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

ANNEXE D – REPORT FROM THE ECONOMY, ENERGY AND TOURISM COMMITTEE

Report on the Scottish Government’s Draft Budget 2010-11

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

Background

1. This report reviews the spending proposals within the Finance and Sustainable Growth portfolio in the Draft Budget 2010-111 which fall within the remit of the Economy, Energy and Tourism Committee (“the Committee”). The report also considers whether, in these challenging economic times, 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 budget proposed by the Scottish Government, the Economy, Energy and Tourism Committee took oral evidence from the following—

  • Michael Levack, Chief Executive, Scottish Building Federation; Dr Peter Hughes, Chief Executive, Scottish Engineering; Peter Taylor, Chairman, The Town House Collection and Scottish Tourism Forum Board Member; Bill Jamieson, Executive Editor, The Scotsman Publications Ltd; and Alf Young, Economic Commentator & Chair of Riverside Inverclyde;

  • Phillip Riddle, Chief Executive, VisitScotland;

  • Hugh Hall, Chief Financial Officer, and Stephen Gallagher, Managing Director, Commercial and Infrastructure, Scottish Enterprise;

  • Sandy Brady, Acting Chief Executive, and Forbes Duthie, Director of Finance & Corporate Services, Highlands and Islands Enterprise; and

  • John Swinney MSP, Cabinet Secretary for Finance and Sustainable Growth, and officials from the Scottish Government.

3. In addition, the Committee also received written evidence from the Confederation of British Industry (Scotland), Federation of Small Businesses (Scotland), Scottish Council for Development and Industry, Scottish Renewables, Scottish Council for Voluntary Organisations, Scottish Social Enterprise Coalition, Friends of the Earth Scotland, Bob Downie of the Royal Yacht Britannia and the Scottish Retail Consortium.

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

The focus of our scrutiny

5. The Draft Budget for 2010-11 is the last in the current three-year spending period. Given the difficult economic climate at the current time and the scale of the challenges ahead for public sector expenditure, there are significant strategic decisions that need to be made in the 2010-11 budget and for the future course of public spending in Scotland.

Finance Committee guidance

6. In its guidance to subject committees, the Parliament’s Finance Committee noted that, partly due to the acceleration of capital funding from the 2010-11 financial year, the current 2009-10 financial year is likely to be seen as the peak year for public spending for some years to come.

7. The Finance Committee also stated that while there is an increase in the departmental expenditure limit (DEL)3 budget between 2009-10 and 2010-11, the cash available to the Scottish Government in 2010-11 is lower than originally envisaged in Spending Review 2007. As a consequence, there are significant short-term issues both for the Scottish Government centrally and for individual public bodies for budget planning in 2010-11.

8. As a result, the Finance Committee suggested that subject committees may wish to examine how public bodies operating in their portfolios are adapting to the fact that spending plans for 2010-11 are lower than they originally envisaged.

9. In the medium-term, while it is not possible to make predictions on the public finances with any certainty, it is clear that 2010-11 marks just the start of a very challenging budget cycle going forward. Budgetary decisions taken for the 2010-11 financial year will, therefore, have to be placed in the context of understanding their strategic effect for the years beyond that. They have to be made with the explicit recognition, where at all possible, of the effect they will have in future years when spending is still expected to be constrained.

10. Consequently, the guidance issued by the Finance Committee suggested that subject committees may wish to examine whether any decisions to maintain or increase expenditure under budget headings in their portfolios are considered to be sustainable in the future, when spending is expected to be constrained.

11. Finally, given the current recessionary climate and the pressures this places on the public sector to be efficient in its expenditure and to prioritise, the Finance Committee has suggested that all subject committees focus on the deliverability of efficiency savings and also on whether the right choices have been made in the draft budget for 2010-11 in terms of the protection of spending on specific policies.

Our priorities

12. In light of the current challenges, the focus in this year’s budget report from the Committee is broadly two-fold. Firstly, will the draft budget proposal for 2010-11 help Scotland through the economic challenges ahead and meet the goals and targets expressed by the Scottish Government in its economic strategy? Secondly, will the decisions proposed in the 2010-11 Draft Budget be beneficial over the medium-term and deliver sustainable economic growth as the challenges on public spending in the next 5-10 years become ever more acute?

13. One significant strand in our deliberations on the draft budget is the finance allocated to our two enterprise agencies; Scottish Enterprise and Highlands and Islands Enterprise. During the Committee’s discussions, we have raised some fundamental questions about the purpose of these bodies and their role in economic development, something that has changed markedly since the establishment of the Scottish Parliament. While we do not seek to answer these questions in this report, the Committee gives notice that it intends to launch an investigation in the spring of 2010 into the purpose of the enterprise agencies and what they should be expected to achieve.

the economic ENVIRONMENT

14. As stated by the Cabinet Secretary for Finance and Sustainable Growth himself in his foreword to the draft budget for 2010-11, “the Scottish Government has had to deal with a fundamentally different financial landscape”4 than that envisaged at the start of this three-year spending review period. The severity of the recession in Scotland and its impact on public finances in the coming years was the subject of evidence taken by the Committee from Dr Andrew Goudie, Chief Economic Adviser to the Scottish Government during an earlier appearance at the Committee.

15. In his wide ranging presentation to the Committee5, Dr Goudie provided details of the expected growth rates for gross domestic product (GDP) in Scotland and also figures for the resultant impact on the UK Government’s expenditure, revenue and net borrowing as a percentage of GDP for the next four financial years.

16. His analysis showed that most independent forecasters did not expect GDP in Scotland to return to positive growth until 2010 or 2011 at the earliest and, even then, for a growth rate of less than 2% to be the norm until at least 2012. Consequently, his analysis set out the current deficit at the UK level between tax receipts (approximately 35% of GDP in mid-2009) and expenditure (approximately 48% of GDP in mid-2009). Dr Goudie also predicted that net borrowing at a UK level as a percentage of GDP would be around 12% in 2010-11, 9% in 2011-12, 7% in 2012-13 and slightly below 6% in 2013-14.

17. His view of the pressures to come on public expenditure at the UK level and, as a consequence, in Scotland was highly dependent on the timing and rate of economic recovery. Dr Goudie’s view was that a growth rate of around 1% (in terms of the percentage increase in output compared to a year earlier) in 2010 rising to some 1.5% in 2012 would make the picture for public finances “much more difficult” and that “more squeeze will be needed” if the UK Government is to maintain its deficit projections.6

18. If, on the other hand, the growth rate were to be in the order of 3% in 2010 and 4% in 2012, Dr Goudie suggested that “it should be possible to sustain our current projections for public finances.”7 On balance, however, Dr Goudie stated he believed that the consensus of opinion was that the former set of lower growth rates was far more likely.8

19. In a survey published in June 2009, the Fraser of Allander Institute stated that while it may be that the Scottish economy was emerging from recession, recovery may be “slow and protracted”.9 Additionally, the Fraser of Allander Institute said that “the consequences of the recession, through the bursting of the property bubble, banking crisis, credit crunch and expected future contraction in public sector activity as future governments seek to deal with the sharp rise in the burden of government debt, appear to have serious consequences for Scotland’s future competitiveness and growth.”10

20. In its ‘central’ (of three) scenario, the Fraser of Allander Institute predicted that the gross value added (GVA) growth rate in Scotland will be 1.4% in 201211. This figure is consistent with the lower of the two sets of figures presented by Dr Goudie in his evidence to the Committee. Even the Institute’s most optimistic scenario predicted a GVA growth rate of only a little over 2% by 2012, compared to the 3% to 4% that Dr Goudie suggested would be needed to sustain current projections for public finances and expenditure levels.

