Public Audit and Post-legislative Scrutiny Committee

Meeting date: Thursday, December 21, 2017

Official Report 599KB pdf

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Settlement Agreements and Severance Policy

Under agenda item 3, we will take evidence from the Scottish Government on the related topics of settlement agreements and severance policy.

I welcome to the committee Paul Gray, director general of health and social care and chief executive of NHS Scotland, and Paul Johnston, director general of education, communities and justice.

I understand that neither of you wishes to make an opening statement so it may be helpful to set some context. The Scottish Government prepares an annual report on settlement agreements, which are legally binding contracts between employers and employees to resolve employment disputes.

Separately, we recently wrote to the Scottish Government to highlight some instances where people who may have been at least partly responsible for a performance issue at a public body were no longer in post by the time we came to consider the Auditor General’s report. The committee noted our frustration about how such individuals could be held to account and said that the award of agreements should be very carefully considered. In short, our concern was that failure should not be rewarded. In his response, the Cabinet Secretary for Finance and the Constitution noted our frustration and said:

“I fully agree with the Committee’s view that failure in public bodies should not be rewarded”.

The cabinet secretary also said that the Scottish Government’s recent consultation on a severance policy for Scotland did not set out to respond to the committee’s concerns. However, he added that our raising issues about exit payments

“provides increased focus on the opportunities to claw-back exit payments, especially where failures are apparent”.

We will hear from officials about the progress that the Scottish Government is making with its policy, how the Parliament and its committees will be kept informed, and how taxpayers can be reassured that money is being well spent.

Before I move to a gentle opening question, I think that both the witnesses will be aware that the committee has taken evidence this morning on the Auditor General’s report on the Scottish Police Authority. I would not be surprised if members wanted to explore some of those issues with you in relation to payments made to public sector employees.

First, though, I will ask a question on settlement agreements that we have previously asked but which was not answered fully. The Scottish Government said that it would adopt, across wider public bodies, the NHS Scotland approach to the use of confidentiality clauses—that is, a presumption against their use unless

“there were clear and transparent reasons for their inclusion”.

Despite that, the use of confidentiality clauses by the Scottish Government and public bodies increased from 21 to 36 between 2014-15 and 2015-16. The question is, therefore, can the Scottish Government influence the number of confidentiality clauses that are used in a particular year or not?

Convener, I heard the earlier discussion and I anticipate the committee’s interest in the issues around the Scottish Police Authority, in particular what role the Government exercised in that matter. I will seek to ensure that the committee is furnished with all relevant correspondence between the Government and the SPA. I appreciate that you may wish to come on to that in more detail later on.

On your specific point about the number of confidentiality clauses that have been inserted, the numbers are all set out in the report that you have in front of you. Our position is that confidentiality clauses will not be inserted automatically. Indeed, there is a presumption against their use. However, there are situations where either the employee or the employer wishes to, and has reason to, include a confidentiality clause. The role of the Government will be to consider and advise on the use of those clauses.

One point that I know has concerned the committee is whether, in any cases, the use of a confidentiality clause might get in the way of an individual making a protected disclosure under whistleblowing legislation. We can be very clear that there are no circumstances in which an individual could be prevented from making such a disclosure.

I do not understand why there is a presumption against using confidentiality clauses. In the Scottish Government report, you quite clearly say that confidentiality clauses are used

“At the request of the employee or their legal representative”.

I do not understand that either, because as an employer, I would want the confidentiality. It is more important to me as an employer to secure confidentiality than it is for the employee or their legal representative. Why is there that presumption?

At one point, confidentiality clauses were inserted as a matter of routine. Previous committees have expressed concern about that routine practice around the use of confidentiality clauses. Having reflected on those concerns, the decision was made that they should not be inserted as a matter of routine. Rather, the presumption would be that there would not be a confidentiality clause. Instead, consideration would be given on a case-by-case basis as to whether there was a desire for such a clause to be inserted. My understanding is that the employer can request a confidentiality clause as well as the employee.

That is slightly different from the report. The public is the employer in this situation and I would have said that the confidentiality clause, or the agreement, is about protecting the employer and making a payment to buy the rights of the employee, if you like. There is a list in the appendix of the report of payments that have been made. Of the top three agreements in terms of the overall cost that have been concluded, two of them do not have a confidentiality clause, including one where the payment is more than £200,000. I find that extraordinary, but is that just the way it is?

