterprise and therefore on what Scottish Enterprise’s final operational budget will be for the next three years. The lack of information from Scottish Enterprise on the activities that will need to be adjusted to adapt to the new budget suggests that a strategic approach to the reform of Scottish Enterprise has not been fully developed and that there is scarce evidence provided by Scottish Enterprise on how it will tailor its strategic priorities over the next three years.

109. The Committee looks forward to receiving a copy of Scottish Enterprise’s new operating plan so that it can consider the impact of the reform of the enterprise network on Scottish Enterprise and how the latter has redefined its strategic priorities. It will also help the Committee to decide whether the abolition of Scottish Enterprise’s Local Enterprise Companies will achieve a reduction in the overall operating costs of Scottish Enterprise and whether the pursuit of co-location opportunities and the sharing of resources will allow the agency to deliver its strategic priorities more effectively, and at a lower cost.

110. The lack of available information on the implications of the transfer of activities to the new skills agency and on how Highlands and Islands Enterprise will allocate its budget strategically over the Spending Review period makes it difficult for the Committee to reach an informed view on the implications of the budgetary cuts to Highlands and Islands Enterprise and its activities.

111. The Committee is of the view that Highlands and Islands Enterprise, as an organisation, seems to be more advanced in planning how it will adjust its activities in the context of the budgetary cuts than Scottish Enterprise. The Committee notes Highland and Islands Enterprise’s intention to reduce its investment in property by up to £10 million per year in order to adjust to the reduced size of its budget. However, at this stage, the Committee has seen no evidence as to whether the adjustments to Highlands and Islands Enterprise’s property acquisitions will be sufficient to compensate for the reduction in its operating grant.

112. By division, the Committee agreed65 that it is very concerned by the higher proportionate cut to Highlands and Islands Enterprise’s budget and the impact that this will have on its capacity to deliver support in the more fragile economic environment of the Highlands and Islands.

113. The Committee looks forward to receiving a copy of Highlands and Islands Enterprise’s new operating plan so that it can consider the impact of the reform of the enterprise network on the agency and how the latter has redefined its strategic priorities. It will also help the Committee to decide whether the abolition of Highlands and Islands Enterprise’s Local Enterprise Companies will achieve a reduction in the overall operating costs of the agency and whether the pursuit of co-location opportunities and the sharing of resources will allow the agency to deliver its strategic priorities more effectively, and at a lower cost.

114. The Committee is concerned by the length of time that negotiations are taking on agreeing the transfer of Scottish Enterprise and Highlands and Islands Enterprise activities. The Committee urges all involved to conclude the discussions as soon as possible.

115. The Committee acknowledges that there may be some savings in the long-term due to the co-location of offices and the sharing of certain services between the enterprise agencies and other bodies. In principle, the Committee supports this approach to reducing costs, but is keen to see how this will be put into practice over the coming years without affecting the services provided.

116. The Committee is surprised that local authorities only became aware of the Scottish Government’s intentions to transfer a local development function to them when the Cabinet Secretary made his announcement to Parliament on 26 September 2007.

117. The Committee looks forward to being able to consider the detail of the final transfer of the Business Gateway service and regeneration functions from the enterprise agencies to the local authorities and the impact – if any – that this will have on the delivery of services at the local level.

Other budget lines

118. The Committee is of the view that the changes to the budgetary allocations to VisitScotland over the Spending Review period will be broadly neutral with a 6.8% cash increase and a 1.2% real-terms decrease in Visit Scotland’s operating budget over the Spending Review period. It also considers that opportunities to co-locate with other agencies should help to reduce operating costs.

119. The Committee welcomes the increase to the third sector development budget and looks forward to greater detail on how this money will be spent and contribute to the Purpose of promoting sustainable economic growth.

120. The Committee welcomes the allocation of money to the Saltire and Horizon prizes. It also welcomes the increased budget for the National Procurement Centre of Expertise and the support it will provide to the Scottish Government’s plans for promoting e-procurement.

121. Although the Committee welcomes the increases to the energy and climate change budget, it does not share the Cabinet Secretary’s conviction that this increased support to energy projects at these levels will be sufficient in and of itself to ensure that Scotland becomes a global powerhouse for renewable energy. This is because there are a significant number of obstacles – such as planning consent, the capacity of the national grid and grid connection charges - that still need to be overcome. This is a subject the Committee will return to in its energy inquiry in the course of 2008.

122. The Committee calls for the Scottish Government to provide more disaggregated data on the planned use of the budgets listed in paragraph 81. The Committee believes that this is necessary to make the budget process a transparent one and also to provide more information on policy intentions.

Additional in-year funding

123. On the basis of the evidence provided by the Cabinet Secretary on additional in-year allocations, the Committee believes that bodies such as VisitScotland and Highlands and Islands Enterprise are less likely to benefit from additional funding as the result of in-year adjustments due to the fact that the Scottish Government has over-budgeted for the 2008-09 budgetary year and the Spending Review period.

Proposals for cash-releasing efficiency savings

124. The Committee considers that the requirement to achieve 2 per cent cash releasing efficiencies annually will represent a particular challenge for the enterprise networks over the Spending Review period. Both Scottish Enterprise and Highlands and Islands Enterprise will have to achieve these efficiency savings at the same time as financing their voluntary severance programmes and undergoing major structural reorganisation. The Committee notes the Cabinet Secretary’s explanation concerning the way that cash-releasing savings will be delivered, but considers that it is unclear how the need to achieve 2 per cent cash-releasing savings will impact on the budgets of the enterprise agencies.

Alternative spending proposals which the Committee wishes to propose within the appropriate portfolio

125. The Committee considered two alternative spending proposals submitted by David Whitton MSP and Marilyn Livingstone MSP respectively. In divisions, both of these alternative spending proposals were defeated.66

ANNEX (pdf)

EXTRACTs FROM THE MINUTES OF ECONOMY, ENERGY AND TOURISM COMMITTEE

3rd Meeting, 2007 (Session 3), Wednesday 5 September 2007

Budget process 2008-09 (Stage 2): The Committee agreed to seek to appoint an adviser on the budget process 2008-09.

4th Meeting, 2007 (Session 3), Wednesday 19 September 2007

Decision on taking business in private: The Committee agreed to consider a shortlist of candidates and agree the appointment of a Budget Adviser in private.

Budget process 2008-09 (Stage 2): (in private): The Committee considered a shortlist of candidates and agreed the appointment of a Budget Adviser.

5th Meeting, 2007 (Session 3), Wednesday 3 October 2007

Decision on taking business in private: The Committee agreed to consider a shortlist of candidates and agree the appointment of a Budget Adviser in private.

Budget process 2008-09 (Stage 2): (in private): The Committee considered a shortlist of candidates and agreed the appointment of a Budget Adviser.

7th Meeting, 2007 (Session 3), Wednesday 7 November 2007

In attendance: Peter Wood (Committee adviser)

Decisions on taking business in private: The Committee agreed to consider its approach to scrutiny of the Scottish Government’s Draft Budget 2008-09 and any future briefings from the Budget Advisor in private.

Budget process 2008-09 (Stage 2) (in private): The Committee considered and agreed its approach to scrutiny of the Scottish Government’s Draft Budget 2008-09.

8th Meeting, 2007 (Session 3), Wednesday 21 November 2007

In attendance: Peter Wood (Committee adviser)

Budget process 2008-09 (Stage 2) (in private): The Committee discussed its approach to scrutiny of the Scottish Government’s Draft Budget 2008-09 with the Committee’s budget advisor.

9th Meeting, 2007 (Session 3), Wednesday 28 November 2007

Also present: Peter Peacock.

In attendance: Peter Wood (Committee adviser)

Budget process 2008-09 (Stage 2): The Committee took evidence on the Scottish Government’s Draft Budget 2008-09, from—

Jack Perry, Chief Executive, Hugh Hall, Chief Financial Officer, and Andrew Downie, Finance Director, Group Operations, Scottish Enterprise;

Sandy Cumming, Chief Executive, Forbes Duthie, Director of Corporate Services, and Sandy Brady, Director of Strategy, Highlands and Islands Enterprise;

Philip Riddle, Chief Executive, and Riddell Graham, Director of Strategy, Partnership and Communications, VisitScotland; and

Councillor Alison Hay, Regeneration and Sustainable Development Spokesperson, James Fowlie, Team Leader, Environment and Regeneration, Barbra Lindsay, Strategic Director, Convention of Scottish Local Authorities, and David Valentine, Head of Economic Development, Angus Council and representative of SOLACE and SLAED.

10th Meeting, 2007 (Session 3), Wednesday 5 December 2007

In attendance: Peter Wood (Committee adviser)

Decision on taking business in private: The Committee decided to discuss its approach to producing a draft report on the Scottish Government’s Draft Budget 2008-09 in private and all future items relating to the draft report on the Scottish Government’s Draft Budget 2008-09 in private

Budget process 2008-09 (Stage 2): The Committee took evidence on the Scottish Government’s Draft Budget 2008-09, from—

John Swinney MSP, Cabinet Secretary for Finance and Sustainable Growth, Jim Mather MSP, Minister for Enterprise, Energy and Tourism, Chris McCrone, Finance Team Leader, Finance Directorate, and Graeme Dickson, Director, Enterprise, Energy and Tourism, Scottish Government.