21. The resultant potential for a severe squeeze on public expenditure in Scotland is therefore marked both for the next financial years. Additionally, the predicted effects on economic output and unemployment are severe. In terms of the latter, the Fraser of Allander Institute suggests that unemployment will rise in Scotland from 110,700 in 2009 to 129,426 by 2012 (using claimant count and under the Institute’s ‘central’ scenario).12

22. Disaggregating these predictions also shows a number of worrying trends. For example, recent analysis produced by the Scottish Trades Union Congress, highlighted an average 75% increase across Scotland in the numbers of 18-24 year olds claiming Job Seekers Allowance since 2007; 40,865 claimants in August 2009 or nearly one-in-three 18-24 year olds13. Similarly, the Chartered Institute of Personnel and Development is predicting that male unemployment will be greater than one-in-ten by mid-2010 due to the recession hitting in particular construction and the private sector.

23. In its written submission to the Committee, the Confederation of British Industry (Scotland) said that its most recent economic forecast showed public sector net borrowing to be £176.2 billion in the current financial year, rising to £181.8 billion in 2010-11 (12% of GDP). The CBI thought that public sector net debt was mounting and is expected to double by 2013, costing £63 billion each year to service in interest payments.14

24. In terms of the impact of the recession and the increases in public sector borrowing, the consultancy firm, PricewaterhouseCoopers (PwC), stated in its recent report that the UK Government should seek to re-balance the budget by 2015-16.15 PwC estimates that a fiscal gap of over £40 billion at today’s values (around 3% of GDP) compared with budget projections would have to be closed to achieve this. To bridge this gap, PwC suggested that there needed to be tax rises (of £13 billion) and real terms public spending cuts, with (UK Government) departmental spending to be down by around 13% in the three years to 2013-14.16

25. It should be noted that the UK Government will publish its pre-budget report in early December 2009, setting out more detail on the public sector expenditure plans beyond 2010-11. As yet, therefore, there are no detailed spending plans published at a UK Government level beyond those for the next financial year.

26. Finally, in his recently published report, the Auditor General for Scotland, stated that by 2013/14, the gap between planned Scottish Government spending and the money available could be between £1.2 and £2.9 billion. Furthermore, Robert Black, the Auditor General said “The Scottish Government’s efficiency programme is reporting significant savings, but the reductions required over the next few years will not be met just by the two per cent efficiency savings, and difficult decisions will be needed on other ways to reduce public spending.” 17

27. Whatever the actual figures turn out to be for the next few financial years in terms of economic growth, public expenditure levels etc., the Committee is aware of the difficulties in meeting the challenges ahead and the critical decisions that must be taken both within the draft budget proposed for 2010-11 and, equally as importantly, as the foundation stone for the early part of the next decade.

budget proposals – an outline

Background figures

Scottish Government

28. Table 1 below, produced by the Scottish Parliament’s Information Centre (SPICe), provides an analysis of the total managed expenditure (TME) of the Scottish Government, depending on whether account is taken of the re-profiling of accelerated capital expenditure. It is important to note that the re-profiling of capital spend does not increase or decrease spending within the 3-year spending period, but simply reschedules expenditure from one year to another.

Table 1: Total managed expenditure with and without re-profiling

£ million 2009-10 2010-11 2010-11 (in 2009-10 prices) % change in real terms
TME 34,865.1 35,144.1 34,624.7 -0.7
Re-profiling -294.0 347.0 341.9 n/a
TME without re-profiling 34,571.1 35,491.1 34,966.6 1.1

NB. £53 million was re-profiled into 2008-09

Source: SPICe

29. According to the draft budget for 2010-11 published in September 2009, the proposed departmental expenditure limit (DEL) budget for 2010-11 will be £29.3 billion (in 2009-10 prices), or a 0.9% real-terms reduction compared to 2009-1018. This reduction of a little below 1% in real-terms for DEL is also cited by the independent Centre for Public Policy for Regions (CPPR) in its recent analysis on the 2010-11 draft budget.19

30. Looking specifically at the DEL budget, SPICe has also provided the Committee with an analysis of the budgets proposed depending on whether the re-profiling of expenditure is taken into account; see Table 2 below.

Table 2: Departmental expenditure limit with and without re-profiling

£ million 2009-10 2010-11 2010-11(in 2009-10 prices) % change in real terms
DEL 29,535.1 29,712.4 29,273.3 -0.9
Re-profiling -294.0 347.0 341.9 n/a
DEL without re-profiling 29,241.1 30,059.4 29,615.2 1.3

NB. £53 million was re-profiled into 2008-09

Source: SPICe

31. At departmental or ministerial portfolio level, the proposed budgets vary in terms of whether the 0.9% real-terms reduction (for the 2010-11 budget as a whole) applies across the board to all budget lines. As analysis produced by the Scottish Parliament’s Information Centre (SPICe) shows, over the period 2009-10 to 2010-11, the Finance and Sustainable Growth portfolio will see a £201 million reduction (in 2009-10 prices)20. This compares, however, to a £74 million increase for local government, a £28 million increase for education and lifelong learning and a £18 million increase for justice21. Therefore, it is clear that not all budget lines proposed for 2010-11 have been equally affected by the overall reduction in the budget proposed.

32. In its analysis, the CPPR indicates that the total DEL budget in 2010-11 is set to be £29.3 billion, representing a £260 million reduction in 2009-10 prices on that anticipated for the current 2009-10 financial year. Therefore, the Finance and Sustainable Growth portfolio reduction of a little over £200 million accounts for around three-quarters of the net cut in DEL.22 That is, this particular portfolio has taken around three-quarters of the reduction in proposed expenditure. Figure 1 below sets out the analysis produced by SPICe.

Figure 1: Departmental expenditure limits by Scottish Government portfolio (£ million at 2009-10 prices, 2010-11 compared to 2009-10)

chartSource: SPICe

33. In terms of the budgets specific to the Enterprise, Energy and Tourism strand of the overall Finance and Sustainable Growth portfolio, analysis from SPICe shows that the proposed budget for 2010-11 is £458 million in cash terms and £451 million in 2009-10 prices.23 This, according to the CPPR, represents a reduction of 13.6% in real-terms and 12.3% in nominal terms compared to 2009-1024. If £35 million of spend from 2010-11 within this budget line had not been re-profiled to 2008-09 (£5 million) and 2009-10 (£30 million) as part of the Economic Recovery Programme, then the real terms reduction would have been 1.3%. Therefore, even after accounting for accelerated spend, there is a net reduction to the enterprise, energy and tourism budget lines in excess of the overall 0.9% reduction in the Scottish Government’s budget for 2010-11.

34. SPICe also provided the Committee with a more detailed analysis of the trends within specific budget lines in the Finance and Sustainable Growth portfolio from the current financial year to the budget proposed for 2010-11. In terms of the broad headline budget for Enterprise, Energy and Tourism (at level 2), Table 3 below sets out the trend.

