Finance Committee, 15 Nov 2005

Meeting date: Tuesday, November 15, 2005

Official Report 272KB pdf

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Scottish Parliamentary Corporate Body Budget 2006-07

Good morning. I welcome to the 26th meeting of the Finance Committee in 2005 the press, the public and our witnesses. As usual, I ask people to turn off their pagers and mobile phones. All committee members are present.

The first item on the agenda is consideration of the Scottish Parliamentary Corporate Body's budget submission for 2006-07. As the covering paper from the clerk states,

"The SPCB's budget is top-sliced from the Scottish Consolidated Fund".

Therefore, we consider the SPCB's budget bid as part of our scrutiny of the Executive's draft budget.

With us today are Nora Radcliffe MSP, who has taken over the finance brief on the corporate body from Robert Brown—I welcome Nora to her first Finance Committee meeting in the role; Paul Grice, clerk and chief executive of the Parliament; and Derek Croll, head of financial resources.

As is customary, I invite Nora Radcliffe to make an opening statement, then we will proceed to questions.

Thank you for your welcome and for the opportunity to make introductory remarks on the SPCB's budget submission for 2006-07.

First, I am pleased to confirm that the total budget bid is within the previous indicative figures that were advised to the Finance Committee in October last year. When my predecessor, Robert Brown, gave evidence to the committee last year, he highlighted the fact that we had just moved into Holyrood and that it would take some time for the operation of the building to settle down and for the impact of the predicted considerable number of visitors to be established. One year on, we have much more experience of working in our new environment and we have welcomed more than half a million visitors to the building. That experience provides a more robust base for our 2006-07 budget submission. However, it should be noted that we are still operating within the initial defects liability, or warranty, for the Holyrood building. Consequently, we do not yet have to pay for undertaking what might be described as normal levels of maintenance.

On the revenue expenditure budget, our proposed net revenue budget submission for 2006-07 is £66 million. The figures are set out in more detail in the schedules attached to the letter from the Presiding Officer. As in previous years, we have highlighted, in schedule 3, comparisons with the current year's approved budget to assist the committee in its scrutiny.

We have maintained tight control of staff costs for the parliamentary staff organisation. Members will note that the overall increase in staff pay is only 1.5 per cent. That is partly as a result of a reduction in fixed-term posts, but it also reflects the fact that permanent staff have largely now reached a plateau in their incremental progression through their agreed pay scales. We have highlighted that point to the Finance Committee in previous years. We expect that future increases will be close to inflation.

As part of our drive for continuous improvement and development, we have a planned programme of efficiency reviews, which we would be happy to elaborate on in response to questions. We are committed to the principles of efficient government and we already share a number of services with other public bodies, including the Scottish Executive.

Members will note that property costs of £6.7 million show an increase of £0.6 million—10.2 per cent—on the 2005-06 approved budget. The largest single component of property costs is the rates bill of £3.6 million, which essentially is outside our direct control and has been debated in previous years. Maintenance costs, both planned and reactive, account for £1.2 million in total. That figure includes £360,000 for fabric maintenance, including the planned limewashing of Queensberry House, and £443,000 for planned works to mechanical and electrical systems. Utilities account for £875,000 and the cost of cleaning, including high level windows and vertical access, amounts to £633,000.

Commissioners and ombudsmen now represent a significant portion of the SPCB's net expenditure: they account for £6.4 million, which is almost 10 per cent of the 2006-07 budget. In his letter of 26 August, the convener invited the SPCB to scrutinise the budget submissions of those bodies and to raise with them in particular issues of location and value for money. We have had a meeting with the commissioners and ombudsmen to challenge them on those matters and to discuss their responses with them. As is set out in the Presiding Officer's letter, we have concluded that it would be beneficial to undertake an independent review of the opportunities for sharing services. The Auditor General for Scotland has intimated that he would be willing to undertake such a review.

The SPCB has scrutinised the 2006-07 budget proposals from the commissioners and ombudsmen, as set out in our overall submission, and we would be happy to discuss the matter further.

