Item 3 on our agenda is the report “Responding to challenges and change: An overview of local government in Scotland 2013”. We will receive a briefing from the Accounts Commission. I welcome John Baillie, chair of the Accounts Commission, and Fraser McKinlay, controller of audit, and Gordon Smail, portfolio manager, from Audit Scotland. We have received apologies from Douglas Sinclair, who is giving evidence to another committee and is unable to be with us.
He cannot be in two places at once.
Indeed. I remind members that the performances of individual local authorities are outwith the committee’s remit, so the purpose of this session is to assist us with a series of joint Auditor General/Accounts Commission reports on national developments that we have been considering. I hand over to Mr Baillie, who will introduce the report.
Evidence sessions such as this one are now an established part of the Accounts Commission’s work, and we welcome the opportunity to discuss with the committee the challenges that councils face. Previous overview reports identified the pressures that local government faces. This year, our report focuses on how councils are responding and what more needs to be done.
Thank you very much. Paragraph 26 of the report comes at the end of a short section on welfare reform as one of the key challenges that local government faces—you mentioned that in your opening remarks. It states:
I will ask Gordon Smail to comment on the detail behind your question. It is fair to say that councils have tried hard to address the challenges that welfare reform presents.
In the report, we have been up-front in flagging up welfare reform as one of the major issues that is it critical that local government deals with over the next few years. It is certainly up there as one of the biggest changes that local authorities have faced in the past 10 years or so.
I accept that a lot of the changes are just coming in or have not actually come in yet, so it might be difficult to work out the scale of the challenge and how well the response is working. What plans does the Accounts Commission have to monitor and report on the effect on local government of the changes?
This is a big-ticket item, if I can put it that way. We will be monitoring the situation in conjunction with Audit Scotland fairly regularly. It is just too important not to keep our eye on the situation as it develops. As you said, convener, there are a lot of uncertainties and we need to monitor the situation regularly.
When do you envisage being able to make some kind of public assessment of the position?
Funnily enough, we will discuss that in the not-too-distant future. I would say that, by this time next year, we should have a fairly clear idea of the initial effects of the arrangements. I suspect that it is one of those issues that, for every question that we ask and get information about, several others will be begged. It is going to be that kind of exercise.
As Gordon Smail mentioned, we have already done a bit of baseline survey work to assess councils’ preparedness for the changes coming in. That survey work went to the Accounts Commission and was on the website a couple of months ago. It gave us a pretty positive picture of where councils are with their planning and preparedness, and, as Gordon Smail mentioned, the seriousness with which they are taking the situation. I expect that work to continue to figure in the annual report, and it might be that it will get a bit more coverage over time and we will be able to say more about the actual impact.
Thank you.
I am a little concerned about the comments on community planning partnerships. Paragraph 37 states:
For a long time now, community planning partnerships have not been able to demonstrate delivery. It is only in the past two or three years that there has been a much greater focus or emphasis on the need for CPPs to be the core of delivery to the community. It is in that context that the findings that you see in exhibit 6 are made.
That is helpful, but I have no feel for how long the journey is going to take and how long it will be before we start to understand whether CPPs are actually fit for purpose and delivering. We might be at the start of a journey but, as you have said, things have been sort of moving forward for the past two or three years now. Are we saying that it is going to take years before we know whether they are delivering?
Our audit programme envisages another four or five audits in the next year, and they should give us a pretty good critical mass to consider what community planning partnerships look like. All the while, the national CPP group—which, as you know, is a joint exercise by the Scottish Government and COSLA—is looking at how to engage with specific partnerships, address their particular issues and help them to improve via the Improvement Service. A lot of activity is going on under the water.
The next couple of years are going to be absolutely key in seeing whether the step change in community planning performance that everyone has agreed is required and to which everyone is committed is actually taking place.
What concerns me is that we seem to be talking about years. For example, you talked about improvements over the past two or three years and you suggested that we might see significant changes over the next couple of years. It seems like a heck of a long time before anything actually comes through.
We agree. Indeed, in our recent report on community planning, we noted that it has been around for a long time—it has been a statutory duty since 2003. We report on it particularly through best-value audits. Given that CPPs are not a new thing, it is reasonable to expect them to have been further on than they are.
Finally, paragraphs 67 and 70 refer to lack of “consistent data”, which seems to be a recurrent theme in many audit reports. Is there any sign of improvement in that respect?
The issue of the data is one of the major points that we made in the other report to which Fraser McKinlay referred. I cannot honestly say that there has been a lot of improvement as of yet, but I know that a lot of work and activity is going on under the surface to get performance measurement much more ably introduced and embedded in CPPs. The Improvement Service is engaged in that.