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I think that that reflects the fact that consideration is given on a case-by-case basis as to whether a confidentiality clause is needed and is requested by either of the parties.

My question is for Paul Johnston. A number of Police Scotland staff are suspended: the chief constable has been on special leave since September, I believe, and four other fairly senior officers are suspended, one of whom has indicated that he is taking retirement in the meantime. What is the status—I realise that you cannot comment on the detail—of those investigations? Have they been completed? When are they due to be completed and when will this be brought to a conclusion?

In a number of the cases to which you refer, the investigations are being conducted by the Police Investigations and Review Commissioner, who is acting as an independent person and I do not have information today for the committee about the time period for the investigations that she is conducting. I can certainly seek to obtain further information about that and provide it to the committee, but I do not have it today.

Has the PIRC concluded her investigations into the allegations against the chief constable?

No, my understanding is that those investigations are on-going.

Do you have any idea of when they are likely to be concluded?

As I say, as of today I do not have information about the timescale that I can provide to the committee.

Right. Is there no indication from the SPA? Is it involved in the investigation?

I know that the SPA, having first passed the matters on to the Police Investigations and Review Commissioner, is certainly engaging with her on the issue. I am afraid that I do not have details as to the timeframe for the completion of the investigation.

Is it not true that the former chair of the SPA, Andrew Flanagan, wanted the chief constable reinstated?

The understanding that I have is that the Scottish Police Authority gives consideration to whether or not the period of leave will be brought to an end and that it does so on a regular basis. It is my understanding that the last time that that was considered, the board agreed that the period of leave would be continued.

Has there been any representation from Andrew Flanagan to have the chief constable reinstated?

I know that there have been discussions about whether or not the chief constable should return. My understanding is that at present, as I say, he is not suspended but on a period of leave. Absolutely, these matters have been discussed and considered carefully, but the most recent position is that the chief constable’s leave continues for the time being.

Just to be clear, in any of these discussions did Andrew Flanagan ask that the chief constable be reinstated?

There have been points at which the view of the former chair was that it may be suitable for the chief constable to return.

How long ago was that?

I do not have the specific dates although again I could—

October? November?

Certainly in recent weeks.

What is the procedure? Does the chair make that request to the cabinet secretary or the Government or to you as the accountable officer? What happened? Did Andrew Flanagan come to you and say that he wanted the chief constable reinstated? What was the procedure?

It is a decision for the board as to whether or not the chief constable’s leave should be continued. Indeed, the chief constable clearly also has a role in terms of the arrangements.

There have been discussions with Government on the issues. The position of Government is that in all these considerations it is important that the board considers the full range of circumstances, which include the need for the board to engage with the Police Investigations and Review Commissioner on whether or not reinstatement should take place.

There is a very strong rumour going around, and I do not believe rumours until I hear the facts. Can I clarify whether Mr Flanagan wanted to reinstate the chief constable because the investigations found that the chief constable had done nothing wrong? Is that true?

I would be very loth to comment on any rumours. All that I would say is that the investigation, to the best of my knowledge, has not been concluded and is on-going. The board has decided most recently that the chief constable’s period of leave should be continued.

To be clear, did the previous chairman make representations that the chief constable should be reinstated?

I can confirm that I understand that at certain points over recent months the former chair of the SPA was of the view that reinstatement may have been appropriate.

Why did that not happen? Is that a Government decision?

No, that is a decision for the board. From the point of view of Government, I can certainly confirm that our interest has been in ensuring that proper processes and procedures are followed at all times, as you would expect, and we have certainly wanted to ensure that the Police Investigations and Review Commissioner would be involved and would have a say in terms of her view of the return or otherwise of the chief constable.

What you are saying is that, when the former chair made it clear that he wanted the chief constable reinstated, the Scottish Government’s position was that that was a matter for the board and that the Scottish Government would have no view on the matter.

The view from Government, certainly the view that I would take, is that while it is a decision for the board, there is an interest on the part of the Government in ensuring that due process has been followed at all times. We would certainly seek assurances that due process was being followed.

