SCOTTISH EXECUTIVE

Financial Issues Advisory Group Report

3. BUDGETARY PROCEDURES

3.1 This section describes the possible framework for the Scottish Parliament's budgetary procedures, including participation of the Parliament in resource allocation decisions, the tax varying power, the form of Budgets and the system for Parliamentary consideration and approval.

The Budget Process

3.2 Annex D describes the present UK public finance system. Until now the process began with the Public Expenditure Survey. However, on 11 June 1998, the Chancellor announced significant reforms to the public expenditure system. These reforms focus on tightening spending control and improving long-term planning. In the new system there will be a clear distinction between capital and current spending. The new system is expected to differ from the present arrangements in the following ways:

the annual Public Expenditure Survey will be ended;
Departments will have firm multi-year plans for 1999-00, 2000-01 and 2001-02. In the year 2000, the cash-based plans for the year 2001-02 will be converted to resource-based format and a further 2 years will be added. From then on, the UK Government will operate on a basis of 3 year plans, e.g. 1 April 2005-31 March2008;
to make longer term planning possible, there will be a more tightly drawn control total called Departmental Expenditure Limits (DEL). This will exclude annually managed expenditure such as social security benefits, Central Government debt interest and certain EC related payments;
there is to be more flexibility in relation to carrying budget allocations over from year to year; and
local authorities will benefit from greater certainty in the total of Government support over 3 years.

3.3 Although the reforms to UK spending controls focus on longer term planning, the annual statutory forms of control, e.g. Main and Supplementary Estimates, accounting arrangements and so on, will all remain in place.

3.4 FlAG believes that, whatever decisions are taken in relation to the Assigned Budget, there remain strong arguments for statutory annual budgetary procedures. These aid parliamentary control and scrutiny without undermining the flexibility of longer term administrative arrangements. In addition, annual arrangements will still be important to dovetail with UK requirements for financial monitoring and control, auditing and accounting. Therefore FIAG recommends the Scottish Parliament adopt an annual procedure to scrutinise and approve the expenditure proposals of the Executive.

The Roles of Parliament and the Executive

3.5 FlAG has considered how the Scottish Parliament can participate in resource allocation decisions. In particular, FlAG has considered what the respective roles of the Parliament and Executive should be in the development of budgetary expenditure policies and priorities.

3.6 The first stage in the former process under the UK system is the publication of the Budget proposals, including expenditure plans. These are followed up by the publication of Departmental Reports. At a later stage, Estimates are produced which refine proposals into a format on which parliamentary approval can be given. FlAG has concluded that these procedures contain a number of shortcomings:1

there is a very limited time available for discussion of budget proposals on the floor of the House;
the motions available do not allow the House of Commons to influence the budget proposals;
the range of documents in which financial information is presented and the way in which such documents are considered by Parliament is less than satisfactory; and
many MPs lack the time and the technical expertise required to understand the budget documents.

3.7 Therefore, the Westminster system has not succeeded in promoting a constructive discussion of budgetary and expenditure priorities or a sensible dialogue between Executive and Parliament on these issues. As a result, the UK Parliament has no meaningful input and the approval of expenditure is made ex post facto. So, although the present system ensures that financial information is presented, it does not encourage the House and its Committees to make the best use of that information.

Committees

3.8 FlAG is clear that the Scottish Parliament should play a larger and more meaningful role in the scrutiny and approval of spending decisions than is currently the case at Westminster. In order to achieve this, FIAG recommends that the Scottish Parliament use a structure based on three distinct committee types. These are:

Subject Committees. These would deal with all matters relating to specific subjects, including financial issues and value for money questions, reporting back to a Finance Committee. They should also have a role in considering, recommending and commenting on individual budget proposals affecting the programmes with which they are concerned. It might be advantageous if they could be aligned with the subject matter of Departmental Resource Accounts.
Finance Committee. The Finance Committee should comment on reports provided by the subject committees and scrutinise the proposals of the Executive, including those for switching money during the financial year. It would also play a co-ordinating role in ensuring that the Executive's proposals are considered by the appropriate subject committee. Its terms of reference might be:

i. To advise the Parliament as required on budgetary and financial procedures and practices.

