Good afternoon and welcome to the Finance Committee's 12th meeting in 2009, in the third session of the Scottish Parliament. I ask everyone present to turn off mobile phones and pagers. The only item on today's agenda is to continue our programme of evidence taking as part of our strategic budget scrutiny inquiry. Our focus is on the effects of the recession on public sector budgets in Scotland, the immediate pressures on the 2010-11 budget and likely future trends.
The pressures that Glasgow City Council is facing include a reduction in asset sales, which we estimate will be reduced by £60 million between 2008 and 2011. We had expected to have an additional £60 million of capital income from land value sales over that period. Associated with that, planning income is down by £2 million. Although inflation has reduced, food prices have not, so there is a further pressure on us of £1 million. There are other pressures on us but those ones are most associated with the recession.
The most obvious immediate effect of the recession on health and for us is the impact on receipts on our capital programme. That was probably the first thing that we noticed. We have a 10-year capital programme that is reliant on contributions from the Scottish Government health department and is supplemented by receipts. We have had to examine the profile of our capital investment programme over those 10 years to acknowledge the risk around the timing and value of the receipts. There has been one positive impact, which is that we are experiencing more applications for vacant posts. In some areas in the public sector we struggle to recruit, but we have seen an increase in the number of applicants for posts. Those are the most immediate impacts, but looking forward is a different issue.
In terms of immediacy, our endowment portfolio is the key thing that has been affected. Each health board holds a substantial endowment portfolio, which is a combination of investments in cash and equities. NHS Dumfries and Galloway's portfolio has reduced by 20 per cent. Obviously our investments are long term, but there will be a short-term dip due to the recession, after which—we hope—those values will continue to pick up.
Some of the most immediate impacts have been on our asset management and property portfolio. There has been a writing down of approximately £30 million of the values of that portfolio and anticipated capital receipts. We have taken those out of the capital programme because of uncertainty about the timing and the value of the capital receipts that may accrue, which has put considerable pressure on our remaining capital programme and how we will fund it within affordable limits.
You have presented a range of problems, some of which are very specific to your sectors. There are some mitigating factors. What is your biggest worry or fear as you look to the future?
As Craig Marriott said, health is very much demand led. NHS Lothian is one of the few boards in Scotland that has had significant increases in population—we are seeing evidence of that in a range of areas, such as primary care, accident and emergency, and maternity services. Our immediate concern is the level of uplift that will be available to the NHS. The basis on which the resource is distributed means that NHS Lothian is currently £60 million away from its NHS Scotland resource allocation committee target. Our prime concern is probably our ability to respond to the demand with lower levels of uplift.
Are you all caught in a rigid trap? How much flexibility do you have to meet those problems?
I have already indicated the pressures on Glasgow's budgets for 2010-11. The effect of those pressures is that Glasgow is already anticipating having to achieve £30 million of efficiencies. Politicians and staff are working on 20 service reform streams in order to plug that gap. The £30 million target assumed an uplift in 2010—we expected an inflationary increase. If we do not receive that, we will have to find a minimum additional £38 million. Straight away, we are more than doubling our efficiency targets.
Are those problems replicated in Dumfries and Galloway, and in Aberdeen?
From a smaller health board's perspective, we are in a unique position in that we are trying to move forward with a clinical strategy, which for Dumfries and Galloway involves investment of the best part of about £150 million, Our revenue costs are £8 million to £10 million. As a board, we are proactively planning to be able to free up the resources to fund that revenue position. That will not come from NRAC gain, but from efficiency.
I hear "efficiency savings". Does that mean that you have to have been very inefficient in order to maximise your efficiency savings? Are your targets realistic? Will you deliver them? How efficient can you get?
I suppose that it is about the balance between efficiency and disinvestment. We are considering a number of different techniques, one of which is the lean approach. We have used other non-recurring funds to support some of the national work—national efficiency groups are helping to support us, and to consider benchmarking of services.
It is probably fair to say that, so far, the economy of the city of Aberdeen has, because of the oil industry and the energy sector, been less affected than the economy of other parts of the country. However, if the global economy does not pick up, if the oil price remains low, and if there is a real downturn in the industry, the impact on the 40,000 oil-related jobs in Aberdeen and Aberdeenshire could be severe. In turn, that would impact on many council services. For example, there would be extra costs for social care services.
Cuts will be coming to us in the 2010-11 budget, and efficiency savings will be required. Bailie Matheson suggested that one way of achieving such savings might be a public sector pay freeze. Was that just hot air over the weekend, or is Glasgow City Council seriously considering it? Has a paper been produced? Is the council's executive considering the idea seriously?
That there should be a pay freeze is the position of the administration Labour group on Glasgow City Council. I am not speaking on the hoof here—the position was agreed previously within the administration. More discussions will have to take place before the council or the Convention of Scottish Local Authorities takes a final position. We are making a serious attempt to raise the issue and put it on the agenda of others beyond local government.
We all face the challenge of making efficiency savings. It is not for us to say whether there should be pay uplifts or not, but in health it has been helpful to have a three-year pay deal. That gives certainty and allows people to plan ahead. Efficiency issues become very difficult when they are required year on year and without a strategic overview of, say, three to five years. Uncertainty causes difficulties, so three-year pay deals are beneficial to planning.
You weaken the system if you do not know where it is going.
Yes.
At last week's meeting, a witness from the housing sector told us that the Barnett consequentials should, in effect, be spent as they are allocated. I am sure that we will hear later from other witnesses that that should happen. The quid pro quo is that negative Barnett consequentials would also have to be allocated directly. Part of the £500 million cut that will come to us next year is a £129 million cut in the health budget. If that £129 million negative consequential was applied to health budgets here, how would that impact on the ability of NHS Lothian and NHS Dumfries and Galloway to provide front-line services?
I think the question is how you will deal with having less money, if that happens.
There is no easy answer. As I said, we have signed off our financial plan, with a recognition that we must deliver on-going 2 per cent savings. A sudden step up from 2 per cent to 4 per cent will be that bit more difficult. As you will hear from colleagues today, that will involve difficult decisions and ensuring that we have political support. It will be extremely difficult to make 4 per cent savings on a recurring rather than a non-recurring basis. That will require turning round organisations so that they are forward thinking.
The reform agenda is absolutely here to stay. The challenge for us all is to focus on our priorities and to deliver efficient services in the years ahead. One area that we have not exploited fully is the shared services agenda. To give an example, I have not spoken to my fellow witnesses today about this, but I know that transport budgets have been busted in the past year or so. We can make significant efficiency savings on transport, but we need to consider the issues not only between departments in a council, but jointly with our NHS partners and neighbouring councils. We must consider how we procure and design vehicles and how we deploy and use vehicles and staff throughout the day. We have taxis running all over our cities delivering patients and pupils, but it is not being done as efficiently as it should be. To gross the efficiencies, we need to increase the scope of the service beyond any one council department or service. That possibility should be exploited.
Which services are most amenable to being shared?
Personnel, human resources—I do not know. There are swathes of expertise that we could share. I spoke about transport. Many millions of pounds could be saved. We will not optimise the savings if we try to achieve them only within departments or services, however innovative we are.
Aberdeen City Council and Aberdeenshire Council have a shared head of procurement, and some big savings for both councils are being made in the procurement of goods and services as well as in agency staffing and transport. We are achieving economies of scale from the shared services agenda, but we must expand that if we are to make the efficiency savings that have been targeted for us to make. The sharing of services and posts between neighbouring authorities and other public sector bodies is one way of driving the efficiency agenda while, importantly, trying to maintain the level of service.
We have a shared services project that is looking at shared services in finance across NHS systems; a huge amount of progress has been made on that over the past couple of years. The sharing of services across organisations will be successful only in areas where the organisational boundaries get in the way of good service delivery. Transport is a good example of that. If we can do more work in such areas, we will have more chance of success than if we simply say, "Go and get your HR departments together."
Another shared service that we have in health is national procurement. We have a national distribution centre in Lanarkshire, which operates very well for NHS services and allows us to share best practice between the different areas.
I wonder whether I could explore with you the urban myth of the £500 million of cuts that Joe FitzPatrick is keen on parroting. I understand that the extent of the efficiency savings is about a quarter less than that figure. Even allowing for that, the departmental expenditure limit baseline, which is the Scottish Government baseline, will rise by 0.5 per cent next year. I have no doubt that that still represents a tightening of the financial circumstances that we are in; nevertheless, it is a different picture from the one that is being painted.
In Glasgow, we do not apply a salami-slice approach to efficiency savings; we focus on our priorities. I recommend that that approach be followed across the public sector in Scotland.
That is within and between local authorities. You have also linked the issue to other public authorities.
Yes. There should be the outcomes that people expect.
We strive for efficiency savings in all service areas, but we can always look further for such savings. Given the magnitude of savings that we are looking for, we must be honest with ourselves, target specific areas and consider where spending more will generate more efficiency savings further down the line. I will give an example. Through spending more to build children's homes and accommodation in Aberdeen city we can incur a capital spend, but we can then bring back within the city children who have been placed outwith the city and for whom we have to pay expensive fees. Doing that will cost us less in the revenue budget.
Does what has been said strike a chord with the NHS?
It does. The improving health agenda, for example, is a long-term agenda; its payback will be in the long term. Taking a salami-slicing approach to that would therefore not be appropriate.
In some ways, it is easy for us to sit here and talk about plans for the future, but there will probably be a combination of what has been described. It will probably be a matter of linking in with managers and services and saying, "Have a look at your service. Where do you think you can create efficiencies?", and of people looking at some of the big macro bits in their organisations or other bodies that they can work with locally. We must ensure that the organisational culture exists to recognise that efficiencies must be delivered.
