Scottish parliamentary review aims for budget overhaul

5 Dec 16

A tripartite review of Holyrood’s budget processes to prepare for its new devolved tax powers will go beyond that remit and look at future proofing the Scottish Parliament’s processes against changes to its financial status, two review members have told PF.

Bruce Crawford, convener of Holyrood’s finance committee, said: “This is a real opportunity to stamp the Scottish Parliament’s authority on the process.”
Don Peebles, head of CIPFA Scotland, confirmed the review would look beyond the fiscal devolution of the 2012 and 2016 Scotland Acts, with the implications of Brexit on Scotland’s financial powers forming “part and parcel” of its scope.

“This is going to be very much a root-and-branch review – this is not tinkering at the edges,” Crawford said. “The budget process hasn’t really changed since 1999. It was a great foundation. But this is a fundamental examination of how we can do things better.”

The review brings together: a Scottish Government team, led by finance secretary Derek Mackay; a Parliament element, headed by Crawford; and a panel of independent experts, including Peebles, auditor general Caroline Gardner, and Scottish Fiscal Commission chief executive Sean Neill.

Its report, due next spring, will lead to a formal budget scrutiny agreement between the government and the finance committee. Although the review has been seen as concentrating on processes rather than principles, Crawford said it would now have to make some political choices, especially given the Scottish Government’s minority status.

A priority, Crawford and Peebles agreed, was to change the process from money for services being allocated under the Scottish block grant from Westminster to one where Holyrood gained responsibility for raising much of its own funding. This would be done through taxes, notably income tax, limited rights to levy new taxes and, for the first time, significant borrowing powers.

“This has been a spending parliament in the past. It’s now a revenue-raising parliament. It’s a tough task, but those doing the budget scrutiny have to lean much more heavily on what revenue-raising powers and also what enhanced borrowing powers it has,” Crawford said.

“On top of that, we need to address how we improve the input, particularly public input, to the subject committees. In any budget process, that’s going to be hard – but that shouldn’t stop us examining how we can do it better.”

Peebles agreed: “Individuals may be holding Parliament to account a bit differently [as they become more aware] that the money it’s spending is directly related to the services they’re receiving,” he said.

“Parliamentarians may well be experiencing a different kind of accountability in their surgeries, and I expect that will flow all the way through to the assessment and scrutiny of the budget.”

Crawford also identified a need to recalibrate Holyrood’s budget process with Westminster’s after a row over the timing of Scottish budget preparations. This has been delayed until after the Autumn Statement, which led to some MSPs complaining they would have little time to scrutinise it. Crawford suggested the review might formulate arrangements for Scotland to vary its tax-setting day.

Revenue-raising powers mean a reliance on fiscal forecasting, described by Crawford as “a huge change” for Holyrood. Peebles said the forecasting machinery provided by the UK Office for Budget Responsibility and the Scottish Fiscal Commission was promising, and both supported the fiscal settlement negotiated with Westminster to calculate residual block grant entitlement.

A further challenge is the ambition to shift the emphasis in priority setting from inputs to outcomes, which has yet to be set in budgetary and audit processes. Parliament, including his own committee, “needs a different toolkit”, Crawford said.

  • Keith Aitken
    Keith Aitken

    covers Scottish affairs for Public Finance from Edinburgh. He was formerly economics editor and chief leader writer on The Scotsman and now has a busy freelance career as a writer, broadcaster and event chair.

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