Scottish Parliamentary Corporate Body (Budget 2011-12)
Good afternoon and welcome to the 21st meeting of the Finance Committee in 2010 in the third session of the Scottish Parliament. I ask everyone to turn off any mobile phones or pagers, please.
I have apologies from Malcolm Chisholm. No other apologies have been received.
Agenda item 1 is to take evidence on the Scottish Parliamentary Corporate Body’s budget planning for 2011-12. I welcome to the committee Paul Grice, clerk and chief executive, and Derek Croll, head of financial resources at the Scottish Parliament. You are welcome. I invite Paul Grice to make an opening statement.
Paul Grice (Scottish Parliament Clerk and Chief Executive)
Thank you for the opportunity to brief the Finance Committee on our approach to setting the SPCB’s budget for 2011-12 and subsequent years.
In the light of the anticipated reductions in public sector budgets, the corporate body agreed to take a strategic approach to implementing year-on-year budget reductions in 2013-14 and, if necessary, beyond. The process started back in January this year. The corporate body takes the view that it must play its full part in responding to the economic challenges that are facing the public sector, and it has agreed a responsible and pragmatic approach to doing so, based on an across-the-board review of all SPCB expenditure.
The corporate body is therefore planning on the basis that it will reduce its overall budget in line with any real-terms reduction in the Scottish budget, while seeking to deliver efficient parliamentary services to members and the public. The approach of tracking the Scottish budget is consistent with our approach in recent years.
We appreciate that the actual reduction that will be required will not become clear until the comprehensive spending review reports on 20 October. However, for planning purposes, we have assumed that a real-terms reduction of 15 per cent will be required from 2010-11 to 2013-14. Most predictions about the likely impact of the Scottish budget suggests that our planning assumption is defensible and prudent.
In undertaking the review of support to the Parliament, the corporate body recognises that changes to the shape and level of services might be required. We do, however, remain committed to the three overriding priorities of supporting parliamentary business, supporting members in undertaking their parliamentary duties, and engagement. That said, a key challenge for the corporate body is to ensure that the balance of resources that are devoted to those priorities is appropriate.
In April, having received corporate body agreement, I instructed my senior officials to identify options to achieve the level of savings required. We reviewed those options in June, and have been developing and discussing a number of them with the corporate body during the summer recess. That process is continuing and we expect to reach a conclusion to enable us to set out a detailed budget for 2011-12 in early November, together with a clear approach to meeting the required savings in the years beyond that.
We have, of course, looked at and are continuing to look at non-staff costs, and we expect to be able to make reductions in a range of such services by, for example, more efficient use of energy and reducing paper consumption, both of which also bring environmental benefits. In an organisation such as ours, staff is a major cost, and we can only achieve sustained budget reductions of the required order by reducing staff numbers. The exact reduction will depend on a number of factors including, in particular, future pay levels. I recently initiated the formal pay negotiations with the trade unions following the agreement of the corporate body, and I expect those to be concluded constructively, building on the good relationship that exists between management and unions in the Parliament.
In recognition of the need to reduce staff numbers throughout the organisation, we are running a voluntary early retirement/early severance scheme, and I am in the process of concluding that. It is too early to comment on the numbers that are involved, but I will be able to report further when we give evidence in November. I am hopeful that the scheme will help us to avoid the need for compulsory redundancies, but I am not in a position to give any guarantees.
One of the key challenges in the coming years will be to ensure flexibility so that we can redeploy staff in areas in which fewer resources might be required to those where we have gaps to fill. Investment in training and support will be key to that, so although we will reduce spending on staff to help to meet overall targets, it is essential to retain enough resource to facilitate that process.
Overall, the process will be driven by a series of service reviews, some of which are already under way. I have begun by reviewing my senior management structure. That will build on the review that was carried out last year in anticipation of the changing environment. I expect that second phase to be completed within the next few weeks. The result will be a group structure that is best suited to the challenges that lie ahead, and a further reduction in the senior management resource.
We have been working with office-holders over the past few months, and they understand the need to reduce their funding in line with the Scottish budget. There have been constructive discussions and we are looking to be in a position to bring forward proposals in November. The corporate body is meeting the office-holders tomorrow to take forward the discussions that have been begun at official level.