There is a queue of members who want to ask questions. Questions should be very brief so that we can move on.
I have a question about the facts. On the potential £129 million reduction in the health budget, my understanding is that the Treasury has agreed on the ability to draw down end-of-year flexibility. If that happens, will that neutralise the effect?
I do not think that we know at this stage.
I have a question specifically for the health board representatives. Obviously, a political decision must be taken at the Government level on whether and the extent to which a funding reduction will be fed through to the health budget. Another discussion must take place about, and a decision must be taken on, the extent to which a reduction will feed through to individual health boards.
We recognise that because of the different financial position that we are in, it would be hugely ambitious to assume that we will get an additional £60 million tomorrow. However, we argue strongly that, in considering levels of uplift, a differential approach needs to be taken to systems that are further away from NRAC totals. By definition, NHS Lothian has a lower cost base. It has less money to spend and provides the same level of services, and is therefore more efficient. Therefore, we argue strongly for a differential approach to the level of uplift, recognising that achieving NRAC's proposals tomorrow is probably now compromised.
The key on NRAC is the pace of change. The health boards have been involved in the process and support it. From the perspective of NHS Dumfries and Galloway, I am concerned that we would be a net loser. The issue is the pace of change and how we reflect that. Large-scale changes of the size that NHS Lothian would require to get back to NRAC parity are just not feasible.
I want to ask some questions about the presentation of figures—uplifts and baseline information, in particular. As you have all seen, the Scottish Government's method of presenting the budget for the next two years is to baseline this year's accelerated capital expenditure to demonstrate that that money will not be available in the succeeding financial years. Have any of the local authorities or health boards had discussions with the Scottish Government about what they will be able to do? Will you baseline the accelerated capital that you will spend this year when you make requests for uplifts next year?
We have had some discussions with the Scottish Government about what projects we could bring forward that would represent good use of money, such as the spend-to-save projects that I mentioned earlier, if we were allocated additional capital grant, but we have not yet been informed that we will get additional Scottish Government grant as part of that initiative. We would ensure that any spend-to-save money that we were given would be spent wisely so that we got a good return on our revenue budget. We would warmly welcome such an increase in capital grant, if it came through.
The NHS probably works under a slightly different regime. We have a five-year capital plan. The boards' capital programmes are pulled together at a macro level by the Scottish Government's health department and any flexibility is played back to boards to help them meet their aspirations, so it is not a question of an in-year change.
I want to take the discussion back to the realities that everyone faces. I am interested in the enlightened discussion that has ensued about the reform agenda, the sharing of services and collaboration. Have such discussions been taking place, not just from a geographical perspective, in relation to cross-boundary services, which Susan Goldsmith mentioned, but on a thematic basis? I am thinking in particular of the recent Government initiative on the procurement of electricity. There are many good examples. How far advanced are the discussions? Have they been going on for some time? Is COSLA engaged as regards the sharing of costs and services by local authorities? Have the various NHS boards across Scotland voluntarily set up a strategic group to examine such issues?
I say to members that a barrage of questions rather takes away the focus. However, who wishes to deal with that?
That area needs to be exploited further—the potential exists to develop that agenda. That said, progress has unquestionably been made across councils in Clyde valley and by Glasgow's community health and care partnership. We have an extremely robust community planning partnership, too, so we are engaged in considering how we can work together optimally to deliver shared outcomes and generate efficiencies while protecting the front line. Many of the structures are in place, but there is more that we can do across the various sectors.
Are the health services doing anything similar, or are you all compartmentalised?
We have focused a lot on the internal agenda across the NHS but, as Bailie Matheson said, we have to work jointly through the community health partnership and CHCP vehicles with our local authority partners in particular. That is still at the early stages. The current financial position will probably provide a good push for that.
Another aspect is single outcome agreements—how we take them forward, embed them, implement them and obtain the benefits from that process.
Linda Fabiani has a quick supplementary question.
Bailie Matheson talked about structures. Sometimes, structures that are already in place can act to prevent collaborative working. Are national bodies—from the Government down to COSLA and other umbrella organisations—doing anything to loosen up structures? Could they do anything innovative in that regard?
The introduction of a power of public sector wellbeing that allowed and made it easier for public sector bodies to work together and to share resources, assets and services would be helpful. Such a general power of public sector wellbeing would help, as it would generate more efficiency savings and best value in the services that we deliver to our public. People are not really worried about who delivers a service—whether it is a health or local authority service—as long as it is well delivered, efficient and effective. That general power would be a major step forward. It would send powerful signals that we are working closely together and it would remove some of the existing barriers.
I think that I heard Mr Edwards say that we must revisit the concordat. Is that the official position of his council's administration?
No, it is not an official position—I was presenting what I feel must be done because of the size of the potential budget reductions that we face. If we are to deal with that in a structured way, we must revisit the concordat. That is not the council's official position; that is my interpretation.
I note from answers to parliamentary questions about uplifts in NHS board funding that the uplift in NHS Dumfries and Galloway's indicative capital level for 2010-11, which was set before the UK budget was announced, is below inflation at 1.1 per cent—the figures go from £9.2 million to £9.3 million. Is that correct?
That is the indicative budget that we have been offered and of which we have been advised.
So even before any discussions about greater efficiencies or reductions in capital and before the UK budget, you expected a below-inflation uplift for capital from the Scottish Government. That is a different context from expecting big growth that is now supposed to be reduced. You were to have a real-terms cut.
The issue is really about setting that in context. What we are given as part of our financial settlement and for our financial planning is an indicative allocation for our capital resource limit. I tried to highlight the fact that we in Dumfries and Galloway are taking a much wider view, through a clinical strategy. As part of that strategy, potential capital investment of about £150 million is to be made. Some of that funding will be from our continuing £9 million of recurring capital resource limit and some of it will be from central funds. Just comparing individual years might not provide the true relationship on the size of the investment.
I understand. Is it correct that the revenue uplifts for NHS Lothian and NHS Dumfries and Galloway were rebaselined from the indicative figures that you were given last year? The Scottish Parliament information centre has told me that, as against the published 2008-09 figures, the 2009-10 initial funding baseline shows a 2.15 per cent average increase, rather than a 3.3 per cent average increase across the board, as the Government took money away from boards because of reduced generic drugs pricing and other payments that it meets centrally. Is it correct that the revenue is being rebaselined so that it looks 1 per cent higher than it is?
I do not recognise those figures—our uplift was 3.7 per cent. However, you are right to say that, where savings have been made on prescribing from renegotiation nationally, those moneys are going back to the centre. I do not know what they translate to in percentage terms, if they are netted off the uplift.
We may be able to follow up on the issue.
If you have anything to add, please do so in writing.
My question is for the two council representatives. Much of today's discussion centres on budgets for 2010-11, in the context of a recession and real-terms growth in the national budget of 0.5 per cent. One policy that the SNP Administration has pursued in relation to councils over the first few years of the spending review is a council tax freeze. What are the budget implications of the freeze for year 3 of the spending review period? Should it be pursued in that year?
As members know, Glasgow City Council established a council tax freeze two years before a freeze was adopted at Scottish level. There are a number of other ways in which Glasgow is leading the way. A 1 per cent increase in council tax would generate £2.4 million in Glasgow. As I indicated, next year we are seeking £30 million in efficiency savings. However, if there is a standstill, rather than the uplift that we anticipated, an additional £38 million, at least, will be required. No doubt the clerks will do the maths, but an inconceivably large increase in council tax would have to fill the gap.
I refer Bailie Matheson to paragraph 1.2 of Glasgow City Council's submission. You have just spoken about the shortfall that you face in 2010-11 and the shortfall in the grant distribution system. Is it correct to say that, in your view, the worst-case scenario would be a reduction in funding of about £99 million and the loss of 4,000 jobs?
The figure of £99 million equates to 4,000 jobs—we are not saying that its loss would necessarily result in the loss of 4,000 jobs. I will illustrate the point in another way. Ninety-nine million pounds is the combined net cost of delivering crematoria, parks, roads, lighting and cleansing services in Glasgow. I am not saying that we would cease to fund those services if funding was reduced by £99 million, or that we would lose 4,000 jobs—I am showing what the figure equates to. However, there is no doubt that such a reduction would have a significant effect on jobs and services.
You do not have to worry about the illustrations—the Parliament is well used to financial reductions being equated to massive job losses, although that is another matter.
There has been an unprecedented banking crisis since our pay agreements were put in place. A pay freeze would contribute £21 million to Glasgow's budget for next year. The alternative is that we find that—
Excuse me for interrupting, but yours is the council that came along and said, "Let's have £7 an hour as a minimum wage." Now you are saying that the workers should have a pay freeze. Their wages are either going up or being frozen—which is it?
It is both. The priority in Glasgow is to look after those with low pay, which is why we think that it is right to aim for the living wage—it is affordable—but the call is for everyone across the public sector who is above the living wage to take a pay freeze next year. Why is it only local government that needs to make the tough decisions? I am confident that COSLA will negotiate from a starting point of there being a pay freeze. If the alternative is to lose jobs and services, I would expect the Scottish Government also to take a pay freeze approach across other areas in the public sector.
Should I take from what you say that the administration in Glasgow has gone for a pay freeze—I think you said that there was an administration agreement; unlike Mr Edwards, you do not speak for yourself, because you are the city's elected treasurer—to try to push the SNP Government to impose a pay freeze across the whole public sector?