Due process had been followed and, presumably, by the time that the former chair said that he wanted the chief constable to be reinstated, he was satisfied that due process had been complied with. Presumably, if he made that request the response from Government would be, “That is a matter for the board.” Or would the Government express a view as to whether the chief constable should or should not be reinstated?

It is not for the Government to make a decision at this stage on whether or not the chief constable should or should not be reinstated.

I did not quite ask that.

No. Let me be clear. Discussions that we have had with the Police Authority on these matters have focused on the need to ensure that due process is followed and that those with an interest, in particular the Police Investigations and Review Commissioner, are consulted.

Finally, to be absolutely clear, when Andrew Flanagan asked that the chief constable be reinstated, the Scottish Government’s response was not to refuse to allow that to happen.

Well, in the course of discussions about whether or not the chief constable should be reinstated, the Government’s concern, and the point that the Government has emphasised, has been around the need for due process to be followed in that matter.

That is not my question. You confirm that Andrew Flanagan did request or did say a number of weeks ago that the chief constable should be reinstated. My question is, why has he not been reinstated?

At least in part, that is likely to be because of the point that I have emphasised: the need for full process to be followed, the need for those with an interest and a locus in this issue to be consulted and for proper consideration to be given to the issues. My understanding is that that having happened and with parties having been consulted, the decision has been taken to continue the period of leave.

Who is consulted?

My expectation, given that the Police Investigations and Review Commissioner is the body with possession of all the facts, is that she should be consulted before decisions are made.

Presumably, before Andrew Flanagan made this request he must have been aware of the outcome of the investigations into the allegations against the chief constable. One presumes that the chair of the SPA did not express the view that the chief constable should be reinstated without the chief constable first of all being cleared by the PIRC. Given that that would be the situation—unless you are telling me that that was not the situation—he has expressed a view that the chief constable should be reinstated. Was that discussed at an SPA board meeting?

The SPA board has certainly given consideration to those issues, yes.

Specifically, was the chair’s view that the chief constable should be reinstated considered by the board?

I am sorry, I do not have details as to—I think these are issues that will have been discussed in part by the board meeting privately and I was not a party to those discussions.

I know that you were not party to them, but you see the agenda in advance.

I think that you need to be a bit straighter with us here, Paul. Remember that you are in effect under oath. I will ask you again. Has the SPA board discussed the view of the then chair that the chief constable should be reinstated? Yes or no?

I think that the SPA board will have discussed that. I am not sure that it would have been on a formal agenda—it certainly was not on an agenda that I have seen—on the basis that such matters would be discussed privately. I am certainly clear that the role for Government here is around due process and we have made clear our expectations that due process will be followed.

Are you telling me that the SPA board discussed an item of absolutely top importance to the whole police service in Scotland—we have the chief constable, on £210,000 a year and presumably on full salary while he is on special leave—and that that was not done at a formal board meeting, that it is part of the underhand activity that we heard about earlier?

Well, there is provision for the board to meet in private. My understanding is that those decisions were made privately.

So there was a private board meeting that discussed whether the chairman was right in wanting the chief constable reinstated. That was a private meeting. You obviously had advance notice that it was going to be discussed, even though the discussion was in private and you were not part of the discussion. What was the outcome of the board meeting?

We would not necessarily have notice of a private board—

Come on, Paul, we are talking about the chief executive. Are you, as the accountable officer, telling me that the SPA board meets in private to discuss the then chairman’s view that the chief constable should be reinstated and you, as the accountable officer, do not know the outcome of that meeting? I do not believe you.

I am confirming that I am not sighted on all the private meetings of the Scottish Police Authority. I have confirmed to you that there have been discussions with the chair—the former chair, rather—about whether or not the chief constable should return and the concern of Government is that that decision be taken properly and with full regard to due process. That has been the extent of our involvement. The extent of our involvement has been to require that due process to be followed.

You are saying that, as the accountable officer, you were aware of a private meeting of the SPA board to discuss the former chairman’s view that the chief constable should be reinstated. You cannot tell me when that meeting took place, you rightly tell me that you were not involved in those discussions, but you cannot tell me the outcome of the meeting. Surely the chair, at the very least, would have phoned you and said, “Look, we have had this discussion and this is the view of the board”? What you are saying is quite frankly not credible.

