Our fourth item of business is evidence from the Scottish Government bill team on the financial memorandum to the Community Empowerment (Scotland) Bill. I welcome to the meeting Dr Amanda Fox, Heather Holmes and Ian Turner. Members have copies of the financial memorandum and written submissions that were received in response to our call for evidence.
I see that Amanda Fox wants to say a few words.
I just want to apologise for wearing sunglasses. I am recovering from a migraine and my eyes are still exceptionally sensitive to light. Please bear with me.
That is okay. I assumed that you had some sort of photophobia, so I did not comment. I did not think that you had just flown in from a beach.
If only.
You might have been running late and had to leave halfway through your sunbed treatment, or something. In any case, thank you for the explanation.
As the witnesses will probably know, the Convention of Scottish Local Authorities has raised a number of concerns with the committee. In its letter to all members of the committee on 6 October, it mentioned the number of new burdens on local government, and said that
“While individually, these are not overly onerous, they have the potential to combine to create a significant increase in work for councils.”
COSLA goes on to say that its main concern centres on the difficulty of anticipating demand for the measures in the bill and, in turn, quantifying the cost that will be incurred by local authorities. What work have you done to try to anticipate demand and to ensure that there is a realistic budget to go to local authorities to ensure that they can effectively deliver the measures in the bill?
A lot of work was done during the consultation leading up to publication of the bill. There was an exploratory consultation and then a consultation on a draft bill. During those periods, we asked questions about how the provisions might be used and what the costs behind them might be. At that time, little financial information and cost information was provided by others. We found it difficult to amass information on how the legislation might be used, which meant that it was difficult to consider what demand might be.
We agree with COSLA that the effect of the new legislation will not be overly onerous, and we agree that the demand element is the element that could change the cost profile. However, because the bill is about community empowerment, it will be up to communities—not authorities—to decide what they want to do, in particular in terms of participation requests, community right to buy and asset transfer requests. It will be hard to predict what communities will do, because communities in different places will want different things, and their decisions will be based on local priorities. Amalgamating everything into a demand profile is hard to do, as we found out. No one else has been able to do it, either.
Part 7 of the bill relates to allotments. As well as the wider consultation exercises, we wrote to the 32 local authorities in December 2013, specifically asking for their views on what the additional costs of the new duties on allotments might be. As Ian Turner rightly points out, the costs in relation to allotments will be dependent on existing provision and demand. The figures in the financial memorandum are based on the information that we received from the 15 out of 32 local authorities that responded.
I understand the points that you are making. The Minister for Local Government and Planning, Derek Mackay, wrote to us just before COSLA did. He said:
“despite ongoing discussions with stakeholders they have not been able to provide monetary estimates for costs or savings making it difficult to provide accurate ranges.”
That makes it difficult for the Finance Committee to scrutinise the bill. What safeguards will be in place should the financial burdens on local authorities be significantly higher than is anticipated?
COSLA said that the bill is
“reliant on council support and provision of community capacity building assistance, which can be very resource intensive and continues for an undefined period of time ... there no reference in the Financial Memorandum of the impact on reductions to a local authority’s asset base.”
It said that the bill
“could adversely affect Local Authorities’ ability to take out loans.”
On common good property, COSLA said that
“some additional costs for Local Authorities are anticipated,”
but that they were not quantified. You touched on allotments, which COSLA also mentioned. What cushioning will there be for local authorities if demand greatly exceeds the resources that have been set aside for the bill?
Demand for participation requests, which are new, and asset transfer requests will be limited—I use that word in a broad sense—by the provisions of the bill. COSLA tried to use the analogy of the Freedom of Information Act 2000, but the bill is not like that act. The 2000 act allows individuals to make requests for information, and that is what they do. The bill will allow community-controlled bodies, as defined by the bill—they must meet certain criteria, such as having a written constitution—to submit participation requests or asset transfer requests, which will also have to meet criteria in the bill. There will then be a cost-benefit procedure, in which the authority will consider the benefit in doing the process and will align that against possible the costs. That process will, to a degree, limit demand.