Convener, I wonder whether the committee could return to the issue of CPPs, which are a big initiative and a major piece of what is happening in local government.
To a degree, the issue is on our agenda. It is something that we have raised with Audit Scotland before, although in terms of a significant piece of work on it, we are in the Auditor General’s hands.
I am just worried about the timescales for seeing something come through.
I think that some follow-up to some of the previous reports might be due at some point. Perhaps we can write to the Auditor General for clarification of that. When the report came through, there was a lot of concern that it was not possible to find any evidence that CPPs have been effective. Let us follow that up.
On the same theme, is the basic problem with community planning partnerships not that they are called that rather than community delivery partnerships, which means that members of CPPs take a particular attitude? In fairness, I think that Mr Baillie hinted at that. Secondly, elected members feel aggrieved by the fact that they sit on a CPP under the principle of democracy but that everyone else on the CPP is an appointee of some organisation or other and as such they have no democratic legitimacy whatsoever. Quite understandably, elected members think “Well, okay, but I carry the can here, because I’m accountable to local people.” Is that not the inherent difficulty and challenge of the bodies?
There are a number of issues around who does what and when, and who is responsible. One of the big issues is whether people have a budget and can contribute to the planning partnership rather than to their base back home, whether that is health, social care or whatever. That issue was discussed at the most recent meeting of the national group. There is a long way to go to get any solid agreement on it, but a lot of discussion is going on under the surface.
The point about planning is well made. The experience of the first 10 years of community planning partnerships is that, at best, people try to align their plans as individual partners. One thing that has changed in terms of expectations is that there needs to be a much more genuinely integrated plan for the place, with all the partners being involved from the roots up, if you like, in planning and arranging delivery of the plan. I do not think that there is an expectation that the community planning partnership at the top level will be the delivery agency. However, the statement of ambition is clear that it needs to provide an overarching framework for the delivery and that everyone needs to be heading in the same direction to deliver the outcomes for the community.
Indeed. When I was a councillor, which was not yesterday, the debate was about a power of general competence and all-purpose authorities. Have we not completely reconfigured local government? It is now seen by national Government as an equal partner of all the other agencies that—I repeat—do not have any democratic legitimacy. Elected members and councils that are elected to be there see themselves being diminished and their central role in their areas being, in effect, dumbed down by the CPP process. Not unsurprisingly, members kick back at that. Is that not the reality?
That is why I concentrated on the money. Attention will follow the money, and if it is firmly committed to something, a lot of things follow from that. I entirely take your point about local democracy, parity of esteem and all the things that go with that, but the essence of it is trying to get people to work together almost regardless of that. I guess that that is part of your point—how difficult is it to get them to work together when the formal structures, in effect, set them apart a little?
I appreciate that it is not your job to make policy. Let me put it the other way round. Would it not be fair to say that, until money is on the table of whatever CPPs are to be called or become, the situation will continue and we will meet annually to discuss it? Is that not the reality of the situation?
Lots of people in CPPs and those who are responsible for trying to improve performance recognise the importance of money as a key point. Once that is resolved in whatever way, things should flow much more fully as a consequence. I would go that far with you, if you like.
Would it be fair to say that, if we went down that route and policy was made in that way, it would be perfectly legitimate to audit that? If Government changed the manner in which CPPs operate so that some budgets were aligned directly with them, there would be no problem auditing that, would there? There would be perfectly clear audit lines.
To a large extent, the policy is set around that, because the statement of ambition is clear that partnerships should be looking at “the totality” of their resources that are available in the area. That expectation has been set out clearly. As I said to Mr Beattie, one of the big tests for us in the next 12 months will be to see whether there is any evidence of that happening. I agree that, if they are to focus on one thing that will really make a difference, it needs to be the money. That is the point on which minds are really focused. Really importantly, it must be money not in a sterile, “What does your budget look like?” way, but in terms of what it means for our collective resources, people and buildings, and how we use them in the community. That is the conversation that partnerships have not been having, and they really need to have it. To that extent, the policy is clear. Our job, the Accounts Commission’s job and the Auditor General’s job—because this includes health and other partners, too—is to hold the mirror up and ask, “To what extent are you actually achieving that?”
My question is based on paragraph 106 of the report and it concerns workforce-related financial pressures. Equal pay is a rather long-running chestnut in local authorities. Have you managed to identify, through issues of best practice and the like, whether local authorities are managing that problem in the best possible way? It is obviously a huge issue for them.
I ask Gordon Smail to take that up.
