Agenda item 2 is an evidence-taking session with the Scottish Government’s bill team on the financial memorandum to the Community Justice (Scotland) Bill. I welcome to the meeting Elaine Hamilton, Arlene Stuart and Andrew Bruce. First of all, I apologise for our late start. I am afraid that because our previous guests were running late, we had to start our session with them half an hour late.
Members have copies of all the written evidence that we have received as well as a paper from the clerks. We will go straight to questions. As I do not think that any of our witnesses have been to the Finance Committee recently, I will explain the process: I will start with a few questions before opening up the session to colleagues around the table.
A number of concerns have been raised about section 27 of the Social Work (Scotland) Act 1968 by the Convention of Scottish Local Authorities and some of the local authorities that have provided written evidence. They have suggested that because the new funding formula for allocating section 27 funds has not been finalised, detailed information about the allocation to local authorities is not yet available. That creates a difficulty for stakeholders in accurately determining the bill’s on-going financial impact on their organisations. How do we go forward with that difficulty?
As stakeholders will be aware, a review of the funding formula for section 27 is under way and an advisory group is being formed to look at the funding mechanism. That review was planned and does not relate to the bill or a change to the model.
The funding technical advisory group has been established to oversee the work of developing a new community justice formula to replace the current model. The group is due to report to the main funding group in October, after which recommendations will be made to the joint Scottish Government and COSLA settlement and distribution group. If its proposals are endorsed, a new funding model will be piloted in 2016-17. The new model will shadow the old model and then go live in 2017-18.
Although some of those who have provided written evidence have suggested that the new funding formula might work well for them, others have concerns. Is it not, as COSLA and others have pointed out, difficult to quantify the impact on stakeholders of something that has not yet been deliberated on?
The section 27 funds are worth around £95 million or £96 million a year and are allocated to allow criminal justice social work to carry out its core business, including court reports and supervision, as well as non-core work, some of which relates to very innovative projects and is locally based. However, the model’s purpose is to take a far broader view of funding and resourcing for improved community justice outcomes. The £100 million is part of the piece—or, I should say, part of the puzzle. It is our intention through the review of the section 27 funding formula and next year’s shadowing arrangements that local authorities know far further ahead than ever before what section 27 funds they are likely to get. Obviously, that will be subject to the comprehensive spending review and the on-going agreement with the settlement and distribution group. The section 27 moneys are for criminal justice social work, but they are only part of the overall puzzle for community justice in Scotland. Essentially, they are part of one of the partners.
Going through some of the evidence that we have received, I have to say that my local authority, North Ayrshire Council, seems to have no concerns whatever. However, not everyone shares that view. For example, although COSLA has said:
“the potential for the new model to develop and strengthen partnerships with local statutory and third sector partners ... will be immensely rewarding in terms of positive outcomes”,
which shows that it is very positive about the change, it is also concerned that
“the transitional funding is only available for three years”.
Obviously the word “transitional” means that the funding cannot go on for ever, but what is the thinking behind that? COSLA is concerned that, after those three years, it will be left holding the baby, so to speak.
We have discussed and agreed with COSLA the transitional funding, the purpose of which is to build capacity and understanding within community justice and community planning partners regarding their role within the new model. Work is going ahead in the transition workstream, supported by the transitional funding, to help build that capability ahead of the new model going live.
Undoubtedly there are some stakeholders who want that funding to continue once the new model goes live, but the task of planning and reporting for community justice is not new; it is a reframing of the existing approach to planning that is already being used by planning partners. Our view, therefore, is, “Let’s wait and see.” Transition work is going on, and transitional funding is being provided, so let us see what happens in the course of that. We have committed to working together with COSLA on identifying any issues that arise during the transition period, so we can see how the transition plan works out and review the position at that point.
What does “review the position” mean? Does it mean the possibility of additional funding at that point?
