 I'm going to, as the oldest member of the committee, I'm going to convene this meeting and I want to welcome you to the first meeting of the finance committee in the fifth session of the Scottish Parliament. Agenda 1 item 1 is the declaration of interests and with members' permission I'm going to go round the table for declarations. You will have read the paper that was circulated in terms of declarations. If I may start off, I am a part-time member of staff at Glasgow University in the role of Professor of Scottish Culture and Governance. I earn approximately £17,000 a year for that. I have an office provided by the university in five lilybank gardens and I just point out the address because it's next to the fiscal commission and in fact is joined by a corridor with the fiscal commission just in case people pick that up. I am a writer and commentator. I've written seven books in which I still receive meagre royalties and I do occasional work, a consultancy work for a range of bodies, including a not-for-profit global charity of conservation called SIAC, which does data processing of monuments throughout the world. I think that those are the relevant interests that I have. I'll ask the... I'll ask Eric Johnson to... Thank you very much. I believe that I have no relevant interests but I will draw members' attention to the entry in my register of interests, where it declares my ownership of property. I think that the only relevant potential interest is that I'm currently in negotiations to be entered into membership with the Institute of Chartered Accountants of England and Wales. I've got three interests to declare. First, I'm a member of the Law Society of Scotland, although I'm not currently holding a practicing certificate. Secondly, I have an interest into residential properties as landlord, which are currently rented out and I'm therefore in receipt of rental income. Thirdly, like yourself, I'm a published author and am in receipt of meagre royalties and occasional payments for our parents at book festivals. I don't think that I have any interests that I'm required to declare. James Kelly. The record declares that my brother Tony Kelly is a sheriff within the sheriffdom of Glasgow in Strathkelven. I declare that I own a house in Stirling local authority area that I rent out and I own so in 50 per cent of a company that lets out residential property. I'm a director of the common rule and renumerated a trustee of a charity Education International. I was a director of a number of manufacturing and consultancy businesses, but those were directives that were resigned prior to being elected to the Parliament. Professor Tomkins. Thank you, Mr Tomkins in the Parliament. I have three relevant interests. I think that the first is that I hold the John Millar chair of public law at the University of Glasgow where I am in receipt of remuneration for services as an employee of the university. I have irregular income through conferences and I am the published author of more books than I can remember about constitutional law mainly and I have some royalty income from that. I understand that I have no relevant interests to declare. I have no relevant interests to declare other than what is declared in my voluntary section of the declaration. For the record, convener, I was a former local councillor in East Asia Council. I own a very small number of shares in the Comarant Football Club and I serve on that club's community engagement board. I used to be an employee of learning and teaching Scotland, which is now known as Education Scotland. I have no relevant interests to declare. Thank you very much indeed. The agenda item 2 is the choice of convener. The selection of the convener requires a member to be nominated by at least one other member of the committee. The Parliament has agreed that only members of the Scottish National Party are eligible for nomination as convener of the committee. That being the case, I seek nominations for the position of convener. Nominate yourself Michael Russell to be convener of the finance committee for this session. Are there any other nominations? As one nomination has been received, I, for us, have a committee to agree. Mr Kelly. I do have a point to raise in relation to your nomination. I think that we probably should proceed with the process unless you wish to object to the process or do you wish to make an observation about it? I wish to object to the process. My objection is on the basis that I believe that you have a conflict of interest. As you declared in the previous section of the agenda, you hold a professor position at Glasgow University for which you are nominated to the sum of £17,000. As this committee will consider matters of finance, including the budget and allocations of the budget to universities, I believe that you have a conflict of interest and that you have a paid interest from a university that has an interest in the budget process. Therefore, I think that there is an issue with your nomination. Okay. There is not anything that the standard order is about objecting to this, so this becomes a matter, in my view, of an election or otherwise. If you wish to object to this, I suggest that I put this to the vote and that you vote as you wish. Would that be acceptable to the committee? Is that acceptable practice? Yes. Does the member wish to push it to the vote? That would be the issue. Yes, I do wish to push it to the vote because I believe that the matters that I have raised are relevant. Okay. In that case, I am going to put this to a vote of the committee. The committee can either vote for the nomination received or vote against it. As one nomination has been received, I therefore ask the committee to agree that I be chosen as convener of the finance and finance committee. Firstly, are we all agreed? Yes. Okay. In that case, we will go to a vote. Those in favour of the nomination, please show. Can the clerks count this, please? Those against, please show. It is therefore agreed that nine votes to two. I then need to move to the, and thank you for the nomination and for the election. Agenda item three has the choice of a deputy convener. The selection of deputy convener requires a member to be nominated again by at least one member of the committee. The Parliament