We propose a contingency of £1.5 million, which is 2.5 per cent of the revenue budget, excluding the commissioners. We consider that that is prudent to meet unexpected new cost pressures.

We have set aside £3 million for capital expenditure in 2005-06, in line with previous forecasts. As noted in the letter to the Finance Committee, the majority of that expenditure is not yet allocated to specific projects.

That was a quick canter through the submission, and we are happy to take questions.

Thank you very much, Nora. Thank you for giving us the figure of £3.6 million for rates. Last year, it was assumed that the figure would be £4 million, so I presume that it is coming in £400,000 below the projected increase. Notwithstanding that, the 10.2 per cent increase in property costs is pretty substantial. Can you say a bit more about the planned maintenance costs and higher utility costs? How much of the higher cost represents the same usage but increased charging by the utility providers and how much of it represents increased use over and above what was expected?

Sorry. I did not catch your last question.

Schedule 3 of the submission mentions a couple of factors behind the 10.2 per cent increase in property costs, one of which is higher than expected utility charges. How much of the increase in utility charges is because the utilities' prices have gone up and how much of it is because use is higher than the SPCB had expected?

I think that it is mainly all down to increased charges from the utility companies. The use of gas has actually been slightly lower than expected. Water rates are different, because they were estimated wrongly before. I ask Derek Croll to cover the detail of that.

The original estimate for the budget submission last year was based on a rateable value, obtained through Scottish Water, which has turned out to be incorrect. When the correct rateable value came through, we discovered that the figure was much higher. There is a significant increase there, from £55,000 in the 2005-06 budget to £225,000 in the 2006-07 budget, based on the rateable value.

We are now moving towards the end of the defects liability period, so we are starting to get a sense of the true maintenance costs. Can you tell us something about how that cost is to be managed? What projections do you have of annual and medium-term costs? Presumably, the present costs should be relatively low, because most services are new or are in the post-construction period. Do you have any notion of a longer-term cycle for maintenance, which could give a sense of what the overall average costs might be in the future over five-year or 10-year periods?

We are now considering costs over a 25-year period. We are confident that the right way to proceed is to put in place a proper annual maintenance regime, so that we keep the building up to scratch. It is a high-maintenance building and if we were to skimp on maintenance now, we would pay dearly for it later. We are being realistic about the maintenance costs of the building and we are doing proper planned maintenance from the start. We have been considering closely how to plan over a period of 25 years.

We are currently producing a 25-year maintenance plan. I am not in a position to give the committee the details on it today, but I would be happy to do so when we have it. As Nora Radcliffe indicated, the intention is to begin the maintenance at a reasonable level now, so that we do not make the mistake of suddenly running up huge bills later. We would hope to set a reasonable average and to keep the level fairly even across the period. However, it will be at least another month or two before we have the maintenance cycle set out. I would be happy to indicate to the committee how we envisage that expenditure developing, hopefully over quite a long period.

To reiterate, we have tried to begin at a realistic level, rather than depressing the figures early on and facing higher bills later. However, until we have the maintenance programme in place, I cannot give an exact figure. We would be more than happy to indicate that to the committee once it is ready.

That would be helpful. For the layout of future budgets, it would also be helpful to separate out utility costs from maintenance costs, rather than combining them in a single property costs column.

I can give you a little bit more detail there. We are expecting a £170,000 increase for electricity in the 2005-06 budget. As you have implied, that is predominantly down to increased utility costs. For gas, we budgeted exactly the same as for last year in cash terms. I am more than happy to provide specific water, gas and electricity budget proposals.

I thank Nora Radcliffe for her presentation and welcome her to the committee. As she has responded to our question on rates, I will leave that subject there—I just wanted accuracy on the figure.

The events budget includes staff overtime and contractor costs. Those figures were not separated last year, so it is hard to judge whether there has been any significant shift in those costs. Has there been any substantial shift in the figures? What is the likely direction of travel in that regard over the next year or two?