We have gone for a pay freeze in the interests of Glasgow because the alternative is to find an additional £21 million. We expected to be able to deliver that, but we also expected an uplift in our settlement. The indication now, though, is that there will be a standstill budget. Our pay agreements were made in a different financial climate. If other services across the public sector can absorb a standstill budget and not have a pay freeze, I question their efficiency.
How many people would qualify for the £7 an hour wage proposal?
I do not know the figure for the public sector.
How many would qualify in the city of Glasgow?
We have been generous payers anyway, but I think that about 700 staff members in Glasgow would have to be lifted up.
You can write to us with the figures.
I think that the figure of 700 is accurate, but I will certainly provide the figure in writing. The £7 an hour wage is affordable and progressive. In the current circumstances, I think that a pay freeze for those who earn more than the living wage is appropriate, too.
We are running out of time, but David Whitton can come back in, to be followed by Joe FitzPatrick.
To be fair to Bailie Matheson, it has been suggested in previous witnesses' written submissions that because wages take up—I think—60-plus per cent of the Government's budget, an obvious way of saving money is to impose a pay freeze. Bailie Matheson is the first witness who has been brave enough to say that in public. It will be interesting to see whether COSLA—or even the Scottish Government—picks you up on that.
Unquestionably. That is why we support a living wage in Glasgow and a pay freeze for those who are above it. We need a targeted approach. We are clear in Glasgow which areas we will continue to prioritise: education and early years, skills and the economy, and targeted support for the vulnerable. We need to get smarter at focusing on our priorities. That involves targeting. Going for universal benefits means subsidising people who can afford to pay their fair share. In the current climate, that approach is not affordable, and I argue that at no time is it progressive.
I see that notes have been handed to the witnesses. I do not want that to happen. It interrupts the flow of the meeting. Further information can be supplied to the committee in writing.
Bailie Matheson said that a 1 per cent increase in council tax would generate £2.4 million. A quick calculation suggests that if you rejected the council tax freeze and the reform agenda, you would have to put up council tax in Glasgow by about 15 per cent. What would a 15 per cent increase in council tax mean for the average person in Glasgow?
That is not on Glasgow's agenda, so the figure that you ask for is not in the front of my mind. Service reform that generates efficiencies and allows us to focus on our priorities is Glasgow's agenda.
That is good and will be welcomed by Glasgow's citizens. However, people are arguing that we should get rid of the council tax freeze, so it would be reasonable to compare what people currently pay—as you said, Glasgow froze the council tax two years before the rest of Scotland did—with what they would pay if council tax were increased by the 15 per cent that would be needed to generate £38 million. If you have not done that calculation yet, it would be useful to hand it in later.
We have not done the calculation simply because that is not on Glasgow's agenda.
We are in danger of getting into a dialogue that leaves out the other three panel members, which is not right or fair.
Mr Edwards said that the concordat needs to be revisited, which was interesting. What is Bailie Matheson's view on that? Do single outcome agreements also need to be reviewed in light of financial pressures?
It is a bit difficult for me to respond, because I do not speak on behalf of the politicians. I emphasised that if we are talking about budget reductions of the size that seem to be on the table, we must review all existing agreements, so that we can be honest with ourselves about what we can and cannot afford to deliver. That is the point that I tried to make. I do not want to get into specifics, because that is part of the political process. I merely said that everything would have to go back on the table, because of the size of the problem that we face.
If the focus remains on outcomes, we can secure more agreement. Some of the lines in the concordat do not appear in the single outcome agreements, because they are not outcomes. For example, the capital and revenue costs of reducing class sizes to 18 for all primary 1 to 3 classes in Glasgow would be £47 million—the figures have been provided to the Scottish Government and I can provide the details to the clerks. That is just a fantasy, and it is not an appropriately targeted response to aspirations to raise educational attainment and increase opportunities. In Glasgow, we have 58 nurture classes, which are very small, to support the most vulnerable children and families, and we have 140 teachers—more than the rest of Scotland put together—who support children and young people whose first language is not English. Such targeted use of our resources reflects our political priorities. If I had the £47 million, which has not been and never will be provided, to reduce class sizes to 18, I would not do it; I would focus on other, educationally more robust priorities.
There is a range of targets in health. The waiting times targets and HEAT targets cover the biggest area. We absolutely support the agenda to deliver reductions in waiting times, but the issue is choices, and we might want to get into a dialogue about the timing around meeting waiting times targets.
Mr Marriott?
I do not have anything to add. The key issue that will utilise resources is the step change with regard to waiting times. Obviously, there is the opportunity to review HEAT and delivery attainments against waiting times. We would need to look at that.
The problems that councils and the NHS face are not small by any manner of means; they are complex and difficult. The committee wishes you all well in your stewardship of those resources. Thank you for your evidence.
Meeting suspended.
On resuming—
Our second panel represents infrastructure interests. I welcome Richard Ackroyd, chief executive, and Douglas Millican, finance and regulation director, Scottish Water; David Middleton, chief executive, and Frances Duffy, director of strategy and investment, Transport Scotland; and Michael Levack, chief executive, the Scottish Building Federation.
My questions are for Scottish Water. In earlier evidence sessions, it was suggested—with a bit of imagination—that the Scottish Water model, particularly in terms of the independent economic regulator, is capable of wider use. What are your thoughts on the pros and cons of the regulatory regime under which you operate? Will you give us a flavour of how much internal resource is deployed to meet regulatory requirements and deal with the regulator?
The pros are twofold—or principally twofold. First, there is a clear, independent external assessment of what the business is doing. The regime also sets targets and applies sticks and carrots to improve performance. In our experience, those are valuable tools that support management in improving the performance of the business. Secondly, our performance is compared and measured against water companies that do similar things in England and Wales, so there is a reasonably fair and objective assessment of how good, bad or indifferent Scottish Water is.
It does not need to be a specific figure, but it would be helpful to get a flavour of how much senior management time is consumed in dealing with the regulator. I presume that it fluctuates over the regulatory period and that, if you did not have a regulator, you would do other things with that time. It would be helpful to get that information as a comparator.
Most of our dealings with the regulator are about supplying information to enable it to monitor performance in every four-year period, so that it can calculate efficiency improvements, determine the cost of investment plans and set prices. By and large, most of the information that we must submit to the regulator is a subset of the information that we need to run the business. We could ask what it costs to provide all that information, but the issue is the marginal cost of the information that we supply to the regulator over and above the information that we need to run the business. To be frank, it is probably a fairly small proportion of the amount that we spend every year.
Are you able to quantify which of your efficiency savings are related not to what you would have done anyway but to what you had to do because the regulator asked you to?
That is probably hard to quantify objectively. The only contrast that we can make is between the efficiencies that were generated in the water industry in Scotland before economic regulation was introduced and those that have been generated since. Those that have been generated since economic regulation was introduced are a quantum leap ahead of what was generated before. Although the pressure of economic regulation can be a burden on the business at times, it is definitely good at driving performance forward, particularly where there is no direct competitive pressure because there is a monopoly.
Could the economic regulation model be transferred to other parts of the public sector as a method of driving further efficiencies?
There is scope for that, but a lot depends on whether it is possible to make fair and robust comparisons. The model relies on having solid, reliable data and being able to make meaningful and robust comparisons.
That sort of thing would ideally fit into Transport Scotland's remit. Perhaps Transport Scotland can indicate whether it would find the model helpful or an additional pressure in making the assessments that it must already make.
I do not feel qualified to give a full answer. We deal with the trunk road network and the rail network regimes. There is a regulator for the rail network in the United Kingdom as a whole, although he deals with Scotland in respect of the moneys that we pay over to Network Rail. I would not like to speculate on an alternative institutional model.
It is perhaps a bit unfair to ask you that question if you have not gone through the water industry's regulatory regime in detail; I suppose that people do not do that unless they have to.
Our bills from household customers are collected with the council tax, so we would expect the rates to be similar.
I will ask about something more fundamental for Scottish Water. In the autumn, there will be a statement from ministers on objectives and principles for the four years up to 2014. If we believe the evidence that we heard from the Centre for Public Policy for Regions in the first evidence-taking session of the inquiry, in that period there could be real-terms reductions in Scottish spending of up to 13 per cent—that was the highest figure. Obviously, that would involve significant change, and there is a degree of uncertainty—and a great deal of scope for political debate—about what the figure might be. However, it strikes me that in drawing up that document, which will in effect set the agenda for Scottish Water for four years during a period of significant pressure on public spending, ministers will presumably be biased towards providing less investment rather than more. Is Scottish Water proceeding on the basis that ministers will simply roll forward the current charging principles or assuming that it will be subject to a broader squeeze, given the pressures elsewhere on public spending?
First, we are part way through setting the prices for customers for that four-year period. That process will not conclude until the autumn, so anything that I say is subject to the outcome of that process. As set out in the plan that we published last year, we are working on the basis that we will run with a capital programme of around £500 million per year. That matches the obligations that were specified in the draft statement of ministerial objectives, which was published a few months ago. Secondly, we are also working on the basis that we will meet the ministerial guidance on charging. Explicitly, that guidance requires us to provide stable charges to customers. Implicitly, I think, the guidance requires us to ensure that those charges do not rise above the retail prices index.
From Scottish Water's perspective, a great deal of its activities are regulated and it is required to try to adhere to the priorities that ministers set. With no direct control over the degree to which its funding comes from charges or from the public purse, Scottish Water is very much—albeit indirectly—in the control of Government and its priorities. Is the starting point that there will be a reduction in annual investment because Scottish Water has just come through an investment programme and no longer needs to invest as much, or is the reduction because the organisation is becoming more efficient and can get more for less? What are the underlying factors?