has agreed that the members of the only members of the Scottish Conservative Unionist Party are eligible to be chosen as deputy convener. That being the case, can I invite nominations for the position of deputy convener? Myrdy Fraser. Thank you. May I nominate Alex Johnson? Okay. Alex Johnson has been nominated. Are there other nominations? Again, the same procedure applies if there is any objection, then we will take a vote on this. One nomination has been received, and therefore I am asking the committee to agree that Alex Johnson will be chosen as deputy convener of the finance committee. Are we all agreed? We are agreed. Alex Johnson, I should have asked you if you are willing to be. Good. Well, I would be crying. I am fortunate that I always have to start again. The next item is to agree to take business in private. Agenda item four relates to a contingent liability issue, which the Scottish Government has requested that the committee consider before the summer recess. Such issues have been dealt with regularly in private in the terms set out in the written agreement between the committee and the Government, as they often relate to Scottish Government contracts that involve third parties. It is, of course, open to members to object to items being taken in private if they so wish, but can I ask members whether they are agreed to consider agenda item seven in private? Anybody contrary minded? No, good. Item five relates to the appointment of a budget adviser. You will have read the paper. The committee has traditionally appointed adviser to assist the committee in its scrutiny of the Scottish Government budget. I should perhaps start this by saying that there is a question in some people's minds as to whether a single adviser at this stage of the process can actually do the job that we are requesting. I think that we should discuss what that job is. That is not part of our discussion about who would do that job. That will come at the next meeting when we look at the nominations that we have been seeking. However, the work of the committee as we will come on to when we discuss the work programme is likely to be complex. It will, for the first time, consider substantial matters of taxation and it will also consider the normal scrutiny of the budget, which is a complex process. I should make the point that the committee will not consider matters of the constitution at this stage because the standing orders of the committee have not yet been changed to give the committee that responsibility. That will only happen in September, if it happens. It will be considered by the Procedures Committee. I am expecting it to report sometime after summer recess. The committee, for the period that is certainly into the early part of after summer, will deal with finance and not constitution. We can come back to the constitution issue of advice later on, but for this specific item, this is to do with the budget process. Adam, do you want to speak? No. Ah, not yet. You were waving your pencil, I wondered. It is not an auction or you would have bought something. Right. Can I invite comments on the appointment of a budget adviser and any views that members have? I think that it might be difficult to find somebody who is an expert in both those areas, and therefore it might suit us better to have two people. If such a person existed that had all the talents to cover the responsibilities, that might be possible, but I agree that it might be necessary, given the additional powers that are coming to the Parliament, to look at two areas of expertise and look at two individuals that hold that expertise. Two very different things potentially require a different background and experience, and I think that it would make sense to look at two options if that was possible. I mean, as I understand it, we would have to probably seek additional resource, but that is not impossible to do. I think that that would be better than finding ourselves constrained in terms of the advice that we get particularly on what is going to be a complex year. I was a constitutional adviser to the House of Lords Constitution Committee for six years, and it was an annual appointment that was then subject to reappointment. I think that in the papers that suggested that the proposed term would be two years. I would recommend, at least in the first instance, thinking about a one-year appointment, or perhaps two one-year appointments, on the basis that the responsibilities that are coming to this committee are different from those that our sister committee had in the last Parliament, and that we should give ourselves some wiggle room for maneuver and learn. I think that that is very sound. I mean, I would tend to agree with that. Would members agree with that as an approach at this stage? Because when we come to the work programme, it is obviously going to be clear that we are in a process of transition. I think that you are right that we should not tire ourselves down too greatly. That is likely to affect the number of people interested in taking the job on. The space is currently putting together a list. I mean, I could not answer that at the moment. We already have some names on the list, obviously. We would have to speak to them again in relation to that. What will we do? We will do that before the next meeting when we bring back the list, so we will have that information for you then. Okay. We would seem to be minded then firstly to go for probably splitting this into two, and secondly to looking at an annual appointment if, as Patrick points out, it was not a disincentive in terms of appointment. I mean, if it was, then I think that we would want to reconsider that. Would that be where the committee is minded to go? Is that acceptable? Okay. Can we take that forward and look at the next meeting to look at a suggested list for two posts? Perhaps we could also start the process of seeking the resource by saying that we think that it should be two posts at this stage. That process we need to take forward. Okay. Excellent. Thank you very much indeed, and we look at this in private. Sorry, Adam. I mean, can I just be clear that this does not preclude us from in the future the possibility of considering the appointment also of an advisor on the constitution? Absolutely, it