It is a big issue and, as Colin Keir points out, it is not going away. It is something that we have monitored for a long time and the figures that are involved are quite substantial; so far, councils have paid out or are planning to pay out something of the order of £600 million.
I might add that we will produce a report later this year on workforce capabilities and movements that—I think that I am right in saying this—will also touch on the equal pay issue.
Yes. That report will acknowledge that equal pay has been a big issue. It would not be possible to produce a piece of audit work on workforce and workforce planning without reflecting on equal pay. However, the report will not go into the kind of detail that people might expect, as we have been interested in ensuring that the public information that is available on the accounting and disclosure of the issue is as good as possible.
Is it possible to identify which councils are handling the issue better and which have the best method of accounting for such problems? How easy is it for you to identify who is doing a decent job and who is having problems?
The short answer is that it is difficult for us. The experience has been that some councils that were reportedly first to have resolved the issue have found that problems have come back to them because on-going legal cases have resulted in the redefinition of things by the courts. The short answer is that it is difficult for us to get a grasp of who is doing things well, as the situation seems to be shifting. I suspect that there is a lot more to come on this.
As it happens, we will have a meeting with all local government auditors this week—we meet them twice a year. As you know, the process is that all auditors report to me as controller of audit in October, and I then report to the Accounts Commission about issues that have come up. Auditors will always look at equal pay, but I will say to them on Friday that we need to look at it closely again. Our sense is that we are now at a point where the councils have just about been managing to keep a lid on the issue. However, the extent to which equal pay and single status have done what they were originally designed to do—which was to modernise pay and grading—is a different question.
Can we assume that the issue will go on for several more years?
As Gordon Smail mentioned, one issue is that the continuing case law and precedent can significantly change the landscape for all councils across the United Kingdom. The issue is a big and complex legal area that continues to shift and move on. Just when you think that you have dealt with one thing, something else crops up and a different set of issues needs to be dealt with. The issue is difficult to keep track of.
I have a question about reserves. I note that the report states that reserves have been increasing, but it also states:
We have tracked reserves closely over a number of years and, as you say, the overall position is that they have increased again. Reserves have increased for a number of reasons, such as elements of underspending and councils seeing the benefits of staff reductions coming through a bit more quickly.
The report also notes:
The point about policies is important. In fact, the commission’s work over the years has got the issue of reserves up front in people’s minds and we now have much better information on that than we ever had before. One consequence is that all councils now have written policies, although there is a question about how up to date they are and how well they reflect current circumstances. That situation is because of the commission’s interest in the issue and because, when our local auditors speak to councils each year, as Fraser McKinlay said, they continue to press to ensure that policies are up to date.
The report briefly mentions the shared services agenda and states that you do not expect
Any time that I think of shared services, I take one step back and think of option appraisal. As you well know, sharing services is one choice that is available to councils in delivering a service. The commission is on record as saying that the first stage is to consider whether that is the right choice to make. If it is, it should be considered, and then off we go. It is fair to say that throughout the country a lot of effort has been put into considering the possibility of sharing services in various ways.
As I said, one of the advantages of the overview reports is that we can track an issue over time and repeat messages. The issue of shared services has been in the reports for a number of years. It is right that we flag up the lack of progress on some of the large-scale shared services that have been attempted, some of which are highlighted in exhibit 8. From what we see, our sense is that many barriers are put up to large-scale shared services. In fact, the commission and the Auditor General made a submission to the Local Government and Regeneration Committee’s inquiry on the issue back in January, in which they identified three areas in which there are barriers: financial aspects, workforce aspects and organisational matters, to do with things such as leadership. That is where the barriers are.
I get the impression that more could be done in that regard. For example, I think that we have about eight community justice authorities at the moment, and surely to goodness we are not going to get 32—that would be unthinkable. There must be some planning and thinking going on right now around the possibility of sharing provision among authorities for that service, which will be a new burden on councils in the next couple of years.
I do not know—perhaps Fraser McKinlay can say something about that.
There is a lot of thinking going on regarding the future of community justice and community justice authorities, which I am not that close to. In the wider sense, there is an interesting debate to be had about whether service delivery should be more decentralised or more centralised. There is no right model for everything, so things should be considered on a horses-for-courses basis. I would expect that to be part of the discussion about CJAs and other elements of services.
Going back to Gordon Smail’s point, we have observed councils trying quite hard on many occasions to group together services with another council or a series of councils, and it seems that in a sense they address all the barriers—as they have to—at the start of the process, before there is any genuine working relationship or trust. That makes it more likely—although not inevitable—that they will run into difficulties as a consequence. If they start small and grow, and build the trust as they go, they will have much more chance of succeeding.
That aspect is probably of more interest to our Local Government and Regeneration Committee colleagues, convener.