35. It should be noted that the Committee has had real difficulties in compiling and reconciling the proposed budgets, particularly those of the enterprise agencies, from the various published documents and from the submissions provided by the different organisations involved in the process. The problem with the provision of data is something we return to in our conclusions.

Table 3: Enterprise, energy & tourism (level 2 analysis)

Enterprise, Energy & Tourism - Level 2 analysis 2009-10 2010-11 2010-11 change change
  £ million £ million £ million (in 2009-10 prices) £ million (in 2009-10 prices) % (real terms)
Totals 522.3 458.0 451.2 -71.1 -13.6%
Totals (without re-profiling) 492.3 493.0 485.7 -6.6 -1.3%

Source: SPICe

36. Similarly, at a more detailed level (level 4), SPICe also provided the Committee with trend data for the current financial year against that proposed for 2010-11. Table 4 below sets out the data both for the enterprise, energy and tourism functions and also some of the wider economy-related budget lines within the Finance and Sustainable Growth portfolios.

37. It is important to note that the 2009-10 figures provided below are those proposed within the Scottish Government’s Draft Budget 2009-10 published in September 2008 – i.e. before the decision on accelerating capital investment as part of the economic recovery programme was made. The 2010-11 figures are those proposed within the Scottish Government’s Draft Budget 2010-11 published in September 2009, and therefore do take into account the re-profiling of capital expenditure.

Table 4: Enterprise, energy & tourism and other relevant budget lines (level 4 analysis)

Enterprise Policy & Delivery - Level 4 analysis 2009-10 2010-11 2010-11 change change
£ million £ million £ million (in 2009-10 prices) £ million (in 2009-10 prices) % (real terms)
Scottish Enterprise 291.7 231.0 227.6 -64.1 -22.0%
Highlands & Islands Enterprise 73.1 68.6 67.6 -5.5 -7.5%
Convention of the Highlands & Islands 0.015 0.015 0.015 0.0 -1.5%
Enterprise Networks - General 0.1 0.1 0.1 0.0 -1.5%
Total Enterprise Policy & Delivery (as provided1) 364.9 299.7 295.3 -69.6 -19.1%
Total (adjusted to exclude all re-profiling) 364.9 334.7 329.8 -35.1 -9.6%
Total (adjusted to include all re-profiling) 394.9 299.7 295.3 -99.6 -25.2%
Business Competitiveness - Level 4 analysis 2009-10 2010-11 2010-11 change change
£ million £ million £ million (in 2009-10 prices) £ million (in 2009-10 prices) % (real terms)
Business Liaison & Networking 0.2 0.2 0.2 0.0 -1.5%
RSA 45.2 43.4 42.8 -2.4 -5.4%
RSA Receipts -2.0 -2.0 -2.0 0.0 -1.5%
Innovation Grants 8.8 8.8 8.7 -0.1 -1.5%
Innovation Advisor 0.040 0.040 0.039 0.0 -1.5%
RSA SIDAB 0.002 0.002 0.002 0.0 -1.5%
RSA Debt Recovery Charges 0.008 0.008 0.008 0.0 -1.5%
Total Business Competitiveness 52.1 50.4 49.7 -2.4 -4.6%
Renewable Energy - Level 4 analysis 2009-10 2010-11 2010-11 change change
£ million £ million £ million (in 2009-10 prices) £ million (in 2009-10 prices) % (real terms)
Electricity Statutory Consents 0.5 0.5 0.5 0.0 -1.5%
Electricity Statutory Consents (income) -0.5 -0.5 -0.5 0.0 -1.5%
Renewable Energy 22.0 22.0 21.7 -0.3 -1.5%
Saltire Prize 0.0 10.0 9.9 9.9 100.0%
Total Renewable Energy 22.0 32.0 31.6 9.5 43.3%
Energy Markets - Level 4 analysis 2009-10 2010-11 2010-11 change change
£ million £ million £ million (in 2009-10 prices) £ million (in 2009-10 prices) % (real terms)
Energy Efficiency 10.0 9.4 9.2 -0.7 -7.4%
Total Energy Markets 10.0 9.4 9.2 -0.7 -7.4%
Innovation & Industries - Level 4 analysis 2009-10 2010-11 2010-11 change change
£ million £ million £ million (in 2009-10 prices) £ million (in 2009-10 prices) % (real terms)
Knowledge Exchange & Innovation Policy 7.9 7.3 7.2 -0.7 -9.0%
Saltire Innovation Fund 2.0 2.0 2.0 0.0 -1.5%
Pathfinder 0.0 10.7 10.5 10.5 100.0%
Tartan Register 0.1 0.1 0.1 0.0 -1.5%
Total Innovation & Industries 10.0 20.1 19.8 9.8 98.4%
European Structural Funds - Level 4 analysis 2009-10 2010-11 2010-11 change change
£ million £ million £ million (in 2009-10 prices) £ million (in 2009-10 prices) % (real terms)
European Programme Admin & Consultancies 1.6 1.5 1.5 -0.1 -7.7%
Total European Structural Funds 1.6 1.5 1.5 -0.1 -7.7%
Tourism - Level 4 analysis 2009-10 2010-11 2010-11 change change
£ million £ million £ million (in 2009-10 prices) £ million (in 2009-10 prices) % (real terms)
VisitScotland 46.8 44.0 43.4 -3.4 -7.3%
Tourism (other capital projects) 0.0 0.3 0.2 0.2 100.0%
Total Tourism 46.8 44.3 43.6 -3.2 -6.7%
Scottish Development International - Level 4 analysis 2009-10 2010-11 2010-11 change change
£ million £ million £ million (in 2009-10 prices) £ million (in 2009-10 prices) % (real terms)
Scottish Development International 0.7 0.7 0.7 0.0 -1.5%
Total Scottish Development International 0.7 0.7 0.7 0.0 -1.5%

1 As provided, the 2009-10 figures for Scottish Enterprise do not include an additional £30 million that was re-profiled to 2009-10 as last year’s Level 4 budget submission was prepared before this decision was taken. The 2010-11 figures do take account of re-profiling of £35 million out of 2010-11 as this year’s budget submission was prepared after this decision was taken.

Source: SPICe

38. In response to a request by the Committee, the Scottish Government’s chief economic adviser provided more detailed information to the Committee on the proposed budget for 2010-1125. This information is set out in the annexes to this report. In this further submission, the Scottish Government sets out its plans for other relevant expenditure, notably the £43.4 million (in cash terms) for Regional Selective Assistance (RSA) grants, £8.8 million (in cash terms) for the SMART:Scotland innovation grant programme, £22 million (in cash terms) for renewable energy, £10 million (in cash terms) for the renewable energy related Saltire Prize26, £9.4 million (in cash terms) for energy efficiency advice through the Energy Savings Trust and the Carbon Trust, £7.3 million (in cash terms) for the SEEKIT and Knowledge Transfer Partnership (KTP) grant schemes, £10.7 million (in cash terms) for the Pathfinder (broadband) programme, £5.9 million (in cash terms) for the Scottish Futures Trust27 and £35.6 million (in cash terms) for the third sector (comprising £20.5 million for development and £14.6 million for the investment fund for that sector).28