I was not called after meetings to be told about the outcome of the meeting.

They had this meeting a number of weeks ago and you do not know the outcome and you are the accountable officer.

I am the accountable officer for the justice portfolio, I am not the accountable officer for the Scottish Police Authority. The Scottish Police Authority itself is responsible for ensuring that it complies with its obligations as the employer.

Nobody has told the cabinet secretary that the chair wants to reinstate the chief constable. The SPA board has discussed it in private and nobody has told the cabinet secretary that they are discussing it or what the outcome is. Is that what you are telling me?

I am saying that the SPA is able to meet privately. On an issue such as the reinstatement of the chief constable, I am absolutely clear that the role of Government would be around ensuring that all due process was followed. I think if we look at the situation as at present, you can see that the chief constable remains on leave.

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Has the chief constable refused to come back to work?

Not as far as I am aware.

I have two follow-up questions. I am very clear that you did not receive a call from the SPA chair. Did anybody in the justice department receive a call about the outcome of that meeting?

Not to the best of my knowledge.

Okay. No call was received and the SPA did not tell you anything. Given the sensitivities, it did not report to anybody in the department.

To the best of my knowledge, there were no discussions with officials on the particular matter to which you refer.

Was there discussion with any ministers?

As I said, there have been discussions with the Cabinet Secretary for Justice about the issue of the return of the chief constable, and the emphasis in those discussions has been on the need for proper process to be followed.

What part of the process was not followed?

Was the outcome of those meetings—or that final meeting—reported to the cabinet secretary?

It is my understanding that the matter is one that now receives on-going consideration.

Sure. I am asking—

My expectation is that there is full engagement with Government to ensure that we are aware of when the consideration is taking place, the matters that are being considered and the outcome of those discussions.

I will shorten that: you did not receive the phone call, but the cabinet secretary did, as part of the on-going engagement that you talk about.

There have been those on-going discussions with the cabinet secretary.

That is fine.

I am slightly confused about something. Why did the board meet to discuss this? What happened that caused it to meet to discuss the issue?

I think that the position that the board arrived at when it agreed to the special leave was that it was a matter that it would keep under regular review.

Why did the board meet to discuss the issue at that point?

It agreed to keep the matter under review every few weeks.

The chair wanted the chief constable to be brought back.

I will bring in Alex Neil in a minute.

I cannot get my head round why such a discussion would be held unless something triggered it—in other words, unless the board had been briefed or advised in some way that the likely outcome of the investigation was that there was no case to answer. If that was the case, I could have understood why the board met to discuss the issue and why the chair placed such an emphasis on reinstatement of the chief constable. That would not be part of a regular review. The board heard something, which is why it adopted that approach and reached a conclusion. I do not know whether you want to comment on that before I bring Mr Neil back in.

My comment is that the SPA agreed that it would keep the matter under regular review, so it had on-going deliberations on the issue.

Did it decide that it wanted to reinstate the chief constable at any point before that final meeting?

As has been discussed already, I have acknowledged that, at points, the view of the former chair was that it might be justifiable to reinstate the chief constable—or rather, for his period of leave to be brought to an end.

You said that the Scottish Government would be concerned only if due process had not been followed. Is that correct?

Yes.

Has due process been followed? Is there any part of the process outstanding that has given you cause for concern and led you to believe that due process has not been followed?

My understanding is that, at certain points—including when the former chair expressed the view that it might be appropriate for the chief constable to return—there had not been proper or full consultation with the Police Investigations and Review Commissioner. That explains the wish on the part of the Government for that to take place.

When was that? Was that in November?

I think that it would have been in November. I can furnish the committee with more information on precise dates; I do not have them in front of me.

It is now 21 December. We have a chief constable who is on special leave—whatever that means—whose reputation has been tarnished because of events, rightly or wrongly; obviously, I do not know the outcome of the investigations. Surely it is a matter of natural justice to him that these matters are cleared up as soon as possible. You are saying that it is still not clear whether due process has been followed, or that you have still not had the discussions with the chair of PIRC to establish whether that is the case.