As you know, the prudential code says in essence that if councils can demonstrate the sustainability of interest and repayments, everything is acceptable. We are just a little concerned that the prudential code may need to be revisited and made clearer and more specific.
Willie Coffey makes a good point, which we have highlighted in the report. The prudential code was introduced in around 2004, and the world has moved on substantially since then. We have undertaken a high-level analysis for the report to give a sense of how things have shifted across the 32 councils, and there is wide variation.
Are councils asking for more flexibility in the code to allow them to borrow?
They are looking at the parameters that the code provides. Whether or not the indicators indicate that something is sustainable and affordable, some of the boundaries are being pushed a wee bit as councils seek to drive on some of the capital projects that they need to undertake, or as money falls short in other areas. That is why it is crucial at this stage in local government finance that the code is re-examined. The Accounts Commission has started to put that work in train through the report, and Audit Scotland will progress it with organisations such as the Chartered Institute of Public Finance and Accountancy.
One thing that comes across loud and clear from the report is that the job of councils has changed over the years, and is changing still and becoming much more complex.
I could not agree more: training and development are absolutely essential. As you say, the role of councillors is now so broad and busy that at times it seems almost to be a 24-hour job.
I wonder whether, as I said, the correct method would involve getting COSLA and SOLACE to sell the importance of training. For a senior councillor role in particular, it may well be that if someone is selected for that job, they should be taken away from some other work and given time to do the training. I can think of some instances in which—I would suggest—the person who took a major office was not ready for it at that time.
There are two aspects to that. One is the need for a detailed individual development plan, and the other concerns the extent to which officers can support the development of councillors. If those two things were done together to a much greater extent, that would bring about a benefit.
One organisation that is involved in such work is the Improvement Service, which has set up some good web-based training for councillors.
With regard to the “Action points for councillors” in appendix 1 to the report, do you ask in your monthly meetings with councils how well those are being implemented? What assurances do you have that they will lead to better training and so on?
As part of our processes when we publish an overview report, we always send out local audit teams to pick up on the recommendations. We expect the report to go to the relevant council committee, which is usually the audit or scrutiny committee.
I am pleased to hear that. I appreciate that the report is an overview, and that—as Willie Coffey said—many of the questions are for local government. However—boringly—I went through the report and found that I could not tell whether quite a few of the issues that were mentioned were a problem or not. I also looked at the recommendations, which were very general: they could apply pretty much to any time, any place or any year.
I am not sure that we would be wholly confident that that is the case.
Are you saying that some services are being delivered when no need for them has been identified?
No, that is not what we are saying; we are saying that councils should ask themselves the question. The answer may well be that the service is needed, but they should ask themselves the question.
Are you saying that councils do not currently ask themselves that question? Are you saying that they gaily deliver services without asking whether there is a need for them?
In the past couple of years, councils have started to ask themselves those questions. Despite what has happened to funding over the past 10 years, services have increased. The issue might not be the service itself, but the way in which it is delivered or the extent to which it is delivered. It is unlikely that local authorities do an activity that they would want to cut completely, although in recent months, a couple of councils have taken such decisions.
It is quite incredible that the Accounts Commission has to recommend in a report that councillors and council officials ask themselves whether there is a need for a service.
One thing that we try to do in the report is paint the overall context. In the report, we suggest that people should be risk aware, not risk averse. The view may be taken that at times when more money has been around, the question of risk has perhaps not been at the forefront of people’s minds. In other words, they have been slightly risk averse.
And that requires a change of culture.
It leads to situations in which people look at options. The report refers on a number of occasions to option appraisal. That means looking at options that, in the past, have not been particularly appealing for whatever reason. One reason might be that the option is relatively risky. A shift of mindset is required whereby councils start to consider things that in the past were perhaps considered unacceptable, whether politically, financially or from the point of view of risk.
Excuse me, but I think that Mr Keir has a supplementary.
My point is on a slightly different issue; it is about ALEOs.
If it is not a supplementary, we will carry on.
It is not a supplementary.
I took my question on ALEOs off my list.
On sickness absence, paragraph 110 compares the figures to the figures in the teaching profession and the fire and rescue and police services. We can write to you with further information, if you wish.
Okay.
On roads maintenance, we produced a roads maintenance report last month that updated those figures. It showed that there has been a marginal improvement, and that something like 67 or 68 per cent of roads are of an acceptable standard. There has been an improvement.
Of 0.5 per cent.
Whatever it was, it was not very much.
There has still been a drop in the budget of 21 per cent in the past two years.