Those amounts were not shown separately last year because many of the costs of events were rolled into the ordinary budget. This year, we have tried to separate out what events are actually costing, to account for them more accurately. That is why the figures are shown like that now, but were not shown in the same way last year.

It is right that we show those costs separately and account for what events actually cost, covering not just the obvious costs but the fact that security staff have to work overtime and the requirements for ushering, portering and clearing up after events. All those costs should be accurately apportioned. However, I am not aware that there is a significant increase.

The costs are broadly the same as for 2005-06. Of course, we do not know about all the events that will happen next year. The Scottish Parliamentary Corporate Body is trying to run events more on an annual basis but, inevitably, some events come up at short notice. The amount that we put in is based on a level of major and medium-sized events that is similar to this year's.

As the corporate body considers the situation further, it will consider whether it should set the budget first and say that events must be accommodated within that or continue with the current approach, whereby events are dealt with on an ad hoc basis.

The direction of travel, which Mr McAveety asked about, is seen to be broadly flat.

Does any particular type of event entail additional costs? Will we have to address the implications of holding certain types of events that might require money to be spent on resources that are external to those that exist within the Parliament?

Clearly, big events that have security considerations, such as the Malawi conference and events involving members of the royal family and presidents of other countries, bring with them significant additional costs. Also, events that take place over weekends or in the evenings create extra costs. They will tend to be the more expensive ones, as they involve a lot of staff.

One of the issues that the corporate body is considering carefully is cost recovery and what it is reasonable to try to recover costs from. Again, that might depend on considerations such as the type of organisation that is running the event and what the prospects of recovery are. At present, we would always seek to recover costs involved with catering and the hire of broadcast equipment. However, there is a debate about whether it is proper to seek to recover further costs, and the corporate body is considering that issue. The £450,000 could go further or could reduce, depending on the extent to which that happens. The corporate body has a bit more thinking to do about what the appropriate approach is in that regard.

This is not really a finance question, but I will try to broaden it out as much as I can.

In the discussion that the corporate body has about what events should take place, is there much debate about opening up the Parliament much more to what we might broadly define as ordinary citizens rather than representative organisations, dignitaries or whatever? Many things are happening but it strikes me that not enough people from wider Scotland are getting a chance to participate in events in the Parliament.

I think that the festival of politics was trying to address that by running the kind of events that the man in the street would be attracted by. I suppose that we have to play with the hand that we are dealt. It depends what people suggest to us.

I take the member's point in relation to high-profile events that are aimed at particular people, such as the recent Carnegie event. The point is fair and the corporate body will be mindful of whom events are targeted towards.

The vast majority of medium-sized events—those that involve 50 to 100 people—are very much driven by members and are focused on constituents. Again, the corporate body would regard that as a high priority.

We are still learning but, next year, we are looking to host a handful of resource-intensive major events and a much larger number of what we might call ordinary events, including receptions for constituents and committee events, which tend to be more to do with pulling in "ordinary citizens", as you called them. The corporate body has not resolved this matter finally, but it is open to the sort of issue that you raise and is anxious that the Parliament should be accessible to the ordinary people of the country.

In that context, will you have a proactive development strategy for events? There are two dimensions that might be worth thinking about. One is that businesses might use the Parliament more for their own types of activities, such as dinners in the evening or training events during the day, which could feature an introduction to the Parliament as a component part. I suppose the other dimension is public bodies of one kind or another and whether they are using the Parliament sufficiently in linking with the public. Both of those could be done on a cost-recovery basis. I wonder whether there is a strategy for developing the Parliament as an events location.

We are developing the strategy. Certainly, the SPCB is discussing whether we should have more corporate involvement. However, there are many issues around that. For example, there are questions around what the Parliament is and what it is appropriate to use the building for. Much discussion of such issues is required before we arrive at a strategy.

On staffing, can you give us an indication of how the balance between permanent staff and fixed-term staff has shifted over the past two years and how you expect it to shift over the next period?

