S2M-3015 Financial Management 2004-05

Scottish Parliament

Thursday 23 June 2005

[THE DEPUTY PRESIDING OFFICER opened the meeting at 09:15]

Financial Management 2004-05

The Deputy Presiding Officer (Murray Tosh): The first item of business today is a debate on motion S2M-3015, in the name of Tom McCabe, on financial management 2004-05, including provisional outturn figures.

09:15

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11:02

Stewart Stevenson (Banff and Buchan) (SNP): I start by making a simple point. There is a clear difference between being efficient in spending money and spending money efficiently. The Executive is to be commended for being more efficient in spending money—maybe—but whether it is spending money efficiently is another question altogether.

Last year, there was an underspend of £515 million and the figures for this year that we have just been given indicate that there will be a possible £183 million underspend. However, that tells us zip about the core issues that are involved in spending Government money.

I am absolutely delighted that we have been joined by a good sprinkling of people in the public gallery for what would normally be a geeks' debate full of technical discussions and so on. However, I will not disappoint: later in my speech I will bring new information and understanding to ministers and others.

One or two things in the document that was embargoed until 9.15 this morning spring off the pages; I refer, for example, to demand-led charges under the health heading. I am not talking about big money, but am interested in what the words suggest. As a result of lower-than-anticipated expenditure on demand-led dental services, money has been saved. Perhaps that gives us a little keyhole view into why money is being underspent in certain areas. Underspending may mean efficiency, but no one is likely to claim that the underspend on dental services is anything other than a failure to manage services effectively. However, I pay tribute to the dentist who extracted the tooth that I have here yesterday. It is still possible to obtain access to dental services and I am extremely grateful to him for his effective and efficient work.

Des McNulty: Is the tooth a wisdom tooth?

Stewart Stevenson: Fortunately, all my wisdom teeth are not only intact but in perfect working order. I wish that I could say the same of others in the chamber.

I challenged the minister, during his statement, on the difference between cash savings and time savings. I understand that they are different—it is perfectly proper for the minister to say that. However, if they are to be savings, time savings have to be either returned to someone as savings or spent to create a new benefit. They are not just a paper thing—they should have some tangible meaning. For the minister to use my intervention as an excuse simply to attack the SNP—which is always fun for him, as it is always fun for us to attack him—is to reveal his poverty of thinking and understanding about what time savings really are. It has been said that God has the best tunes, but I think rather that God has the best arguments. I remind the minister that, despite rumours, he has yet to convince us that he is God.

The iron chancellor tells us that the UK economy has recently enjoyed the most spectacular continuous growth for more than 200 years. As a result, we have seen a growth in Scottish spending; however, we are the beggars at the door, asking for our share of that supposedly tremendous economic record down south. We are not being given the opportunity to make our own bread and earn our own way in the world.

Christine May tells me that I can go to SPICe and find the value of the infrastructure in which we have been investing. That is very encouraging; however, so far, I find that that is not the case. I have here the draft budget and all the updates. In tables 0.06 and 0.07, there are private finance initiative figures that touch tangentially on the issue of capital. Nevertheless, the reality is that we are given only an income and expenditure statement, as we have been given in previous years. We do not have a proper statement of assets and liabilities, and we do not know the capital efficiency or inefficiency of our investments because the information that would enable us to form a view is not available. I hope that the Finance Committee will work with ministers on that, because that would help ministers to make judgments about future capital spending and to understand the maintenance costs that are associated with capital spending. At the moment, the linkage between those things is imperfect.

Of course, public-private partnerships and PFIs introduce a whole new problem. We have rehearsed on many occasions the interest rate inefficiencies of the contracts that are written, which result largely from the fact that PFI contracts are allocated to single-purpose companies. That means that the risk is captured within the boundary of that company rather than being—as in the SNP's proposals—shared across a portfolio of projects, which would dramatically reduce the overall risk that would be assessed by banks in considering lending to public projects. It is not about bringing things back on to the balance sheet; it is about getting better value from our banks. At the moment, we are probably 64 basis points above the base rate on PPP lending. I know, having asked the people who would have to be involved, that we could probably bring that down to 8 or 10 basis points.

Jeremy Purvis is clearly not an economist. I make no claim to be one either, but I occasionally talk to and listen to economists. A reduction in taxation—be it corporation tax or whatever—does not tell us intrinsically whether the tax take will rise or fall. I draw his attention to the Laffer curve that shows that, in some circumstances and within certain limits, we would increase the tax take by increasing economic activity.

Phil Gallie: Will the member give way?

Stewart Stevenson: I am sorry. I do not have time.

I also direct Jeremy Purvis to the elasticity of demand formulas that govern the way in which the market works. There is not a linear connection between tax rake and tax take.

I close with one or two other observations. We have heard of projects—especially large capital projects—being delayed. The minister must acknowledge and be accountable to Parliament for the fact that, when a project is delayed, its cost rises. That is not simply because of the effects of inflation; it is also because the optimum length for a project is 0.4 of the cube root of the number of man months in the project. If attempts are made to speed up the project, the cost will rise. Equally, if the length of the project increases, with the same amount of effort being made, the cost will rise. The reason is simple: if people have to put the work down and pick it up again, they will have to re-learn and re-do work. That is my understanding of the way in which projects work. The problem is that the Executive has yet to explain the inefficiencies of delaying projects.

11:10