does not. The resource would stretch potentially to three advisors. Okay. If we require that resource, then it is right that we seek that resource. Okay. Thanks. I don't think that these are not items that can be skimped, so if we find ourselves in that position, but we won't be in a position to do that until the autumn, I suspect. Good. Could I also suggest that, given that we are then going to be dealing with names and appointments at the next meeting that we take this item in private at the next meeting, I think that it's impossible to do it in any other way, frankly. Okay. Good. Thank you very much indeed. The next item involves consideration of the legacy paper, and there are two items that are particularly important. First of all, having read the legacy paper on several occasions, now I think that we should record our thanks to the members of the previous finance committee and to its convener and vice convener for the work that they undertook. This is a robust and informative legacy paper, and it should give us food for thought, particularly in shaping what is going to be a very busy and complex series of actions over the next few months. We need to do two things today to start an openness process. One is to invite the cabinet secretary to give evidence to us at the next meeting to open his thoughts up to us, because I think that it's important that we know what he and the Government are thinking about those matters. The second one at that meeting is to look at the issue of the work programme. I just want to make a couple of points before I open it up and ask Gallagher to contribute. There is a clear role that we have to fulfil in budget scrutiny, so our hands are tied to some extent about what we're going to be doing at certain times of the year. When the budget process starts in September, we have a clear run through and things that we have to do right through until January or early February. In addition, for the first time, the Parliament will be considering serious matters of taxation, and the budget scrutiny model that we are operating on is a model that is predicated on spending but not on raising money. That creates a new situation that we have to consider and that the Government has to consider, both in terms of timescale and in terms of how that scrutiny process goes forward. We have a model that is much respected and has been effective in terms of budget scrutiny. I wouldn't want to lose that, but equally we will have to adapt it. The first task that we have is to undertake our budget scrutiny task and to negotiate that as ever with the Scottish Government, but also to put in place, along with the Government, the question of how we put in a new but model. That is going to require parallel actions to take place over the winter and into the spring. Then there will be other issues that each of us are bringing to the table in terms of our interests in the subject and, ultimately, our interests in the constitution as well, which we will want the committee to consider. However, the space for us to do so in the period certainly up until January will be very limited. It will be more likely that we will have time and space thereafter, probably from the beginning of February, through until next summer. That is likely to be the annual programme that we will take. We hope to have a wayday in August to start to take those issues forward and also to help us—I have asked the clerks also to consider how else we can do this—to help us to come to grips with some of the very complex issues of which we will deal. Those of us who were in the last Parliament and who nodded sagely when the fiscal framework was going through have not necessarily engaged in the greatest detail with the fiscal framework, which it is now incumbent upon us to do. I think that we need to look at the budget process, we need to look at the new process of putting in place a new construct for scrutiny and we will also have our own issues to bring forward. Those are all things that we need to address here. I look forward to an early opportunity to have the minister before us, because I think that a close relationship between the committee and the minister, the members of the committee and the minister, is vital. I know that the work that was done by John Swinney, while we may have disagreed with him, to a large extent on many of the things that he did, the fact that we had that good work in relationship was key to the success of the process. I also agree that, of course, with the new powers of taxation coming our way, the committee will have to adapt the way that processes the budget. It is not only taxation, my concern also extends the borrowing, but that is just me. The convener also mentioned the issue of the fiscal framework. Having been on the devolution and further powers committee at the time, the fiscal framework was being developed. It was disappointing to some extent that members of the Parliament and members of the committee were almost excluded from that process. I would like, if possible, to see a stronger relationship developed so that we could better monitor what is going on in that area. For that reason, I think that the constitutional element will become very important to us and has an importance that will be reflected in the fiscal work of this committee, not just in some separate box that is constitution. Good points. Who would like to—I hope that we would all contribute—Murdo? There are two issues that are touched on in the legacy paper that I think are important. The first is the role of the Scottish Fiscal Commission that has newly been established and its remit was only agreed in detail as part of the fiscal framework discussions. I think that it would be important that this committee has an early opportunity to meet with the fiscal commission members and have a full understanding from them as to how they see their role and how the committee might interact with the fiscal commission. In terms of other issues in the legacy paper—there is one particular issue that is of interest having met the Law Society tax committee just last week—there are issues around LBTT and its operation. I noticed in the legacy paper at paragraph 14 that there is a recommendation that the committee looks to review the first year of