You are absolutely right about the capacity of communities, because communities are not necessarily on a level playing field. However, we do not believe that that is a matter for the bill. The bill provides the legal framework to allow community bodies to do these things; capacity comes from other funds and other places. For example, the £3 million strengthening communities fund was announced in April, with the purpose of helping community organisations in disadvantaged areas to increase their capacity. However, that fund does not say that such organisations must do an asset transfer or a participation request: it is for them to decide what they want to do, on their terms.
My concern is that expectations will be raised and that there will not, even allowing for that £3 million, be enough resources to meet expectations, so the bill will not be able to deliver what is promised. That is why I asked what cushioning would be available. Would the Scottish Government be willing to consider providing additional funding for local authorities, to ensure that the bill is delivered smoothly?
As it has for most new duties that come from legislation, the Government has a general convention that we will provide extra funding. The difficulty with the bill is that we cannot quantify that funding at the moment. That additional funding would need to be demonstrated and quantified through practice. That would happen through the normal processes and the funding would be provided in that way.
12:15
I will ask a couple more questions before I open up the discussion to the myriad members who are queuing up to ask questions.
The Scottish Property Federation has stated that its main concern is
“that the enhanced scope of CRTB and by extension asset transfer may inhibit larger scale and complicated investment in development land in a manner that has not hitherto been an issue under the existing CRTB rights.”
Do you see that being an issue?
I do not. Such issues were brought up around the time when the Land Reform (Scotland) Bill was going through Parliament. Since then, in the operation of the community right to buy for the past 10 years, we have not seen what the SPLF described and we have not seen community applications that are trying to blight big developments. If we got applications that were blighty—if I can use that word—the chances are that they would not meet the public interest test. We have checks and balances on our side, so I do not think that that is going to be a big issue, especially in the context of urban land coming within the scope of the community right to buy.
Okay. Before we move on, let me give you three brief quotations. The Scottish Environment Protection Agency says that there are
“false expectations that SEPA will fully engage with all CPPs in Scotland”,
which would be highly resource intensive and not cost neutral. With regard to participation requests, Highlands and Islands Enterprise says that it
“would expect to be able to absorb that to a large extent within the costs of staff time currently devoted to on-going business improvement activities.”
NHS Lothian has said:
“Without appropriate support and investment in community empowerment the key components of the Bill will not be fairly accessible to communities”.
Given those concerns, do you not feel that the Scottish Government has been too cautious in respect of the amount of resource that it feels will be required to implement the bill? From the evidence that we are receiving, it appears that that is the case.
SEPA is talking particularly about community planning, because it will be a partner in the 32 CPPs throughout Scotland. The bill does not say what the level of engagement in each of those CPPs should be. The fact that SEPA should be involved goes alongside what their outcomes are intended to deliver. How SEPA engages will be flexible and will be decided in collaboration with CPP partners, so we do not necessarily see the same resource issues as SEPA does.
What about the comments of HIE and NHS Lothian?
We work with HIE on the likes of the land fund and cases in which communities want to exercise the community right to buy, but also to keep open the option of going through negotiated sales. HIE’s work to assist communities is very much like the work that is undertaken by our community right to buy branch, and there is a certain amount of flexibility, given the number of cases that have to be dealt with. We build flexibility into our work planning and manage it in that way. As you say, HIE expects more work. Likewise, the Scottish Government expects to have a bit more work through the community right to buy, and we reckon that we will have to be flexible in our ways of working.
If I have taken anything from the experience of my political activity over the past few months, it is a sense that the people out there want to have a greater say in the factors that determine their lives. The bill is, therefore, hugely welcome if it can do anything to achieve that aim.
I have some sympathy with what the bill team is saying. If any bill was going to present us with a financial memorandum that found it hard to cost the proposals, it is this one. We are talking about empowering people, but we do not know how they are going to respond, so it must be difficult to quantify the exact costs.
I was taken with a turn of phrase that Ian Turner used. You talked about it being difficult to establish a demand profile. If you had said what the demand would be and what the bill would cost, could there have been a danger that that would have been viewed as an upper limit for how much could be done, which might have been viewed as being the opposite of empowerment?