I agree that it is important that a proper investigation is taken forward as speedily as possible, and my understanding is that that investigation has not yet been concluded.

So why did the former chair recommend reinstatement?

What I understand from the SPA is that the chief constable was on leave partly to enable him to prepare his full case and to engage with the Police Investigations and Review Commissioner.

Quite frankly, I find a lot of this not credible. I think that we ought to call the chief constable, Andrew Flanagan and probably the new chair to appear before us at our next meeting.

The committee will consider that in private session.

I want to bring in Liam Ewing.

Liam who?

Oh my goodness! Liam Ewing is an old friend. I meant to say Liam Kerr.

You are saying that I am not an old friend. Oh, Jackie. [Laughter.]

You are a new friend.

I will begin with a couple of questions about the “Scottish Public Finance Manual”, which contains a section on settlement agreements. There are a couple of terms on which I seek clarity. The term “voluntary resignation”—as opposed to “involuntary resignation”, which I would have thought would be more like a dismissal—caught my eye. The SPFM talks about the making of a proposal by a relevant body

“to offer a financial consideration to secure the voluntary resignation of an employee”.

That sounds like an offer that one cannot refuse. Can you explain what the process of securing a voluntary resignation is?

I think that we have provided to the clerk a definition of the various terms that are set out in the SPFM. We acknowledge that there are a lot of different terms and that we therefore need to proceed with caution in relation to them.

My understanding of the provisions of the manual is that “voluntary resignation” is an overarching term and that it is possible to have specific schemes for voluntary exit—either voluntary release or voluntary early retirement—approved by a particular body. On a case-by-case basis, it is possible to have unique schemes or, indeed, settlement agreements. If there is remaining doubt about terminology and definitions, I agree that it is very important that that is clarified, and I suggest that we should do that in writing.

I think that that is important. I will come back to early retirement shortly.

We should not have to proceed with caution in relation to terms—we should be absolutely clear what terms mean. I want to press you on something else that caught my eye, because a distinction is made between severance agreements and a settlement agreement. Somewhere in the document—I forget exactly where—a severance agreement is defined as a subset of a settlement agreement. Can you explain that to me, because I am not familiar with the difference between a severance agreement and a settlement agreement?

I do not think that what the “Scottish Public Finance Manual” says is quite the way that you put it. “Severance arrangements” is the overarching term that captures a number of different arrangements that are set out in the SPFM, and “settlement agreements” are a subset of those arrangements. A settlement agreement is the document that is used in cases in which there has been some breakdown in the relationship between the employee and the employer. The report that has been submitted to the Parliament that the committee is considering today focuses on cases in which settlement agreements have been put in place. The SPFM makes it clear that, where there is a settlement agreement, it is important that there is prior consultation with Government, but there are other situations of severance or departure that are not caught by the term “settlement agreements”. As I said, they might be covered by a severance scheme.

I was with you until the last thing that you said.

Sorry.

You mentioned situations that might be covered by a severance scheme.

Yes. I will try to find the right part of the guidance. The relevant section of the SPFM includes a number of references to existing or new schemes. Those are schemes to enable the early departure of employees in an organisation. If a public body is going to set up such a scheme, that will require the approval of Government. What we have in the case of the Scottish Police Authority is an agreed scheme that has existed for a number of years but which is reviewed and approved by ministers. The committee will appreciate that, given the significant change that was brought about by police reform, which involved a number of organisations merging into one, it has been necessary and appropriate to have in place a scheme. The scheme is approved, and it is then for the public body to make individual decisions once the scheme is in place. Those are not settlement agreements.

I understand. Let us look at the scheme. You will have heard about the events that the committee looked at earlier. Annex A of your submission is the annual report on the use of settlement agreements. Paragraph 1 says:

“The Scottish Public Finance Manual (SPFM) states that in considering terms for settlement agreements, severance, early retirement or redundancy packages public bodies should ensure that issues of regularity, propriety and value for money are fully taken into account.”

Given what you have heard this morning, how obligatory is what I have just read out?

I do not think that I can add to what that paragraph says. It is important that public bodies take such matters into account.

But, from this morning’s consideration, it does not appear that that is what has happened. There seems to have been a breakdown between what is stated about the SPFM and what has actually happened in practice. Do you accept that?