There is a combination of factors. Our investment programme was always planned to peak in the current period, and that is exactly what has happened. In the year that has just finished, investment ran at about £680 million. We expect that investment levels will reduce principally because much of the investment that was needed to renew treatment plants has already taken place. That will also reduce our capital maintenance requirements, because we now have a greater proportion of modern, functioning assets. We had always planned that investment levels would reduce.
Even if we might take a different view on borrowing, I understand the need for stability.
Who would like to start? Mr Middleton?
I am happy to start, although it is difficult for me to debate these matters too widely, as I represent an executive agency of Government.
The construction sector does not receive any grant subsidy; all that we look for is a steady stream of work. Clearly, things are difficult in the marketplace. In recent years, many client bodies in the public and private sectors complained about not getting value for money. They found it difficult to get construction companies interested in their projects and were concerned by tender prices. However, on the basis that the industry has cooled down severely in the last year, there is clearly now great value to be had.
Can you give us an idea of the extent to which the industry cooled down in the past year?
Because the industry is quite fragmented, it is difficult to get a handle on the numbers. However, we are comfortable quoting the figure of 20,000 job losses in Scotland last year. The numbers move by the day, however, and I suggest that we have not yet seen the worst, because many major projects that are currently under way—schools and so on—will be handed over in the late summer, and there are no projects to replace them.
It is difficult to turn your industry on and off like a tap.
Absolutely, and there are other concerns. Earlier, we heard about local authorities' significantly reduced income from planning fees and building warrant fees. Further, developer contributions have reduced significantly—almost to nothing—and we are worried that investment in planning departments, building control departments and, indeed, the college network, which is important in terms of protecting apprenticeship training for the construction industry, will be insufficient. If insufficient numbers of young people come forward, colleges will have to make tough decisions. That happened in the previous recession, when college capacity for construction trades was turned off and diverted to other sectors.
I would like to widen out the discussion. The recession is now looming over everything. What pressures is the recession placing on your budgets and how can the Scottish Government's budget best be used to mitigate those pressures?
The pressure on our budget is to complete the number of projects that we have been asked to undertake. There may come a point at which things require to be revisited by ministers—we have all alluded to that. There is pressure on Transport Scotland to deliver because of the number of jobs that we support and because of what we contribute to the economy. Those considerations were, to some extent, why we were the beneficiary of a small amount of accelerated capital, which we have been able to devote to projects. Others have talked about pressures on services, but there is probably no direct link between the effects of the recession—significant though they are—and what we do. The pressure comes from the expectation that we will deliver all the projects that we have been asked to deliver.
On the positive side, you could help to mitigate the recession through those projects.
The arguments for that are well rehearsed.
I understand that Mr Levack has the sometimes difficult task of talking on behalf of the federation's membership. However, as we have received no written submission from Transport Scotland, I wonder whether we can have a couple of minutes' presentation on Transport Scotland's own strategic budget scrutiny—on how it has addressed efficiencies and so on in the organisation.
We did not produce a written submission, but I would be happy to provide further information if the committee would like that.
If there is any information that any of the witnesses wants to add to what we have been given, they should please submit it in writing.
I want to pursue the point that Mr Levack made about the delivery of capital investment. My question also follows on from Mr Brownlee's questions.
We have nine PFI contracts, which were all created back in the late 1990s by the previous water authorities. We inherited them and have not added any since we came into being. Those nine PFI contracts are typically in the large conurbations, and although they cover 20 waste water treatment plants out of our 2,000 sewage plants throughout Scotland, or only 1 per cent of our total number of sewage works, they account for about 45 per cent of the waste water by volume that is treated and about 80 per cent of the sewage sludge that is treated and disposed of.
Those are significant figures. Will the infrastructure delivery model for Scottish Water Solutions still be a public-private partnership, in which there is profit with regard to private sector equity? Is that the model that is being considered for the next round of investment, or has the Scottish Government said that it does not like that model and that it wants you to do something else?
The Scottish Government has not said that to us. We think that Scottish Water Solutions has been successful in the current investment period. We are part way through a competitive tendering process to replace that model with a refined model for the next period. The model is similar in principle but has some differences in detail. That will deal with only half our capital programme; the other half is delivered by a more traditional route, whereby we have people employed in-house who will organise design feasibility and then let contracts to contractors in the marketplace to do the construction.
I want to ask Transport Scotland about some of the projects that it is anticipating that it will deliver. I think that Mr Middleton said that the focus is on ensuring that the projects that Transport Scotland has been tasked to deliver are delivered. One of those projects—the Borders railway—is in the heart of my constituency. Have there been discussions with the European Investment Bank about potentially borrowing from it to deliver the project?
I cannot comment on whether there have been discussions with the European Investment Bank. Perhaps my colleague Frances Duffy knows.
As part of the development of the Borders railway, there have been a number of discussions with the private sector and funders to test the market appetite for the work. We have on-going discussions with the European Investment Bank about a number of our projects; we have done so for a number of years.
Is the bank a potential funder, or is it involved simply in an advisory capacity?
It may be a potential source of funding.
At what stage will it stop being a potential source of funding? When will the Government decide how to deliver the project? It is a £300 million capital project, is it not?
It is of that order.
When will a decision be taken about how it will be financed?
The time to make that decision will be when market conditions indicate that it is most favourable to raise that sum.
This is relevant to the debate, because—
Please be quick, because other members are waiting to ask questions.
I am intrigued by Mr Middleton's answer. On what basis do you decide when the market or the environment is right?
As Frances Duffy said, we talk to a number of parties to form these judgments. The right time will be when we think that we can get the best deal to progress the project.
Are any other transport capital projects waiting for such a decision?
There is a range of projects that we hope to pursue by the non-profit-distributing model. There are roads projects as well as the Borders railway. We want to get the right deal for those projects and to achieve the timescales. We still hope to achieve the published completion date for the Borders railway.
I think that we have taken that as far as it can go. Joe FitzPatrick can ask a question, as long as it is relevant to that issue.
Transport Scotland needs to find finance for several projects, some of which are legacy PFI projects. How difficult has it been to raise capital for those projects?
The most recent one, which was just before my time as chief executive, was the M80 project. In general, that deal has been widely praised by the commentators who have observed the terms that we got. Frances Duffy is probably better informed than I am about that.
You are right that the M80 was a successful contract that was awarded fairly recently.
How has the money been raised for that?
There is a consortium of funders, but I do not have the details.
We could provide that information, if that would be helpful.
That would be very helpful.
It is not appropriate to ask the Transport Scotland witnesses about some issues, as they are politically sensitive. However, political decisions will be made on relative priorities for the coming period. Transport Scotland has just been through the strategic transport projects review, and there was no great disagreement over the theory of that review. Within that process, or any other process that Transport Scotland has been through, was there an objective and transparent cost benefit analysis—or whatever phrase you want to use—that can be applied to projects so that politicians can argue about the priorities and so that we can engage the public? It is important that we can have a mature discussion with the public about the priorities and the consequences of the various options. However, very often in transport projects, it is easy to get lost in the depths of such issues. Is there a relatively straightforward prioritisation ratio that can be used to compare projects?
It is not as simple as that. A cost benefit analysis is always carried out for individual projects, but how we compare projects depends on how people value the benefits of those projects, their scale and how they relate to the rest of the transport infrastructure. Frances Duffy led on the STPR, so she might have something to add.
One key point about the appraisal of transport projects in Scotland is that we have for some time pioneered an appraisal system that goes far wider than a straightforward cost benefit or economic analysis. We have tried to ensure that we capture and fully understand the environmental impact of projects and we are moving to monetise some of the carbon benefits. We have also ensured that people can clearly see the wider impacts such as those on safety and social inclusion. That gives us a better picture, but it moves us away from the straightforward numerical listing of projects. Through our appraisal system, we can understand the potential implications of a project, which allows decision makers to make decisions on prioritisation in the full knowledge of how all those issues are balanced. We do not follow, and never have followed, a straightforward numerical-only approach.
I understand that the analysis covers more than just costs and benefits, but is it done at a sufficiently high level to allow the public and politicians to engage in a general discussion about where one transport project fits relative to another and relative to other types of project?
It is difficult to compare one project with another. With all the projects that have been taken forward, we publish the Scottish transport appraisal guidance report that has been produced, which shows the cost benefit analysis, the economic impacts and the other assessments. In the technical appendices to the STPR report, people can see the analysis for every suggested intervention, although some of the information is more detailed, depending on the stage of development or design of the intervention. That information exists, and we publish it for each project.
Mr Levack mentioned the pipeline of projects drying up. That is certainly true in my constituency, where six school projects are about to finish and house building has almost stopped. Has there been any sign of the Scottish Futures Trust?
No, there has not. Obviously, you will be well aware that Mr Barry White has been appointed as chief executive from 1 May. We hope to have early discussions with him. I look forward to hearing some actual news—I was going to say positive news—and a little bit of certainty; the importance of a bit of certainty has come through in some of the comments made by my colleagues in this evidence session and by local authorities and NHS boards in the earlier session.
According to Scottish Water's evidence, its investment from 2006 to 2010 was running at £700 million, and it was always planned that that would come down to £500 million from next year onwards. It is supporting 40 per cent of the civil engineering industry, and there has been a reduction in connections to new homes, with 39 per cent fewer new properties in the first quarter of last year. Was any thought given to switching Scottish Water's capital programme? There might be fewer houses, but there is still plenty of repair work to be done. Scottish Water could have kept its capital investment at a level that would have continued to support construction and civil engineering.