ii. To advise the Parliament as required on the Executive's budgetary proposals at each stage of the budget procedure, including any proposal for the use of the tax varying power and expenditure policies, priorities and presentation.

iii. To advise the Parliament as required on any proposals by the Executive for amending budgets or use of the temporary or interim spending authority procedures.

iv. To take the lead, on the Parliament's behalf in discussions with the Executive about these matters.

v. In all these areas, to have regard to the views and proposals of the Parliament's subject committees.

Membership of the Finance Committee should be restricted to MSPs. However, FlAG recommends that the Parliament puts standing orders in place to enable the Finance Committee to call upon external experts when additional advice is needed.

Audit Committee. FlAG believes it is essential the Parliament has a powerful Audit Committee, independent of the Executive. Since it will be for the Audit Committee to scrutinise the Executive, it would not be logical to permit Ministers to sit on the Committee. It should be chaired by an individual whose political party is not part of the Executive. The committee would oversee the audit and accounting of the Government in Scotland but it would not consider the policies of the bodies concerned. It would consider reports from the Auditor General for Scotland (AGS) concerning financial audit, and have a leading role in maintaining standards of regularity and propriety. The Committee should also consider where appropriate, value for money reports from the AGS. It should have wide powers to call for people (normally officials from audited bodies, including Departments of the Executive) and for papers. Its terms of reference might be:

i. To examine reports laid before Parliament by the Auditor General for Scotland so as to:

see that public funds are spent only on those activities that have been authorised by Parliament;

confirm that policies have been carried out efficiently, effectively and economically; and

ensure that extravagance and waste are minimised.

ii. To promote good financial practice within the Scottish Administration.

3.9 FlAG recommends that the Parliament makes appropriate arrangements for Committees to carry our their finance responsibilities effectively. A committee's legislative role is quite different its role as a scrutineer. If Committees are to be all purpose, then it will be important to ensure that, in their scrutiny role, they are seen as independent ie not whipped and not partisan. FIAG raised concerns in its interim report about whether this can be achieved within an all purpose structure and these concerns remain - although it recognises these may require to be balanced by CSG against wider advantages.

Parliamentary consideration

3.10 As mentioned above, at Westminster, although Main and Supplementary Estimates are delivered by deadlines, there is a lack of detailed scrutiny by Parliament. Standing Orders provide that 3 days are set aside in each session for consideration of Estimates and these will normally be close to each of the deadlines for Spring, Winter and Summer Estimates (i.e. 6 February, 18 March and 5 August) but they must all take place before 5 August. The Liaison Committee may recommend to the House that certain Estimates are selected for debate on each of these days. In practice, debates focus on general policy matters rather than the expenditure proposals themselves.

3.11 FlAG believes there should be more Parliamentary consideration of Budgets than is currently undertaken. The Group has considered the main methods for parliamentary scrutiny of budget proposals and drawing on the experience of other countries, FIAG recommends a combination of the following:

the whole Parliament should have the opportunity to scrutinise budget proposals (both main and amendments) in plenary;
the Subject and Finance committees might also play an important role in scrutiny of the Executive's proposals prior to consideration by the whole house; and
forms of questions or inquiries. This would also be open to members of the Scottish Parliament but is probably more effective in calling the Government to account in relation to policy questions than for specialised financial scrutiny.

Parliamentary control through Budget Procedures.

