Chance for MSPs to change the future

Following a brief festive pause, Scotland's politicians will resume the process of securing a budget settlement. They do so mindful of the scale of the challenge presented by the scale of reductions in public spending. It will also escape few minds they face public accountability at the ballot box in just five months' time.

Yet, while the pressures of short-term expediency will be strong, Scotland needs a budget settlement which delivers against our nation's long-term ambitions of a sustainable economic future.

In this, Scotland requires bold-thinking, tough choices and a clear focus if it is to be a strong and successful competitor in the global marketplace and a smarter, fairer nation.

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We must be enterprising and collaborative. We must maximise our natural and created assets. Most of all, we must realise the fullest potential of Scotland's greatest resource, our people.

Following the UK Comprehensive Spending Review, Scotland faces the most challenging public spending reductions for at least 30 years. Scottish Council for Development and Industry supports a managed restoration of the public finances, while ensuring that public funds support capital spending, innovation and skills.

In this context, and building on the ambitions outlined in our Blueprint for Scotland, we believe it is important that clear principles relating to our nation, assets and people are agreed, against which Scottish public spending and budgetary decisions are made.

We have developed six budget principles and urge that these - along with key questions - are applied to decision-making by the Scottish Government and parliament and by business and civic Scotland.

First principle

Increasing sustainable economic growth is now an even higher priority for the Scottish Government and public services

Public funding should prioritise increased productivity in the medium to long-term, by rebalancing the economy towards net exports and higher innovation, investment and skills

Increasing sustainable economic growth will generate greater funding for public services

Sustained public funding is needed to support the transition to a low-carbon economy

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Key question: What does this spending contribute to sustainable economic growth?

Second Principle

Scottish budgets should ring-fence priority outcomes, rather than departmental budgets

Ring-fencing of specific budgets assumes perfect efficiency of provision in that area and there is clear evidence of scope for efficiencies within every portfolio

All spending programmes should be realistically re-evaluated and decisions should be based on an analysis of their long-term contribution to Scotland's sustainable economic growth and wellbeing

A national debate should be encouraged on the priority outcomes and the level and form of taxes which could deliver them, particularly in view of the rising cost-pressures on public services, demographic changes and increasing public expectations of services,

Key question: What are Scotland's priority outcomes and what departmental allocations would best support and protect them?

Third Principle

The core functions of public sector bodies must be identified and resourced. This represents an opportunity to develop new models and partnerships for public service delivery.

The Scottish Government and public services need to take a more strategic long-term view of priorities and direct scarce resources where there are clear needs and benefits to users

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Across all areas, there are opportunities to look at shared services, integration and smarter working

As well as securing value for money for the public purse, procurement should be accessible to SMEs and third sector organisations and encourage business growth and community benefit.

A percentage of the annual procurement budget should be ring-fenced to stimulate innovation

There is likely to be an increased role for user charging for certain services, such as roads

Key question: Does this spending offer a sustainable way of providing services for priority public needs and benefits?

Fourth Principle

Public spending should be subject to a 'Scottish Exports Test'

Priority should be given to spending which supports a Scottish Exports Target - SCDI has proposed this is to double the value of Scotland's international exports in the next ten years. Spending can be targeted in a range of areas to support higher exports e.g. health spending which supports growth of Scotland's life sciences sector. A more commercial, export-orientated mindset should be 'mainstreamed' in all parts of government, not just enterprise

The 'Scottish Exports Test' should also apply to legislation in the Scottish Parliament

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Key question: Does this spending pass the Scottish Exports Test?

Fifth Principle

The capital investment programme is a high priority, but business cases should be re-evaluated rapidly to ensure that projects are prioritised with current economic opportunities

Scotland's 'national assets' have huge importance. All initiatives should be examined to determine whether or not they enhance those assets.

The Scottish Government will need to place a higher priority in its own resource allocation to capital spending than has been projected by the UK government

Opportunities for re-profiling of the planned capital investment programme should be considered in light of changing economic and public expenditure context

Creative thinking and public-private partnerships are needed on new investment vehicles from strategic to community levels eg local authority pension funds into energy assets. Priority should be given to developing assets which will generate revenues for the Scottish economy and those which through a public share, may generate revenues for Scotland's finances in the medium to long-term

Key question: Is capital spending sufficiently aligned with current economic priorities?

Sixth Principle

Scotland's public spending should be reviewed to ensure inter-generational equity and funding to create new education, training and job opportunities for young people., who face particular challenges and, in the overall priorities for public spending, the Scottish Government should prioritise measures which support enhanced life chances for young people

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The international competitiveness of Scotland's higher and further education sector must be secured

Since devolution, the Scottish Parliament has committed itself to a larger range of universal benefits than other parts of the UK.

Certain universal entitlements may need to be limited because they are not achieving their objectives, or are no longer fiscally and economically sustainable in view of changing circumstances and demographic projections

Key question: Does this spending enhance the skills and employment opportunities of our young people over the medium to long-term?

We believe these six budget principles offer sound foundations on which to build a sustainable future for Scotland at a time of unprecedented economic change.

These are, after all, uncharted waters for Holyrood's politicians. Significant and sustained public spending reductions presents the Scottish Parliament with what is - for this still relatively young institution - a completely new challenge.

It is vital that they rise to this challenge and show the leadership Scotland requires. Cross-party working is vital to agree the Scottish Budget for next year and establish priorities which will deliver for the medium and, vitally, for the longer-term. Government has, for the first time, created national and local 'business plans' for Scotland. One of their weaknesses has been in not drawing in the private and voluntary sectors. Now is the opportunity to build a strong and open partnership between the Scottish Parliament, business and civic Scotland which would further support the budgetary process and the delivery of priority outcomes.

In addition, Scotland could derive value from greater independent analysis of public spending, for example, through the establishment of a Scottish Office for Budgetary Responsibility. A Scottish OBR could take a lead role in making an independent yet informed assessment of the public sector balance sheets, have control over forecasting and inform spending decisions. In an operating environment of greater fiscal powers, this would have increasing importance.

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No-one would suggest budgeting for Scotland against a global backdrop of economic uncertainty is going to be easy.

Yet, at a time when there is a risk that the global economy lurches into protectionism, Scotland must seek to play a constructive role in the UK, European Union and on the world stage, as an outward-looking and engaged country.

The first step on this ambitious journey for 2011 and for the long-term is securing a budget settlement that delivers for Scotland, founded on the shared principles and shared aspirations of a civic Scotland committed to a sustainable and successful nation.

• Gareth Williams is Head of Policy at the Scottish Council for Development and Industry