Given that we are financed over a four-year period, the overall investment that we will make over the four years—in creating new capacity to support housing through water and waste water treatment works and through connecting properties to our system—will run ahead of what we originally expected. Because of growth in the past two to three years, we delivered more connections in those years than we envisaged: we were up to approximately 25,000 connections a year, and even in the year that has just ended we did 18,000 or 19,000 connections. It is purely in the final year of the regulatory period that we envisage the number of connections dropping off. If we look across the four-year period for which we are financed, the level of growth in new connections has been broadly in line with original expectations for that four-year period.
You are jumping about a bit. From where will you get the money if you are suddenly told to rack work up because five housing developments in East Dunbartonshire need to be connected to the water supply?
We endeavour to make sure that we plan our capital investment over a four-year period. That gives certainty to the construction industry—that was referred to earlier—and helps us to drive greater levels of efficiency. We try to plan over the longer term. For example, in our plans for investing for growth in the next period, we will take into account the expected increase in demand through to 2018. We do not just provide for the immediate requirements of a site; we look at what the demands of that particular community might be over the next nine or 10 years.
Yes, but in your industry there are leakages in the system: people complain about the amount of water that is wasted because it just runs out the pipes. Obviously, you have an on-going maintenance programme, but ministers can also turn to an industry such as yours in a time of recession when they are looking for a capital project to get some money spent. They can tell you that you must have a couple of projects that you can start on fairly quickly. Have you been asked for that?
There is always a list of below-the-line projects, if I can put it that way, but we do not actually have the cash—we are cash constrained, like any other organisation. All our resource for the rest of this period is committed.
So a minister's wish list would have to be accompanied by a large cheque.
Such a project, whatever it happened to be, would have to be backed up by appropriate means of financing it.
Perhaps fortuitously, we are at an absolute peak in investment, which coincides with downturns elsewhere. Over the past year and the current year, we will be investing about £1.4 billion, which is an absolute record.
But rigidity is inbuilt in budgeting. A four-year budget leads to certain constraints, although it brings you the advantage of knowing where you are going. Is that four-year rigidity there because of the nature of what you do, or is it assisted—or hampered—by what you do? In other words, is there a chance of some flexibility, or are you in a very rigid budgetary system?
We think that the system is very flexible; it is an awful lot better than an annual budgeting system. It enables us to take longer-term views. With the regulators, we work on a four-year cycle, but our plans take a much longer view than that. We have a reasonably clear view of what needs to be done beyond the four-year period, which can inform debate with ministers. You should also bear in mind the fact that, in terms of pounds per head of population, Scottish Water's capital programme is the biggest in the UK water industry.
The very last question goes to James Kelly.
My point has already been covered.
That being so, we have reached the end of this evidence session. I thank our witnesses very much for their presence and for the information that they have given us. If there are any other pieces of information that you wish to add, do not hesitate to write to us.
Meeting suspended.
On resuming—
I welcome our third panel of witnesses, who are David Caldwell, director, Universities Scotland; Andrew Livingstone, director of finance and audit, Skills Development Scotland; and Chris Travis, chief executive, Association of Scotland's Colleges.
The college sector is experiencing unprecedented demand for college places in the academic session that starts after the summer. That demand is both from school leavers and from individuals who have been made redundant and are looking to modernise or change their skill set to gain employment.
A tenet of faith of mine in asking for more money for universities is never to do that at the expense of others. For that reason, I am not prepared to answer your question directly, convener. I have always felt that colleges need additional investment, just as universities do. We should not be set in competition with each other. That belief is reflected in the way in which our submission is presented. As you will have seen, we begin by saying that we are not asking for more money. We know that we will face an incredibly tight public funding situation for at least five years and possibly for as long as 10 years. There will be no additional money.
The other witnesses and I did not discuss the issue beforehand, but there is a certain degree of overlap between the description that they have given and how I perceive matters. Our role is to act as a catalyst. In our written submission, we referred to a range of activities that the Scottish Government has asked us to develop and that we have developed under our own steam. They include both activities that are forward looking and activities to deal with current economic conditions. Looking forward, we have made a range of attempts to join up the services that are provided by colleges and universities, in particular, and by all sorts of partners from the third sector, other parts of the public sector and the private sector.
I appreciate David Caldwell's point that all three sectors are interlinked and that they offer different services, courses and assets. However, with a limited budget, it is important to know where to target money; that is part of our problem.
I will start with Mr Caldwell. You say that you will make the best use of the resources that are available to you. Are universities considering productivity improvements, such as a longer university year, shorter courses of three years instead of four or two years instead of three, and perhaps even reducing principals' salaries?
The last of those measures would make little difference to the overall picture. However, you make some serious points. Universities' record on productivity and efficiency is not too bad—that point is highlighted in our written evidence. I can think of no other sector that has doubled its productivity in a generation, as universities have done on teaching. The question is whether we cut close to the bone and risked quality by in effect doubling class sizes. People get excited about class sizes in schools, but they seem less concerned about the effect of doubling class sizes in universities, which has happened. Universities have delivered everything that was asked of them in the various efficient government initiatives of recent years.
Many universities offer the same courses. Perhaps we could focus a little more and say, for example, "Go to Glasgow if you want to do law," or, "Edinburgh is the centre of excellence for medicine." There might be productivity gains from concentrating courses on certain establishments.
There is already quite a lot of specialisation. If your suggestion were taken up, we would lose the creativity that emerges from interdisciplinary activity. Interdisciplinarity is a key feature in the modern development of learning. The less comprehensive the range of subjects that a university offers, the more difficult it is to achieve a high degree of innovation and creativity.
Mr Travis, you mentioned the increase in demand for college places. Yesterday, in my constituency I visited the Kirkintilloch offshoot of Cumbernauld College, which is experiencing a 100 per cent increase in demand for certain courses. You said that you try to match demand to local need. How closely is demand being matched to skills shortages in certain areas?
There is significant increased demand. In our submission, we said that there is a 35 per cent median increase in college applications, but more recent figures suggest that the increase is well over 40 per cent, and some colleges are experiencing increases of several hundred per cent.
I think that the principal of Anniesland College said this morning that she will have to turn students away.
There is actual and anecdotal evidence from college principals throughout Scotland that their "house full" signs will be up before the summer is out. In some instances, courses will be full before the current batch of school leavers receive their exam results, which means that school leavers might struggle to access college places. Universities are also experiencing an increase in demand, although it is not quite at the same level.
Would colleges have the capacity to cope with the increased demand even if you were given the finance to enable you to do so? Do you have the classrooms and staff that would enable you to cope?
We probably could not cope with all the increase in demand. However, recent investment in the college estate has resulted in significant expansion of the physical capacity of colleges—I am talking about not just space but the efficient use of space. The biggest single constraint on taking additional students is the number of staff who are available to teach courses. Some colleges will find it easier than others will to expand their lecturing provision. People in the community who have vocational skills could be brought into colleges to deliver courses. However, ramping up provision by 30, 40 or 50 per cent is not an easy task. If there is going to be any realistic attempt to do that, investment in the college sector needs to take place now, before the end of the current session, so that colleges can be ready to take in additional students in August. As you may know, we are arguing for the £29 million of Barnett consequentials from the UK budget to be passed directly to the colleges through the Scottish Further and Higher Education Funding Council.
Good. You have anticipated my next question.
That is a problem at my local college, where there is increased demand. I guess that the situation is the same throughout the country. Can you give us a clearer picture of the demands that are now faced by Scotland's further education sector?
We have data from about three quarters of the colleges. In some areas, the uplift in demand is quite modest. At Aberdeen College, for example, it is up by only about 16 per cent, probably because Aberdeen is, to a certain extent, cushioned from the current recession by the oil industry. However, at Cumbernauld College, demand has increased by nearly 300 per cent in some areas. At Coatbridge College, the increase is 200 per cent; at South Lanarkshire College, it is 100 per cent; at Jewel and Esk College, it is 50 per cent; at Langside College Glasgow, it is 70 per cent; and at Kilmarnock College it is 87 per cent. We collected those figures from the colleges three or four weeks ago. The level of demand appears to be increasing pretty regularly throughout the country.
If you could give us that information in writing, that would be helpful.
We will submit it to you.
Am I right in saying that the level of demand varies from course to course? For example, the number of applications for health sector courses at Cumbernauld College has gone through the roof. I suspect that that is partly due to the fact that most of the jobs that are currently advertised are in the health and caring professions.
The health sector is one area of Scotland's economy in which it can be predicted with some confidence that there will be an increasing demand for labour, as we have an ageing population. There is clear evidence of that increasing demand. The colleges are entering into partnership with NHS Education for Scotland to secure a steady supply of appropriately skilled individuals for the health sector.
You mentioned the Barnett consequentials of £79 million for 2009-10 and almost £25 million for 2010-11. You said that you would like all of that money to be spent in the education sector. I take it that you concur with that view, Mr Caldwell.
I return to what I said at the beginning. This is a time when all public spending will be under extremely severe pressure. You must consider the evidence and reach conclusions about where the money can be spent most effectively. I do not envy you that task. We have made a contribution towards helping you by gathering together a team of 11 of the leading economists in Scotland, who have produced a piece of evidence-based analysis called "What was/What next". That is a serious contribution. I am not aware of any other evidence-based study that has been undertaken so far, but I acknowledge that it is not necessarily the last word. You have an extraordinarily difficult task ahead of you.