My understanding is that the SPA’s view—this is certainly the view that has been expressed to me by the SPA—is that, in the circumstances of Mr Foley’s departure, it considers that the options that it exercised met the tests.

You are talking about the board of the public body in question, whichever body that might be. It is an issue for the board. Therefore, the board is accountable if it has failed to do what is required by the SPFM.

Ordinarily, it will be for the accountable officer to ensure that those requirements are met, but when matters relate to the accountable officer him or herself, the board needs to consider those issues.

I want to move on. Let us say that we have a severance package that you would presumably say would be embodied under a settlement agreement. Once individuals have left an organisation, how can they be held to account by this committee and by the public if they have gone away with a package under a settlement agreement?

I am not sure whether it is helpful to again make the distinction and to emphasise that there was no settlement agreement in the case that the committee has considered this morning. My assumption is that the committee could invite an individual who has received an agreement to come and give evidence even though they are no longer employed by the public body in question.

Of course the committee could invite them to give evidence, but if the committee or anyone else finds that there has been mismanagement, impropriety or whatever it might be, how is that individual held to account and how is the public recompensed if there has been a settlement agreement?

Clearly, if it was concluded that the settlement agreement had been issued and there had been a clear failure to meet some of the required tests and standards, I would absolutely want consideration to be given to whether there was any possibility of recovery, but many of these things will depend on the individual contractual arrangements that are in place and the specifics of the contract between the employee and the employer. I am sorry that I do not have a complete answer to your question, given the need to look at what the contract would say in specific cases.

Are you aware of any cases in which an individual who has underperformed—a section 22 report might have been presented to the committee or they might have left an organisation under a settlement agreement—might have been re-employed in the public sector?

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Since 2015, the Scottish Government has operated a five-year no-return policy. Therefore, if an individual receives payment, whether under a settlement agreement or not, they may not be re-employed in the Scottish Government or by any of our associated agencies or bodies for that five-year period.

Do the associated bodies include all those that are listed in the appendix to your submission?

Yes.

I want to pursue that. Is it the case that no such people are brought back as consultants?

That would be one of the circumstances that would breach the five-year no-return rule.

That is interesting, because I understand that some such people have been brought back as consultants.

That is certainly something that I would be happy to look into.

Excellent. Can I continue the line of discussion? Let me be very open here. You heard the evidence that we took from the Auditor General on the 2016-17 audit of the Scottish Police Authority. You also heard the evidence that we received about very poor financial judgment and very poor accountability and governance arrangements—frankly, I think that the committee found them to be quite shocking. Can I explore with you both the package that was arrived at for the accountable officer—in this case, the former chief executive John Foley—and some of the decisions that he made in his capacity as accountable officer? To be clear about the terminology, by the Scottish Government’s own definition, a severance package can include payments for early retirement and redundancy, both of which seem to have come into play in Mr Foley’s case. We have heard that payment might not have been completely made at this point. Is there an opportunity to pause that payment so that you can go away and investigate whether that should be allowed under whatever contractual agreements you have with Mr Foley?

I start by emphasising that there is no contract between Mr Foley and the Scottish Government on this issue. My clear understanding is that the contractual arrangement is between the Scottish Police Authority, as his employer, and him, and that a contract for his release was entered into in August. I do not have all the information about exactly when payments have been made and whether other payments may yet be made. In light of the committee’s deliberations today, I can certainly ask the Police Authority to confirm whether payments are outstanding and, if they are, whether they could be paused.

That would be enormously helpful. Although I recognise that the contract may not be with the Scottish Government, your department is the sponsoring department and therefore you have some responsibility, in my view, to ensure that these things happen.

We are interested in pursuing who knew what and when they knew it—we are interested in people’s involvement in all of this. We understood that the decision about Mr Foley’s package was taken by the board via email, and that at some point between 7 June, when the options were considered, and more recently, the Scottish Government was most certainly advised—I think that emails were exchanged with senior civil servants. Could you tell us who those civil servants were and whether the on-going discussions were brought to your attention?