3.12 There are a number of conventions and requirements in the UK budget procedures which play a key role in the Parliament's control of Government Expenditure. Other legislatures employ similar safeguards. FlAG endorses these. In the Group's view the principles have considerable merit and also make sense since, in relation to the Assigned Budget, we will continue to live within the Westminster system. FIAG proposes they are adopted by the Scottish Parliament as follows:

no expenditure without proper authorisation. Policy legislation cannot provide authority to spend on its own;
revised Budgets are produced to reflect adjustments;
no undue reliance on the Budget Approval alone - FIAG commends the long standing convention that most continuing functions should have the authority of specific policy legislation;
an absolute (cash) limit to spending;
annual Budget Approval (with end year flexibility arrangements covering much of the expenditure);
separate authority needed for overspends;
emergency spending subject to Parliament's authority;
no release of funds without legislative authority; and
Parliamentary authority is required to apply receipts.

3.13 In addition, FIAG has concluded:-

there should be a presumption that managers who save some of their allocated budget should be able to retain this for future use; and
there should be a regime (approved by the Parliament) which enables programme managers to retain current receipts to add to programme expenditure. However, it will be necessary to decide programme by programme and sub-programme by sub-programme, whether receipts should be available to sustain increased expenditure; ie whether the budget spending proposals should be gross or net of receipts and whether receipts should be scored as surrendered income or expenditure financing items. However, capital receipts (above certain limits to be decided) should be controlled.

Tax varying powers

3.14 In designing a budget approval system, it is also important to consider the mechanisms and timing by which the Scottish Parliament will make decisions in relation to its tax varying powers. The Scottish tax varying powers fall within the new Annually Managed Expenditure (AME) total and the deadline for the Executive's decisions on the amount of the tax to be levied would ideally be around November each year in order that final decisions can be taken on other spending programmes.

3.15 However there is a further complicating factor in that UK tax raising decisions may be taken later in the following March (depending when the Budget is made). It is possible that UK Government decisions on taxation could result in the Scottish Parliament wishing to revise a previous decision on the use of the tax varying power. However, this would pose many practical problems as plans based on a tax varying decision would need to be adjusted to reflect a revised funding situation. Therefore, while the possibility of a revision to a previous decision should be incorporated into the legislative timetable, it is hoped that this option will not be required in practice.

Rights of Amendment

3.16 In addition, there is the related issue of the extent to which MSPs might have the right to alter the Executive's proposals once they are presented to Parliament. FlAG has examined other systems and notes that although in many Parliaments members have such rights constitutionally, various rules have been made to restrict these. The UK system forbids not only increases in expenditure, but also increases in revenue, so that the Parliament may not vote sums in excess of the Government's Budget. Consequently, the only amendments that are in order are those that aim to reduce the sums requested.

3.17 One option might be the notion of a balanced budget where members may only move amendments to create or increase a public charge or to reduce revenue if they indicate how the resulting budgetary deficit is to be met - ie a zero sum game. FlAG has considered this option. But while it is important to provide the opportunities for committees and members to influence spending proposals, the Group believes the right time for the main Parliamentary input is not at the budget approval stage but at an earlier stage in the process, when priorities are being set. To do otherwise would mean local authorities and others would face difficulties in setting their budgets since they require a firm indication of the resources likely to be available to them by December (which is too early to enable proper consideration of the Executive's final proposals). That aside, FlAG believes there are considerable advantages in this approach. It would provide more opportunity for debate and would leave the final approval of spending proposals as more of a formality. There would be significantly more opportunity for consideration of proposals at an earlier stage in the process than is currently the case.

Three Stage Framework

3.18 Essentially, FlAG is concerned to provide the mechanism whereby, at an early stage in the process, subject committees can put forward their views in relation to both changes in priorities and cases for additional resources. This input would take account of the

representations of the public to relevant committees. The Finance Committee would also play a co-ordinating role in indicating its view of overall priorities at an early stage as well as the need for the use of tax varying powers. FlAG also supports the role of individual MSPs and believes there must be suitable opportunities for them to table formal amendments which, depending on the level of support, could be debated in plenary sessions. However, FlAG is clear that in the case of formal amendments it would not be acceptable to recommend changes which increase the budget. MSPs cannot propose use of the tax varying power (ruled out by the Scotland Act) or similar charges. Therefore any amendments to increase the budget in one area should be accompanied by an indication of how the resulting budgetary deficit is to be met - ie where savings are to be made.