Yes. In trying to do a demand profile, we would have to guess at what might be low demand or high demand. It is not easy to work out what those might be with respect to the number of rights that we are giving communities. For example, an area might not use participation requests at all because the public authorities in that area are very good at participation and engagement and are doing the job already, so demand would be low. However, in another area, demand might be low because there is no capacity in the community. How would we assess those two different communities when there could be different parts and profiles?
Fife Council, I think, said in its evidence to the committee that there will be peaks and troughs as things work through the system and as public organisations change. I took HIE’s comments about improving its business as meaning that it will need to change to ensure that the bill works. When communities come to HIE, the process will not be about engagement and consultation through HIE’s mechanisms; it will be about what the communities want to do.
Those are some of the difficulties. My point was more that, even if you attempt to come up with a set of figures, whether they show low demand, high demand or something in between, the danger is that people will think that that is what they have to work with. However, the process cannot really work that way, because if it is to be in the hands of people out there, they sort of lead, do they not?
Absolutely: demand will be led by communities, so we cannot work in that way. If we set a limit, that will confine the process and box it in. That is why community capacity is so important throughout the process.
I agree with Ian Turner. When the bill that introduced the community right to buy was going through Parliament, there was an attempt to work out what demand would be. I think that it was predicted that there would be 15 cases in the first year and five cases a year thereafter. However, things have worked out quite different; we get an average of 15 cases a year. We have to work flexibly with the communities and the demand. When I work with my branch, I do not always know what the next case will be and when it will come in. We utilise the resource well and we work flexibly. We want the legislation to be successful and we want as many communities as possible to use it—it is for the communities to use and not for us to tell them to use it. We do not have a benchmark that says that if we have only 14 cases in a year, the legislation is not successful. Communities lead the process and make it successful.
So, the number is not a measure of success: 15 cases in a year is not an upper limit and does not mean that other communities will have to come back next year. The community right to buy is a good parallel, as it is led at community level, I presume.
Yes.
I return to the COSLA submission, which has a degree of criticism in relation to quantifying costs. However, at the end, COSLA echoes Mr Turner’s point when it states:
“it is difficult to anticipate the uptake and demand that will be placed upon Local Authorities. This makes it very difficult to quantify the financial cost that will be placed upon local government in complying with the legislation”.
In essence, that is the same as the point that Mr Turner made. It is interesting that, despite the criticism in the COSLA submission, COSLA has not made an attempt to say what the bill will cost. Has COSLA provided any figures to you?
It has not done so separately. The information that we have is the information in the financial memorandum and the additional information that the minister provided last week.
Quite a lot of areas of public policy are demand driven, as are many of the bills that come before the committee. Generally, the sponsoring bill team or minister does their best to get an approximate amount, although they add caveats on what might be the upper or lower reality, so that we have a best estimate. Why is that possible in other demand-driven areas of policy but impossible here?
To some extent, it is because the range would be too large to be considered worth while. We do not know what the demand profile will be so we cannot put a range on it. We have estimated that participation requests, for example, could cost between £1,000 and £7,500 each, depending on what the request is for and what area it covers. If there are 100 across Scotland, that will be between £100,000 and £750,000. It is a range. You could say, “Well, it could be 1,000 or more,” but that only gets you so far. We cannot really go into any more detail at this stage about which is more reasonable. It will only be in practice that we see the level of demand.
So you have no idea how many participation requests there will be. There could be a million.
I very much doubt that there will be a million participation requests. The bill makes provision on who can make requests—community participation bodies—and what requests they can make. To an extent, it will be limited by the costs and benefits of going through the process. In making participation requests, community participation bodies need to say what experience they have in the process and the benefits—the outcomes—that the process will bring to them. It is for the public authority to assess the request on that basis and to go through the process.
So it definitely could not be a million. Could there be 10,000 participation requests?
I could not say at this time. I doubt it. That would be at the very high end. The risk profile for that would be high impact but very low likelihood.
My point is that you seem to able to quantify the situation slightly better now than you have done in the memorandum. You must have some idea of what you think the likely range will be.