We are now moving to a period of engagement with members, staff and other stakeholders. I met the Conveners Group last week, and it was helpful to have its feedback. In the coming weeks, corporate body members will meet colleagues to discuss key issues. That feedback, too, will help us to shape proposals, which should underpin the budget for next year and our proposals for future years, which we look forward to bringing back to this committee in November.
Can you give us an overview of the general approach? How are you approaching what are clearly extremely difficult times? What general principles will you apply to your decisions? Are you still planning on the basis of a 15 per cent reduction over three years, or is there any plan for the four-year period that the United Kingdom comprehensive spending review is likely to cover?
The first principle that was agreed by the corporate body is that everything is on the table. It wanted us to consider everything, and that is what we have done.
We have looked at the key services in detail—we cannot escape a detailed analysis—to consider which of those services add the greatest value, where there is the greatest scope to deliver savings and what the process will be. We have run through all the key services, and my senior managers have produced a range of options that we can achieve over a period of years. We are currently working with the corporate body to develop those individual proposals into a more institutional corporate plan. That is very much what will underpin the proposals that we bring before the committee.
The 15 per cent is a planning target. As I have said from the outset, the actual reduction will depend very much on the CSR outcome and the impact on the Scottish budget. Obviously, we will have to substitute the actual figures.
If, as we expect, the CSR outcome is four years, we will come to the committee with a four-year budget. The reason why we have been working to three years is that we began this process before the UK Government announced that it was going for a four-year process. However, we will substitute the actual CSR numbers for the planning targets, and that is what we will bring before the committee in November.
You have outlined your discussions with staff, trade unions and so on on voluntary redundancies. Are the other bodies whose budgets you are responsible for, such as the commissioners’ offices, considering similar cutbacks?
Yes, they are. With corporate body agreement, we set them exactly the same target, and we have had discussions with them about how they should achieve that. We also made available to them the voluntary early retirement/early severance scheme.
So all the commissioners are considering voluntary redundancies and cutbacks in their staff numbers.
The commissioners have been given the overall target. The purpose of tomorrow's meeting with the corporate body is to discuss that in more detail. Like us, they have a range of staff and non-staff costs. Many of them have a very small number of staff. My colleague here, Derek Croll, chaired a shared services working group with the commissioners. It is fair to say that we will probably make the most progress across the piece in savings on accommodation costs, and in shared services such as the preparation of accounts. I am not yet in a position to say what the actual staffing impact will be in individual commissioners’ offices, but I should be able to bring that information to the committee in November.
In previous meetings when you have come before us as part of the annual budget-setting process, it has been striking that quite a significant proportion of the budget of the Parliament is not within your direct control. A large chunk—I think about 50 per cent—is, in effect, under the control of individual MSPs and their groups. David Whitton has referred to the office-holders budget and there are other costs such as business rates. There is a relatively small controllable element unless you ask MSPs to share some of the pain. Is that part of the plan? It seems sensible, if it is. To what extent will that 15 per cent fall—I presume disproportionately—on the elements that are discretionary and not in the areas that would be passed on to individual MSPs to control? You have talked about staffing. Do you have a more general feeling about where specifically the real pain is going to be felt?
In the past, we have used the phrase “directly controllable”. You are absolutely right. Ultimately, it is the corporate body’s budget, but we must recognise that rates have to be paid, for example. We pay about £4 million in rates, which is non-negotiable.
We have focused very much on the controllable costs, and the corporate body is very clear that all elements of expenditure—including pay and expenses for members—are part of that. Those discussions are on-going. I cannot speculate at this stage, and it is not possible even to give you much of a feel ahead of those negotiations and discussions being concluded. Nevertheless, it is fair to say that the corporate body has taken the view that, to make that level of savings over a period of years, we must look across the entire range of expenditure. That certainly includes office-holders. They are within the corporate body’s budget, and the Finance Committee has made it clear in years gone by that although they have operational independence—and rightly so—the setting of their budget is a matter for the corporate body, this committee and, ultimately, the Parliament. The corporate body has very much taken that view and, to be fair, office-holders have generally accepted that view.
