SP Paper 738 (Web Only)
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 Government 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:
Kenneth Gibson (Convener)
John Mason (Deputy Convener)
Richard Baker
Gavin Brown
Malcolm Chisholm
Mark Mcdonald
Jean Urquhart
Note: The membership of the Committee changed during the period covered by this report, as follows:
Mark McDonald replaced Jamie Hepburn on 27 November 2014 and Richard Baker replaced Michael McMahon on 08 January 2015.
Annual Report 2014-2015
Introduction
1. This report covers the work of the Finance Committee during the parliamentary year from 11 May 2014 to 10 May 2015.
Budget scrutiny
2. The Scottish Government published its draft budget for 2015-16 on 9 October 2014. This was the first draft budget to contain provisions relating to the devolved taxes established under the Scotland Act 2012. The Committee’s focus for budget scrutiny this year included a specific focus on the introduction of these taxes, particularly the proposed bands and rates for the Land and Buildings Transactions Tax (LBTT).
3. The Committee issued a call for evidence in August 2014 inviting views on what the rates and bands for the devolved taxes should be. Twenty one responses were received which assisted the Committee in identifying a number of key themes and issues which it explored further in taking oral evidence from stakeholders.
4. The Committee also continued its scrutiny of how the Scottish Government’s draft spending plans supported the shift to preventative spending.
5. The Committee’s report on the draft budget was published on 12 January and debated in the Chamber on 21 January as part of the debate on Stage 1 of the Budget (Scotland) (No.4) Bill.
6. The Committee then considered the Bill at Stage 2 on 28 January. The Scottish Government responded to the report on 3 February. The Bill was subsequently debated at Stage 3 and passed by the Parliament on 4 February.
Inquiries and reports
7. The Committee has carried out a number of inquiries this year on the implications for Scotland’s public finances in the event of changes to the financial responsibilities of the Parliament extending further than the powers contained in the Scotland Act 2012.
Scotland’s Public Finances Post-2014
8. The Committee held a series of evidence sessions between April and June 2014. The issues considered included pensions in Scotland post-2014, the Barnett formula and the potential size of Scotland’s budget following the referendum in September 2014.
Further Fiscal Devolution
9. The purpose of this inquiry was to enable the Committee to contribute to the debate on the options for the devolution of further financial powers to the Scottish Parliament and the impact on the block grant of any such devolution.The issues considered in the inquiry included the Barnett formula, the block grant adjustment, borrowing powers, fiscal institutions and intergovernmental machinery.
10. The Committee held a number of oral evidence sessions during the inquiry, including an evidence session with theChief Secretary to the Treasury and the Cabinet Secretary for Finance, Constitution and Economy. The Committee published itsReport on Further Fiscal Devolution on 4 March.
Scotland’s Fiscal Framework
11. The Committee agreed to undertake an inquiry examining the proposals for a fiscal framework set out in Chapter 2 of the UK Government command paper: Scotland in the United Kingdom: An enduring settlement.
12. The Committee issued a call for evidence in relation to the inquiry and has agreed to take evidence at a number of meetings with a view to reporting before the summer recess.
Implementation of the Scotland Act 2012
13. The Committee took oral evidence on the implementation of the Scotland Act 2012 from Her Majesty’s Revenue and Customs on 14 May.
14. The Committee also took oral evidence from Revenue Scotland, Registers of Scotland and the Scottish Environmental Protection Agency on the implementation of the devolved taxes which came into effect on 1 April.
15. The Committee took evidence from the Office for Budget Responsibility on 1 April on the forecasting of receipts from the devolved taxes as well as on the wider UK economic and fiscal outlook.
Bills
Revenue Scotland and Tax Powers Bill
16. The Committee was lead committee for the Revenue Scotland and Tax Powers Bill. The Bill provided for a Scottish tax system to enable the collection and management of devolved taxes. It also allowed for the establishment of Revenue Scotland as the tax authority with responsibility for the collection and management of Scotland's devolved taxes from 1 April 2015.
17. The Committee considered the Bill at Stage 2 on 11 June.
Community Charge Debt (Scotland) Bill
18. The Committee was lead committee for the Community Charge Debt (Scotland) Bill. The Bill provided for an end to the collection of community charge or poll tax debts in Scotland.
19. The Committee issued a call for evidence on the Bill on 10 December in response to which twelve submissions were received. The Committee took oral evidence on the Bill in January.
20. The Committee published its Stage 1 Report on 22 January and the Government response was received on 2 February. The Committee considered the Bill at Stage 2 on 4 February.
Scrutiny of Financial Memoranda
21. The Finance Committee scrutinises the Financial Memoranda (FMs) that set out the estimated financial implications of legislation. Each Bill that is introduced in the Parliament must be accompanied by a FM.
22. In the course of this year, the Committee considered twelve FMs, inviting written submissions from stakeholders and, depending on the issues identified in these submissions taking oral evidence from stakeholders and the Scottish Government. Where the Committee has not taken oral evidence, conclusion of scrutiny has involved passing on the written views or writing to the lead committee to highlight some of the key themes on which views had been given. Where the Committee decided to take oral evidence, a formal report was submitted to the lead committee.
Subordinate legislation
23. The Committee considered 20 affirmative and 13 negative Scottish statutory instruments during this year. The bulk of these instruments related to the introduction of the devolved taxes under the Scotland Act 2012.
Engagement and innovation
24. During the year, the Committee met 32 times. No meetings were held entirely in private but 22 meetings included items taken in private. The items taken in private included consideration of draft Committee reports and work programme issues. All Committee meetings were held at the Scottish Parliament except the external meeting in Arran.
25. As part of its scrutiny of the draft budget, the Committee held a workshop and formal meeting on Arran in December 2014. The workshop allowed the Committee to hear from local businesses, organisations and community representatives about the impact of public expenditure on their community.
26. Following the workshop the Committee took oral evidence from the Cabinet Secretary for Finance, Constitution and Economy. The formal meeting took place before an audience including workshop participants, Arran High School students and members of the public which provided an opportunity to see how the views of local people were used by the Committee in scrutinising the draft budget.
27. The Committee also took on a new role this year, holding pre-appointment hearings with the nominees for appointment to the Scottish Fiscal Commission (SFC). This followed the Committee’s inquiry into proposals for the establishment of the SFC in which it recommended that appointments to the SFC by Ministers should be subject to the consent of the Parliament on the recommendation of the Committee.
Equalities
28. The Committee took evidence from organisations such as the Child Poverty Action Group in Scotland, and Inclusion Scotland during the inquiry into Scotland’s public finances post-2014. The Committee also took evidence from Trade Unions and the Poverty Alliance during Further Fiscal Devolution inquiry.
29. The Committee heard from local organisations in Arran about the equalities impacts of an underdeveloped broadband infrastructure and issues faced by young people in attempting to attain affordable housing or gain entry to employment, further education or training.
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