That is possible. Another consequence might be that it is felt that no additional funding is required. The Scottish Government is keeping an open mind on that, and we are inviting our stakeholders to do the same and see what comes of the transition period.
Although you have put some solid figures into the financial memorandum, my difficulty with it is highlighted in a number of specific comments that we have received. For example, Aberdeenshire Council has said that
“It is difficult to make an accurate assessment prior to the operational impact of the allocated resources becoming apparent”,
and Angus Council has stated that
“there is little to suggest that ongoing costs have been given due consideration.”
It is clear that there continues to be some concern in local government with regard to how the model will be rolled out.
Just to switch from local government for a minute, I note that the criminal justice voluntary sector forum has said that, from its perspective, the uncertainty about funding in relation to the sustainability of the service
“creates a lack of confidence amongst sentencers and other partners about the future availability of the service and therefore acts as a barrier to (i) partnership working (ii) increasing the use of viable community alternatives to custody.”
It goes on to say that
“these financial costs may lead to the closure of some services.”
We have worked closely with the third sector—and with the forum and its chair in particular—throughout the entire process from pre-consultation on the model right through to the present. The forum, which sits on the funding group that is looking at section 27 funding and broader leverage, has raised an issue about the year-on-year funding, which it believes makes it difficult for people to look more strategically at services in the longer term. One can understand that point of view, and in looking at the funding model, we will also look at whether we can start to create a longer vision around that. It is still being discussed at this point, but we are starting to look at whether we can give people some indication—based on principles, not on facts and figures—of the longer-term funding situation.
We have also heard from people how difficult and time consuming commissioning can be with multiple tenders and so on, particularly for those providers, and one of the first things that community justice Scotland will do when it is established will be to work with all partners and stakeholders, both purchasers and providers—in-house, third sector or others, including the private sector—to develop a strategic approach to commissioning. By that I mean we will look at what we are currently delivering and evaluating the performance of those services—including shared services, because it is important to get economies of scale. We must also consider what the needs will be going forward and whether we have the services to meet them. If not, we must look at the evidence and see what the best services are that will do so. Finally, we will look at how we can deliver that and whether that will lead to procurement exercises or, indeed, a public social partnership approach or other more creative approaches.
At the moment, we do not have that kind of strategic approach for community justice or criminal justice social work. We have also said that because this is a local model, commissioning should be based on local needs and any procurement should, first and foremost, be carried out by a lead authority or agency or through existing arrangements before considering whether to do any commissioning or contracting through community justice Scotland.
With regard to the concerns that have been expressed about short-term funding cycles, one of the outcomes of the review of section 27 funding that was mentioned earlier is the potential for giving people three-year settlements, which would allow them to carry out local planning on a much longer-term basis.
We understand the concerns about year-on-year settlements, and in work that is going on outside but running in parallel with the bill, we are seeking to improve the way in which we fund and look at performance across the piece in order to move to a longer-term view. I think that that will help answer the concerns that the committee has heard from the third sector.
Thank you.
Table A of the financial memorandum contains a number of cost categories and estimates. I find it interesting that, for the on-going annual running costs for community justice Scotland, there is a very precise figure of £2.209 million as well as very precise figures for the community justice authorities severance liability—which ranges from a minimum of £248,094 to a maximum of £744,284, with the eventual figure being somewhere between those—while the rest of figures in the table seem to be rounded ones. I have to say that rounded figures always look like ballpark figures to me.
Only late yesterday—or it might have been early today—we got a wee letter from Paul Wheelhouse, the Minster for Community Safety and Legal Affairs, in which he comments on the issue of the pension liability. Referring to the
“estimated shortfall of £2.5 million”,
he says that the figure should perhaps be £4.5 million. That £2 million is quite a difference. Can you talk us through the rounded figures that have been given, particularly that shortfall figure?
Sure. There has been a certain amount of rounding up with the figures just for neatness and ease of understanding.