We do not, because it is for the communities themselves. It is not just geographic communities; it is potentially communities of interest, too. Different groups might want to do different things in different ways, and it will depend on local circumstances. There are too many variables to factor into what would be a reasonable demand profile, or a reasonable idea of how many requests could come forward. We have gone back to what the unit cost might be and, as COSLA says, it is not overly onerous.
So the Government position is that it is impossible to quantify participation requests and costs. Would you make the same comments in relation to asset transfer requests and costs?
Yes. Again, that would be limited by the issues that we have been discussing. However, because asset transfer in the bill is not just about ownership—it can be about leasing, managing or using an asset—there is a range of things that a community might want to do within the provisions of the bill. Asset transfer already exists—the community ownership support service did 38 over three years. That provides an idea, but it is certainly not the range across Scotland because the support service is not involved in all the transfers and its funding is limited so it can get involved in only a certain number. As we go forward, we will see what the bill involves, but we cannot give the committee a definite figure for how much it might be used.
The Government says that it is impossible to give figures on any of these aspects. How, then, will the funding mechanism work?
We cannot say at this time. If local authorities can demonstrate and quantify what the new duties in the bill have cost them, that will be part of the on-going process of local authority settlements.
Let us assume that the bill is passed, which I am sure it will be. When does it take effect? Is it the financial year 2015-16?
It will probably be 2015-16 that we start to implement the provisions in the bill.
That is what I thought. Tomorrow, we will be given the draft budget for the year 2015-16. Amounts will be allocated to every department, non-departmental public body and council. Given that you will somehow have to quantify it tomorrow, how much is being given to local authorities in the draft budget to cover the obligations in the bill?
It comes within the current remit of local authorities. No particular additional work has been done because, at this point, we cannot quantify or demonstrate what the additional burdens might be.
Is it your understanding that local authorities will be given zero pounds and zero pence extra as a result of the bill?
12:30
Asset transfers are not new, so local authorities already do community capacity work and participation engagement with communities, which is one of the reasons why it is difficult to extrapolate how much additional cost the bill may bring to the process. Asset transfers already happen across Scotland.
We are not anticipating any particular financial burden in 2015-16. COSLA is right to say that it will not be overly onerous and therefore could be encapsulated within current resources. However, we recognise that additional funding might be required in the future.
My reading of COSLA’s position was that, although the individual elements were not overly onerous, the totality had the potential to be so. Is that not what COSLA said?
Yes, but we do not agree that the cost has the potential to become significant. We think that the individual elements are not overly onerous and will not be overly onerous in total. We believe that the cost can be managed within current resources, with some addition if the demand is more than local authorities can cope with.
As far as you are aware, as the bill stands, local authorities are not getting any additional resources. What if COSLA turns out to be right and it is onerous and there is a huge upsurge in demand? How concrete is the guarantee from the Scottish Government to underwrite the costs that councils will face?
That would be part of the normal discussions with local authorities through the annual budgeting process. Local authorities would have to demonstrate and quantify what was involved and then go into discussions with the Scottish Government.
This may be a question for the Minister for Local Government and Planning—I do not know whether he is giving evidence to the committee so perhaps I will have to write to him. Let us just say that there is a huge upsurge in demand, which costs councils—for the sake of argument—several million pounds more than they had budgeted for. If they can demonstrate that the upsurge is a direct consequence of the bill, is it your understanding that the Government will pay councils that money, or would that have to be negotiated?
That is something that would have to go through the normal processes of negotiation with local authorities. I do not think that there is a particular guarantee. That is probably a question for the minister, rather than for me.
You have established that the figures in the financial memorandum are not quantifiable and you have explained why they are unquantifiable. I accept your explanation, although I have some concerns about—as Gavin Brown said—where that leaves the overall budget for local authorities. Can you give us an example of previous legislation where the financial memorandum was in a similar position to this one, in which the potential costs are unquantifiable? Was anything established in that legislation to take account of the potential for the budgets to come under pressure?
I have looked, but I have not found a similar example.
