Finance Committee

5

th Report, 2013 (Session 4)

Annual Report 2013

Published by the Scottish Parliament on 11 June 2013

SP Paper 330 Session 4 (2013)

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Finance Committee

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

(a) any report or other document laid before the Parliament by members of the Scottish Executive containing proposals for, or budgets of, public expenditure or proposals for the making of a tax-varying resolution, taking into account any report or recommendations concerning such documents made to them by any other committee with power to consider such documents or any part of them; (b) any report made by a committee setting out proposals concerning public expenditure; (c) Budget Bills; and (d) any other matter relating to or affecting the expenditure of the Scottish Administration or other expenditure payable out of the Scottish Consolidated Fund.

2. The Committee may also consider and, where it sees fit, report to the Parliament on the timetable for the Stages of Budget Bills and on the handling of financial business. 3. In these Rules, "public expenditure" means expenditure of the Scottish Administration, other expenditure payable out of the Scottish Consolidated Fund and any other expenditure met out of taxes, charges and other public revenue. (Standing Orders of the Scottish Parliament, Rule 6.6)

Membership: - Gavin Brown Malcolm Chisholm (member from 12 December 2012) Bruce Crawford (member from 18 September until 24 October 2012) Kenneth Gibson (Convener) Jamie Hepburn (member from 25 October 2012) John Mason (Deputy Convener) Mark McDonald (member from 15 December 2011 until 18 September 2012) Michael McMahon Elaine Murray (member from 22 December 2011 until 12 December 2012) Jean Urquhart (member from 18 September 2012) Paul Wheelhouse (member from 1 June 2011 until 6 September 2012) Committee Clerking Team: Clerk to the Committee Jim Johnston Assistant Clerk Alan Hunter Committee Assistant Parminder Kaur

Finance Committee

5th Report, 2013, Session 4

Annual Report 2013

The Committee reports to the Parliament as follows—

Introduction 1. This report covers the work of the Finance Committee during the parliamentary year 11 May 2012 to 10 May 2013. The Committee had a busy work programme in its second year of this fourth parliamentary session. As in previous years, the Committee’s main area of work was on the annual budget process. An overview of the Committee’s work is set out below. Meetings 2. During the year, the Committee met 33 times. No meetings were held entirely in private but 27 meetings included items in private. The purpose of the private items was to consider draft Committee reports, work programme issues or proposed contingent liabilities. All Committee meetings were held at the Scottish Parliament except the external meeting in Hawick (see below). Work programme Budget scrutiny 3. The principal role of the Finance Committee is to lead the Parliament’s response to the Scottish Government’s spending proposals through the annual budget process.

4. The Scottish Government published its draft budget for 2013-14 on 21 September 2012. However, the Committee’s scrutiny began in June when it agreed to focus its scrutiny of the draft budget on whether spending decisions were aligned with the Scottish Government's overarching Purpose of increasing sustainable economic growth. 5. The Committee issued a call for evidence before summer recess inviting the views of interested and affected parties on the proposals that they would like to see in the draft budget.

SP Paper 330 Session 4 (2013) 1

FI/S4/13/R5

6. The Committee subsequently published the written evidence it received which identified a number of key themes and issues on which it then focused during oral evidence sessions. 7. As part of its scrutiny of the draft budget, the Committee heard oral evidence from a number of organisations including from the private and third sectors before taking oral evidence from the Cabinet Secretary for Finance, Employment and Sustainable Growth on 5 November 2012. 8. To assist in their own scrutiny of the draft budget, the Committee issued budget scrutiny guidance to subject committees, the Equal Opportunities Committee and the European and External Relations Committee.

9. The Committee’s report on the draft budget was published on 10 December 2012 and the Chamber debate on the report took place on 20 December 2012. The Scottish Government published its response to the report on 21 January. 10. The Budget (Scotland) (No.2) Bill was introduced in the Parliament on 17 January 2013 and the Chamber debate took place on 22 January. The Bill was subsequently debated and passed by the Parliament on 6 February. Scottish Futures Trust 11. The Committee took oral evidence from the SFT on the draft budget, Non Profit Distributing Programme and Asset Management. Scotland Act 2012 12. The Committee took evidence from the Office for Budget Responsibility on 17 April on the work being undertaken by it to forecast receipts from taxes to be devolved to Scotland as a result of the Scotland Act 2012. 13. The Committee took oral evidence on 24 April on the implementation of the Scotland Act 2012, with particular emphasis on the resulting adjustment to the block grant. Written submissions from Professor Gerald Holtham, Professor David Bell and the David Hume Institute were published online. 14. The Committee took oral evidence from the Cabinet Secretary for Finance, Employment and Sustainable Growth on the implementation of the financial powers arising from the Act on 1 May 15. The Committee took oral evidence from HM Revenue and Customs on 8 May on its preparations to support the devolution of these taxes. Demographic change and an ageing population 16. The Office for Budget Responsibility in its fiscal sustainability paper of 2011 stated ‘demographic change is a key source of long-term pressure on the public finances’. Having recognised the importance of this issue and its impact on public finances the Committee held an inquiry including a call for written evidence and a series of round table discussions.