LBTT, how it has operated, what the impact has been on the market, what the tax take has been because the suggestion is that the tax take is below original expectations and specifically look at the question of the additional dwelling supplement that has been newly introduced and how that is operating in practice and how practitioners, lawyers, including those who are having to deal with the practicalities of that particular measure. I hope that that is something that the committee could consider. I think that that should certainly be passed to the character of consideration in the work programme. On the fiscal commission, the intention, I believe, is to have them present at the away day for an informal presentation and I will meet the convener of the fiscal commission to have a first conversation before the end of session and I will obviously report on that and I will have a chance to meet all the members and to have that conversation, but I think that we will require to establish a close relationship with them. I am happy to support the proposals that I have there at Macai and also the commission engaged with the committee in the near future. I think that there are just one or two issues that I wanted to pick out. One is about the recommendation in the legacy paper that the committee should be leading on wider debate within Scotland about tax policy, and I struggle to see when we will have a chance to do that. We are about to break for summer recess, not very long after the summer recess a draft budget will be published. It seems that there is no space for that wider debate about tax policy to take place. It would be regrettable if we simply had to dingy that aspect of the legacy paper, but it is worth noting that that is going to be a lack of time. I wanted to say something about the timescale of the budget process and the impact on other committees. On a number of occasions over the last session, other committees have quite justifiably complained that they are unable to make the judgments that they need to. The one that irritated me most frequently was that the carbon assessment of the budget was not produced in time for the climate change committee to do its budget scrutiny. There are a number of other examples around the remits of other committees who will be reporting to us on the budget about their specific portfolios and remits. I think that we need to put pressure on the Government to ensure that it has the information available for them to do their job. I just want to say something as well about minority government. Experience tells us that, in a period of minority government, there can be much more substantial changes, for example, to legislation as it goes through. Where very substantial changes come through to legislation, it may well be that the financial memorandum has introduced bears very little relationship to the final article that is being passed. I notice that there is a recommendation that the Government should be asked to bring forward some sort of post stage 1 update on the financial memorandum. I wonder if that proposal needs to be beefed up in the context of minority government and ask the Government to give an assessment of the possible changes that are under consideration by Parliament in legislation. There might be other changes that we want to make to the budget process itself given the context of minority government, but that is just one aspect that may be relevant. Two important points. One is that everything that has been said in the discussion in the clerks will consider and refine through into the work programme paper, so we are essentially laying out the ground. I think that those are all important issues. We will have, I hope, the Cabinet Secretary here in two weeks key issues, which I think members and you particularly will want to raise one of those issues from the legacy paper. It is not my intention in the briefings that the committee would have to suggest questions for members. I think that members should want to ask their own questions, but, as questions occur to you, you may want to ask Spice or the clerks for further information to allow those questions to be filled out, but they are important questions that you are reflecting on. The timescale will have the chance to influence, of course, strongly, because we are talking about a new budgetary model as that goes forward. I think that those are very important parts. We are just picking up a point that has already been made about timescales and new powers as well. Moving from just primarily scrutinising spending to also including discussions on tax and the need to A, get it right and B, tax has a big impact on behaviour and making sure that our discussions are given enough time and we get enough time to scrutinise as well to ensure that this time in a year where there is a lot of flux and we have these new powers that we get it right and so not hurrying this side of Christmas. There is a protocol established that will require to be considered as we go on, and the committee will have to be happy that it can recommend it to the Parliament. I know the comments that people have made about the changing landscape and the additional tax powers and that has got to be a great focus for the committee. I think there are two practical points that come out to me from the legacy paper. I think that is first of all the use of forecasting, particularly in terms of the fiscal commission. I think that can greatly help the work of the committee working along with the budget adviser in terms of forecasting the impact of changes and also different scenarios can help inform our discussion and also give a certain robustness to any decisions that we take going forward. I think the other thing that is of interest is outcome-based budget scrutiny. I was first sat on the finance committee in 2007 and there was a lot of discussion then about outcome-based budgeting. It is probably fair to say that it is something that we have not addressed correctly and got right. I think that the Government would even acknowledge that, but the point of it is that it is not just about pushing the spending into different areas. It is about what that spending is actually achieving, and I think that it is right to focus on outcomes. We need a framework around that