3.19 Finally, the Parliament must retain the right to accept or reject in entirety the Executive's detailed spending proposals. This should be seen as an option of last resort and outright rejection of the final budget is very unlikely but it gives the Parliament the leverage to ensure Executive does not flout its rules to an unacceptable degree.

3.20 Taking the above issues into account it will be important that any Scottish budgeting system is capable of:

providing opportunities for the Parliament to comment on expenditure priorities and to influence the Executive's preparation of Budgets. This suggests committees be provided with the opportunity to comment at the planning stage;
provide the opportunity for the public to participate in the process. FlAG believe interested parties ought to have the opportunity to put their views to the relevant subject committees, as well as individual MSPs at an early stage in the process;
providing sufficient time to consider and debate proposals fully. This suggests significant debate of plans as well as strengthening the argument for a system of interim budget approval;
providing balance between the requirement for Parliamentary scrutiny and the needs of the Executive;
for some degree of certainty so that on-going activities can continue without prolonged uncertainty;
providing an efficient mechanism to deliver motions to be debated by the Parliament;
providing a meaningful role for subject and Finance Committees;
delivering timeous decisions on tax varying power and the Budget (as well as the interim spending approval and budget amendments);
engaging all MSPs;
facilitating the Executive's formulation of proposals; and
providing for rights of amendment as described in paragraph 3.17 above.

3.21 FIAG has developed the following three stage framework which aims to meet the above considerations. A detailed timetable showing how this framework would look in practice is at Annex C.

Stage 1

3.22 The first stage in the budget-making process should begin when the previous year's process are concluded in March or April. At that stage in the year, the discussion will be about future strategy and priorities, based on the forward plans for years 2 and 3. Stage 1 consideration should include the opportunity for public input through subject committees. Local authorities and public spending bodies should have the opportunity to comment as part of this process.

3.23 In keeping with this, FIAG recommends that the Executive publishes an Annual Report by 20 April each year, setting out the final proposals for the year immediately ahead, as embodied in the "Budget approvals", and the provisional plans for the two following years. The Report should also set out policy objectives and some assessment of performance against past objectives.

3.24 The report should be the basis for a full debate, preceded by select committee hearings by the Finance and other committees. The Finance Committee might then produce its own report, cross-cutting to reports by subject committees, on strategy for the two years ahead. The Parliament could debate this, possibly on a "take note" motion, and endorse it, or otherwise, in general terms, by the end of June each year.

Stage 2

3.25 This stage should begin with publication by the Executive in mid-September of a preliminary draft budget for the year ahead which is more detailed than the earlier plans (but not down to individual subhead level) and takes account of recent developments. This budget has, however, to be provisional. There are several reasons why significant changes may be needed at a later stage:

first, the Cabinet in London may take decisions on the expenditure aggregates which will affect the total budget size. Such decisions may not be taken until the second half of November;
second, some demand-determined programme projections may change or some other unforeseen pressures may appear (or unforeseen opportunities for savings) which will affect the whole position; and
third, the Government in London may decide to change tax rates in ways which would influence the Scottish Parliament's decision on whether to ask the Scottish people to pay more (or less) tax. If such changes are announced in March, there is little that can be done to take them into account. If however Cabinet reverts to end-November announcements, these could be taken into account in framing the Executive's final proposals.

3.26 The risk of significant change in the budget total, in individual programme requirements and in the wider tax position, makes it awkward to have a budgetary procedure during the autumn in which Parliament is actually voting on individual budget lines, (though this option should still be available to MSPs). FlAG wishes to encourage a productive discussion of policies, strategies and priorities between the Parliament and the Executive. The old-fashioned approach of amendments to individual lines is not the best way to promote such discussion.