I am sorry to interrupt you, but I would have understood that had all the figures been rounded up. However, some have been rounded up and some have not. I am specifically asking why that is the case.
Maybe we should have rounded up the severance liability figures just for the sake of uniformity, but I assure you that where the figures have been rounded, they have been rounded up, not down.
On the £2 million discrepancy in the pension figures, when the financial memorandum was drafted, we used the existing triennial valuation of pension liability, which dated from March 2014. We consulted the United Kingdom Government Actuary’s Department, which confirmed that that was the best estimate that we could use at that time, so that is what we did.
The existing triennial valuation was based on the community justice authorities remaining employing authorities for pension purposes. However, the higher figure of £4.5 million to which you have referred is a recalculation based on what is projected for 2017. Although the next triennial valuation is due in 2017, we have asked for it to be done now, but the key difference is that this time we have treated the community justice authorities as ceasing as of 31 March 2017. That has a considerable impact on the cessation value for the fund. Because the CJAs are no longer employing authorities, they can no longer contribute to the fund and therefore any shortfall has to be drawn from them on 31 March 2017.
In plain terms, once the community justice authorities are disbanded, there is no means by which the pension fund can call on them again for any shortfall. Therefore, the actuaries are taking a long-term view. As they do with long-term forecasting, they have made quite a big provision for the risk attached to those pension figures. That explains the increase in the figure from £2.5 million to, potentially, £4.5 million.
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I realise that it is kind of a guesstimate, but we are talking about quite a big difference. It is almost double the initial estimate.
Absolutely.
What has changed between the point at which the financial memorandum was provided to the Parliament and now is the availability of this more accurate assessment. The financial memorandum says that the figure is likely to be an underestimate and that we would be looking to update it at stage 1. When we make these kinds of estimates, we get into difficult territory. The £4.5 million is the best estimate that we have now, but even that will remain subject to some uncertainty come the actual point of disestablishment.
Convener, you talked about figures being rounded up. Some of those figures are round figures but they are absolutely accurate. For example—
Obviously, the £1.6 million figure that is mentioned is the £50,000 for each local authority.
Exactly. That was the point that I was going to make.
My point was about some of the other figures in that table.
Thank you for that. I will now open up the session to colleagues around the table.
We have touched on quite a lot of areas already. What struck me in COSLA’s submission was the comment that when the police and fire services were merged from eight bodies into one,
“local authorities received funding to compensate them for the additional costs associated with carrying out their local scrutiny functions.”
COSLA is drawing a kind of parallel there. It seems to me that this might involve extra work for local authorities. Is that the case?
COSLA has mentioned that to us, too, so we are aware of it. However, the reconfiguration of the police force is a very different change process from what is being envisaged for the community justice authorities. It is not a like-for-like comparison.
It will affect the voluntary sector—for example the National Society for the Prevention of Cruelty to Children—if, instead of relating to eight bodies, it has to relate to 32. Surely that has resource implications somewhere.
We are aware of that, have discussed it with the third sector and fully appreciate the point that the sector is putting across. As well as transitional moneys that are being made available to community planning partners, we are also making available £50,000 to the criminal justice voluntary sector forum to assist it in the transition period. As part of the overall transition work programme, we are bringing forward those very issues in the hope that such bodies will work together on trying to streamline the process to ensure that they do not face a burden of having to bid 32 times over.
You are providing £1.6 million a year transitional funding to smooth the transition. However, as it stands, there is no additional money per annum for the community planning partnerships. You have said that you are in discussions with them and that you will follow progress and so on. In response to the convener, you said that that could result in more funding—or, equally, it might not result in more funding. Is it therefore the Scottish Government’s view, as we sit here now, that you cannot foresee any additional funding being required after the transition period for local planning partnerships?
Yes. That is our position at the moment. However, as I have said, we are working with COSLA and monitoring the transition period. It is for everyone involved to keep an open mind and to review the position, as necessary, as we go forward.