Budget process 2008-09 (Stage 2) (in private): The Committee discussed its approach to producing a draft report on the Scottish Government’s Draft Budget 2008-09.

11th Meeting, 2007 (Session 3), Wednesday 12 December 2007

In attendance: Peter Wood (Committee adviser)

Budget process 2008-09 (Stage 2) (in private): The Committee considered a draft report to the Finance Committee on the Scottish Government’s Draft Budget 2008-09. Various changes were agreed to, and the Committee agreed to consider a revised draft, in private, at its next meeting.

12th Meeting, 2007 (Session 3), Wednesday 19 December 2007

In attendance: Peter Wood (Committee adviser)

Decision on taking business in private: The Committee agreed to consider a draft report to the Finance Committee on the Scottish Government’s Draft Budget 2008-09 in private.

Budget process 2008-09 (Stage 2) (in private): The Committee considered a draft report to the Finance Committee on the Scottish Government’s Draft Budget 2008-09. Various changes were agreed, including some following divisions, and the Committee agreed to send the revised version of its report to the Finance Committee.

Finance Committee – 1st Report, 2008 (Session 3) – Annexe E

Education, Lifelong Learning and Culture Committee

Report on Budget Process 2008-09

The Committee reports to the Finance Committee as follows—

Introduction

1. The Scottish Government’s Scottish Budget Spending Review67 was published on 14 November 2007. The Education, Lifelong Learning and Culture Committee agreed its approach to the budget process 2008-09 at its meeting of 14 November 2007.68 Given the limited time available this year for budget scrutiny, the Committee decided to focus its attention mainly on the further and higher education and skills aspects of the budget.

2. The Committee took oral evidence over the course of three meetings as follows:

21 November 2007

  • Mark Batho, Head of Lifelong Learning Directorate, Scottish Government; Donald Henderson, interim Chief Executive, Skills Development Scotland; Linda McDowall, Acting Senior Director of Skills and Learning, Scottish Enterprise; Alex Paterson, Director of the Developing Skills Group, Highlands and Islands Enterprise; and Damien Yates, Chief Executive, Learndirect Scotland.
28 November 2007
  • Howard McKenzie, Acting Chief Executive, Association of Scottish Colleges; David Caldwell, Director, Universities Scotland; and Roger McClure, Chief Executive, Scottish Funding Council.
5 December 2007
  • Cllr Isabel Hutton, Education, Children and Young People spokesperson, Jon Harris, Strategic Director, and Robert Nicol, Policy Manager, COSLA.
  • Fiona Hyslop MSP, Cabinet Secretary for Education and Lifelong Learning, Colin MacLean, Director, Children, Young People and Social Care Directorate, Liz Hunter, Director, Schools Directorate, and Mark Batho, Director, Lifelong Learning Directorate, Scottish Governmen

3. Written evidence was submitted by all of those who gave oral evidence, with the exception of the Cabinet Secretary. Written evidence was also submitted by Save the Children. Details of all oral and written evidence submitted to the Committee can be found in Volume Three of the Finance Committee’s report.

4. On 21 November, the Convener of the Education, Lifelong Learning and Culture Committee wrote to Fiona Hyslop MSP, Cabinet Secretary for Education and Lifelong Learning, and Linda Fabiani MSP, Minister for Europe, External Affairs and Culture, to request more detailed budget information for their respective portfolios. Replies from the Cabinet Secretary and the Minister were received on 27 November and 5 December respectively. All correspondence is attached at Appendix A.

5. Following the oral evidence session on 21 November 2007, Mark Batho, Head of the Lifelong Learning Directorate, Scottish Government, wrote to the Committee to clarify a number of points raised. A copy of this letter, dated 27 November 2007, can be found at Appendix B.

6. Following the oral evidence session on 5 December 2007, Mark Batho, head of the Lifelong Learning Directorate, Scottish Government, wrote to the Committee to clarify points raised during the meeting. A copy of this letter, dated 6 December 2007, can be found at Appendix C.

7. Following the oral evidence session on 5 December 2007, Cllr Isabel Hutton, Education, Children and Young People Spokesperson, COSLA, wrote to the Committee to clarify points raised during the meeting. A copy of this letter, dated 10 December 2007, can be found at Appendix D.

Context

8. The budget directly under the scrutiny of the Education, Lifelong Learning and Culture Committee amounts to around £2,748m (2007-8). Around four fifths of the budget for education and lifelong learning is for further and higher education. This is made up of the grant to the Scottish Further and Higher Education Funding Council (the Scottish Funding Council) (£1,634m) and student support provided through the Student Awards Agency for Scotland (£539m). The budget also includes elements for schools, children’s services, social care services (£252m) and a number of policies related to lifelong learning (£94m). The majority of schools and children’s services are provided through local government funding. £229.4m is provided for ‘Culture and Gaelic’ and for Historic Scotland.

Presentation of figures

9. Significant elements of the budget (totalling £612m69), considered by the Committee in previous years, have been transferred to local government. The Education and Young People budget (including specific grants), as presented in the previous budget, totalled £862m70. Due primarily to transfers to local government, the equivalent budgets this year total £252m71. The Committee was not able to track the extent of these transfers and the extent to which they may or may not be protected and/or prioritised within the receiving budget. Certain other budgets had been grouped or renamed in a way which also created difficulty in following the trail of funding from one year to the next. This constrained the ability of the Committee to scrutinise the budget.72

10. The Committee expressed its concerns to the Cabinet Secretary for Education and Lifelong Learning that the format changes and transfers to other areas of the budget within the Committee’s remit had not been clear. Moreover, in responding to the Committee’s request for information on what transfers and changes had been made, no figures had been attached to the listing of budgets which had been changed.

issues considered

Skills

11. The oral evidence session on 21 November focussed on skills. It covered the Scottish Government’s Skills for Scotland: A Lifelong Skills Strategy73, the creation of a new skills body, Skills Development Scotland, and how these policies have been reflected in the budget.

Skills Development Scotland

12. The Committee sought a range of information from witnesses on the costs and benefits relating to the establishment of the new skills body. The costs of establishment, as outlined in the budget, are £16m. Witnesses were unable to provide information on the combined running costs. Detailed information on which services would be transferring was not yet available.

13. Mark Batho, Head of the Lifelong Learning Directorate, Scottish Government, told the Committee that—

“The running costs of the organisation are under discussion. They will in part depend on exactly what functions are transferred to the new body and what functions remain with the enterprise networks […] I cannot put a figure on the running costs in 2008-09.”74

14. Mark Batho also told the Committee that there “ought to be economies of scale”75 in creating the new organisation, and the use of shared services was being investigated. The Cabinet Secretary for Education and Lifelong Learning, in her responses to the Committee on 5 December, said that “over the longer term, we expect efficiencies will be achieved that could be deployed in providing front-line services”76. Witnesses were, however, cautious regarding the impact of efficiency gains on service delivery. Mark Batho told the Committee that—

“We must not try to extract every ounce of efficiency to the detriment of the continuing delivery of existing programmes”77

15. No evidence was provided to the Committee on whether the new skills body would be asked to contribute to the Scottish Government’s target of annual 2 per cent efficiency savings in the public sector. The Committee requests further information from the Cabinet Secretary on whether or not the new skills body will be expected to make efficiency savings.

Individual Learning Accounts

16. The budget for Individual Learning Accounts (ILAs) is demand led and the reduced demand in this area had allowed funds to be transferred from this heading to other budgets to support new initiatives and structures. Notwithstanding this, there was an anticipated upturn stemming partly from an increase in the promotion of ILAs. The Committee heard in evidence at a later meeting that income from the delivery of ILA funded courses in further education colleges did not cover the full costs and yet no additional funding to support these courses appeared in the proposals to fund further education. There was some concern that while there was support for the expansion of ILAs, particularly in relation to their positive impact on lower paid individuals, the true cost of expansion had not been considered across the budgets scrutinised.

17. However, the Committee notes the previous significant under spend in the budget allocated to ILAs and recognises that the reduction in the budget is aimed at reducing this under spend. The Committee seeks reassurance from the Scottish Government that the proposed budget for ILAs is sufficient to meet the additional demand likely to be generated by the planned improved marketing.

Skills Strategy

18. There was reference in the budget to the ministerial priorities and targets set out in the skills strategy, with particular focus on additional funding (£20m in a new budget line) for low paid, low skilled workers. To that extent, the Committee noted that funding for further developing the skills strategy (£3.9m, £7.9m and £7.9m) was in place and that the budget document states that this will—

“[…] provide additional support to low paid/low skilled workers through a combination of more money through Individual Learning Accounts Scotland and increased support through learndirect Scotland”78

However, the Committee was not provided with specific information on how, and on what, this money would be spent within these areas and requests further information on this from the Scottish Government. The Committee would also request information on how the other elements of the skills strategy will be funded, if not by the ‘Skills Strategy’ funding line.