I have a final question for Andrew Livingstone. You mentioned the investment that has been required in the PACE teams. I suspect that demand has outstripped supply. Is there increasing demand? How much extra cash would you need to enable PACE to meet the demands that are being made of it?
Obviously, PACE reacts to changes in economic conditions, particularly redundancies. One of the key aims of PACE is to protect people from becoming redundant. However, in reality, most of the work recently has been about dealing with those who have been made redundant and are trying to find ways back into employment. That has involved a lot of access to Careers Scotland, Jobcentre Plus and a range of options such as the training for work programme, which allows people to be supported for a period as they gain experience.
In the current financial year?
Yes.
The committee's task is to gather the facts, as far as that is possible, on the basis of which decisions can be taken. If you wish to provide any additional information in writing after the meeting, please do.
I, too, have a question for Mr Livingstone. The importance of skills to economic development and of prioritising that area in a recession has been acknowledged by previous witnesses and in some of the submissions, so it is a bit of a surprise that the budget for Skills Development Scotland is planned to drop from £188 million to £182 million in 2010-11. What are the implications of that for your work programme?
It is a budget profile that we would not necessarily choose to go with. Only around 10 per cent of our budget is purely discretionary. I hesitate to use the phrase "semi-fixed", but the other elements of our budget are inflexible in how we can utilise them. Fifty-two per cent of it relates to the provision of the national training programmes—modern apprenticeships, skillseekers, get ready for work and training for work. A further 20 per cent or so relates to staff costs, most of which are forward facing.
How would you do that?
We must look at the skill sets that are required. The information that we are getting in conjunction with the universities and colleges, and through the community planning partnerships, is helping us to determine demand on a national and regional basis.
Is demand not established on a national and a regional basis at present?
We do not have access to information that gives us those data at present.
Who would have that information?
We believe that it will be gained through working with sector skills councils, local authorities, universities and colleges.
But no organisation gathers together that information now.
Not that I am aware of.
The universities collect that information systematically. We can therefore say that demand for university programmes has increased by 5 per cent on last year. That figure is not anything like as dramatic as Chris Travis's figures, but it is nonetheless significant. There is a good reason why it is smaller: it represents people who expect to be qualified for university entry. There will not suddenly be a huge number more people with three highers than there were in the previous year. In annual terms, the increase is pretty big. It is also significant for skills.
You said that the universities have a model for collecting information, which is the basis of rational planning. Would that model be applicable elsewhere? Could it be shared with other organisations?
Absolutely. It is called the Universities and Colleges Admissions Service and is there for people to see. UCAS has existed for decades, and its existence means that reliable data can be used to compare the demand for university programmes from year to year. I think that colleges could adopt that model relatively easily, although it would not be as simple for them to use it as it is for universities, because they deal with a much more diverse group of applicants. In fairness, using it would be even more difficult for Skills Development Scotland, which is trying to gather data relating to a number of different sectors. However, we certainly need to work to create rather more reliable information about overall national demand.
I have a question that neatly follows on from the points that David Caldwell has made about higher-level skills. Universities Scotland's submission refers quite a lot to the value of high-level skills in research for stimulating economic recovery and expresses concerns about the dangers of not realising their value. It refers to President Obama and José Manuel Barroso, which is great. At the research level, how are things going with universities obtaining as much grant funding as possible from the European Union? Are opportunities being maximised? Is funding on the increase? Scotland's universities have punched above their weight in framework terms, but could more be done at the Government level to promote them?
Things are going really well in that regard, although we would like them to go even better. That funding is a good example of the leverage that we have highlighted. Public funding for research enables Scottish universities to lever in research money from a number of other sources. Some people have estimated the leverage to be as good as 5:1—with five times as much being obtained from other sources as the additional public money going in.
To what extent does that apply elsewhere?
That was my next question.
Sorry about that.
The college sector has worked very hard to lever in European funding, and it continues to do so. The colleges in the west of Scotland have formed a partnership, the nicely entitled WOSCOP—the west of Scotland colleges partnership—which is specifically designed to help colleges work both individually and collaboratively to access European funding and to enhance the level of resources that they get from Government.
As we said in our submission, it is our aspiration to use that partnership far more in future. The legacy parts of Skills Development Scotland have utilised European funding, although the level has tended to be less than £1 million. As I have said already, we would like the PACE initiative to leverage something closer to £2 million. We should be looking for bigger sums from other sources. The Scottish Government recognises that more clearly now, and a bid is under way for a project in which we would participate but not lead. That bid seeks funding for the support of apprentices who are made redundant and therefore cannot continue under the current rules of the schemes.
The interrelationship that was mentioned at the start is becoming clearer as we take evidence.
I am interested in the collaborative partnership working aspect that we have heard about. There have been concerns for decades about all levels of educational institutions and business not interacting very well in joint research projects and endeavours. I know that there have been issues about intellectual property and so on, but I wonder whether times such as these concentrate minds. Is that interaction starting to come together a bit better? I would also like to know about how that relates to—dare I say it—venture capitalism ideas.
Minds have been concentrated for some time, and relations between the academic and business communities are improving all the time. One of the most successful initiatives in the university sector in recent years has been a project called interface, which helps small and medium-sized enterprises in Scotland to access academic expertise through a single door, with a group of highly expert staff who know exactly how to make the connections. That has proved to be a very successful enterprise, and we hope to announce its expansion in the near future. It is a priority, in these times, to facilitate such connections.
I will make two points about collaboration. The first is a general point about collaboration between the college sector and universities. We support the universities' position on the need for higher-level skills, and over the years we have worked hard to develop strong articulation links between colleges and universities to allow students who might traditionally not have secured a place at university to progress from college to university to develop those higher-level skills. We continue to build on those articulation links, and we look forward to having further conversations with Universities Scotland about its research for the "What was/What next?" report and about how we can ensure that further and higher education delivers for Scotland's economic future.
I am much cheered by that. The traditional Scottish system was one system all the way through from elementary education to university, in which each element had its part to play.
As the committee has heard, colleges and universities have developed a range of funding sources, but it is clear that a key amount comes from the Scottish funding council, whose budget is about £1.6 billion. About £200 million is being invested in Skills Development Scotland. It is significant that, in the past few months, it has been agreed that a funding council member who is also a member of SDS's board will chair the council's skills committee, with a view to joining up activity a bit more.
I sign up to the concept that economic success is partly driven by the knowledge and skills that we have, but sufficient funds need to be available to achieve that, notwithstanding what you might generously say about funding settlements.
Who wants that nice easy question?
The issue is straightforward for universities, but only in a sense. We are obliged to operate fair admissions policies so, if we have to select, we select the best-qualified person. That is not quite as straightforward as it sounds: it does not relate just to examination qualifications; a judgment must be made about which of the candidates has the greatest capacity to complete successfully the course for which they have applied. Examination results are perhaps the best single indicator of that, but they are not the whole story. This autumn, a significant number of applicants who are almost certainly able to complete a course successfully will be disappointed because places will not be available for them.
Like universities, colleges select the people who they think will benefit most and will be able to complete the courses that they start. The increased demand tends to be for full-time education. Many colleges have significant roles in part-time education because they take block or day-release students from local employers or because individuals are sponsoring themselves to improve their own skill set through part-time courses. Filling the full-time courses will be the priority because much of the uplift in demand is from young people who are leaving school. Given the precarious state of the labour market for unskilled young people, the alternative is that they would not be in education or training.
NEET.
Yes, NEET—I hate that acronym.
Mr Livingstone, can you help?
I am not sure that I can add much. If what Chris Travis says is so, the only other provision that we will have in Scotland is the third sector and private training providers, most of whom tend to deal less with highly qualified people and technical skills and more with soft skills or basic introductions. That would certainly create a supply issue.
I heard the tail end of the interview with the principal of Anniesland College this morning. Somebody paraphrased the Minister for Schools and Skills as saying that he shared your pain and would try to do something about it, which was quite a positive comment. Does a dialogue take place to ensure that you are not faced with making some of the hard decisions that you might need to make come the autumn? Has there been any indication of whether the consequentials from the budget are likely to head in your direction?
All that we have been told is that the Government is examining the Barnett consequentials. We understand that there is a degree of sympathy for our case, but it is clearly up to the Government to determine how to allocate the funds. We have not got into any detailed discussions. If the Government is minded to pass the £29 million Barnett consequential—or some of it—on to the college sector, we would get into detailed discussions with it and the funding council on how best to allocate those resources to ensure the maximum impact on skills production for Scotland.
Universities Scotland has had no detailed discussions with the Government about that, but we hope that it will understand that there is a short-term and long-term gain to be achieved if it finds some way of financing a modest expansion in the universities and colleges. The short-term gain is fairly obvious—the number on the unemployment register would be slightly smaller—but much more significant would be the long-term gain of upskilling our workforce so that we are well placed for the recovery when it comes.
Borders College and Jewel and Esk Valley College are in my constituency, and the principals have both written to me. In Borders College applications are up by 20 per cent, and in Jewel and Esk Valley College they are up by 72 per cent.
They are sensible people, Jeremy. Learn from them.
Gentlemen, you can see the dangers that we get into. This committee deals objectively with the facts until moments like these. Would anybody like to take up the question?
Yes, I am happy to answer the question.
Can anybody tell me if I said something that was factually incorrect, because I am—
It was a political statement. Rather than getting into politics, we are looking for information.