so that we can properly assess the outcomes and whether the spending that has been allocated to different areas is there for effective. That is an important point, and I am sure that that requires to be built into our work programme, both in what we do through the budget but also as a special item. Thank you. I will just echo that point that James has made. I am obviously on the health and sport committee as well, which is the biggest spending committee, and the relationship between where the money is going and what outcomes it is delivering are and how that aligns up with priorities and how that is measured. I think that that is very important and something that we should consider, but that is all. Adam? Thanks. I found the legacy paper extremely helpful, and I would echo the remarks that have already been made about it. I think that looking carefully at the role of the Scottish Fiscal Commission should be a short-term priority of this committee. I think that almost doing post-legislative scrutiny of the Fiscal Framework Agreement would also be—I mean, I know it is not legislation, but post-agreement scrutiny of that would be valuable. I do have a concern about building in enough time in this committee's very crowded agenda in the autumn for whatever the constitutional consequences are of next week's referendum. I am very conscious of the protocols. I would not say anything about the referendum, but whatever the result on Thursday, it will have constitutional consequences, not only for the United Kingdom, but also for Scotland. We should not, I think, convener, with respect, imagine that it would be appropriate only to start consideration of those in the new year. I think that we will have to find time, whether we like it or not, in the autumn to take on board something of that. I think that you are absolutely right about that. Although we cannot go into any detail of it, that will be an imperative, and I do not think that there is any question that that will require to be done. It is just in terms of the way that the committee operates. I am obviously entirely in the hands of the committee, but during the discussion of committee reform in the last session, there were discussions about ways in which committees might operate either through rapporteurs, and this committee has worked through rapporteurs before, I think, has it? I do not think that you mean by rapporteur, but not particularly, I tend to work as a committee as a whole, to be honest. Either through rapporteurs or through small groups, with the consent of the committee, because it is, we will be immensely pressed. I mean, this committee will meet once a week, and I really do not think that it is sensible for committees to meet twice a week, but there will be other things to be done, so I will hopefully the committee will be agreeable about working in slightly different ways from time to time, and I think that we should have developed the confidence in each other that we can allow that to happen. Just a couple of points. I echo Murdo Fraser's point about looking at LVTTT, and the issues there have obviously been concerns raised by the Scottish Property Federation and others about the impact on that particular tax. Obviously, we should be more understanding that. I would agree with what has been said about outcome-based budget scrutiny, and also, if we can look at not just outcomes but the impacts as well, I think that that would be of budget decisions that would be beneficial. The other thing in terms of timescales that has come up, I obviously note that the legacy paper says that the committee was often put under unrealistic timescales by other committees. I am not sure in terms of financial memorandum—there is over 60 financial memorandum, I think, in the last term—I am not sure if we are going to be dealing with the same amount of legislation in this term or not. Obviously, I have not been on the committee before, but I do not know if there is anything that we can do to change that, but it might be worth discussing that. That is an important point. With the secondary legislation too, which, given the implementation of tax powers, I suspect will be considerable, we will have to look at that. In your own remarks, you talked about a new construct for scrutiny. While I completely agree with the comments made about outcomes-based scrutiny, I think that there is a case to be made for trying to put some kind of scrutiny process in at an early stage of financial planning. Murdo Fraser might recall some of the experiences that we both had in the audit committee over a number of years, in which there were some common threads running through the public sector and public finances, and we always seemed to intervene or scrutinise at the end of a process. A good practice would tell me, and I would hope that Members would agree, that if we can do any element of earlier scrutiny of some of the financial planning, perhaps we might not get the opportunity to do it too much, convener, and I am not suggesting that we begin to attempt to micromanage projects or capital projects or whatever that is going on, but I think that there is a job of work to be done to look at as early a stage as possible if financial planning is reliable enough for us. If not us, who should do that kind of activity, and I hope that Members might support that, and the committee might get an opportunity to do something in that area. Good, thank you. Ash, would anybody like to make further comment? If not, I think that the clerks have a clear indication of what the initial priorities are. What I would suggest is that we have agreed to invite the Cabinet Secretary to come two weeks' time. I think that we should then consider a work programme in private, which is a normal way of doing it, and it will take account of the points raised here and the legacy papers, and we will then be able to discuss in more detail what we might do. We will also know what post-Brexit looks like, so we will have some idea of what will fit in there. Yes, we will take the paper in private, is that agreed? We are now at the end of the public part of the meeting, so I am going to close this part of the meeting, allow the public and the official report to leave, and then we will move into private session for agenda item 7.