Outcomes and indicators - skills

19. The Committee notes a number of the national outcomes are relevant either directly or indirectly to the skills agenda. In particular, the targets and outcomes have a welcome focus on reducing the numbers of young people not in education, employment or training, and on tackling adult basic education. These are reflected in specific funding streams under ‘Other Lifelong Learning’ such as ‘Individual Learning Accounts Scotland’, ‘Union Learning’, ‘Skills Strategy’, and ‘Young People Who Need More Choices and Chances’.

Further and higher education

20. The oral evidence session on 28 November focussed on further and higher education and how the budget reflected policy commitments in these areas.

Impact of the budget on universities

21. Despite a significant gap between the submission to the spending review by Universities Scotland and the actual amount of funding allocated to universities, the Committee received information from witnesses that the universities would manage to meet the budgetary targets set for them. The impact of pay awards in the sector is significant.

22. David Caldwell, Director, Universities Scotland, told the Committee that—

“In the final year of the pay deal, the uplift-taking account of the cost of living element and the staged increase-is likely to come to between 7 and 8 per cent. At a time when universities are receiving an increase of inflation minus 0.2 per cent, that clearly involves cost pressures. We have calculated that over the sector as a whole, for the relevant staff, the total gap is about £20m. That is an approximate figure, but it is pretty good estimate.”79

23. Little detail was available to the Committee on how this pay award would be funded and what impact this might have on university structures, internally and nationally, if savings were to be made. The Cabinet Secretary for Education and Lifelong Learning confirmed in evidence on 5 December that, in terms of funding the pay award, “universities may need support in addressing the issue”80.

24. Commenting on the ability of universities and colleges to fund pay awards in excess of funding allowed for in the budget, the Cabinet Secretary for Education and Lifelong Learning told the Committee that—

“[…] there was no indication that the pay settlement would cause the universities particular difficulties. I suspect that, because the level of the request from the universities was so high, they thought that the pay settlement would not be an issue.”81

25. The Cabinet Secretary for Education and Lifelong Learning also told the Committee that many establishments had built significant reserves and that these could be utilised in the circumstances of short term financial difficulties. The Committee has some concerns over the longer term viability of institutions which found themselves in this situation.

Higher education share of total funding

26. The Committee was concerned over the lack of clarity of information on the share of university funding as a proportion of total national spending. However, it appears that, in broad terms, the proportion of total national spend will remain at roughly the same level over the spending review period. David Caldwell told the Committee that—

“I looked at the figures recently to be absolutely clear about them. In the current year, funding council grant for the universities is 3.12 per cent of the Scottish budget. Next year, it will go down to 3.11 per cent. The following year, it will go back up to 3.12 per cent. In the final year of the spending review period, by my calculations the share will increase to 3.14 per cent. We are working within a very narrow range—at the second figure after the decimal point and over a long period of time. Essentially, our share of the budget is flat. I am quite happy to drop arguments about whether our share of the budget is increasing or reducing because, in any meaningful sense, it will remain pretty much exactly the same.”82

27. The Cabinet Secretary for Education and Lifelong Learning told the Committee that—

“Between 2004-05 and 2007-08, the baseline for higher education institutions represented 3.13 per cent of Scottish Government total managed expenditure, which obviously includes annual managed expenditure. Between 2008-09 and 2010-11, it will represent 3.14 per cent, which is an increase.”83

28. The Committee notes that there is no reconciliation between the figures for 2008-09 and 2009-10 between Universities Scotland and the Cabinet Secretary for Education and Lifelong Learning as the figures are being measured in different ways.

29. The Committee also heard that investment in universities in the longer term would provide a positive return to the Scottish economy through knowledge transfer activity and other external benefits.

30. David Caldwell told the Committee that—

“We said that by the end of the spending review period we were capable of delivering an additional £340million-worth of public benefit. We were seeking an additional public contribution towards that of £168 million, or only half […] we can get twice as much public benefit as the additional public investment.”84

31. The Committee noted the establishment of a “joint future-thinking task force”85 to look into university funding, collaboration, cooperation and efficiency.

Research funding and competitiveness

32. The witnesses before the Committee were consistent in their view that top level research activity in Scottish universities was internationally renowned. The Committee, however, was concerned that the lack of expansion in funding at a level which would allow universities to compete with their nearest neighbours could lead to a diminution in research quality in Scotland and failure to recruit renowned leaders in research from abroad. The Cabinet Secretary for Education and Lifelong Learning, in evidence provided on 5 December, could not speculate on the likely gap in funding between Scottish universities and those in England where funding was being enhanced by top up fees. However, the Committee had heard from David Caldwell that—

[…] “the English will benefit to the tune of about 8 per cent by the end of the period. If we get 2.9 per cent, a gap of about 5 percentage points will open up.”86

Research non intensives

33. Universities with large research portfolios have better scope for income diversification than those which are not research intensive. Those universities with less income from research may therefore be more affected by a tight funding settlement. Witnesses were unable to give detailed evidence about the effect this could have on teaching.

Further education

34. In reaction to the further education provision in the budget, Howard McKenzie, acting Chief Executive, Association of Scotland's Colleges, told the Committee that—

“To absorb what is going on, we will have to change what we are doing. The capital line that we have been given is welcome, but not quite enough—it will not do everything, and some colleges will be left waiting. The revenue is just about enough to do what we are doing now, but if we are asked to do any more we will have to start to move the chairs around in the colleges quite quickly. Several principals have told me that they will have to make decisions about some of the more high-cost courses and perhaps move some of the provision for those to lower-cost courses. High-cost courses include engineering, construction and special needs. To deal with the additional costs, the funding may be put into business and other courses that are cheaper to deliver.”87

35. The Committee is concerned that one impact of the relatively tight budget settlement might be to disadvantage students who need extra support. There appears to be little scope within the budget for expansion of these areas, and therefore potentially limited scope for colleges to respond to local markets and to the needs of their local communities. In response to this point, the Cabinet Secretary for Education and Lifelong Learning told the Committee that—

“Decisions about how to deploy the resource are for the Scottish Further and Higher Education Funding Council and for colleges as individual institutions […] Local colleges provide courses that respond to local needs. Therefore I expect some changes in provision to be made to reflect local needs and the demands of employers in the local area. I also expect the delivery of courses to reflect funding council guidance. I am developing my own guidance to the funding council on what I expect to see.”88

36. The Committee notes that the Scottish Government has invested an additional £100m of capital funding in colleges and universities, which will initially be divided on a £60m/£40m basis between the college sector and the higher education sector respectively although it was stated by the Scottish Government that this will balance out to a 50/50 split over a three year period so that the two sectors will have had equal investment over the spending review period. This additional capital investment has been made in the current financial year and therefore does not appear in the budget document. The Committee cannot therefore accurately scrutinise, at this stage, how this £100m will affect the wider further and higher education budgets.

37. Whilst the Committee welcomes provision in the ‘Other lifelong learning’ budget to encourage vocational education, it notes that there is also a need to provide increased funding through the Scottish Funding Council budget to support the policy of school-college partnerships.

38. The Committee also heard evidence that efficiency savings within colleges and universities which might be derived from back office sharing were very limited as most establishments were already tightly managed in terms of overhead costs. Concern was therefore expressed that savings through efficiencies would impact directly on the delivery of education rather than administration.

39. However, the Cabinet Secretary for Education and Lifelong Learning told the Committee that—

“Collaboration does not necessarily mean the complete rationalisation of institutions. I know that many wish to pursue an agenda that would involve our considering the number of universities in Scotland. It is perhaps more productive to consider the functions of universities, and for those institutions to come back with the form that that might take, but the development of shared back-room activities—I know many of the institutions already share such activities—would be extremely positive.”89

40. It was not clear to the Committee whether the further and higher education sectors would be required to deliver the Scottish Government’s target of annual 2 per cent efficiency savings in the public sector.

Outcomes and indicators – further and higher education

41. The Committee recognises that the further and higher education sectors are central to the achievement of many of the national outcomes. Whilst the Committee welcomes the use of indicators on applied research and on graduate outcomes, it is not clear that the indicators proposed are sufficient to track the international competitiveness of Scotland’s universities, or the quality of provision in both further and higher education.

Local authority education spending

42. The Committee took evidence on local authority education and skills spending from COSLA at its meeting of 5 December 2007.

43. In direct questioning to COSLA, it was apparent to the Committee that in negotiating the concordat between the Scottish Government and local authorities very little detailed evidence was available to COSLA on the costs relating to the implementation of educational policy initiatives. This was of major concern to the Committee in carrying out its role of scrutiny of budgets connected with education and raised significant concern about those areas of the budget which were formerly ring fenced, and within direct scrutiny of the Committee.