39. In a separate letter from Alex Neil MSP, Minister for Housing and Communities, the Scottish Government set out its plans to provide £15 million for the Home Insulation Scheme (a pilot programme across 10 council areas) in 2010-11 (the same cash budget as 2009-10)29. The Scottish Government’s draft budget also sets out the plans to provide £45.9 million in 2010-11 for the Energy Assistance Package30 (a reduction of £5 million in cash terms on the 2009-10 budget).31 This package is designed to eradicate fuel poverty “as far as is reasonably practical”.32

Enterprise agencies

40. From the Scottish Government’s Draft Budget 2010-11, it is calculated by SPICe that the budget for Enterprise Policy and Delivery (for the most part this budget line relates to the budgets for Scottish Enterprise and Highlands & Islands Enterprise) in 2009-10 prices is £295 million in 2010-11, a reduction of £81.2 million on the budget in 2009-10. This takes into account the £35 million capital investment accelerated from Scottish Enterprise’s 2010-11 budget to 2008-09 (£5 million) and 2009-10 (£30 million), a decision taken as part of the Scottish Government’s economic recovery plan. Even by removing this “acceleration” from the Enterprise, Policy & Delivery budget line, there is still a £16.7m in 2009-10 prices reduction in the budget over the period 2009-10 and 2010-11, see Table 5 below.

Table 5: The budget for Enterprise Policy and Delivery

Level 3 Budget line 2009-10 Budget £ million 2010-11 Budget £ million 2010-11 Budget £ million (in 2009/10 prices) Change in real terms£ million Change in real terms%
Enterprise Policy & Delivery 376.5 299.7 295.3 -81.2 -21.6
Enterprise Policy & Delivery without re-profiling 346.5 334.7 329.8 -16.7 -4.8

Note: The 2009-10 budget figures in the above table are £18.3m lower than those for the Enterprise Policy & Delivery budget line in Table 4 as subsequent to last year’s Draft Budget publication the 2009-10 budget was reduced by £18.3 million due to reduced running costs of smaller organisations and the transfer of business gateway and local regeneration to local authorities.

Source: SPICe

41. According to our adviser, the proposed reduction in budgets of the enterprise agencies is a continuation of a trend which has been in evidence since 2007 for Highlands and Islands Enterprise and for somewhat longer in the case of Scottish Enterprise. Allowing for transfers and shifts of responsibility, funding for the activities historically provided by Scottish Enterprise has fallen by around 33% in real terms since 2007 and is about 40% in real terms below the level of 1997. Highlands and Islands Enterprise experienced rising budgets in the first ten years of devolved government but the funding for the activities which it undertook has fallen by about 30% since 2007; see figure 2 below.

Figure 2: Trends in enterprise network funding

chart

Source: SPICe

42. At the request of the Committee, the Parliament’s Information Centre collated the figures originally provided by the two enterprise agencies to provide longer-term trend data on funds for the agencies. This is set out in Table 6 below.

Table 6: Funding the enterprise agencies (31KB pdf)

43. In its submission, Scottish Enterprise suggests that it plans to supplement the finance provided by the Scottish Government with a further £63 million in 2010-11, consisting of £20 million from property sales, £12 million from the EU, £17 million from its Co-Investment Fund and £14 million from other income streams.33

44. However, as Scottish Enterprise itself noted, its 2009-2012 Business Plan assumed that income derived from property disposals during 2010-11 would be just under £30 million, but it has subsequently revised this figure downwards to “a more prudent £20 million due to continuing pressures in the property market”.34

45. One of the critical comparisons that the Committee was keen to make with the enterprise agencies were the changes in the proposed budgets between the current financial year and that proposed for 2010-11. In their evidence to the Committee, the senior representatives of Scottish Enterprise present at the meeting said initially that year-on-year comparisons were “terribly difficult in any event” 35 and that initially such information could not be provided to the Committee at the time of asking.36

46. However, in subsequent evidence to the Committee, Scottish Enterprise did provide the Committee with a year-on-year breakdown of their budgets. It should be noted that Scottish Enterprise have provided figures which include other sources of income and exclude funds to be transferred to other agencies and the non-cash element of their budget allocation. As a result the figures presented below differ from those extrapolated from the Scottish Government’s Draft Budget publications throughout the rest of this document which include funds to be transferred and the non-cash element of their allocation

Scottish Enterprise, comparison of: i) projected spending scenarios for 2009/10 submitted to EE&T Committee in October 2008; ii) spending plans for 2019/10 published in SE’s Business Plan in April 2009; and iii) potential spending scenario for 2009/10 as submitted to the Committee in October 2009

  Projected Spend 2009/10 Potential Projected Spend Scenario for 20010/11 Explanatory Notes
Committee Submission October 2008 Submission figures reset for definition/line allocation changes SE Business Plan Published April 2009/10
Enterprise 65 61 49 42  
Made up as follows:  
Company start ups and growth 44 40 27 20 (i)
Internationalisation 21 21 22 22  
Innovation 39 44 32 26  
Made up as follows:  
Business Innovation Support 18 18 15 17  
Innovation support to key sectors 21 26 17 9 (ii)
Commercialisation 51 38 34 27  
Made up as follows:  
Development of Intellectual Assets 35 37 31 24 (iii)
Commercialisation of Intellectual Assets 16 1 3 3 (iv)
Investment 61 61 113 65  
Made up as follows:  
Business Infrastructure/Property Portfolio 28 28 75 27 (v)
Urban Regeneration Companies 13 13 12 12  
Equity Investments/Loans 20 20 26 26 (vi)
Customer Facing Staff 40 46 47 44  
Research & Development 6 16 12 10 (vii)
Running the business 27 27 27 31  
Made up as follows:  
Support Staff & related costs 11 6 12 17 (viii)
Operational property/IT 16 17 20 20 (ix)
Total Expenditure 289 289 319 251  
Funded by:  
Grant in Aid 220 250 201  
European Funds 10 10 12  
Released Co-Investment Funds 10 10 17  
Property Disposals/Property Income 40 40 28  
Other Business Income 9 9 6  
  289 319 264 *  

NB. The explanatory notes (i) to (ix) from Scottish Enterprise for the above table can be found in the annex of written evidence provided to the Committee for this report.

47. In its initial written submission to the Committee, Highlands and Islands Enterprise indicated that it will supplement the budget provided by the Scottish Government with a further £14.4 million, comprising £7 million from the EU and the rest from capital and revenue receipts.37

48. As with Scottish Enterprise, in further evidence to the Committee, Highlands and Islands Enterprise provided the following, year-to-year breakdown of their proposed budgets:

table

Note that the 2009-10 "Grant in Aid - Baseline" includes an additional £0.2 million as a result of Crofter's Commission funding to HIE in the interim period as a permanent baseline adjustment. As a result, Government baseline cash and non-cash funding for 2009-10 amounts to £73.3 million instead of £73.1 million as presented within the Scottish Government's Draft Budget 2009-10.

49. One of the other main issues explored by the Committee in relation to the enterprise networks was that of the level of, and efficacy of spend within, the budget transfers made by the agencies to bodies such as Skills Development Scotland and to local authorities as a consequence of recent reforms to the enterprise networks. In analysis produced by SPICe for the Committee, the scale of such transfers was set out (see below).