It was a very tight funding settlement and, when it was announced, the universities made no secret of the fact that we were disappointed by it. We made that point, and since then circumstances have changed very much for the worse. We are facing a serious economic downturn in which—as I said at the beginning—we know for certain that there will be severe pressure on public funding for at least five years and, very possibly, closer to 10 years.
You will not be surprised to hear that we are in close agreement with Universities Scotland. When you know that there is nothing behind the cabinet secretary's door—no pots of money to be liberated—there seems little point in breaking it down.
Mr Livingstone?
I am not sure that I can add much to what has just been said.
When resources are scarce but demand is tremendous, the danger is that we take a deil-tak-the-hinmost approach, which would be a disaster for everybody. You have all stressed the need to find the best solution that spreads across the whole education system. To use very scarce resources in the best way possible, we should be addressing the complete education system.
Meeting suspended.
On resuming—
Our fourth and final witness panel comprises representatives of the voluntary sector. I welcome the witnesses: Kirsten Gooday, policy and development manager for Community Care Providers Scotland; Ian McLaughlan, chief executive of the Scottish Pre-School Play Association; Liz Rowlett, senior policy, information and parliamentary officer for the Scottish Disability Equality Forum; Ruchir Shah, head of the policy and research department at the Scottish Council for Voluntary Organisations; and, finally, Ella Simpson, chief executive of the Rock Trust. They are all welcome.
I can do so. Community Care Providers Scotland regularly surveys its members on their experiences of how local authorities commission services. The majority of our members' work is under contract to local authorities, so we have amassed a fair amount of evidence, much of which we can make available to the committee in written format. It is not our normal modus operandi to name and shame individual councils, but I can give the example of a council that has put two papers to the main council meeting in the past month that categorically state that the lack of inflationary uplift given to contracted service providers in social care has been used to offset demand for other services. They also state that services that are provided in house will be given a particular uplift in order to cover pay settlements that have already been agreed.
Our written submission mentions research that the Scottish Executive commissioned on the impact of full cost recovery. That research was part of the previous strategic funding review initiative, which involved partners from the Government, the third sector and local authorities. The idea was to consider the extent to which services that were provided through the third sector were subsidised, as opposed to being services whose costs would be fully recovered. It was found that voluntary organisations were making quite substantial subsidies from their reserves, donations and so on. That was documented in that research, so we have evidence.
Is that the general view?
In the past couple of years, we in the early years sector have recognised on a number of occasions that local authorities have been considering taking in house support services that were once provided to the most fragile small pre-school centres by organisations such as the Scottish Pre-School Play Association. There is evidence that, after many years of strong partnership working, a couple of local authorities have considered for the first time taking those services in house. The reasons that have been cited for doing so are based on costs. It has been said that it would be more cost effective to deliver the services in house. Perhaps there is an opportunity for the Finance Committee or the Scottish Parliament to look into that matter in more detail and analyse how those costs are derived. Infrastructure costs for the voluntary sector have to be up front and considered, whereas local authorities can perhaps find ways to absorb some infrastructure costs. We have found that to be a new experience.
Is that approach widespread or particular to one region or area?
It is widespread. Like Kirsten Gooday, I would not like to name and shame local authorities. We have strong partnership working with our local authority colleagues, but we have been a bit alarmed and concerned that a couple of our strong partners have considered taking services in house, although they have not done that so far.
The Rock Trust is a direct service provider in Edinburgh and the Lothians, where we have seven contracts. We have renegotiated those contracts over the years, but we have been unable to apportion full overhead costs to several of them. We directly subsidise two of them, and cover all our costs in only two of them. Things depend on where we are in the lifespan of those contracts.
I would like to explore that a bit further. Some witnesses from whom we have heard have said that, at a time of recession or when there are tight financial budgets and there is to be no increase in funds, people become more innovative and consider new models of service delivery, which could involve the third sector. What might that mean to you in real terms? Do you anticipate that the kind of thing that is happening in Glasgow will happen elsewhere, rather than what Ian McLaughlan has outlined as his experience of some local authorities?
Certainly, in the experience of CCPS and its members during the past few years, it has been the norm to not have a budget uplift, particularly in relation to inflation but also in relation to additional requests that may be put to an organisation.
We have anecdotal evidence that our members are suffering from a poorer quality of service as a result of costs being driven down. In my submission, I discussed equality proofing budgets and the impact that that will have on some vulnerable groups. If equality proofing does not happen and services are provided on a cost basis, that will harm not only the organisations in the voluntary sector that provide good service, but the service recipients—it will have a huge impact on their quality of life.
The issue is not necessarily about overall funding to the sector. The difference in the voluntary sector—especially given the recession, which will accelerate some of the problems of a tightening funding environment—is that individual voluntary organisations are susceptible. One often finds that individual voluntary organisations, particularly those that deliver services, have short-term contracts or contracts in which they have not been able to secure pay rises each year. They will have a problem, in that any efficiency savings that they may generate will not necessarily be passed on to them.
To go back to the original question about whether a recession is the mother of invention, reinvention and rethinking, it is good that we continually rethink how we deliver services, whether we are meeting the right needs, and what our priorities are. That cycle of learning is a good process. If our priorities are driven by the pound, we are in danger of putting finance before the outcomes for the service user.
I was interested to hear Ian McLaughlan's comment about councils choosing to take services back in house. It strikes me that a lot of people complain about councils outsourcing and not keeping things in house. Why would you necessarily think that a council deciding to do something in house was a bad thing?
There is a good debate on that to be had in Parliament and in our sector. In Scotland, there has been a rich relationship between the various sectors in delivering quality services for people in communities.
When councils outsource services, they are outsourcing them more and more to private companies rather than the voluntary sector. We should never fall into the trap of thinking that the voluntary sector consists entirely of people who do things for nothing, because there is an element of business in it as well, which we must recognise. What added value does the sector offer as a service provider over and above that offered by the pure private company model?
I return to Jackie Baillie's point about innovation. Particularly in a tightening funding environment, the voluntary sector innovates in two ways: it finds new ways of getting money, and it develops new services to produce better outcomes. Many organisations are being driven down the first route, whereby they have to be innovative in finding new ways of getting money—new ways of presenting their case to funders—which takes them away from the other kind of innovation.
Added value is always extremely difficult to quantify. I do not want to be too broad brush, but if we look at the areas of service provision in social care in which the voluntary sector is active and those in which the private sector is active, we find that the private sector goes where there is profit to be made, and will not go where there is no profit to be made, because that is the model under which it operates. Therefore, the added value that the voluntary sector provides is that it will go into areas in which there is a need for complex care and demanding services. However, it is difficult to say that the voluntary sector is better at one thing, in-house provision is better at another, and the private sector is better at yet another. We need to ensure that we have the appropriate model of service delivery for each service.
It is horses for courses: different providers will be right for different sectors at different times. One factor is underestimated in the discussion: although the voluntary sector is professional, has business models and, on the whole, provides quality services, the fact that people volunteer in it makes connections back to communities, which builds individual and community resilience. Voluntary organisations add social capital to the fabric of the community, which would not necessarily be uppermost in the mind of a straightforward private provider.
The early years framework that the Government introduced towards the end of last year includes the need for strategic partnerships between the voluntary, private and statutory sectors. Added value can come from that. We are at our most innovative and creative when strategic partners in local authorities, in health and in various other sectors work alongside us, creating quality services for, in our case, young children. I have voluntary sector colleagues around the country who interchange with local authority colleagues and with statutory providers. Such creativity and innovation add value to the whole process.
Can you give us an idea of the extent of such partnerships in practice? Are they growing?
In the economic downturn, we are finding things challenging. People are looking after their own budgets and things are getting tight. However, I know of one area where my colleagues work alongside child care partnership colleagues from the local authority. They go out and find out the needs in the area and then create services; colleagues from the local authority and our own organisation go out together to assess needs and find the best solutions.
Are such examples specific to, or more prolific in, certain areas, or are they pretty uniformly spread throughout the country?
Members of organisations such as the SPPA can be found in every local authority area across the country, and in all types of socioeconomic area. However, it is fair to say that, because of restrictions in funding, capacity and buildings, and because of the need to get best value for the public pound, there is more creativity and joint working in rural communities than in other communities.
As Ian McLaughlan says, the voluntary sector can be more flexible and innovative than others. It often goes into areas and discovers gaps in service provision, and then spends time and resources working on services to fill those gaps. Those services can later be mainstreamed when they are shown to be valuable.
I will address my first question to Kirsten Gooday. The submission from Community Care Providers Scotland says that you provide support for about 160,000 people, attracting an income of just over £1 billion. However, at the foot of the same page, the submission says that 79 per cent of the respondents to a survey of your members in 2008 reported
We repeat the survey every year, usually in the months of May and June, after providers have had their budget discussions with local authorities. I therefore cannot give you an update at the moment.
So the survey will be going on just now.
Yes, it will.
Will we be able to hear the outcome once you have completed the survey?
Yes—that would be no problem.
You have raised the issue of constantly having to retender. Is that about e-tendering, or is just about being asked to tender again and again to provide the same service?
E-tendering has been used on occasion, but it is not the overall problem. Tendering in itself is not necessarily bad if it is done properly, so we have been working with the Scottish Government and other stakeholders to put together guidance on how it can be done in a more acceptable way. There are examples of bad practice.
You said that the same rigorous approach is not taken with in-house services as it is with those that are contracted out to the voluntary sector. How widespread is that?
Sorry—how widespread is what?
Does every council do that? You did not name a council, but you should feel free to do so. The committee is happy to hear of recalcitrant councils.
Are you asking how widespread retendering is?