Is the indicative 15 per cent reduction going to be applied to budgets or to, say, previous years’ spends? There has been quite a variance in some areas of spending. In particular, I have the impression—I do not know whether it is shared by other members—that some areas and some office-holders have been guilty of thinking that their budget was there to be spent, which is not the prevailing ethos that we would like to see for the rest of the spending review period.
We are taking the 2010-11 budget as the baseline. The corporate body is furnished with information on the previous years’ spends, and it is entitled to take that into account—if I can put it that way—in agreeing individual budgets. The corporate body will agree individual budgets with individual office-holders but will also look across the office-holders budget as a whole. So, we will come to you again in November and present an overall budget, but we will also be prepared to explain individual budgets within that and, I hope, allow the Finance Committee to scrutinise that.
In previous years, we have had quite a robust defence of the corporate body’s budget and an explanation of the cost pressures. The obvious question is this: if you are able to take out 15 per cent of cost without having any meaningful impact on the service that is delivered to members, why has it taken the current financial circumstances to do that?
There is a rather important “if” in your question. If that were true, that would be the case, but I do not believe that it is.
If any chief executive sat here and said that their organisation was 100 per cent efficient, you would want to treat that pretty sceptically. We are a pretty efficient organisation and we try to deliver the services that members want and that the Parliament needs. I do not think that making savings of the order of 15 per cent is going to be easy. On our side, we have a period of time in which to do that and technological developments. We also need to work with members. I think that we can get productivity gains over that period to achieve most of that. In some areas, we need to talk to members and other users about the exact shape of the services that we offer. It will be a combination of those things.
I do not think that it will be easy, but I believe that it is manageable. In my discussions with them so far, members have been very constructive. The unions have been constructive and the staff are up for this. So, I think that we can get there, although it will not be easy. Whatever the target is—whether it is 15 per cent or some other number—I think that we can achieve it over the period. However, you will see a different-looking organisation at the end of that.
14:15
The outcome of the voluntary redundancy scheme will be helpful in moulding what the organisation looks like in the short term. When do you expect to know how many people have accepted voluntary redundancy, and when do you think you can give us an update on the number of people who have taken up that offer?
I am in the middle of that at present, so I am afraid that I cannot speculate today. I expect to be able to give you a precise number when I report back to you in November.
You cannot before November.
I may know the number before then, but I have to report it to the corporate body and work it through. I will certainly be able to give you a detailed report at that time, which will set it in the context of the budget. If that is acceptable, I can do it on that basis.
One element that crosses over both staff costs and non-staff costs is something that we have always been very proud of in the Parliament—the outreach and engagement work that is undertaken beyond the Parliament. The education service is a case in point, and there is openness and accessibility. I know that changes have been made, such as closing the Parliament on Sundays. However, for some comfort, I would like to know that the importance of that part of our work has been taken on board by the corporate body and those who are looking at options for reducing costs.
I said in my opening remarks that the three strategic priorities remain, one of which is engagement. I hope that that provides at least a degree of comfort. From a personal point of view, I think that the way in which the Parliament looks outward is a hallmark. Whenever we have people visiting from other legislatures, it is what they remark on most. I do not think that the corporate body has any mind to move wholesale away from that; however, it obviously has to look at those services and activities individually and take a view on their relative priority. I do not think that you will see a mass movement away from that, but you will probably, in all honesty, see some changes. Corporate body members will be talking to MSP colleagues—I have spoken to the Conveners Group—to get a sense of which of those engagement activities members feel add the greatest value to the work of the Parliament.
I can give you a degree of comfort. When we come back in November, perhaps we will be able to talk about some more specific proposals and you will be able to challenge and scrutinise our individual decisions.
There being no further questions, I ask our witnesses whether there is anything that they would like to add.
No—except to thank you again for giving us the opportunity to come here today, although I recognise that I was unable to give an update in many respects. We look forward to giving evidence to you again in November.
I thank you for your evidence today and for that future evidence. I wish you well in your endeavours.
There will be a short suspension to allow a changeover of witnesses.
14:18
Meeting suspended.
14:20
On resuming—