Scottish Enterprise transfers

  2008/09 2009/10 2010/11
  £ million £ million £ million
GRANT IN AID FROM SCOTTISH GOVERNMENT (CASH) - BUDGET INFO PREVIOUSLY PROVIDED 236 250 1871
       
The above figures assume / assumed the following transfers to Skills Development Scotland (SDS) and Local Authorities:-
Transfer of Operational costs to SDS 145.4 142.1 136.3
Notional cost of shared Services provided to SDS 12.1 12.1 8
Total SDS 157.5 154.2 144.3
       
Transfer of Business Gateway contracts to Local Authorities 12.2 12.2 12.2
Transfer of Local Regeneration budget to Local Authorities 12.5 12.5 12.5
Transfer of Business Gateway Marketing and Quality Assurance to Local Authorities 0 0 2
Total transfers to Local Authorities 24.7 24.7 26.7
       
Total transfers to SDS and Local Authorities 182.2 178.9 171
       
For reference purposes, of the above transfers, the following have actually been or are in the process of being undertaken as at 29th September 2009 (see notes below for further details):-
Transfer of Operational costs to SDS 145.4 142.1 136.3
Transfer of Shared Service Costs to SDS (A) 0.5 4.2 4.2
Total transfers to SDS 145.9 146.3 140.5
       
Transfer of Business Gateway contracts to Local Authorities 12.2 12.2 12.2
Transfer of Local Regeneration budget to Local Authorities (B) 4.4 0 0
Transfer of Business Gateway Marketing and Quality Assurance to Local Authorities   1.5 2
Total transfers to Local Authorities 16.6 13.7 14.2
       
Total transfers to SDS and Local Authorities 162.5 160 154.7
       
NOTES 1 This figure differs from that in Scottish Enterprise’s subsequent evidence as the subsequent evidence does not reduce the Grant in Aid figure to take into account c. £13m transfers to SDS.A The final settlement with SDS for Shared Service Costs is still being worked through and current estimates are thata total of £8 million will be transferred to SDSB There is a ring-fenced allocation of £12.5 million for Local Regeneration activity which SE continue to undertake on behalf of Local Authorities.The expenditure is not included in the GIA figures provided previously and hence it is appropriate to account for the full £12.5 million as a transfer. The £4.4 million transfer which took place in 08/09 represented the difference between £12.5 million and the £8.1 million actually delivered by SE on behalf of Local Authorities

Source: SPICe

Highlands and Islands Enterprise transfers

Budget Transfers

2008/09

2009/10

2010/11

Actual

Forecast

Forecast

£'000

£'000

£'000

Skills Development Scotland

16,070

nil*

nil*

Skills Development Scotland - services 1

nil

1,210

1,160

Local Authorities (Business Gateway)

nil

2,589

2,255

Notes

* HIE's baseline reduced so no further transfers

1. This relates to 'transactional services' notional budget

Source: SPICe

50. Finally, one of the other key strands of Scottish Government policy is the small business bonus scheme. In information produced by SPICe for the Committee, the Scottish Government’s projection (based on estimates only) for the revenue foregone as a result of the scheme is presented below in Table 6.

Table 6: Small Business Bonus Scheme (revenue foregone)

£ million 2009-10 2010-11 2010-11
(in 2009-10 prices)
% change
Small Business Bonus Scheme 126.0 165.0 162.6 29.0%

Source: Scottish Government, personal communication to SPICe.

51. In April 2008, the Cabinet Secretary issued a statement38 that the scheme would assist 150,000 businesses at a maximum cost of £165 million. This implies an average award of £1,100 per business

Tourism

52. In its submission to the Committee, VisitScotland stated that its proposed budget for 2010-11 will consist of £44.3 million of grant-in-aid from the Scottish Government and £20.5 million from commercial and other income streams. This latter figure is, according to VisitScotland itself, an estimate subsequently reduced during the course of the current financial year based on market conditions.

53. According to the Committee’s budget adviser, this budget of £44.3 million for 2010-11 represents a reduction of 11.5% in real terms on the 2009-10 budget allocation. In comparison with the draft budget for 2010-11 originally published in last year’s budget, VisitScotland also received increased funding of £2.5 million for the Homecoming project in 2009-10 and this now also drops out of the draft budget.

54. In its written submission, VisitScotland has proposed across-the-board reductions in its main activities as follows:39

  • Business Engagement, reduced by 8%

  • Corporate Services, reduced by 7.5%

  • Strategic Partners, reduced by 7.7%

  • Visitor Engagement, reduced by 2.5%

  • EventScotland, reduced by 1.5%

  • Capital expenditure, reduced by 23%

55. Following receipt of VisitScotland’s written submission to the Committee, further developments were announced in relation to one of the key signature events organised as part of Homecoming 2009; The Gathering. In October 2009, it was announced that the company behind the event – The Gathering 2009 Ltd – had run into financial difficulties and that a number of public sector bodies would now write off the finance provided for the event and that the City of Edinburgh Council’s new destination marketing agency (Destination Edinburgh Marketing Alliance, DEMA) would take over any similar events in the future.

56. According to DEMA, the Scottish Government has agreed not to seek the recover a loan of £180,000 (£100,000 from the Scottish Government and £80,000 from Homecoming Scotland) previously provided to The Gathering 2009 Ltd, in order to secure the future of The Gathering as an event and the associated economic benefits. For the same reason, DEMA noted that Historic Scotland and other public bodies have decided that they will not seek to recover the amounts that they are owed.40

57. It is understood that the monies provided by Historic Scotland totalled £100,000, with a further £100,000 being provided by VisitScotland/EventScotland in the form of a grant, and £100,000 from Scottish Enterprise. The Committee is awaiting further clarification on this matter from the Scottish Government.

key issues

A budget for economic recovery?

58. The Committee’s consideration of the Scottish Government’s draft budget for 2010-11 comes at a time of economic recession in Scotland, uncertainty at the timing and pace of any recovery and a recognition that because of the recession in Scotland and the UK as well as the recent crisis in the banking sector, the pressures on public finances in the medium-term are very likely to be severe.

59. Consequently, for the Committee whose responsibility it is to ensure that the Scottish Government is taking the necessary steps to minimise the effects of the downturn in the economy and to move back to sustainable growth in the medium-term, the central focus of our budget scrutiny this year could not simply be on the specific proposals set out by the Scottish Government in its draft budget for 2010-11 alone.

60. The critical issues at the heart of our consideration this year have been whether the current proposals as set out in the Draft 2010-11 Budget will deliver on the Scottish Government’s top priority (its “Purpose”) and whether, with the pressures ahead on public sector budgets, prudent decisions are being taken now for the future. We have also considered whether the decisions of the past – notably for accelerated capital spending, the investments in skills, apprenticeships and energy efficiency, the reform of the enterprise agencies and the creation of new bodies such as Skills Development Scotland and the Scottish Futures Trust – are delivering on their objectives.

61. As indicated previously, during our deliberations this year, a number of fundamental questions were raised on the role that government and its agencies should play in economic development. While we make comments on these below and in our conclusions, the Committee has indicated that it plans to return to this subject in the spring of 2010 with a ‘first principles’ review of the role for enterprise intervention from the public sector.