There has been a slight shift. I think that there are about nine or so fewer fixed-term staff, there has been an increase of about nine permanent staff and the overall staff number is up by about nine, so the figures are broadly the same. I expect a gradual shift to having slightly fewer fixed-term staff, many of whom were taken on to handle the Holyrood migration and transition. In some areas in which we face uncertainty because of blips in work, or when we want to bring in professionals, we will continue to use fixed-term contracts. That strategy gives us flexibility. As Nora Radcliffe said, using fixed-term contracts is one of the ways in which we have been able to keep the overall staff budget in reasonable balance.

There might be a gradual shift to fewer fixed-term contracts, but I foresee in the medium term a reasonably significant number of fixed-term posts of about the current order, which is just over 50, across a range of disciplines in the Parliament.

Is the corporate body involved in and consulted on shifts in overall staff numbers? Does it monitor that closely?

We have a twice-yearly bidding round for staff, so we have a tightly controlled process for new staff coming in, and I report the outcome of that to the corporate body. Obviously, shifts within the Parliament are handled more at my level. For example, if we needed extra resources for a particular committee or area, I would not go to the corporate body about it, unless it involved major headaches and implications. Obviously, I would report to the corporate body on proposals to take on significant numbers of new staff. Over the past year, though, that has not been the pattern.

You say that you have a planned programme of efficiency reviews. Can you give an indication of whether you expect total staff numbers to fall or rise because of the reviews?

It is hard to say, really. A very definite outcome of the operational security review was that we were able to reduce overtime costs. We are currently doing a review of visitor services, which I think is the area of the organisation that is under the greatest pressure. We are still coming to terms with the pressure of running the building as a visitor attraction as well as a Parliament, and that is quite problematic. I suspect that there will be a range of outcomes from that review. In some areas, we might consider other providers of services and we might well require additional staff in some areas.

We are keen to improve the service to members. That goes back to the events point. We are trying to shift the focus so that many of the visitors come in via members. No doubt members of the Finance Committee have brought in people, and I have certainly come across members with large groups of constituents. That is very positive, but it is obviously a burden on members, so we are looking to see whether there is anything we can do to enable the visitor services team to provide a service to members.

Because of the immense pressures in visitor services, I certainly would not expect staff numbers to fall there. However, we might consider whether we are always the best people to provide the services. We might consider whether they should be contracted out or whether we should extend existing contracting-out arrangements. We will try to go in with an open mind. Those are the two things that are immediately on the horizon.

The other planned efficiency reviews have still not commenced, so it is hard to give projected outcomes at this stage.

You mention sharing services with other public bodies, including the Executive. Will you say a wee bit more about what services those might be and what programme you have for the development of shared services?

We share a finance system with the Executive; for procurement, we use the Office of Government Commerce; utility contracts are negotiated along with the Executive, to get the benefit of economies of scale; our internal audit is seconded from Scottish Enterprise; and payroll is done in association with a number of public bodies, so that the expenditure is shared.

That brings us neatly to the subject of commissioners. Thank you for your efforts to monitor the budgets of commissioners. Why do you think an independent review is necessary following the discussions that you were asked to have with the commissioners and what do you think the remit of that would be?

It just seemed sensible to get somebody from outside to come and examine them all. In dealing with commissioners, one must recognise that they were set up to be independent. There is a lot of sensitivity around our being seen to be too directive, so it seemed sensible to get somebody such as the Auditor General to consider independently the possibilities for sharing services and, possibly, locations. That would be better coming from an independent person than from us directly.

We have discussed the matter directly with the office holders and the Auditor General has been approached. Audit Scotland is already undertaking a review of governance and it intends to extend the remit of that. We are discussing with Audit Scotland exactly how that will be done. Does that answer your question?

Partly. One can be a bit too sensitive about the level of independence, as it must be balanced with accountability and against financial controls, which are the prime interest of this committee. Did you ask the commissioners why they took the location decisions that they did? It is hard to understand why we have ended up with commissioners based in Edinburgh and St Andrews.