Whatever the figure was, like a lot of people around the country, I was surprised that it had gone up at all. At this point, we have to look at the definition of “acceptable”. I cannot quote it to you just now, but I expect that the engineers’ definition of “acceptable” is “safe”.
So that means that one third of our roads are unsafe.
Gordon Smail can talk further about that.
I think that the phrase that is used is “acceptable condition”.
The roads issue is a good example of the difficult decisions that councils are having to make. All councils know that, as a result of many years of underinvestment, the condition of the roads is not what it should be, and they are trying to do something about that, at a time of reducing resources. They are struggling to balance spend on roads with spend on schools, social work, care for vulnerable people and everything else that they have to do.
Mark Griffin asked about reserves; I would like to ask about council debt. As a member for the Highlands and Islands, I am aware that Highland Council’s debt was around £600 million and that its housing debt was around £150 million. I see that the current situation is about the same, with total debt approaching £750 million.
I will deal with the Edinburgh question first, just to get it out of the way. It is relatively straightforward. Edinburgh’s trams project, which represents an enormous amount of debt—was it around £700 million or £800 million or so at the last count?—and the purchase of the council’s headquarters at Waverley Court contributed hugely to the increase.
With regard to the Edinburgh example, it is always important to bear in mind that big councils are indeed big and that by dint of that the numbers are going to be big. Edinburgh spends of the order of £1 billion to £1.5 billion and has assets of, I think, about £4 billion, and the issue always needs to be seen in that context. Mr Baillie has flagged up a couple of reasons for why Edinburgh’s debt, in particular, has gone up over the past 10 years.
I do not have the figure in front of me—it is in an answer to a parliamentary question—but I note that the interest that councils pay each year, which runs into millions and millions, is money that cannot be used to deliver public services.
Yes. In fact, we are talking about not only interest payments, which you are right to point out, but PPP payments and any other long-term fixed cost that ties a council’s hands behind its back.
I thought that Mrs Scanlon made an interesting point when she talked about local authorities doing all these things that they do not need to do. I simply point out that they have statutory obligations that they need to meet; essential things, whether or not they be statutory obligations, that they need to do; and desirable and beneficial things that they will want to do for their community. I understand why Mary Scanlon has made her comment, but I think that she framed the point in a rather one-dimensional way. I do not want local government to disinvest from our communities; instead, I want it to be proactive and involved in them.
You are answering questions now.
No—I am actually about to ask a significant question.
I will start with a very general point and then invite Fraser McKinlay to answer your question.
My sense is that local authorities are pretty well prepared and are planning carefully for the change. The Public Bodies (Joint Working) (Scotland) Bill came out only last week, so councils and health boards are getting their head around the detail, but that is not to say that they have not done anything while they wait for it to be passed. Indeed, some shadow boards are in operation and some council areas have effectively integrated health and social care. There is a mixed picture across the country.
I was not sure what answer I would get, so I find that response reassuring. I genuinely did not know the level of preparedness—I was looking at the action points for councillors in which you ask them whether they are prepared. I was not sure if you knew whether they are prepared, but I am delighted that it appears that there is lot of good work going on.
We will monitor a variety of things. Locally, auditors will be interested in how integration arrangements work. That forms an important part of our consideration for the performance audit programme, and we will want to look at how implementation has gone. In addition, there is a whole series of things that we can do to keep an eye on how the planning and delivery of the integration are going. There are colleagues in Audit Scotland whose job it is to keep an eye on community health and care, so we will monitor that closely.
Thanks.
Mr Keir, you wanted to come back in. Is it a quick question?
Audit Scotland has talked before about the relationship with ALEOs. Will you provide a quick update on your work on that?
A paper is going to the commission’s meeting next week. Our interest—“concern” would be too strong a word to use—in the issue is the extent to which there is public accountability for public money in ALEOs. There is financial accountability, but accountability for performance is another matter.
I am quite happy to wait until next week.
That draws our questions to the panel to a close.
I am concerned about the timescales—it could be years before something comes through. We are sitting with something that has been in place for 10 years, but we do not even know whether it is fit for purpose or whether it is delivering.
I do not disagree. However, the Scottish Government’s response to the concerns was to set out what it was doing, which is the statement of ambition and the programme that flows from it, and the legislative change through the community empowerment and renewal bill. We have not seen that bill, so we do not know what is in it. I am therefore open to any suggestion that we do something else but, if we take up the issue with the Government again, we will get the same answer. Perhaps we should make a note for ourselves that we need to look at the bill when it appears to satisfy ourselves that it is the vehicle to address some of the concerns; if it is not, we can take that up. I think that what Mr Beattie raised is very much what we raised a couple of months when we looked at the joint report.