3.27 A possible way ahead would be for standing orders to provide for the Parliament's Finance Committee to produce, and the Parliament to endorse or otherwise, by the end of the first week in November, a report on the Executive's preliminary proposals. The Finance Committee would be expected to have regard to points made by subject committees. It could also, if it wishes, produce a rival set of proposals not involving more money in total. The Executive would then have this available to it when preparing its final budget proposals for publication in January. There would not, however, be a process of line by line votes by the Parliament in Stage 2.

Stage 3

3.28 It should, as suggested above, be a key objective to have the Budget for any given year agreed before the year begins. It should also preferably be agreed some weeks before the year begins so that local authorities, nationalised industries and grant-aided bodies (among others) have time to finalise their budgets before the year begins. There are two considerations which point towards this:

first, it is bad practice, and inimical to good management, although regrettably common, to begin the year without a firmly agreed budget or to expect others to do so;
second, it is far better that the budget for the year immediately ahead should be agreed before stage one of the procedure for the following year's budget begins.
3.29 The Stage 3 process should be:
the Executive publishes by 20 January a complete set of budget proposals, with an accompanying commentary setting out (among other things) how it has responded to the Parliament's earlier reports and the latest developments in London;
a debate is held on the proposals. The Executive could be empowered to amend its proposals if necessary;
during Stage 3, committees should be able to seek clarification from officials. They should not however be able to vote on individual budget proposals made by the Executive;
not less than 20 days after the proposals have been tabled, and not more than 30 days, the Parliament votes on the Executive's proposals for use of the tax raising or diminution power, if there is any proposal to exercise this power; and
if the Executive's proposals prevail, the Parliament then votes immediately on whether to accept or reject (in toto) the Executive's proposals for the expenditure budget.

3.30 The timetable would therefore be as follows:

By 15 December Executive announces provisional proposals for local authorities.

By 20 January Executive announces complete set of budget proposals.

Early February Debate.

By 14 February Parliament votes on the tax decision and then the expenditure budget.

Budget Documentation

3.31 FlAG has considered what the Executive's Budget documents should look like when they are submitted to Parliament. The issues it has examined include:

what is the right level of detail for the documents?
how should they be approved - by primary legislation or by secondary legislation?
what should they cover? and
how many should there be?

3.32 An example of the current UK format together with what a resource budget might look like is at Annex E.

3.33 Essentially, UK budget documents - known at Westminster as "estimates", are divided into classes broadly aligned with Departmental structures. Within each class, each Department's estimate is divided into 3 parts. Part 1 gives a form of description of the services to be financed. This is known at Westminster as its "ambit". This has statutory force in the UK system. It is reproduced in the "Appropriation Act" (which Westminster uses to authorise expenditure) and provides the statutory description of the purpose for which the money is to be granted. No expenditure can properly be incurred when any service is not covered by the ambit. Part II of the Estimate analyses the proposed expenditure into, firstly, broad subject area and secondly broad economic category (current or capital, grants or direct expenditure). Part III gives particulars of receipts which are expected to be received in connection with the expenditure on the relevant service but which are to be paid to the

Consolidated Fund and not used to supplement the allocation of money to the specific service in question.

3.34 Resource estimates will replace the current cash based system by allocating resources-to each department in a new format that will include:

a total for "resources" being the accruals-based amount for current expenditure; and
a total for "cash".

3.35 Resource based estimates will be introduced from 2001-2002 in Whitehall. FlAG recommends that in Scotland the 2000-01 budget documents should resemble as closely as possible, the format to be adopted under resource accounting and budgeting. FlAG recognises however, that it might still be necessary to report on a cash basis at this stage.