44. Measuring the success of significant policy initiatives, such as the move towards class sizes of 18 or less for P1 to P3 had not been defined clearly and the Committee was concerned that in the absence of clear and measurable targets, a very small improvement could be considered to be “progress”. The Committee was concerned that without clear criteria for determining what progress was being achieved, local authorities would not necessarily be required to show significant improvements in outcomes to satisfy the policy initiative.

45. In seeking evidence from COSLA, the Committee could not establish what the specific mechanisms would be for monitoring progress in implementing the key policy initiatives included in the budget. COSLA told the Committee that—

“If there is an issue and we are not delivering a particular commitment, we will consider how we can respond. There may be many reasons for not delivering and we will have to deal with them as they arise […] I like to think that we are working towards partnership working and that, if there are pressures, rather than having prescriptive sanctions, we would take a joint approach to alleviate those pressures […]”90

46. In later questioning of the Cabinet Secretary for Education and Lifelong Learning told the Committee that—

“We must, however, be aware of the need to monitor the situation, just as COSLA will want to monitor developments among local authorities. The bi-monthly meeting with the Cabinet Secretary for Finance and Sustainable Growth, me and the COSLA leadership will be critical to our delivering on the concordat and on some of the policies that develop from it.”91

47. There was concern that any release of additional funding to local authorities, should this be required, could be very limited given the demands of the higher education sector and the “over budgeting” which had taken place in setting the overall budget (recognising that there may be some slippage in delivering on all policy fronts).

48. The Cabinet Secretary for Education and Lifelong Learning told the Committee that—

“If an authority decided not to pursue or not to deliver on the specified set of commitments, we would not be able to reach a single outcome agreement with it and it would not benefit from the end of ring fencing or be able to keep its efficiency savings, as it would not be signing up to the deal and package that has been agreed. Authorities cannot pick and choose. The concordat identifies six specified commitments and reflects the national outcomes that have been agreed. If local authorities do not want to accept the deal, that is a matter for them, but the deal is a package.”92

School education and children’s services – outcomes and indicators

49. The Committee welcomes the use of the key principles of the Curriculum for Excellence in the national outcomes and the focus on early intervention and reducing inequalities. However, the Committee is not clear whether the indicators proposed measure progress against outcomes in these areas. For example, the key indicator for schools is increasing the proportion of schools receiving ‘positive’ inspection reports. In order to measure progress, the definition of a ‘positive’ report will need to be carefully framed to reflect policy priorities on inequalities, early intervention and improving outcomes for vulnerable children. A similar point can be made in relation to the indicator covering area child protection committees.

Culture

50. The Committee had been concerned that funding for new initiatives might have led to the budgets for culture being reduced. Additional information on the culture budget was requested from Linda Fabiani MSP, Minister for Europe, External Affairs and Culture and this can be found at Appendix A. Within budgets, there does seem to have been a shift from existing institutions to ‘new government priorities’. However, given the time constraints on consideration of the budget, the Committee has not been able to undertake a detailed consideration of the culture budget and can therefore draw no conclusions on the adequacy or appropriateness of the culture budget.

CONCLUSIONS AND RECOMMENDATIONS

51. The Committee considers that in many areas there is a lack of detail supporting figures in the budget, which may lead to difficulties emerging as costs are finalised.

52. The Committee also believes that, in arriving at strategic agreements with different sectors, there appears to have been a lack of consideration of the overall costs of implementation of significant policy initiatives. This has made thorough scrutiny of figures difficult to undertake.

53. There was an inadequate audit trailof budgets transferred in and out of the Committee’s remit, which itself constrained its ability to scrutinise the budget. Many of the transfers from areas within the Committee’s remit were previously ring fenced and the Committee is concerned that there is no assurance that funding for services to vulnerable individuals, which was previously protected by ring-fencing, will be guaranteed in the future. The Committee requests that the Cabinet Secretary consults with the Committee on how to address this.

54. In setting budgets, particularly when funds are constrained it is important to assist local decision makers in understanding what priorities should be used to determine resource allocation. There are significant areas of the budget (e.g. higher education) where detailed, specific policy guidance has yet to be issued, other than that contained in the national outcomes detailed in the budget document. However, it is acknowledged that the Scottish Government has provided more detailed policy guidance in other areas, such as skills.

55. Priorities in allocating additional funds which become available during the year have been mentioned in evidence to the Committee. The Committee considers that there is a risk of potential over commitment of end year flexibility monies.

56. It was clear to the Committee that there were emerging risks that commitments in one area of the budget would impact elsewhere and the Committee considers that these knock on impacts had not been fully recognised.

57. The Committee is also concerned that one of Scotland’s key success stories has been the universities and in particular their research activity. Failure to invest in this success could lead to longer term decline in university status and in the benefits derived from knowledge transfer.

58. If the Parliament should vote to retain the graduate endowment, the Committee submits that the £17 million sum which would have been spent on its abolition should be reallocated to the budgets for higher education revenue funding and the provision of more Young Students' Bursaries.93

59. The Committee is extremely concerned that universities may be in a position that they are forced to make pay awards out of their contingency reserves because of the real terms cuts in 2008-09. Contrary to the assertion of the Cabinet Secretary for Education and Lifelong Learning that she was unaware of the likely serious situation faced by the sector because of the cut, Universities Scotland had itemised their bid concerning staffing and pensions. The Committee believes the Scottish Government, at the very least, should ensure within its own budget settlement over the 3 years that there is no real terms cut in the sector funding next year. This may mean rebalancing the levels of capital and revenue funding to ensure a more consistent approach in the three years. The Committee requests that the matter is addressed urgently by the Cabinet Secretary.94

60. The Committee recommends that all relevant Level 3 budget lines and the relevant local authority GAE totals should be restored to the budget for next year. Further, the indicative spending allocations to specific grants now in the local government block should be published in the Draft Budget next year.

61. The Committee is not satisfied that the Budget reflects the Scottish Government’s economic strategy or its ‘Purpose’ in growing the Scottish economy. It is clear that the higher education sector plays a key role in delivering economic growth and the Committee is disappointed with the low level of priority given to it as a driver for the economy.

62. The Committee is concerned at the high set up costs of the new national skills body, budgeted at £16 million. The Committee seeks clarification from the Cabinet Secretary on the estimated ongoing running costs of the new skills body.

63. The Committee is very concerned at the lack of clarity of the intention of the Scottish Government to rebalance the 50/50 split of capital funding between the college and university sectors. The Government has stated that £10 million will be removed from the college capital lines in the budget and given to universities but there is no reference to this in any budget documentation. This requires urgent clarification.

64. The Committee acknowledged that the Universities Scotland bid was supplemented by additional non-public sector contributions that it would lever in using the additional public sector support. Given the additional baseline funding of only £20 million in real terms we are very concerned that universities will not be able to secure the levels of non-public sector funding required.

65. Given the difficulties that the Committee found in being able to track level 3 budget lines, transfer amounts to local government, whether transferred amounts would be uplifted with inflation or increased and how the concordat will sit with single outcome agreements currently being discussed, it would like Audit Scotland to carry out a review of the procedure for determining clarity and transparency in education funding.95

APPENDIX A

CORRESPONDENCE FROM KAREN WHITEFIELD MSP, CONVENER OF THE Education, Lifelong Learning and Culture Committee, TO FIONA HYSLOP MSP, CABINET SECRETARY FOR EDUCATION AND LIFELONG LEARNING, DATED 21 NOVEMBER 2007.

Budget process 2008-09

The Education, Lifelong Learning and Culture Committee began its formal consideration of the Scottish Government’s Scottish Budget Spending Review 2007 at its meeting of 21 November 2007 and considered that further detail on the information presented in the budget document is required to enable full and proper scrutiny of the spending areas within your portfolio.

It was also noted that the Finance Committee agreed, at its meeting of 20 November 2007, to write to the Cabinet Secretary for Finance and Sustainable Growth to request additional information required for scrutiny of the draft Budget. It was therefore considered consistent for a subject Committee to request additional information relevant to its own remit.

Specifically the Committee require full level 3 figures for all relevant areas within the education and lifelong learning budget lines.

Given the tight timescale the Committee is working to in order to complete its budget scrutiny on time, I would appreciate this information being made available by 27 November 2007.

CORRESPONDENCE FROM KAREN WHITEFIELD MSP, CONVENER OF THE Education, Lifelong Learning and Culture Committee, TO LINDA FABIANI MSP, MINISTER FOR EUROPE, EXTERNAL AFFAIRS AND CULTURE, DATED 21 NOVEMBER 2007.

Budget process 2008-09

The Education, Lifelong Learning and Culture Committee began its formal consideration of the Scottish Government’s Scottish Budget Spending Review 2007 at its meeting of 21 November 2007 and considered that further detail on the information presented in the budget document is required to enable full and proper scrutiny of the spending areas within your portfolio.

It was also noted that the Finance Committee agreed, at its meeting of 20 November 2007, to write to the Cabinet Secretary for Finance and Sustainable Growth to request additional information required for scrutiny of the draft Budget. It was therefore considered consistent for a subject Committee to request additional information relevant to its own remit.

Specifically the Committee require full level 3 figures for all relevant areas within the culture budget lines.