I emphasise that at no point was the Scottish Government consulted, and at no point was the approval of the Scottish Government sought, on the payment that was offered. I also emphasise that at no point was the Scottish Government’s approval required, given that an existing scheme was in place. That is not to say that the case has not thrown up issues that require to be looked at very carefully with a view to considering whether changes might be needed in future, but at no point was the Scottish Government’s specific approval sought. As you would expect, a number of engagements take place between officials in the justice and safer communities directorates and the Scottish Police Authority about a range of on-going issues, and I am aware that some conversations took place over the summer about the proposed arrangements for Mr Foley’s departure. As I said at the outset, I can see that there is an interest in the precise chronology of those arrangements, and I can seek to provide the committee with further information about exactly what communication took place, by whom and when. I wrote more formally to the chair of the Scottish Police Authority about the payment in November, when I was aware of the concerns that existed both on the part of colleagues in my team and on the part of Audit Scotland. Again, I can furnish the committee with that correspondence.

That would be very helpful. I would be keen to capture not just the email exchanges but any verbal exchanges, as those would have been noted in a matter of such importance. It is customary for civil servants to note such conversations, so we would be interested to see that information as well.

I am very clear that, although neither your nor the Government’s approval was sought, you knew about the on-going discussions, you knew about the options and you would have, in the course of those conversations, given guidance as to what the Scottish Government’s view would be. Is that a fair summary of what you have said?

It is fair. I would add that I expressed reservations or concerns about the issues around payment in lieu of notice that the committee has considered today.

It is very helpful to have that on the record.

Turning to interpretation of your severance policy, it is very clear that notification needs to be given to the sponsoring department in the Scottish Government, which seems to have happened. However, sensitive issues are escalated to ministerial level. I am curious to know whether the cabinet secretary knew about the on-going discussions, given how active he was in relation to the previous issue that Alex Neil explored with you.

Let me clear. Under the terms of the severance policy that is set out in the public finance manual, the need to consult ministers applies in the case of settlement agreements. It does not apply specifically in cases where exit is agreed as part of a scheme that has already been subject to ministerial approval. However, I absolutely recognise the high-profile nature of this particular exit under the approved scheme. Although we did not need to approve it or have the opportunity to approve it, on being made aware of it we would have briefed the cabinet secretary on what was proposed.

Okay, so the cabinet secretary knew. Again, it is helpful to have that on the record.

I am conscious of time, so let me put to you two very quick points, which I will wrap into one. You are responsible for conducting Andrew Flanagan’s annual review, and, in turn, Andrew Flanagan is responsible for conducting John Foley’s annual performance review.

That is correct.

In your discussions with Andrew Flanagan as part of his annual performance review, was there anything that highlighted the serious concerns we are now considering? How did you rate his performance?

Some—in fact, all, I think—of the issues that the committee is considering today have arisen in the context of the audit that has been done in recent months by Audit Scotland. Since the chair’s appointment, I have been in regular engagement with him and formal performance appraisals have been conducted. Those are discussions between two individuals, and I do not think that the committee would expect me to go into the details of those. However, I have been in front of the committee before when other issues around governance in the Scottish Police Authority have been raised and I can confirm that they absolutely have been discussed between me and the chair.

It is just that it appears to me that he was not really listening when you were making some of those comments to him.

Liam Kerr would like to come in at this juncture.

I will be very brief.

Paul Johnston talked about the contract that was entered into for the release of Mr Foley. At least in the early stages, that was styled as a redundancy. If there is a redundancy, there is a dismissal. If there is a dismissal, it is capable of being an unfair dismissal; therefore, there is a risk, including the risk of some kickback, absent a settlement agreement. In such circumstances, I would struggle to think of an employer that would not at least consider a settlement agreement. Who took the decision not to use a settlement agreement, and why?

Again, I can confirm this as part of providing the detailed timeline to the committee, but my understanding is that there were some informal discussions with the Government about whether we would be likely to support a settlement agreement. You will be aware that individual settlement agreements must come to ministers for comment.

Who were those discussions between? Were they individual discussions between Government ministers?

No. The discussions would have taken place with officials in the teams for which I have responsibility, as part of their on-going, regular engagement with the Scottish Police Authority. I am aware that discussions took place about whether the Government would support a settlement agreement, and we were not inclined to support a settlement agreement.