3.36 FlAG has concluded that:-

Budgets are formal procedures but are nevertheless necessary in terms of securing the Parliament's formal authority for expenditure and as a means for checking the regularity of payments, etc;
Budgets should follow the internal structure of the Scottish Administration and hence align with Accountable Officer responsibilities.
the ambit is a useful concept and should be retained. However, FIAG recommends that this part of a Budget should be known as its "Scope" as this is a term which is more commonly understood;
the Budget spending proposals should cover all expenditure by the Executive which the Parliament has to approve, rather than all public expenditure in Scotland;
these proposals should also include, after consultation with the Parliament, expenditure which the Parliament has to approve but is not formally for the Executive to propose - notably expenditure by the Parliament itself and expenditure on judges' salaries;
the Executive should also report to the Parliament on the levels or expected levels of other public expenditure in Scotland, including expenditure decisions by local authorities, expenditure by Parliament and judges' salaries;
each Budget proposal should be accompanied by a narrative (ie a financial memorandum) explaining the objectives which would set out proposed outputs and expected outcomes; and
Budgets should be disaggregated to lower level than that required by the Parliament for the purposes of financial control.

Interim Spending Approval

3.37 One of the key objectives of the Scottish Parliament should be to make sure that each year it approves a Budget for the Scottish Administration before the beginning of the new financial year. This is needed so that those who rely on money from the Parliament can make their own financial plans. The Parliament's procedures therefore need a timetable that supports this aim.

3.38 FlAG has considered 2 possible options for the Scottish Parliament namely:

the Parliament puts in place its main Budgets by March; or it adopts a more relaxed timescale, leaving more time for consideration of proposals, and puts in place a procedure to fund the Scottish Administration before the Budget has finally been approved.

3.39 Until now, it has been questionable whether it was feasible to produce Budgets and have the Parliament consider and approve these by the end of March. The decisions in relation to the 3 year settlements may have reduced these difficulties. However, FlAG concludes that it is still desirable to propose an interim procedure, if only as a fall back mechanism. This arrangement would be flexible enough to cope with future changes to the Parliament's timetable. In conclusion, FIAG recommends the Scottish Parliament sets up a procedure to ensure that the Administration can be kept in funds until a Budget has been approved.

In year changes

3.40 The existing Westminster system enables the Executive to seek Parliament's authority for revised estimates in the summer, winter and spring. FlAG recommends similar arrangements are adopted by the Scottish Parliament as a convenient means to balance in-year flexibility for managers with parliamentary control.

3.41 However, FlAG believes the Westminster system is difficult to understand, has no provision for Parliament to reduce approvals and too few opportunities for Parliament to approve revised Budgets. FlAG therefore recommends a system of Budget Amendments which;

is simpler to understand;
would provide Parliament with monitoring information in relation to expenditure as well as the current information in relation to increased limits, etc; and
would provide better dovetailing between control mechanisms and statutory approvals.

Executive Discretion in relation to in year changes

3.42 At Westminster, there is a process (known as "virement") by which savings on one subhead of the Budget are transferred to be spent on another subhead. Broadly, during the course of a year a Department may choose to spend more on a particular subhead, offsetting the extra amount by savings elsewhere within the Budget. This process provides the means of varying the allocation of money granted by Parliament. However, it is not permitted for the total expenditure on any Budget to exceed the amount granted by Parliament.

3.43 Transfers between subheads are possible because, when approving a Budget, Parliament specifies only the total amount and scope of the Budget. Variations within this overall total are therefore possible. By long standing custom, at Westminster this discretion is exercised by the Treasury. Parliament is not specifically informed of budget transfers except, implicitly, on the presentation of accounts, but it is open to the Comptroller and Auditor General to mention in his report any transfers to which he or she thinks the attention of Parliament should be drawn.

3.44 FlAG has considered the degree of discretion which the Executive should have to make budgetary changes in-year. There are three main options:

greater control for the Parliament (than the Westminster model) leaving the Executive with little or no scope for discretion;

broadly equivalent arrangements as now - ie the status quo; and

light control leaving the Executive with much greater discretion. This would imply discretion to transfer between entire Budgets.