62. In his evidence to the Committee, Alf Young, the former economic and business commentator at The Herald and The Sunday Herald, stated that, in his opinion—41

“... when the objective of increasing Scotland's sustainable growth rate year-on-year is set against the numbers [in the draft budget] that we have talked about this morning, there is a question mark. I would be tempted to go further and ask whether the sustainable growth rate growth is within the gift of the Parliament, given its powers, or indeed whether it should be a desirable, overarching objective of politics.”

63. Mr Young questioned whether the “Purpose” of increasing the GDP growth rate in Scotland should be the overarching objective of the Scottish Government and indeed “whether it is the right objective for the right Parliament.”42

64. In his advice to the Committee, our budget adviser suggested that for the draft budget for 2010-11 to be considered as designed to foster economic growth, most observers would accept that such growth as measured by per capita income requires, in combination, increases in skills, increases in entrepreneurship, development of business and management techniques, application of technology and accumulation of capital (including infrastructure).

65. This is a view shared by Scottish Enterprise, which stated in its written submission to the Committee that increased GDP growth is driven by increased productivity, population growth and economic participation. The enterprise agency acknowledged that Scotland’s current poor productivity performance arises from shortfalls in enterprise, innovation, investment and skills.43

66. In its initial response to the draft 2010-11 budget, the Confederation of British Industry (CBI) in Scotland said that—44

“The decision to axe the rail link to Glasgow airport is very disappointing. We warned previously that funding for infrastructure projects is often wrongly seen by politicians as a soft target, and so it has proved. The focus of expenditure reduction ought instead to have been on restraining public sector costs and altering spending priorities, for example by making investment in the water industry much less reliant on the public purse.

“The lack of any mention of a programme of contracting-out public service delivery, to private and not-for-profit providers, is a missed opportunity to modernise and improve services and make them more affordable for individual and business taxpayers.”

67. In its written submission to the Committee, the Federation of Small Businesses (FSB) in Scotland stated that “any reduction in spending on a range of policy areas associated with supporting economic growth is disappointing.”45 It said that—

“While we recognise the efforts made by the Scottish Government to keep the Economic Recovery Plan updated, more concerted action will be necessary to kick-start the economy. We believe that further action would be possible both in terms of business access to finance, and creating employment. Both will be difficult to achieve without additional funding.”46

68. In its initial response, the Scottish Trades Union Congress (STUC) said—47

“This was never going to be an easy process for the Scottish Government with the budget reducing from that forecast in the last comprehensive spending review. However, the STUC believes that a number of very poor choices have been made in the draft Budget. There will be serious consequences for the Scottish economy and jobs resulting from the cancellation of the Glasgow Airport Rail link and the cuts in the affordable housing budget.”

69. The draft budget proposed offers justification as to why certain portfolios or budget lines are to receive reductions whilst others increase. In his accompanying news release in September 2009, the Cabinet Secretary for Finance and Sustainable Growth stated—48

“At a time when many businesses and families are facing the challenges brought by the recession, it is imperative for government to respond effectively and decisively to support them.

We have had to face difficult choices about where to reduce planned spending next year. We will meet this challenge while continuing to work with our partners to achieve our priorities and protect programmes that matter most to the people of Scotland.

Crucially that will mean protecting spending on front-line public services, such as schools and hospitals. It will mean ongoing investment in our economic recovery plan, including support for skills development and for hard pressed businesses; and on programmes that help protect households at a time of economic hardship.”

70. Additionally, during his evidence to the Committee in late October 2009, the Cabinet Secretary for Finance and Sustainable Growth said—49

“When I presented the draft budget to Parliament, I said that my aim had been to do two things: to prioritise the promotion of sustainable economic growth and to protect front-line services. That is what the Government tries to do.”

71. The Cabinet Secretary also stated—50

“…my duty is to introduce a budget that reflects the Cabinet's agreed propositions and fulfils the Cabinet’s requirements, which are to promote economic recovery and to protect front-line services. The draft budget is the judgment that I have arrived at.”

And that—

“Having marshalled all the ways in which we are prioritising economic growth in different areas of expenditure, I think that the draft budget speaks for itself as a genuine piece of work that seeks to achieve the two objectives of promoting economic recovery and protecting front-line services.”

72. For his part, the Cabinet Secretary for Finance and Sustainable Growth rejected the proposition of some of the external organisations that were quoted in the press as stating that the budget proposed for 2010-11 was not in line with the Scottish Government’s priorities for sustainable economic growth. In his evidence, John Swinney MSP said that he “fundamentally reject[ed] that proposition”.51 Additionally, in response to the criticism from the main business organisations that had been made in the media and in the written submissions received by the Committee, the Cabinet Secretary said during his appearance that he feared he was going—52

“… to spend the whole day disagreeing with the business organisations of Scotland, which is an interesting position to be in, given all the efforts that I have made to have dialogue with them.”

73. One of the main considerations this year for the Committee is whether the draft 2010-11 budget provides the right foundation to tackle the acute pressures ahead on public sector expenditure. In his evidence to the Committee, Alf Young was critical of all the administrations since devolution noting that businesses “crave long-term certainty” in terms of government policy and that there is no consistency of approach in policy development in Scotland or the UK because “we jump from fashion to fashion and from concept to concept.”53

74. During his evidence to the Committee, Bill Jamieson, Executive Editor at The Scotsman, expressed concerns at the decisions that had been taken relating to accelerated capital expenditure believing that this meant “we are stealing from future years for the current year”. He felt this will cause “a problem with sustainable growth” and realising the Scottish Government's main “Purpose”.54

75. Looking at the budget proposals for expenditure on economic growth, enterprise and supporting the economy, Mr Jamieson considered that the reductions in planned expenditure (he estimated an 8% real terms reductions) represented “a terrific whack when it is compared with other Scottish Government departments.” He therefore had concerns for 2010-11 and “looking beyond that, it is going to be much tougher.”55

76. For its part, looking at the proposed budget as a whole, the CBI Scotland stated that “merely allocating reduced funds to existing policies and shirking difficult issues, a ‘less of the same’ approach, will not properly address the challenge in a manner which will contribute to a sustainable recovery.”56 The CBI Scotland also believed that the overall package of savings measures proposed by the Scottish Government is “inadequate” in light of the financial challenges to come and in terms of driving future wealth creation.57

77. Similarly, the Scottish Council for Development and Industry (SCDI) said by way of its summary that overall, it does not consider that the draft Scottish Budget displays the long-term prioritisation that it believes is necessary and the Finance and Sustainable Growth portfolio has suffered the largest absolute and percentage reduction, down by over £200 million, or 7%.58

78. In response to questions on this issue, the Cabinet Secretary for Finance and Sustainable Growth stated that—59

“Over the past 15 or 16 months, the Government has actively taken steps to adjust its plans and priorities to deal with the economic situation; those steps have concentrated on the economic recovery plan. When I look at the various interventions that the Administration has made, I think that we are doing all that we possibly can within our resources to support the Government's purpose of increasing sustainable economic growth.”

79. He also said that in relation to accelerated spend, he believed that when decisions were made in the past to bring forward these budgets, this was broadly welcomed at the time. Furthermore, in relation to the proposed budget for 2010-11, the Cabinet Secretary said that—60

“In 2010-11, I would prefer to continue with the injection of capital expenditure that we think is required to boost and stimulate economic recovery in Scotland and therefore delay the repayment of that expenditure until 2011-12. I accept that the money has to be paid back at some stage, but given the pattern of development in the economy, we could benefit from having another tranche of accelerated capital expenditure, which is why I made the pitch that I did [to HM Treasury].”