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17. The Committee published its report on demographic change and an ageing population before taking oral evidence from COSLA on its recommendations, particularly those relating to the integration of health and social care. 18. The Committee then led a debate in the Chamber on 5 March 2012 on the themes that arose during its inquiry. Improving employability 19. One of the key themes to emerge from the fiscal sustainability roundtable sessions that the Committee held at the beginning of 2012 was employability and sustainable employment. The Committee agreed to hold an inquiry into the issue including a call for written evidence and a series of oral evidence sessions which explored the need to improve the employability of individuals experiencing high levels of multiple deprivation as a prerequisite to increasing sustainable economic growth. 20. A summary of written evidence was published. The Committee also held three workshops in Ardrossan, Dumfries and Dundee with key employability stakeholders including local businesses, employability groups, third sector organisations and service users. 21. The Committee published its Improving Employability report on 3 December 2012. It then led a debate in the chamber on the subject. Welfare Reform Act 22. The Committee took evidence from a number of stakeholders on the financial implications for Scotland of the Welfare Reform Act in June 2012. Data collection 23. Having recognised the importance of having accurate financial and statistical data on which to base policy scrutiny, the Committee held an evidence session on data collection and measuring outcomes in June. UK Budget 24. In spring 2013 the Committee took oral evidence from the Institute for Fiscal Studies and the Office for Budget Responsibility on the impact of the UK Budget on Scotland. Bills 25. The Committee was designated as lead committee for the consideration of the following Bills—

Budget (Scotland) (No.2) Bill

Freedom of Information (Amendment) (Scotland) Bill

Land and Buildings Transaction Tax (Scotland) Bill

Landfill Tax (Scotland) Bill

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Financial Memoranda 26. The remit of the Finance Committee includes consideration of the financial implications of legislation through scrutiny of financial memoranda accompanying all bills. 27. The Committee considered the following financial memoranda—

Aquaculture and Fisheries (Scotland) Bill

High Hedges (Scotland) Bill

Forth Road Bridge Bill

Local Government Finance (Unoccupied Properties etc.) (Scotland) Bill

Post-16 Education (Scotland) Bill

Scottish Civil Justice Council and Criminal Legal Assistance Bill

Scottish Independence Referendum (Franchise) Bill

Social Care (Self-directed Support) (Scotland) Bill

Victims and Witnesses (Scotland) Bill

Water Resources (Scotland) Bill

Welfare Reform (Further Provision) (Scotland) Bill 28. In addition, it began its consideration of the following Financial Memoranda— Scottish Independence Referendum Bill Regulatory Reform (Scotland) Bill Legislative Consent Memoranda 29. The Committee considered and reported on the following Legislative Consent Memoranda—

Enterprise and Regulatory Reform Bill Public Service Pensions Bill

Subordinate legislation 30. The Committee considered and reported on the following affirmative Scottish Statutory Instruments—

Official Statistics (Scotland) Amendment Order 2012

Budget (Scotland) Act 2012 Amendment Order 2012

Budget (Scotland) Act 2012 Amendment Order 2013 Engagement and innovation 31. The Committee played a key role in the first ever Parliament Day in Hawick. As part of its budget scrutiny, the Committee met with local business groups and organisations to gauge views on the budget before taking oral evidence on the Draft Budget 2013-14 from the Cabinet Secretary for Finance, Employment and Sustainable Growth. Equalities 32. As in previous years, equalities considerations were integral to much of the Committee’s work. In particular, its inquiry on improving employability focused on the

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need to improve the employability of individuals experiencing high levels of multiple deprivation as a prerequisite to increasing sustainable economic growth. Its report on the draft budget also considered the impact on equalities of welfare reform, social fund successor arrangements and fuel poverty.

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