Are you able to tell me why?

I am absolutely mindful of concerns that the committee has raised, and of the need to ensure proper and effective use of public money in all cases. I will always look very carefully at any proposal to pay money that perhaps goes beyond what an individual is contractually entitled to receive.

Forgive me, but a settlement agreement simply embodies the deal that is made. In this case, the deal that was struck was a payment in lieu of notice, which would be a contractual payment, but then there is an early retirement payment, at least some element of which—we will find that out next year—will be non-contractual. It will be some kind of ex gratia payment, one would have thought. I do not understand why you would not put a settlement agreement in place to protect the employer going forward.

My understanding is that the payments that are being made are consistent with the requirements of the agreed severance scheme that is in place. A number of individuals are departing from the SPA and Police Scotland, and they are doing so on a consistent basis—that is, on the basis of the approved severance scheme, without any settlement agreement. Having considered the matter, I could not see why a settlement agreement would be needed in this case and that the already approved scheme was the scheme that should operate.

Okay. I have had no indication that members want to ask questions, although perhaps Mr Coafey—

It is pronounced “Coffee”. I have some questions relating to the paper route that we have in front of us today. I would also like the chance to bring Mr Gray into the discussion. He has been sitting very patiently and has not been able to contribute.

What is the Scottish Government’s specific role in the management and monitoring of all the various arrangements?

The role includes consultation on any proposed settlement agreement and, importantly, reporting to the Parliament. A fundamental aspect of the Government’s role is that we are consulted on any proposed agreements. As part of that consultation we will consider a range of issues, such as whether there should be a confidentiality clause and whether we think that value for money would be achieved in the settlement agreement, and then we will report to Parliament. Ministers have a responsibility for the overall policy framework for severance and settlement agreements; as the committee is aware, a consultation on those issues took place earlier in the year.

I note the breadth of such arrangements throughout the public sector and elsewhere. How long have they been in place? Has anything changed about them in the previous or current session of Parliament?

11:15  

Confidentiality clauses used to be arranged such that it was not even possible to disclose the fact that a settlement agreement had been entered into. In other words, people would neither confirm nor deny that such an agreement had been entered into. A member of your predecessor committee made very strong representations that he thought that that was an inappropriate use of public funds. We agreed and we removed that form of settlement agreement from the options that were available.

I know that members have expressed differing views on the matter, but when I came into my role, it was the case that of 148 settlement agreements in the national health service, 147 included confidentiality clauses. There was concern on the committee, elsewhere in Parliament and in public discourse that somehow confidentiality agreements were inhibiting people from raising concerns that they may have had.

As Paul Johnston said, no confidentiality agreement or clause can stop someone making a public interest disclosure. However, the then Cabinet Secretary for Health and Wellbeing, Mr Neil, concluded that the best approach was to remove the presumption in favour. Up to that point, all health service settlement agreements that were drafted included a confidentiality clause—it was there automatically. We removed that automatic inclusion. A draft clause is available if required—similarly, a draft derogatory statements clause is available if required—but those are matters for negotiation. Such clauses are not automatically included, so there have been some changes as a result of Parliament’s interventions and the views of ministers.

Would you say that the direction of change has been towards more openness, more accountability and greater scrutiny?

That has certainly been the intention. As I know my colleagues do, I firmly subscribe to the view that the expenditure of public funds must be transparent.

Some tables in the report show figures across various sectors, including the NHS. Is there anything that stands out as unusually high or low—anything that breaks trends—in relation to the NHS? It is hard for the committee to see whether there is anything significant. Is the issue part and parcel of what happens within a service the size of the NHS?

In a service the size of the NHS, which employs more than 150,000 staff, it would not be regarded as a disproportionate use of the approach to have 36 settlement agreements in a year. Many relate to relatively junior members of staff. The committee has the report, so I will not read them out, but the points that are made in paragraphs 5 to 8 are important in defining the areas in which a settlement agreement might be used. Quite often a settlement agreement is used because the costs of pursuing other approaches would be higher, so in fact it reduces the cost to the public purse. That would be the normal, value-for-money basis for taking that approach.

I thank both the witnesses for coming along this morning and for their evidence.

11:18 Meeting continued in private until 11:30.