Given the tight timescale the Committee is working to in order to complete its budget scrutiny on time, I would appreciate this information being made available by 27 November 2007.

CORRESPONDENCE FROM FIONA HYSLOP MSP, CABINET SECRETARY FOR EDUCATION AND LIFELONG LEARNING, TO KAREN WHITEFIELD MSP, CONVENER OF THE Education, Lifelong Learning and Culture Committee, DATED 27 NOVEMBER 2007.

BUDGET PROCESS 2008-09

Thank you for your letter of 22nd November requesting additional information relating to the Draft Budget 2008-09, specifically full Level 3 figures relevant to my portfolio.

However, that information is already set out in the Scottish Budget Spending Review 2007 publication. With the exception of those areas that have been transferred to the Local Government chapter, I believe that there is as much level 3 detail as has been provided in previous Draft Budget publications, taking into account the ongoing process of refining the titles of level 3 budget lines as structures or programmes evolve and to better reflect the activities of the portfolio. The attached Annex indicates where changes in Level 3 budgets occurred.

You may find it helpful to know that Level 2 real terms numbers will shortly be available in SPICe (Bib number 44133). Again, a similar level of detail was provided in previous Draft Budget publications.

I should also take this opportunity to clarify one of the commitments in the Spending Review document, and the local government concordat, about extending entitlement for free school meals. As drafted it could be open to different interpretations. For the avoidance of doubt, the commitment is to extend entitlement to free school meals to all primary school and secondary school pupils whose parents or carers are in receipt of both maximum child tax credit and maximum working tax credit.

Finally, I would of course be happy to consider any further requests for specific information. I am very keen to work constructively with you and the Committee as a whole. Robust Parliamentary scrutiny of Government spending plans is important and welcome.

ANNEX: 2007-08 LEVEL 3 LINES WHICH ARE MERGED, RENAMED OR DROPPED IN 2008-09 DRAFT BUDGET

Numbers refer to the tables in each document

2007-08 DRAFT BUDGET (published Sept. 2006) Level 3 lines merged, renamed or dropped SCOTTISH BUDGETSR 2007 (Published Nov 07) Relevant level 3 lines Reason for change
3.03 Pupil Support and Inclusion 22.02 Support for learning To integrate all approaches to the initiatives associated with special educational needs support
3.03 Additional Support Needs 22.02 Support for learning A name change with no budget implications or change of policy direction to reflect the fact the Division covers all aspects of special educational needs rather than offers additional support.
3.03 Qualifications, assessment and curriculum 22.02 Qualifications, assessment and skills/22.02 Curriculum A split of the existing Division to allow focus on the main areas to better achieve the required outcomes.
3.03 New educational developments 22.02 Qualifications, assessment and skills The IT content of NED Division (the bulk of funding) has been transferred to the new Division to better incorporate the initiatives of the Scottish Government in this area.
3.04 Early education and childcare 22.03 Positive Futures A more rounded approach to the various initiative strands associated with pre school and early education
3.04 Children and families 22.03 Organisation The new Division has taken on the role of coordinating CYPSC Directorate interests in the Concordat and the development and implementation of Single Outcome Agreements including post SR07 funding arrangements.
3.04 Looked after children and youth work 22.03 Care & Justice/Prevention To offer a more co-ordinated approach to the problem of Youth Crime, the issues involved and its prevention.
3.04 Youth justice and children’s hearing 22.03 Care & Justice/Prevention
3.04 Social work services policy 22.03 Workforce and Capacity To better reflect the range of initiatives undertaken by social work policy in the training and allocation of social work practitioners and helpers on the ground.
3.05 National Priorities Action Fund 27.01 Resource Grants Transferred to new LG portfolio
3.05 Special educational needs 27.01 Resource Grants Transferred to new LG portfolio
3.05 Gaelic in education 27.01 Resource Grants Transferred to new LG portfolio
3.05 Social work services 27.01 Resource Grants Transferred to new LG portfolio
3.05 School buildings/PPP 27.01 Resource Grants Transferred to new LG portfolio
3.05 Teachers’ induction 27.01 Resource Grants Transferred to new LG portfolio
3.05 Discipline 27.01 Resource Grants Transferred to new LG portfolio
3.05 Centres of Excellence 27.01 Resource Grants Transferred to new LG portfolio
2.04 Community Learning and Development/ Social Economy 22.06 Learning Connections/20.19 Third Sector Development (split not known) Change of name and moved as part of portfolio restructuring
2.04 Adult Numeracy and Literacy 22.06 Learning Connections (split not known) Change of name and moved as part of portfolio restructuring
5.03 Tuition Fees 22.04 Fees, grants and bursaries. Student support integrated into one line.
5.03 Grants and bursaries
5.03 Student Loan subsidy net 22.04 Cost of Student Loans Renamed
5.04 Non-cash budget (formerly SFEFC) 22.05 SFHEFC Administration Non-cash Budget now not shown separately but as part of the total Resource budget (£519k)
5.04 Non-cash budget (formerly SHEFC) Non-cash Budget now not shown separately but as part of the total Resource budget (£502k)
5.12 Beattie Inclusiveness 22.06 Young People who need more choices and chances Re-named to better reflect delivery priorities.
5.12 Science Centres 22.06 Science-related Programmes delivered by the Office of the Chief Scientific Advisor Re-named to better reflect delivery priorities.

CORRESPONDENCE FROM LINDA FABIANI MSP, MINISTER FOR EUROPE, EXTERNAL AFFAIRS AND CULTURE, to KAREN WHITEFIELD MSP, CONVENER OF THE Education, Lifelong Learning and Culture Committee, DATED 5 decEMBER 2007.

BUDGET PROCESS 2008-09

Thank you for your letter of 21 November requesting additional information on the culture budget to enable the Committee to scrutinise the spending areas within my portfolio.

The purpose of Spending Review 2007 is to focus resources to achieve the Government’s purpose and strategic objectives. The review has taken place in the context of a tighter UK Comprehensive Spending Review. Notwithstanding this difficult settlement, Scottish Government planned spending on culture will increase by £33.6m or 14% in cash terms from £238.4m to £272.0m over 3 years.

Culture 2007-08 2008-09 2009-10 2010-11
  Budget £m Draft Budget £m Plans £m Plans £m
Creative Scotland 49.0 50.2 55.1 57.5
Cultural Collections 85.8 88.6 98.9 100.5
National Performing Companies 23.9 25.4 24.9 27.4
Gaelic 14.4 20.7 18.7 18.7
Architecture 1.6 1.9 1.8 1.8
Other Arts 7.0 2.3 4.8 5.3
Culture and Gaelic 181.7 189.1 204.2 211.2
Historic Scotland 47.7 51.7 49.3 50.3
National Archives of Scotland 9.0 10.3 10.3 10.5
Total Culture Portfolio 238.4 251.1 263.8 272.0

We have provided for £6m over the period for the creation of an Edinburgh Festival Expo Fund to promote Scottish works at the Festivals and we will be announcing details of funding for other new Government priorities in due course. We have been able to provide significant increases in funding for the Cultural Collections in 2008-09 while requiring them to deliver efficiencies of 3% per annum from 2009-10. An additional £13.4m over the period has been provided to the portfolio for new capital investment which will be subject to Ministers’ consideration of the capital strategy for culture and the details will be announced as projects complete their approval processes. We have provided £11.6m over the period to complete the Royal Museum Project and £3.7m capital in 2008-09 for Historic Scotland.

A more detailed breakdown of the planned budget for culture is set out at Annex A. The figures shown for 2008-09 onwards remain indicative and will be subject to the annual enactment by the Scottish Parliament of the Budget (Scotland) Bill.

I hope you find this information useful.

ANNEX A

CREATIVE SCOTLAND

Planned funding for Creative Scotland and new Government cultural priorities will increase by £8.5m or 17% in cash terms from £49.0m to £57.5m over 3 years.

Creative Scotland 2007-08 2008-09 2009-10 2010-11
  Budget £m Draft Budget £m Plans £m Plans £m
Scottish Arts Council 45.419 45.419 44.919 42.769
         
Scottish Screen 3.403 3.473 3.473 3.473
         
Edinburgh Festivals Expo 0.000 1.308 2.692 2.000
New Government Priorities 0.000 0.000 4.016 9.258
 
TOTAL 49.0 50.2 55.1 57.5

CULTURAL COLLECTIONS

Planned funding for Cultural Collections will increase by £14.7m or 17% in cash terms from £85.8m to £100.5m over 3 years. An additional £13.4m over the period has been provided to the portfolio for new capital investment which will be subject to Ministers’ consideration of the capital strategy for culture and the details will be announced as projects complete their approval processes. We have provided £11.6m over the period to complete the Royal Museum Project.