Yes. Is it a widespread practice among local authorities not to bother too much about what they provide in-house, but to take an inordinate interest in what the voluntary sector provides? A simple yes or no will be sufficient.
Yes.
That is fine.
Yes—although the evidence so far is mainly anecdotal. I spoke to someone this morning about a council that was represented earlier in the meeting—
That narrows it down to Glasgow City Council or Aberdeen City Council.
Yes. There have been cuts in service provision, with care services being amalgamated into a single service. People have lost their care managers and support. The changes have had a particular effect on people with learning disabilities. The same council has decided, as part of a cost-cutting exercise, to remove the taxi card from people who receive the high level of the mobility component of disability living allowance—the people who are most in need of extra mobility services. That was done purely to cut costs and it was done in the face of an adverse impact assessment.
I guess that that brings us back to the first question that the convener asked, which was about whether voluntary providers feel that, in these straitened financial times, voluntary sector services are feeling the impact more than in-house services are.
I would say that they are, but with the caveat that there are structural reasons for that. Local authorities are in three-year pay settlements, whereas voluntary organisations have not been given the opportunity to do that within their contracts with local authorities. Also, pension entitlements are more onerous on the local authorities. So there are commitments that the local authorities must honour, which arise from measures that they do not pass on to contracted service providers.
It is a very uncertain time. We—and, as our surveys suggest, the rest of the voluntary sector—feel susceptible because of short-term contracts and the overall short-termism of funding compared with other parts of the public sector infrastructure. The sector feels vulnerable because, in many cases, the structure is more vulnerable.
My final question is for Mr McLaughlan. Linda Fabiani touched on the fact that, in your submission, you say:
It has not happened to our organisation yet, but a number of local authorities are actively considering it. It is a concern, because we have had excellent working relationships with those authorities. However, the outcome of strategic reviews of early years services that has been undertaken by local authorities in the past year is, as Linda Fabiani highlighted earlier, that those services should perhaps be taken in-house. On a couple of occasions, we have felt that there has been a lack of consultation and sometimes a lack of awareness, particularly with regard to TUPE. For example, some local authorities were not aware that if they were to take a service in-house, they would have to transfer the staff whom we had employed to continue it.
I want to pin this down. I can understand local authorities taking services in-house if they were going to provide them cheaper—after all, we all pay local taxes. However, you seem to be saying that they are taking into local authority provision services that are already being provided cheaper, regardless of whether by doing so they make them more expensive.
The local authorities in question said that they would be saving money. One local authority said that it would save £6,000 by taking services in-house, even taking the TUPE regulations into account. However, that figure might require further analysis of the infrastructure costs of running the services. In delivering services, voluntary organisations have a fairly efficient and lean head-office operation to deal with finance, HR and other aspects, whereas local authorities have, from the chief executive office all the way down, heads of departments on whom they can fall back for back-office support services. We have to cost those elements and put them up front in our tendering bids.
If services were taken in-house, would the provision to the general public be more expensive?
We believe so—
In other words, would parents have to pay more to put their children in nursery?
I do not think that it would cost more at the sharp end. In general, the taxpayer would have to cover the costs.
I have been struck by how much the Rock Trust's evidence links with the evidence that was given by the previous panel, particularly with regard to the prospect of the number of college places not growing to meet demand. In that context, the principal of Jewel and Esk College has written to me, and says:
The young people with whom we work have always found it difficult to access further education, employment or training, even in times of high employment. They have traditionally—for want of a better word—been the people who have failed in the school system, and a lot of the work that we do with them concerns trying to rebuild some of that learning, although we have concentrated most on building their social skills. Increasingly over the past few years, we have started to try to build up hard elements of their CVs by engaging with schemes such as the Duke of Edinburgh awards, the millennium awards and the youth achievement awards, which give the young people something to work towards.
Applications to colleges have gone up by 75 per cent or even 100 per cent this year, and colleges would prefer it if students to whom they give places did not drop out. I raise that as an issue; I do not say that it will have an impact.
We are in a bit of a paradox at the moment. During a recession, when pressure on the voluntary sector is at a peak, our funding—from all sources, not just statutory sources—is squeezed. There is a lot of demand being placed on the sector in relation to debt services, employability services and so on. Accordingly, we have been trying to present the sector not just as something that is going to be hit by the recession but as a solution provider during the recession. For example, on employability and community need, we have recognised that the discussions around welfare reform and the future jobs fund create an opportunity for the creation of an alternative community-based option, which would involve making a connection between the needs of people who are long-term unemployed, particularly the harder-to-reach section, to get into jobs and the idea of meeting community need directly. That is not just about improving employability and thereby improving the sustainable economy of Scotland; it is also about simultaneously meeting community need immediately. That is an example of the kind of quick win that is part of smarter budgeting.
Almost all the submissions referred to the concordat and the single outcome agreements, which is understandable. Aberdeen City Council's director of finance said that he believes that the concordat must be revisited with a view to changing the priorities that were set. Do any of you agree with that? I am not saying that that is the council that Liz Rowlett was referring to earlier, by the way.
I was not here to hear that witness speak, but I can say that there is a mismatch in terms of equalities issues, the national performance framework and the concordat. There is no good way of measuring performance on equalities issues. We are talking about skilling people up and reducing disadvantage through education at the same time as others are talking about education cuts that will result in a reduction in student support.
Does the SCVO agree with Aberdeen City Council's director of finance?
The key issue for us involves measuring impact and scrutinising spend, but we do not know how the budget decisions were made in relation to the concordat, because everything happened behind closed doors. One of our big messages to the committee centres on transparency in the budget-setting process. We have made suggestions that build on the submission of the CPPR, which talked about a challenge function that would operate as a sort of internal check within the Scottish Government. However, we recommend that there be an external mechanism that would report to Parliament through this committee and help to ensure that we have much more transparency around budget-setting processes that involve Scottish public money, including money that makes its way through the concordat. We ask the committee to champion our call for greater transparency. We want to ensure that all the best advice and input can come together, which will ensure that we will end up with a strong and powerful budget that will meet the needs of Scotland, particularly during a recession.
The Scottish budget is in excess of £30 billion, and the local authorities get in excess of a third of that. The money that goes to local authorities is passed down to other organisations, but a feeling has developed over the past two years that, as Mr Shah said, there is a lack of transparency around that process. The Government has put in place single outcome agreements to try to bring some clarity to the process. Mr Shah's feelings on that matter are quite clear, but do the other members of the panel feel that the single outcome agreements are not up to the task of providing transparency and displaying whether performance measures have been met? Do you feel that the Parliament and the Finance Committee should take a more hands-on role in monitoring the local government portion of the Scottish budget?
At this stage, there are two things that we do not know about single outcome agreements, which makes that quite a difficult question to answer. One is how exactly they are going to be reported on and performance against them monitored. That is key, and once we have clarity on that we will be a bit further forward. The other is how the second iteration of outcome agreements has responded to the fact that we are now in a recession. If people have slightly reined in what they propose to do and what their priorities are, that will be important. If, however, they continue to say that they will be able to achieve X, Y and Z without recognising the budget implications, that will be dangerous.
I invite Linda Fabiani to ask a quick last question.
My question is in two parts. Will I put them together?
Very quickly.
You gave me a row last time for asking too much in the one question.
Put the two parts together.
Okay. Listen carefully: I will say this only once. In earlier evidence today, there was a lot of talk with the council and health board witnesses about partnership and collaboration. It is perhaps because I asked too much, but I noticed that none of the panellists mentioned the voluntary sector in their responses, even though I specifically asked about it. Is there still a feeling among the voluntary sector that there is not true partnership, particularly when organisations are dealing with local authorities? I should ask about the relationships with any public body—I should not single out local authorities. What has happened with the voluntary sector compact? I have a distant memory that, many years ago, something was put in place to make all of that right.
In some ways, our organisation has been quite lucky in that we have had some really good experiences of developing and reviewing—and, to an extent, monitoring—strategies around homelessness in particular. We have had some good partnerships. There is a disconnect, however, between that and the commissioning process. There is a gulf between them, which is in some ways understandable. I will be bidding in the tender processes: there must be some way of dividing the strategy and the reviews, and then monitoring the outcomes from the commissioning process.
It can, however.
It can mean efficiency, but not necessarily. We need to find ways of ensuring that we know what we are looking for when we are working together. Do you know what I mean?
Yes I do.
Rather than just say that we have to do it, there must be real synergy in terms of the benefits for organisations and the service user.
This market day is wearing late. Are there any final comments?
I would like to hear more.
I find it interesting that Linda Fabiani referred to the two local authorities that gave evidence earlier. Those two authorities have been strong partners of SPPA and many other voluntary sector organisations, as have all 32 local authorities; perhaps it is a bit unfortunate that you have not heard all the examples of the creative and innovative work that is going on.
Some voluntary organisations operate primarily in a marketplace, which must be taken into account in considering collaborative working. There are some occasions on which the organisation with which we might most naturally collaborate is our main competitor in a competitive marketplace.
I will jump in to say that we are not a service provider in the same sense as the other organisations on the panel. My organisation is the umbrella body for the access panels, which work well in a voluntary capacity with all the local authorities and many other public bodies—such as the NHS—to help them to consider disability needs and fulfil their statutory obligations under the disability equality duty.
A pilot project—funded by the Scottish Government—is currently under way to examine public social partnerships. That is the more formal end of collaboration, and it is one to watch, because it will consider cost savings and implications as part of its examination of collaborative working. It is worth checking out.
Thank you.
Meeting closed at 17:34.