Effective delivery of previous commitments?

80. In October 2009, the Scottish Government published an update reviewing the progress of its economic recovery plan and summarising what decisions it had taken to alter prior plans in light of the economic recession.61 A central part of the revised plan were the decisions taken in 2008-09 and 2009-10 to bring forward planned expenditure from 2010-11 into the current and preceding financial years; known as accelerated capital expenditure.

81. In its update, the Scottish Government noted that it had accelerated £293 million of capital spending into 2009-10, in addition to £53 million accelerated in 2008-09. In total, ministers estimated that this accelerated investment will support around 5,000 jobs in the Scottish economy over the period.62 However, in its previous update on the recovery plan published in June 2009, the jobs figure was 6,350.63 Additionally, the Scottish Government suggested that local authorities were to invest £90 million to accelerate a range of capital spending programmes spread across Scotland.64

82. A further strand of the recovery plan and the accelerated capital expenditure was the ‘additional’ finance for affordable housing. Here, the Scottish Government brought forward £40 million of funding for the Affordable Housing Investment Programme from 2010-11; £5 million of the accelerated funding was directed to the Home Owners Support Fund Mortgage-to-Rent programme, increasing it to £15 million. The remaining £35 million was allocated to projects in 28 local authority areas to fund accelerated construction activity, purchase unsold units 'off the shelf' from private developers and fund land acquisitions to accelerate future developments. According to Scottish Government projections in June 2009, each new investment of £100 million in the housing sector would support around 1,000 jobs directly, with an additional 600 jobs within related supplier industries.65 In total, the Scottish Government said in October 2009, that it was “on track to approve an unprecedented 8,100 homes this year” from its investments in housing.66

83. In its October 2009 update, the Scottish Government said that its capital expenditure budget for this year (2009-10), including accelerated spend, will ultimately support approximately 57,000 jobs in the Scottish economy, including nearly 37,000 in the construction sector alone.

84. In his evidence to the Committee, Michael Levack, chief executive of the Scottish Building Federation, was critical of the speed of delivery for the accelerated spend, whilst welcoming the principle of bringing forward money. He told the Committee that—67

“Of course the industry welcomed the accelerated capital expenditure that was announced during the past year, and one would not want to appear ungrateful, but it was never going to be enough, given the drastic times that the construction sector is facing. It has not worked its way through the system quickly enough”

85. In relation to the accelerated spending on affordable housing in particular, Mr Levack said “… we have found that a lot of the money has been used to buy land and some existing stock, rather than to start new projects, which would protect employment and capacity in the industry.”68 He stated that he feared that the budget proposals for 2010-11 might not provide the necessary level of expenditure to maintain some assistance for the construction and building industry.

86. From his perspective, Mr Levack indicated that his industry estimated it had lost 8,500 jobs in 2009 in addition to the 20,000 lost in 2008.69 It is probably fair, however, to note that the accelerated spend could only have been expected to soften the employment decline, not prevent it.

87. In his evidence, Peter Hughes, chief executive of Scottish Engineering, agreed with Mr Levack and noted that from the perspective of companies in his trade association that acted as suppliers to the building and construction sector, the accelerated capital expenditure had “certainly not reached them”. He said such companies were “in deep trouble as far as orders for the next six months and beyond are concerned.”70

88. Measuring the impact of such accelerated spend was, in the opinion of Mr Jamieson, difficult at the macro-level. He told the Committee that he believed that the measures taken will have been of help but that it may not be possible to measure the impact for a further 12-18 months.71

89. During his evidence to the Committee, the Cabinet Secretary for Finance and Sustainable Growth stated that in relation to spending on housing and the accelerated spend in this sector in particular—72

“We have never had a year of expenditure on housing like the one that we are having in 2009-10; we have never built more units as part of the budget. That is the case because I took a decision, in the face of economic decline, to enhance the housing budget significantly in 2009-10 …”

90. A second issue related to accelerated capital expenditure explored by the Committee was the progress being made to establish the Scottish Futures Trust (SFT). In his evidence to the Committee, Michael Levack said that the SFT had “a golden opportunity” and that while the Scottish Building Federation had noted the significant increase in funding for staffing that had been provided to the Trust, he was “desperate for it to get up a real head of steam”. Mr Levack said that “its success as a facilitator of major infrastructure investment will rely on the availability of funding, wherever it comes from” and that the question that has not been answered is whether the UK banks are going to be interested in participating in the SFT.73

91. In its draft budget for 2010-11, the Scottish Government is proposing that the budget for the SFT would be £5.8 million in real terms.74 In its written submission to the Committee, CBI Scotland described the SFT as “a useful start” in trying to aggregate common infrastructure procurement, but indicated that it had “strong reservations about whether this flagship initiative is getting the support it needs to actually make a significant contribution to aiding the construction and related industries in the life of the current devolved parliament”.75

92. In the Scottish Government’s October 2009 update of its economic recovery plan, the Scottish ministers stated that the SFT will also manage the new £1.25 billion school building programme, which will see the Scottish Government invest an additional £800 million of capital support in the school estate, delivering 55 new schools across Scotland. The Scottish Government said that the first tranche of the programme, announced in September 2009, will see 14 secondary schools benefit from funding – lifting over 12,000 pupils out of poor condition or unsuitable schools.76

93. In response to questions on the proposed budgets for the Scottish Futures Trust the progress towards establishment, the Cabinet Secretary for Finance and Sustainable Growth said that the Trust was “working on a number of capital projects around the country” and that “its chairman and its chief executive are taking an active role in the discussion of future infrastructure priorities and ways of delivering those in a number of areas”.77

94. A third component of the 2009-10 budget and the revised recovery plan was the creation of a £60 million town centre regeneration fund. Within this, the Scottish Ministers proposed that the first offers of grants would be made in the summer of 2009.78 Such decisions were, of course, possible as a result of the decisions taken by the Parliament as part of the debates, negotiations and agreements on the then Budget Bill.

95. As a member of the board of one of the urban regeneration companies (URCs) in Inverclyde, Alf Young outlined some of his concerns with the delivery of the town centre regeneration fund. Firstly, he questioned Scottish Enterprise’s commitment to regeneration (or ‘place-making’) believing that the body only provided finance to the URCs because the budgets were “ring-fenced” and because the enterprise agency has been directed to do so by the Scottish Government. He believed that Scottish Enterprise’s “… general commitment to place making throughout Scotland is almost zilch now”.79

96. Mr Young also expressed concerns at the longevity of the funding of URCs and for town centre regeneration indicating his board “do not know what the budget is going to be a year from now, let alone 10 years from now”.80 He also questioned whether the decisions to award funding only in July 2009 will result in effective spend. He suggested that the limited time period for spending available in the remainder of the current financial year will mean “people across Scotland will do very quick interventions and clean up town centres, but the long-term impact on what town centres will look like through the next decade will be limited.”81 Furthermore, he stated that the accelerated nature of funding would skew the longer term regeneration efforts.