The COSLA submission is quite supportive of the proposal as a whole, and you appear to have worked with COSLA on a number of areas. However, it puts forward the view that there has been
“little attempt to identify or capture the resource implications of delivering the new structure locally.”
Is that a fair comment, or would the Government dispute that?
It is probably a mixed comment. It may be a comment to us, but it may also be a comment to the local partners. We have funded a post within COSLA to lead the transition workstream, which will manage the change process and understand how partners are progressing on the ground and whether additional resource will be required. Some local authorities have said that the partners together will absorb the costs, because it is about their coming together to work out how they can improve outcomes rather than put everything on the head of the person over there. Other partners have said either that they are going to absorb the costs or that they do not foresee any additional costs for them at all. It is a very mixed picture and we will get a clearer understanding of it through the transition workstream.
There are reports on the transitional funding. The reports for this year are due in May 2016 and will show what has been done with the funding, how the change is progressing and what the next steps will be. We also expect the transition plans for 2016-17 to come out in January next year, and they will set out how the funding will be used, how the change is progressing and what the future local arrangements will be. Within that, we expect them to say how those local arrangements are going to be resourced.
The provision of the £1.6 million transitional funding was a direct result of the consultation that we had with a range of partners over the period. They made the case to us that it would be useful to resource the transition period, and we were able to make the case to ministers for that three-year period.
COSLA made that point and was quite positive about it in its written submission. However, COSLA has said that, in its view, the successful delivery of the performance framework is likely to cost each community planning partnership £100,000 per annum. It gives a better breakdown of the number of staff that it thinks will be required. What is your response to the statement that it is going to cost £100,000 per annum?
We would welcome a bit more information about that. The written submission from Perth and Kinross Council puts the cost at £45,000 and, as Arlene Stuart mentioned, we are in touch with other local authorities that think that they can absorb the cost completely. Arlene talked about the purpose of transition and the arrangements that we have put in place to monitor the change so that we can be open minded at the end of the period and ensure that we understand it properly. We would not want to find ourselves underresourcing the new model in a way that prevents it from achieving its potential, but my initial reaction is that £100,000 seems to be on the high side for the sort of activities that we envisage may be taken on. Among local authorities, there seems to be a spectrum of what additional resource, if any, they might need.
Some local authorities have told you that they can absorb all the cost or that the net cost to them will be no greater, and some have said that there will be a cost to them, but your view is that £100,000 is on the high side.
That is correct. We probably have a responsibility to be sceptical and to look at what is going on to ensure that we are resourcing the new model appropriately. Looking at the way that the model is intended to work—it puts responsibility on the local partners to work together—we think that it is not unreasonable for us to expect that sort of partnership working to be done as part of their everyday work in the same way as the health boards work with criminal justice social work and so on. It is our responsibility to identify what additional resource, if any, is needed, and the transition period allows us to do that.
This may be a question more for the minister than for the bill team. Let us assume that the transition continues and you engage with COSLA but, as a team, you then reach the view that additional funding is required. To your knowledge, is there a commitment from the Government that that funding will definitely flow if it can be demonstrated that it is required?
The commitment that the minister has given in conversations about that is that the Government will be absolutely open minded about it. To go back to my earlier comment, if it becomes one of the things on which the new model’s ability to achieve everything that we want it to achieve depends, we will need to think very hard about ensuring that we are supporting the new model to achieve everything that we expect it to achieve.
I will not ask you to go further because, obviously, that is one for the minister to answer more directly, should the question be put.
As the convener said, you gave a reasonably detailed outline of the set-up costs and the annual running costs of community justice Scotland. Broadly, how do the annual running costs of £2.2 million or thereabouts compare with the annual running costs for the totality of the eight community justice authorities? You say that it is difficult to do a direct comparison, but you must be able to do a ballpark comparison. The £2.2 million is not completely additional spend. There must be some saving. Have you done any analysis of that?