Cultural Collections 2007-08 2008-09 2009-10 2010-11
  Budget £m Draft Budget £m Plans £m Plans £m
National Museums of Scotland 31.564 33.725 32.917 31.877
National Galleries of Scotland 15.739 16.487 16.685 16.926
National Library of Scotland 18.867 19.542 19.597 19.703
Royal Commission on the Ancient and Historical Monuments of Scotland 4.455 4.855 4.747 4.639
Cultural Collections (general) 0 5.400 5.400 6.700
Local Museums and Libraries 4.841 4.841 4.841 4.841
New Government Priorities 10.361 3.764 14.664 15.795
TOTAL 85.8 88.6 98.9 100.5

These provisional financial allocations are net of efficiencies of 3% per annum which will be required from 2009-10.

NATIONAL PERFORMING COMPANIES

Planned funding for National Performing Companies will increase by £3.5m or 15% in cash terms from £23.9m to £27.4m over 3 years.

National Performing Companies 2007-08 2008-09 2009-10 2010-11
  Budget £m Draft Budget £m Plans £m Plans £m
National Performing Companies 23.9 24.4 24.9 25.4
New Government Priorities 0.0 1.0 0.0 2.0
TOTAL 23.9 25.4 24.9 27.4

Figures include one-off sums of £1m capital in 2008-09 and £2m capital in 2010-11 which are subject to Ministers’ consideration of the capital strategy for culture.

GAELIC

Planned funding for Gaelic will increase by £4.3m or 30% in cash terms from £14.4m to £18.7m over 3 years.

Scottish Ministers have demonstrated their commitment to Gaelic by including significant increases for Gaelic development in SR 2007. Their aim is to create a sustainable future for Gaelic in Scotland and in order to achieve this Ministers realise it is essential to make urgent progress in all the key areas of Gaelic activity. In particular this includes increases for Gaelic in the areas of education, implementation of the National Plan and broadcasting. This amounts to an increase of £7.5m new funding over the period of the SR.

The total overall investment for Gaelic in each year of the spending review period will be around £21m, an increase on the level of investment in 2007-8 of approximately £14m.The reason that the full amount is not shown in the Gaelic budget line below is that some of this total is part of the baseline budgets of other portfolios but will be spent on Gaelic related activity.

Bòrd na Gàidhlig 2007-08 2008-09 2009-10 2010-11
  Budget £m Draft Budge t£m Plans £m Plans £m
Bòrd na Gàidhlig 4.409 4.409 4.409 4.409
Other Gaelic 9.991 16.291 14.291 14.291
TOTAL 14.4 20.7 18.7 18.7

The Other Gaelic figures include a one-off sum of £2m capital in 2008-09 which will be subject to Ministers’ consideration of the capital strategy for culture. In addition to funds shown above, £4.414m is contained within the budget for local government for Gaelic Education Specific Grant.

ARCHITECTURE

Planned funding for architecture will increase by £0.199m or 12% in cash terms from £1.613m to £1.812m over 3 years.

Architecture 2007-08 2008-09 2009-10 2010-11
  Budget £m Draft Budget £m Plans £m Plans £m
Architecture and Design Scotland 0.852 0.952 0.927 0.901
Architecture Initiatives 0.761 0.911 0.911 0.911
         
TOTAL 1.6 1.9 1.8 1.8

The funds allocated for architecture will provide continued support for the Access to Architecture campaign delivered by The Lighthouse, and enable further support for:- A+DS posts for housing and public sector development; extension of Sust. programme on sustainability, supporting the “greener” objectives of government; development of further housing fairs; continued support for design awards, inc. RIAS Doolan and Saltire; developing educational material for schools through Building Up Connections; further development of school building design work; and the international promotion of Scottish architecture.

OTHER ARTS

Other Arts 2007-08 2008-09 2009-10 2010-11
  Budget £m Draft Budget £m Plans £m Plans £m
Arts Research 0.255 0.255 0.255 0.255
Other Government Priorities 6.745 2.045 4.545 5.045
TOTAL 7.0 2.3 4.8 5.3

The £6.745m figure in 2007-08 consists mostly of unallocated funds from the £20m added to the culture portfolio budget in financial year 2007-08 – announcements on the allocation of these funds will be made in due course.

HISTORIC SCOTLAND

Historic Scotland 2007-08 2008-09 2009-10 2010-11
  Budget £m Draft Budge £m Plans £m Plans £m
Historic Scotland 47.7 51.7 49.3 50.3
TOTAL 47.7 51.7 49.3 50.3

The Historic Scotland budget will help support cultural identity and community regeneration through educational programmes and the Historic Environment Grants programme. This programme contributes funding for the repair of Scotland's most important historic buildings, the regeneration of historic areas and the enhancement of the quality of Scotland's historic city centres.

An additional £3.7 million capital investment in 2008-09 will be used for the provision of new accommodation for the Conservation Unit.

In 2009-10 and 2010-11 additional funding is made for the costs of a heritage bill £0.250 million £0.250 million and for the Stirling Royal Palace project £1.0 million / £2.0 million.

NATIONAL ARCHIVES OF SCOTLAND

National Archives of Scotland 2007-08 2008-09 2009-10 2010-11
  Budge t£m Draft Budget £m Plans£m Plans £m
National Archives of Scotland 9.0 10.3 10.3 10.5
TOTAL 9.0 10.3 10.3 10.5

The National Archives of Scotland (NAS) budget will support its work to select, preserve, and make available the national archives of Scotland in whatever medium, to the highest standards; to promote the growth and maintenance of proper archive provision throughout the country; and to lead the development of archival practice in Scotland.

This budget will allow NAS to provide legal customers with improved access to the public registers and records in order to support Scotland's property market, and to develop the Scotland's People service for family history in order to encourage inbound tourism. It will also allow NAS to improve access to the nation's records and help it to enhance the advice it gives to Scottish public authorities on the creation and management of their records. This, in turn, will promote streamlined and more effective government.

APPENDIX B

CORRESPONDENCE FROM MARK BATHO, HEAD OF THE LIFELONG LEARNING DIRECTORATE, SCOTTISH GOVERNMENT, to KAREN WHITEFIELD MSP, CONVENER OF THE Education, Lifelong Learning and Culture Committee, DATED 27 NOVEMBER 2007.

I am writing to provide you with the additional information I promised to send following my own and colleagues’ appearance before the Education, Lifelong Learning & Culture Committee on Wednesday 21 November. There were three points which I promised to provide information on.

Firstly on the question about the ring-fenced nature of Determined to Succeed funding, I can confirm that the 2007 Scottish Budget Spending Review confirms an allocation of £19.2m, ring-fenced for Determined to Succeed, in each of the financial years 2008/09, 2009/10 and 2010/11. The Budget additionally makes clear the funding “is ring fenced for specific deployment on the same policy objectives and activities”.

Secondly on the question of rebalancing the additional £100 million of capital funding invested in colleges and universities between the two sectors. I can confirm that the Scottish Funding Council plans to transfer £10 million from the college capital budget to the HEI capital budget during the Spending Review period. This will not affect baselines going forward.

This means that in terms of transfers of capital funds to our universities there will be an additional £40 million in 2007/8, £87.4 million in 2008/9, £94.7 million in 2009/10 and £95.2 million in 2010/11 and the additional £10 million outlined above at some point to be specified by the Funding Council during the Spending Review period. Therefore there has been no double counting in the calculation of year on year increases.

Thirdly on the question about the Young Student’s Bursary, there are no firm plans to increase the bursary above inflation over the spending review period. The Scottish Budget did announce that an additional £30m is to be invested in 2010/11 to increase bursary support and to progress the move from loans to grants.

The Scottish Government will consider how best to use this money as part of as part of a consultation on student support and tackling graduate debt next year. It is possible that this could include adding an element of new funding to the Young Students Bursary, but that decision will be influenced by the results of the consultation exercise.

I hope this information is of assistance to you and the other members of the Committee.

APPENDIX C

CORRESPONDENCE FROM MARK BATHO, HEAD OF THE LIFELONG LEARNING DIRECTORATE, SCOTTISH GOVERNMENT, to KAREN WHITEFIELD MSP, CONVENER OF THE Education, Lifelong Learning and Culture Committee, DATED 6 decEMBER 2007.

I am writing to provide you with the additional information I promised to send following the Cabinet Secretary’s appearance before the Education, Lifelong Learning & Culture Committee on Wednesday 5 December. The issue in question was about the process for rebalancing the additional £100 million of capital funding invested in colleges and universities (initially divided on a £60m/£40m basis between respectively the college sector and the higher education sector) so that by the end of the Spending Review period there will be an equal allocation between the two sectors.

The process will be that, within the Spending Review period, the Scottish Funding Council will make adjustments to the college and HEI baselines published in the draft budget. This will result in a £10 million reduction on the college side and a £10 million increase on the HEI side compared to what is published across the 3 years. The timing of this will be a decision for the Funding Council. They may choose to make the adjustment in a single year or over a number of years. However, as I indicated at the Committee, the net effect of the adjustment will be that each sector will have available during the spending review period, the total of all the capital shown in each of their baselines plus, for each sector, an additional £50m.

This position has been made clear to the Association of Scotland’s Colleges and Universities Scotland. Both organisations are content with this approach.

I hope this information is of assistance to you and the other members of the Committee.