97. In response to questions on the efficacy of spending on regeneration, Scottish Enterprise told the Committee that “the projects that we have been investing in are all related to our medium-to-longer-term plan for sustainable economic growth.”82


Footnotes:

1 Scottish Government, Scottish Budget: Draft Budget 2010-11, September 2009.

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

3 Spending which is planned and controlled on a three year basis in Spending Reviews. The DEL is the annual spending limit imposed on a government department arising from its agreed, longer-term financial settlement. Normally categorised into capital DEL and resource DEL and fixed for three years ahead.

4 Scottish Government, Scottish Budget: Draft Budget 2010-11, p4, September 2009

5 Economy, Energy and Tourism Committee, Official Report 23 September 2009, col2400.

6 Economy, Energy and Tourism Committee, Official Report 23 September 2009, col2407.

7 Economy, Energy and Tourism Committee, Official Report 23 September 2009, col2407.

8 Economy, Energy and Tourism Committee, Official Report 23 September 2009, col2407.

9 Fraser of Allander Institute, Economic Commentary, Vol 33, No 1, p4, June 2009.

10 Fraser of Allander Institute, Economic Commentary, Vol 33, No 1, p8, June 2009.

11 Fraser of Allander Institute, Economic Commentary, Vol 33, No 1, p20, June 2009.

12 Fraser of Allander Institute, Economic Commentary, Vol 33, No 1, p20, June 2009.

13 Scottish Trades Union Congress, News Release, STUC urges action on rising youth unemployment, 12 October 2009

14 Confederation of British Industry (Scotland), written evidence provided to the Committee.

15 PricewaterhouseCoopers, Dealing with (even more) debt - Big decisions, tough choices, 2009.

16 PricewaterhouseCoopers, Dealing with (even more) debt - Big decisions, tough choices, 05, 2009

17 Audit Scotland, Press Release, Auditor General calls for urgent action across the public sector, 5 November 2009

18 Scottish Government, Scottish Budget: Draft Budget 2010-11, p4, September 2009.

19 Centre for Public Policy for Regions, Scottish Government’s Draft Budget 2010-11, Briefing No 1, p1, 2009.

20 SPICe briefing paper, not published by the Committee.

21 SPICe briefing paper, not published by the Committee.

22 Centre for Public Policy for Regions, Scottish Government’s Draft Budget 2010-11, Briefing No 1, p2, 2009.

23 SPICe briefing paper, not published by the Committee.

24 Centre for Public Policy for Regions, Scottish Government’s Draft Budget 2010-11, Briefing No 1, p4, 2009.

25 Scottish Government, written evidence provided to the Committee.

26 N.B. It was suggested during evidence to the Committee that this particular budget would be used for other renewable energy related spending as the Saltire Prize would not be awarded until 2014 or 2015.

27 According to the Scottish Government, the draft budget requirements for 2010-11 for the Scottish Futures Trust are based on the estimated operational costs set out in its 2008 business case publication.

28 Scottish Government, written evidence provided to the Committee

29 Scottish Government, letter from Alex Neil MSP to the Committee, 13 October 2009, not published.

30 Previously known as the Central Heating Initiative/Warm Deal.

31 Scottish Government, Scottish Budget: Draft Budget 2010-11, p67, Table 3.05, September 2009.

32 Scottish Government, Scottish Budget: Draft Budget 2010-11, p68, September 2009.

33 Scottish Enterprise, written evidence provided to the Committee.

34 Scottish Enterprise, written evidence provided to the Committee.

35 Economy, Energy and Tourism Committee, Official Report 28 October 2009, col2520.

36 Economy, Energy and Tourism Committee, Official Report 28 October 2009, col2524.

37 Highlands and Islands Enterprise, written evidence provided to the Committee.

39 Highlands and Islands Enterprise, written evidence provided to the Committee.

40 Destination Edinburgh Marketing Alliance, Press Release, Thursday 15 October 2009.

41 Economy, Energy and Tourism Committee, Official Report 30 September 2009, col2446.

42 Economy, Energy and Tourism Committee, Official Report 30 September 2009, col2446.

43 Scottish Enterprise, written evidence provided to the Committee.

44 CBI Scotland, News Release, 17 September 2009.

45 Federation of Small Businesses in Scotland, written evidence provided to the Committee.

46 Federation of Small Businesses in Scotland, written evidence provided to the Committee.

47 STUC, News Release, STUC on Scottish Budget Statement, September 17th 2009.

48 Scottish Government, News Release, Draft Scottish Budget 2010-2011, 17 September 2009.

49 Economy, Energy and Tourism Committee, Official Report 28 October 2009, col2561.

50 Economy, Energy and Tourism Committee, Official Report 28 October 2009, col2573.

51 Economy, Energy and Tourism Committee, Official Report 28 October 2009, col2567.

52 Economy, Energy and Tourism Committee, Official Report 28 October 2009, col2577.

53 Economy, Energy and Tourism Committee, Official Report 30 September 2009, col2429.

54 Economy, Energy and Tourism Committee, Official Report 30 September 2009, col2426.

55 Economy, Energy and Tourism Committee, Official Report 30 September 2009, col2445.

56 Confederation of British Industry (Scotland), written evidence provided to the Committee.

57 Confederation of British Industry (Scotland), written evidence provided to the Committee.

58 Scottish Council for Development and Industry, written evidence provided to the Committee.

59 Economy, Energy and Tourism Committee, Official Report 28 October 2009, col2561.

60 Economy, Energy and Tourism Committee, Official Report 28 October 2009, col2563.

61 Scottish Government, Economic Recovery Plan: Update, 29 October, 2009.

62 Scottish Government, Economic Recovery Plan: Update, p12, 29 October, 2009.

63 Scottish Government, Update of the Scottish Economic Recovery Programme, p19, 15 June, 2009.

64 Scottish Government, Economic Recovery Plan: Update, p12, 29 October, 2009.

65 Scottish Government, Update of the Scottish Economic Recovery Programme, p8, 15 June, 2009.

66 Scottish Government, Economic Recovery Plan: Update, p17, 29 October, 2009

67 Economy, Energy and Tourism Committee, Official Report 30 September 2009, col2422.

68 Economy, Energy and Tourism Committee, Official Report 30 September 2009, col2423.

69 Economy, Energy and Tourism Committee, Official Report 30 September 2009, col2423.

70 Economy, Energy and Tourism Committee, Official Report 30 September 2009, col2447.

71 Economy, Energy and Tourism Committee, Official Report 30 September 2009, col2426.

72 Economy, Energy and Tourism Committee, Official Report 28 October 2009, col2585.

73 Economy, Energy and Tourism Committee, Official Report 30 September 2009, col2437.

74 Scottish Government, written evidence provided to the Committee.

75 Confederation of British Industry (Scotland), written evidence provided to the Committee.

76 Scottish Government, Economic Recovery Plan: Update, p18, 29 October, 2009.

77 Economy, Energy and Tourism Committee, Official Report 28 October 2009, col2580.

78 Scottish Government, Preparing for Recovery: Update on the Scottish Economic Recovery Programme, 15 June, 2009.

79 Economy, Energy and Tourism Committee, Official Report 30 September 2009, col2432.

80 Economy, Energy and Tourism Committee, Official Report 30 September 2009, col2425.

81 Economy, Energy and Tourism Committee, Official Report 30 September 2009, col2426.

82 Economy, Energy and Tourism Committee, Official Report 28 October 2009, col2522.

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