The cost of the present model is around £2.74 million. As you say, we need to be slightly cautious about making comparisons, because it is not a like-for-like comparison.
I accept that entirely, but your view from the analysis that you have done is that community justice Scotland will not cost us an extra £2.2 million a year. If anything, it will save us £0.5 million or thereabouts.
Yes.
The final area that I want to cover is the disestablishment of the community justice authorities. We have covered pension costs, so I will skip that question. On severance costs, there is quite a broad range, from around £0.25 million to £0.75 million. Although the difference is not huge in cash terms, it is quite a big spread in percentage terms. Will you outline why there is such a big spread?
When we are dealing with uncertainties, it is best to provide a range of figures. The upper end of the range involves an assumption that all community justice authority staff will remain in post at 31 March 2017. The lower end of the range assumes that a third will remain in post at that date. It is a simple arithmetical third—that is how we worked it out. Obviously, we do not know what the reality will be, so that is our best estimate at present. As I said, we have given a range of values, in light of the uncertainty.
I understand that. There will be a normal turnover of staff, as with any organisation. If somebody leaves one of the authorities now, is it the position that they will not be replaced, which will bring down the figure, or will they be replaced but the redundancy cost will be lower because the person will have been there for a shorter period? What is happening on the ground?
On the ground, the CJAs know that there will be disestablishment and that employment will come to an end at a certain date. As you will imagine, staff there are looking for other jobs, and other opportunities will come up as a result of the new model. I will not go into the details of each individual, but we know that a number of people have left and moved on to different jobs. When that happens, a decision is taken about replacing them. Where the decision is to replace, the replacement will be put on a fixed-term contract, so there will be no severance liability at the end. The figure has already probably come down a little from the upper end, because some staff that we included in the calculation have already moved on to other jobs.
Let us say—for the sake of argument, I will pluck a number out of the air—that 10 people are employed by the CJAs come 2017. What will happen then? Will they have to take compulsory redundancy?
There will be a severance package for them. Clearly, their employer will no longer be there, so a package will be afforded to them. We hope to get into a position in which the only people who are left in that situation are, in effect, those who want to be there and who have made that decision. Over the transition period, we are looking to allow people to move to other posts elsewhere in the sector or in other sectors altogether. With your figure of 10 people, calculating the cost that would then arise would depend very much on their salary, length of service and so on.
You have not decided where community justice Scotland’s premises will be yet, but has a decision been made on where it will be located and, if so, are you allowed to say publicly where that is? Have you chosen a town, city or region? Could it literally be anywhere at this stage?
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The location has not yet been chosen. We are working with estates and others on that. We also have to do the assessment.
One of the key points that came back from the consultation was that the location needs to be accessible by public transport. The other point was that, given that the new body is to be called community justice Scotland, it might be possible for people to be home based, particularly people who might be working in the hub on learning and development activities and would be going out and about delivering training to people on the ground across Scotland. We said that that makes sense, so we would encourage it. Obviously, it would be up to the chief executive to set those sorts of policies when they came into post. We would be encouraging policies to allow people to be home based because, after all, the new body is to be called community justice Scotland. We are undertaking a location assessment at the moment with our estates colleagues.
Thank you.
Thank you very much. There appear to be no further questions from committee members, but I have one or two, just to round things up.
Paragraph 16 of the financial memorandum, on the appointment of community justice Scotland members, says that there will be
“no fewer than five and no more than eight non-executive members”.
However, paragraph 24 estimates the cost for members as
“£14,904 (2 days per month for 6 months)”.
That is very precise. How many members will you have? If it is to be between five and eight, I would have thought that there would be a ballpark figure there. I take it that the two days per month is for all the members, not for each member—otherwise, it would give them £1,250 a day, which seems quite extravagant.
It would be two days per month for each member. In terms of how many members—
The figure is very precise—that is why I was wondering.