APPENDIX D

CORRESPONDENCE FROM CLLR ISABEL HUTTON, EDUCATION, CHILDREN AND YOUNG PEOPLE SPOKESPERSON, COSLA,to KAREN WHITEFIELD MSP, CONVENER OF THE Education, Lifelong Learning and Culture Committee, DATED 10 decEMBER 2007.

Supplementary Evidence on Education Budget

I write in response to three points which the committee asked COSLA to respond to at our evidence session on the 5 December. The Committee wanted:

  • COSLA’s submission on the spending review;
  • Information on the transfer of resources to local government; and
  • The number of councils with falling school rolls.

On the first point, the only publicly available document on the spending review is the Concordat. As a result there is no additional information that we can share with the Committee.

However, I would like to take this opportunity to explain once again the Concordat agreement on class sizes – as I remember this being a particular focus for the Committee. COSLA is well aware that the cost of class size reduction will vary across the country due to a number of local factors. That is why there is carefully worded commitment which sets out how class size reduction will be delivered nationally within the overall settlement.

The new relationship is a radical departure from the past and demonstrates the new level of trust that exists between local and national government. I hope that the Committee will view this positively, and extend the same level of trust to councillors as Ministers have.

The second point is closely related to the first and is also answered by the Concordat. The Committee will be aware that there has been a substantial reduction in ring fenced funding as part of the overall agreement with the Scottish Government. The Concordat sets out the detail of this reduction in ring fencing. One of the consequences of this is that funding which was previously ring fenced for variety of purposes is now available to local authorities to invest on local priorities – including education. The same level of funding is going to local government but with the significant reduction in ring-fencing this resource can be used more effectively and efficiently in the delivery of services to our local communities.

The last point was on the number of councils with falling school rolls. On this question I would like to refer the Committee to the Scottish Government website, which has official statistics and projection for school rolls. However, I would like to say that COSLA and the Scottish Government are discussing the practical detail of the Concordat class size commitment and that we intend to address all challenges in partnership.

I hope that the Committee finds the additional information useful.

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

6th Meeting, 2007 (Session 3), Wednesday 3 October 2007

2. Decision on taking business in private: The Committee agreed to take item 3 in private.

3. Budget process 2008-09 (Stage 2) – appointment of adviser (in private): The Committee agreed its preferred candidate and ranked the remaining candidates for the post of adviser in connection with its forthcoming consideration of the Scottish Government’s Budget.

9th Meeting, 2007 (Session 3), Wednesday 14 November 2007

1. Decision on taking business in private: The Committee agreed to take item 4 in private.

4. Budget process 2008-09 (Stage 2) (in private): The Committee agreed its approach to the budget process 2008-09.

10th Meeting, 2007 (Session 3), Wednesday 21 November 2007

1. Budget process 2008-09 (Stage 2): The Committee took evidence on the draft budget from—

Mark Batho, Head of Lifelong Learning Directorate, Scottish Government; Donald Henderson, interim Chief Executive, Skills Development Scotland; Linda McDowall, Acting Senior Director of Skills and Learning, Scottish Enterprise; Alex Paterson, Director of the Developing Skills Group, Highlands and Islands Enterprise; and Damien Yates, Chief Executive, Learndirect Scotland.

11th Meeting, 2007 (Session 3), Wednesday 28 November 2007

3. Budget process 2008-09 (Stage 2): The Committee took evidence on the draft budget from—

Howard McKenzie, Acting Chief Executive, Association of Scotland's Colleges; David Caldwell, Director, Universities Scotland; and Roger McClure, Chief Executive, Scottish Funding Council.

12th Meeting, 2007 (Session 3), Wednesday 5 December 2007

1. Budget process 2008-09 (Stage 2): The Committee took evidence on the draft budget from—

Cllr Isabel Hutton, Education, Children and Young People spokesperson, Jon Harris, Strategic Director, and Robert Nicol, Policy Manager, COSLA.

and then from—

Fiona Hyslop, Cabinet Secretary for Education and Lifelong Learning, Colin MacLean, Director, Children, Young People and Social Care Directorate, Liz Hunter, Director, Schools Directorate, and Mark Batho, Director, Lifelong Learning Directorate, Scottish Government.

13th Meeting, 2007 (Session 3), Wednesday 12 December 2007

1. Decisions on taking business in private: The Committee agreed to take agenda item 2 and any future consideration of the draft report to the Finance Committee on the budget process 2008-09 in private.

2. Budget process 2008-09 (Stage 2) (in private): The Committee considered a draft report and agreed to consider a further draft at its next meeting.

14th Meeting, 2007 (Session 3), Wednesday 19 December 2007

3. Budget process 2008-09 (Stage 2) (in private): The Committee considered a draft report to the Finance Committee. Various changes were agreed to (7 by division). The report was then agreed to.

Record of divisions in private:

The Convener proposed that paragraph 9 be agreed. The proposal was agreed to by division: For 5 (Ken Macintosh, Mary Mulligan, Elizabeth Smith, Jeremy Purvis and Karen Whitefield), Against 3 (Aileen Campbell, Rob Gibson and Christina McKelvie), Abstentions 0.

The Convener proposed that paragraph 58 be agreed. The proposal was agreed to by division: For 4 (Ken Macintosh, Mary Mulligan, Elizabeth Smith and Karen Whitefield), Against 4 (Aileen Campbell, Rob Gibson, Christina McKelvie and Jeremy Purvis), Abstentions 0; proposal agreed to on casting vote.

The Convener proposed that paragraph 59 be agreed. The proposal was disagreed to by division: For 3 (Ken Macintosh, Mary Mulligan and Karen Whitefield), Against 5 (Aileen Campbell, Rob Gibson, Christina McKelvie, Jeremy Purvis and Elizabeth Smith), Abstentions 0. The original paragraph stated:

59. The Committee recommends that £10m per annum be transferred from the ‘Capital Grants for Higher Education Institutions’ line to the ‘Current Funding for Higher Education Institutions’ line, to ensure there is no real cut in funding and thus protect university staffing levels for our universities over the spending review cycle.

The Convener proposed that paragraph 60 be agreed. The proposal was agreed to by division: For 5 (Ken Macintosh, Mary Mulligan, Elizabeth Smith, Jeremy Purvis and Karen Whitefield), Against 3 (Aileen Campbell, Rob Gibson and Christina McKelvie), Abstentions 0.

The Convener proposed that paragraph 61 be agreed. The proposal was agreed to by division: For 5 (Ken Macintosh, Mary Mulligan, Elizabeth Smith, Jeremy Purvis and Karen Whitefield), Against 3 (Aileen Campbell, Rob Gibson and Christina McKelvie), Abstentions 0.

The Convener proposed that paragraph 62 be agreed. The proposal was agreed to by division: For 5 (Ken Macintosh, Mary Mulligan, Elizabeth Smith, Jeremy Purvis and Karen Whitefield), Against 3 (Aileen Campbell, Rob Gibson and Christina McKelvie), Abstentions 0.

The Convener proposed that paragraph 66 be agreed. The proposal was agreed to by division: For 5 (Ken Macintosh, Mary Mulligan, Elizabeth Smith, Jeremy Purvis and Karen Whitefield), Against 3 (Aileen Campbell, Rob Gibson and Christina McKelvie), Abstentions 0.


Footnotes:

1 Volume 2 contains the reports and relevant extracts from the Minutes from other parliamentary committees and the Scottish Commission for Public Audit

2 The Scottish Government’s Purpose is defined in the introduction to the Scottish Budget Spending Review 2007, p.iv,as “To focus our resources on creating a more successful country, with opportunities for all of Scotland to flourish, through increasing sustainable economic growth.”

3 These submissions are contained in appendix 1 to this report.

4 John Swinney, Economy, Energy and Tourism Committee Official Report, 5 December 2007, column 349.

5 John Swinney, Economy, Energy and Tourism Committee Official Report, 5 December 2007, column 349.

6 This information is reproduced in appendix 1 to this report.

7 Letter from the Convener of the Economy, Energy and Tourism Committee - Tavish Scott MSP, to the Cabinet Secretary for Finance and Sustainable Growth - John Swinney MSP.

8 Jack Perry, Economy, Energy and Tourism Committee, Official Report, 28 November 2007, column 283.

9 Sandy Cumming, Economy, Energy and Tourism Committee, Official Report, 28 November 2007, column 300.

10 A division was held on this paragraph. The result was: For 5 (Gavin Brown, Marilyn Livingstone, Lewis Macdonald, Tavish Scott, David Whitton), Against 3 (Brian Adam, Christopher Harvie, Dave Thompson), Abstentions 0.

11 The Scottish Government, Scottish Budget Spending Review 2007, p.44.

12 SPICe briefing 07/58, Spending Review 2007, p.8.This is based on the GDP deflator of 2.7% used in annex C of the Scottish Budget Spending Review 2007. In Chapter 1 of the Scottish Budget Spending Review 2007 (p.1), the Scottish Government states that “For the next three years, the real growth for essential public services will be only 0.5 per cent in 2008-09, 1.6 per cent in 2009-10 and 2.3 per cent in 2010-11 – an average of 1.4 per cent.”