3.45 However, FlAG believes that:

it would be impracticable to allow the Executive little or no discretion to transfer funds. Original spending approvals are unlikely ever to match actual demand, and unforeseen circumstances could always result in the requirement to transfer funds urgently;
the present practice of budget transfers encourages economy in the Budgets. If surpluses on some subheads could in no circumstances be made available to meet excesses on others, it is likely that departments would seek to provide estimating margins in each subhead of the original Budget, leading to over provision on the Budget as a whole;
there is a possible relationship between the control (or budget transfer) framework and the level of disclosure of the spending authorities. Executives will tend to resist a greater degree of disaggregation of spending authorisations if these also represent the control aggregates. This could lead to uncoordinated requests from individual members (and others) for supplementary information giving details of particular allocations. This could be inefficient. On the other hand, a clear understanding that individual numbers in spending authorisations are not control aggregates could lead to greater willingness from the Executive to publish detailed allocations; and
there is a case for continued internal controls (as is exercised by Treasury in the current system) to ensure that such discretion can only be exercised in the light of the circumstances at the time, taking into account other pressures on the Assigned Budget. However a degree of flexibility could be introduced. For example, Departments might automatically be allowed to transfer up to 15% of receiving subheads or �50 million whichever is the lesser. The operation of such a system should be reviewed from time to time.

3.46 In conclusion, FIAG recommends:

the Executive be allowed reasonable discretion to transfer funds with appropriate internal controls BUT this should be subject to the Parliament being informed of transfers on a regular basis and not just when accounts are prepared as now;

transfers should be allowed between sections and subheads of a Departmental Budget but NOT between Departmental Budgets. This prevents wholesale switching of resources between Departments which could undermine the broad priorities agreed by Parliament;
Departments should be allowed to transfer up to 15% of receiving Budget sections or �50 million whichever is the lesser; and should be allowed to make transfers without restriction between subheads within a Budget section all without specific Parliamentary approval. (For this purpose, the term "section" is used to mean the level of aggregation used at Stage 2, i.e. one level below main subjects, e.g. national roads, roads and public transport might be sections of a transport budget. "Subheads" is used to mean any level below that); and
the system for budget transfers should be reviewed in 2002 (for 2003-04).

3.47 The Group has also made recommendations elsewhere in relation to contingent liabilities and Contingencies Fund arrangements (see Chapter 7).

Primary versus Secondary Legislation

3.48 FlAG has considered the need for legislative approval of the Executive's budget. This could be by primary or secondary legislation. Advantages of primary legislation might include:

it has clear precedent in many countries including the UK Parliament;
it might signal the importance of the Budget, relative to other matters;
it cannot be overturned except through legislation; and
primary legislation is amendable whereas subordinate legislation can only be accepted or rejected.

3.49 Against this primary legislation gives rise to considerable delay. Under the Scotland Act there is potentially a 4 week delay between a Bill passing and its receiving Royal Assent in order to allow for the possibility of challenge in relation to the Parliament's legislative competence. While this delay could be coped with in relation to the main Budget Proposal (through the interim spending approval procedure that FlAG has recommended), the timetable for budget amendments, particularly spring budget amendments is too tight for standard primary legislation.

3.50 FIAG therefore recommends that standing orders are developed to enable financial legislation to be passed more quickly than is normally the case, by, for example, limiting the opportunities for non-government amendments, This would have the advantage of giving more opportunities for parliamentary scrutiny than would be the case if secondary legislation was used, without making the process impractical.

3.51 In addition FIAG also recommends:

the Executive should provide as much information as possible as early as possible including giving indications in relation to its proposed use of the tax varying power;
budget approval should be made using primary legislation; and
in the event of Parliament rejecting the entire budget, fresh proposals would require to be brought forward before the expiry of the interim budget approval.

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