Yes, we have set the range as between five and eight. The Scottish ministers will decide how many to appoint. The appointments are likely to be staggered because the members will serve three years and obviously we do not want everyone beginning and ending at the same time. There is some uncertainty as to exactly how many members there will be. I am just trying to find very quickly—
Paragraph 24 refers to
“Members at £14,904 (2 days per month for 6 months)”.
If there are to be between five and eight members, how did you come up with a figure like that? Surely it would be a ballpark figure for that one.
We may have based it on six members at two days per month, for example. I am sorry, but I cannot find that information right away.
We can check that for you. My understanding is that it is the upper end that we have used, but we will come back to you.
We have talked a lot about the £1.6 million per annum divided among 32 local authorities. Why was it decided to give £50,000 to each local authority, given that there is quite a significant difference in scale between Orkney, Shetland and the Western Isles at one end and Glasgow and Edinburgh at the other? Why was it decided to make it a straight £50,000, rather than having a balance between a set amount plus a bit more? One would have thought that the workload would be significantly higher in some areas than in others.
Two different options were put forward. One was the straight split of £50,000 for all. That was in recognition of the fact that, yes, there are different population sizes, but some of the smaller areas by population are much larger geographically. It was a little bit of swings and roundabouts.
Excuse me, but Highland has significantly more people and is a lot more geographically spread than Clackmannanshire, for example.
That is true, but we are still dealing with the same number of partners, so we are still dealing with a health board, a local authority and Police Scotland. The actual activity of building the capacity and capability at a partner level is similar.
The other option that was put forward took size and workloads into account, so there was more of a range. Both options were put to the joint COSLA and Scottish Government settlement and distribution group. It made a recommendation to COSLA leaders, who decided on the £50,000 split.
That is fine, thank you. I am not convinced by the logic, but never mind—if that has been decided, that has been decided I suppose.
One final issue is that paragraphs 12 and 13 of the COSLA submission state:
“The Bill and its supporting documents pays little attention to resourcing the development of the new model locally ... That ... the local partnerships will receive no additional funds does not seem to support the policy intention to shift to a local model.”
Why is that?
I am sorry, but I did not quite catch what you said at the beginning.
Sorry. In paragraphs 12 and 13 of the COSLA submission, it says:
“The Bill and its supporting documents pays little attention to resourcing the development of the new model locally ... That ... the local partnerships will receive no additional funds does not seem to support the policy intention to shift to a local model.”
That goes back to your previous point about transitional funding being continued into future years. Yes, we are aware that COSLA has concerns about resourcing local partnerships, as I believe we have already said. Together with our stakeholders, we will keep that under review during the transition period, also bearing in mind that there are other views that disagree with COSLA’s point of view.
Was there some other aspect that you feel we have not covered?
No, that was it. COSLA has made it quite clear to me—and Gavin Brown has pointed out—that it is very supportive of what you are doing. Earlier, I read out a quote that said exactly that. I was just trying to cover its concerns about whether the funding is going to be there to be delivered on the ground, which is the key issue for us.
To go back to the global funding figure, the section 27 money comes in at around £100 million. In the context of the £1.6 million of transitional funding that we are giving here, there is still a huge amount of money going out to support local authorities.
Clearly we and our colleagues at COSLA want to make the absolutely best use of that money, but as we have said, we were absolutely open minded about what additional money might be required in the future. However, we think that it is best to wait and see what happens in the transition period and to see what the evidence shows us before finalising the position.
In paragraph 11 you say:
“there will be no overall reduction in the level of funds currently provided by the Scottish Government for Community Justice.”
That is an important point.
I thank the witnesses for giving evidence and answering our questions today. Is there anything further that you want to say before we wind up the session?
We will come back to you on how we worked out the precise figures, as we discussed, including the numbers used to calculate them.
That would be greatly appreciated.
12:22 Meeting continued in private until 12:32.