13 SPICe briefing 07/58, Spending Review 2007, Table 7, p.8.

14 Details of the cash and real-terms figures for the Enterprise, Energy and Tourism budget lines is attached in appendix 1 to this report.

15 John Swinney MSP, Economy, Energy and Tourism Committee, Official Report, 5 December 2007, column 358.

16 Economy, Energy and Tourism Committee, Official Report, 28 November 2007, column 284.

17 John Swinney MSP, Economy, Energy and Tourism Committee, Official Report, 5 December 2007, column 358.

18 John Swinney MSP, Economy, Energy and Tourism Committee, Official Report, 5 December 2007, column 360.

19 Letter from John Swinney MSP, Cabinet Secretary for Finance and Sustainable Growth, to Tavish Scott, MSP, Convener of the Economy, Energy and Tourism Committee, 11 December 2007.

20 Scottish Budget Spending Review 2007, p.98.

21 John Swinney MSP, Economy, Energy and Tourism Committee, Official Report, 5 December 2007, column 351.

22 Jack Perry, Economy, Energy and Tourism Committee, Official Report, 28 November 2007, column 274.

23 A division was held on this sentence. The result was: For 5 (Gavin Brown, Marilyn Livingstone, Lewis Macdonald, Tavish Scott, David Whitton), Against 3 (Brian Adam, Christopher Harvie, Dave Thompson), Abstentions 0.

24 John Swinney MSP, Economy, Energy and Tourism Committee, Official Report, 5 December 2007, column 354.

25 ibid.

26 Written submission from Scottish Enterprise.

27 Hugh Hall, Economy, Energy and Tourism Committee, Official Report, 28 November 2007, column 276.

28 Written submission from Scottish Enterprise.

29 Hugh Hall, Economy, Energy and Tourism Committee, Official Report, 28 November 2007, column 292

30 Jack Perry, Economy, Energy and Tourism Committee, Official Report, 28 November 2007, column 280.

31 Jack Perry, Economy, Energy and Tourism Committee, Official Report, 28 November 2007, column 282.

32 John Swinney MSP, Economy, Energy and Tourism Committee, Official Report, 5 December 2007, column 356.

33 Letter from John Swinney MSP, Cabinet Secretary for Finance and Sustainable Growth, to Tavish Scott, MSP, Convener of the Economy, Energy and Tourism Committee, 11 December 2007.

34 Jack Perry, Scottish Enterprise, Economy, Energy and Tourism Committee, Official Report, 28 November 2007, column 292.

35 Jack Perry, Scottish Enterprise, Economy, Energy and Tourism Committee, Official Report, 28 November 2007, column 292.

36 Jack Perry, Scottish Enterprise, Economy, Energy and Tourism Committee, Official Report, 28 November 2007, column 277.

37 Jack Perry, Scottish Enterprise, Economy, Energy and Tourism Committee, Official Report, 28 November 2007, column 277.

38 Sandy Cumming, Economy, Energy and Tourism Committee, Official Report, 28 November 2007, column 293.

39 Sandy Cumming, Economy, Energy and Tourism Committee, Official Report, 28 November 2007, column 308

40 Written submission from Highlands and Islands Enterprise.

41 Sandy Cumming, Economy, Energy and Tourism Committee, Official Report, 28 November 2007, column 311.

42 Forbes Duthie, Economy, Energy and Tourism Committee, Official Report, 28 November 2007, column 299.

43 Sandy Cumming, Economy, Energy and Tourism Committee, Official Report, 28 November 2007, column 306.

44 A division was held on this paragraph. The result was: For 4 (Marilyn Livingstone, Lewis Macdonald, Tavish Scott, David Whitton), Against 4 (Brian Adam, Gavin Brown, Christopher Harvie, Dave Thompson), Abstentions 0. The Convener exercised his casting vote in support of this paragraph.

45 John Swinney MSP, Scottish Parliament, Official Report, 26 September 2007, column 2072.

46 Councillor Alison Hay, COSLA, Economy, Energy and Tourism Committee, Official Report, 28 November 2007, column 337.

47 Councillor Alison Hay, COSLA, Economy, Energy and Tourism Committee, Official Report, 28 November 2007, column 333.

48 David Valentine, COSLA, Economy, Energy and Tourism Committee, Official Report, 28 November 2007, column 334.

49 John Swinney MSP, Economy, Energy and Tourism Committee, Official Report, 5 December 2007, column 367.

50 David Valentine, COSLA, Economy, Energy and Tourism Committee, Official Report, 28 November 2007, column 335.

51 Philip Riddle, VisitScotland, Economy, Energy and Tourism Committee, Official Report, 28 November 2007, column 317.

52 Letter from John Swinney MSP, Cabinet Secretary for Finance and Sustainable Growth, to Tavish Scott, MSP, Convener of the Economy, Energy and Tourism Committee, 11 December 2007.

53 Letter from the John Swinney MSP, Cabinet Secretary for Finance and Sustainable Growth to Tavish Scott MSP, Convener of the Economy, Energy and Tourism Committee, 26 November 2007.

54 Economy, Energy and Tourism Committee, Official Report, 28 November 2007, column 377.

55 Scottish Government, Scottish Budget Spending Review 2007, November 2007, p.100

56 The real terms figures for these budget lines are included in appendix 1 to this report.

57 Philip Riddle, VisitScotland, Economy, Energy and Tourism Committee, Official Report, 28 November 2007, column 328.

58 John Swinney MSP, Economy, Energy and Tourism Committee, Official Report, 5 December 2007, column 379.

59 Scottish Government, Draft Budget Spending Revue 2007, November 2007, p.5.

60 ibid.

61 John Swinney MSP, Economy, Energy and Tourism Committee, Official Report, 5 December 2007, column 357.

62 Written submission from Scottish Enterprise.

63 A division was held on this paragraph. The result was: For 5 (Gavin Brown, Marilyn Livingstone, Lewis Macdonald, Tavish Scott, David Whitton), Against 3 (Brian Adam, Christopher Harvie, Dave Thompson), Abstentions 0.

64 A division was held on this paragraph. The result was: For 5 (Gavin Brown, Marilyn Livingstone, Lewis Macdonald, Tavish Scott, David Whitton), Against 3 (Brian Adam, Christopher Harvie, Dave Thompson), Abstentions 0.

65 A division was held on this paragraph. The result was: For 4 (Marilyn Livingstone, Lewis Macdonald, Tavish Scott, David Whitton), Against 4 (Brian Adam, Gavin Brown, Christopher Harvie, Dave Thompson), Abstentions 0. The Convener exercised his casting vote in support of this paragraph.

66 In both divisions, the result was: For 3 (Marilyn Livingstone, Lewis Macdonald, David Whitton), Against 5 (Brian Adam, Gavin Brown, Christopher Harvie, Tavish Scott, Dave Thompson), Abstentions 0.

67 Scottish Government. Scottish Budget Spending Review, 14 November 2007. Available at: http://www.scotland.gov.uk/Publications/2007/11/13092240/0

69 This figure is made up from the £392m noted in Annex A in the Budget document as being transferred from education to local government and the £220m of specific grants stated in table 3.01 of the Scottish Executive’s draft budget 2007/08.

70 Table 3.01 Scottish Executive Draft Budget 2007/08

71 Tables 22.02 and 22.03 Scottish Government Scottish Budget Spending Review 2007

72 The Committee agreed this paragraph by division: For 5 (Ken Macintosh, Mary Mulligan Jeremy Purvis, Elizabeth Smith and Karen Whitefield); Against 3 (Aileen Campbell, Rob Gibson and Christina McKelvie); Abstentions 0.

73 Scottish Government. Skills for Scotland: A Lifelong Skills Strategy (2007). Available at: http://www.scottishexecutive.gov.uk/Publications/2007/09/06091114/0

78 Scottish Government. Scottish Budget Spending Review, 14 November 2007. Page 115. Available at: http://www.scotland.gov.uk/Publications/2007/11/13092240/0

93 The Committee agreed this paragraph by division: For 4 (Ken Macintosh, Mary Mulligan, Elizabeth Smith and Karen Whitefield,); Against 4 (Aileen Campbell, Rob Gibson, Christina McKelvie and Jeremy Purvis); Abstentions 0. The Convener used her casting vote in favour of inclusion of the paragraph.

94 The Committee agreed paragraphs 60, 61 and 62 by division: For 5 (Ken Macintosh, Mary Mulligan, Jeremy Purvis, Elizabeth Smith and Karen Whitefield); Against 3 (Aileen Campbell, Rob Gibson and Christina McKelvie); Abstentions 0.

95 The Committee agreed this paragraph by division: For 5 (Ken Macintosh, Mary Mulligan, Jeremy Purvis, Elizabeth Smith and Karen Whitefield); Against 3 (Aileen Campbell, Rob Gibson and Christina McKelvie); Abstentions 0.

 
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