Even without the bill, a growing number of community groups are already looking to take over local authority assets for community purposes, for example in the Highlands and Islands. You mentioned Highlands and Islands Enterprise. Will Scottish Enterprise have a similar role? It has never had the community role that Highlands and Islands Enterprise has had and, if the bill is successful, I imagine that it might have a role to play. Do you see that as the case?
Scottish Enterprise could have a role to play. Highlands and Islands Enterprise is often a funder—it provides money to make the asset transfers—and I do not know whether Scottish Enterprise will be in that position. It will be involved in the community planning partnerships, so it will be involved in setting the local outcome improvement plans, which we hope will set in context how some of this might work within local areas.
Scottish Enterprise gave evidence to the Local Government and Regeneration Committee last week and talked about being an opportunity-led organisation, seeking opportunities and gaining the maximum benefits from those. An asset transfer in the Highlands and Islands could be such an opportunity if Scottish Enterprise sees that it has a role to play there.
On the point about trying to fix a budget, I would guess that the community land fund was established with a finger in the air to make a judgment, because nobody knew how many communities would apply or register interest in land. Would that be right?
Yes, as I understand it.
I think that a sum was allocated, but I do not know what calculations were done to arrive at the figure.
Finally, there are a number of critics of the bill, who are saying that it does not go far enough and is quite tame. Which more radical issues from the consultation were left out of the bill?
It is hard for me to comment on what was radical and what was not. In the bill, we set up a process whereby, if someone seeks an asset transfer, it is still for the authority to decide whether it takes place, and the bill ensures that the process for that decision is transparent and open. I think that some community groups would want more of an absolute position whereby, if someone asks for it, they get it. The same applies to the community right to buy, particularly for abandoned or neglected land, and people may see that opening up beyond such land. However, the bill does not provide for that.
That concludes questions from committee members, but I have one or two further questions.
Do you envisage that the bill will have an immediate impact? Will there be a rush to involvement or will demand rise steadily? Has there been any analysis of that?
It depends on who you speak to. We have talked to a lot of community organisations and stakeholders. Some of them say that there is pent-up demand in their areas and that people may use the provisions—there is always a “may”, because it depends on what communities want to do and how they might use the provisions. Others say that it will take time for communities to adapt and to develop capacity to use the provisions.
The bill is in legal language because it is a bill, and a participation request looks like quite a process. It will have to be covered in guidance so that people can understand it and see how it might be used. When people see such requests being used, they might catch on. If people see them having an impact in their local area, demand may increase from that. It all depends on what communities want to do and how they want to use the provisions.
The financial memorandum does not provide specific cost estimates for many aspects of the bill, in some cases because costs are expected to be demand driven. However, rule 9.3.2 of standing orders states:
“A Bill shall on introduction be accompanied by a Financial Memorandum which shall set out the best estimates of the administrative, compliance and other costs to which the provisions of the Bill would give rise, best estimates of the timescales over which such costs would be expected to arise, and an indication of the margins of uncertainty in such estimates.”
In what regard does this financial memorandum meet those criteria?
We attempted to include costs in the financial memorandum in a number of places where we believed that we could actually indicate what the costs will be. In some areas, we know that the costs under the current provisions are fairly low, for example, and we therefore have an idea of what the costs may be in the future.
We express a caveat a number of times about the margins of uncertainty, because to attempt to state what the bill might cost in future would be unreasonable and potentially misleading. We indicate a timescale—
Standing orders make it clear that there should be best estimates. The committee has been down this road before when a bill team has come in and has not been able to give us figures. It is frustrating from our point of view. We are supposed to be scrutinising legislation from a financial perspective, but it is difficult when we are not given much to get our teeth into, so to speak.
I absolutely know what you mean. There is frustration on our side as well when it is difficult to quantify the costs.
Are you saying that it is impossible to meet the criteria or are you arguing that they are actually met?
I would argue that they are met, because it was accepted.
Thank you. Are there any further points that you would like to make?
No.
I thank you very much for your evidence and I thank colleagues for their questions.
We now move into private session, as was agreed earlier.
12:39 Meeting continued in private until 12:46.Previous
Draft Budget Scrutiny 2015-16