We asked them about that. One of the contributory factors is the fact that they have all come on stream at different times. They have all been given a job to do and sent off to do it, and they have had to make their own arrangements. We have learned as we have gone along. The fact that the bill for the most recent commissioner recognises that there might be merit in having some powers of direction in that regard reflects how, with hindsight, we might have done things differently. We will start from where we are and see what sensible rationalisation we can have.

Are you saying that there need to be greater powers of direction to avoid inappropriate choices being made by the commissioners on the back of their purely operational independence?

My starting point is that we must assume that we are all reasonable people.

That is a dangerous assumption.

It is a very Liberal Democrat statement.

Indeed. I do not think that there need to be powers in the bill for us to have influence. If we have a reasonable discussion about what is a sensible way for the commissioners to be based, we will get a reasonable outcome.

I do not think that you were personally involved at the time, so this might not be a fair question to ask you, but were not the commissioners asked about their locational choices?

Yes.

What response did they give?

They came up with a very reasonable explanation for why they are where they are.

What was that reasonable explanation?

Oh, gosh! I could give you chapter and verse. We have a whole screed written about why it was necessary for them to be in Edinburgh, why they needed to be close to the Parliament and so on. If we are talking about co-location, there were some perceived sensitivities about people who were in a sense regulating each other or who were seen as being too closely integrated, but those do not necessarily wash.

In practical terms, we should consider the commissioners' accommodation contracts, which are all different. I would like to take a closer look at the policy of dispersal and perhaps query a bit more strongly why people need to be in Edinburgh.

You said at the start that the commissioners had given some reasonable explanations about why they should be in Edinburgh, but now you seem to be saying—

I am saying that they made what seemed to them reasonable explanations. As we explore that further, I would challenge those explanations.

What is the process for arriving at the budgets for each of the commissioners, particularly in relation to factors such as staff numbers? The overwhelming majority of the running costs of the commissioner's offices will be staff costs. Do the commissioners put a proposition for staff numbers to the corporate body, on which the corporate body adjudicates?

I do not know whether "adjudicates" is the right word. The only major increase in staff has been for the information commissioner. We thought that his bid for more staff was reasonable, given the volume of work that has arisen from freedom of information requests.

I am looking at the situation for all the commissioners. I do not know what the staff numbers are for each commissioner, but does the corporate body consider in detail why it is appropriate that one commissioner should have five staff, another should have 10 and another should have 100? Is that the type of investigation the corporate body carries out? If so, how does it go about that exercise?

The corporate body starts with zero-base budgeting. It asks the commissioners to explain the job that they want to do, how they intend to do it and the resources that they need to do it. The budgets are derived from that information.

Has the corporate body on any occasion revised down staff estimates that have been made by a commissioner?

It has not done so in my time, which has been very short. I will need to consult my colleagues.

This is the first year that we have invited the commissioners together to submit bids. We had a face-to-face question and answer session—not dissimilar to this—with the commissioners. It is early days, but the short answer is that we have not revised estimates down.

The corporate body considered staffing carefully and, particularly in relation to the commissioner for children and young people, considered budgets such as that for publicity. The work of the two principal commissioners is very much casework driven and the corporate body challenged them vigorously on that. At the end of the day, the commissioners were able to demonstrate that they had a large amount of casework and that they needed their caseworkers. The corporate body focused more on what it might regard as discretionary expenditure around publicity and promotion, in which we feel that there is perhaps more latitude. Some of that is reflected in the Presiding Officer's letter. The corporate body has not said that the commissioners should have fewer staff; it was persuaded that the staff bids were reasonable, at least this year.

I understand that process, but I am a bit confused about why there is a need for the Auditor General to carry out an independent review. If the corporate body is satisfied with the staffing component in each of the commissioners' offices—which have relatively recently formulated their budget bids—why are we going to the Auditor General for an independent review? I am not against that, but either it is not necessary or the commissioners' budgets should not have been signed off by the corporate body.

We are asking the Auditor General to consider whether there might be opportunities for making savings, for example by sharing support services.

The point that I am driving at is that if the corporate body signs off the budget for the commissioners, I do not see what prevents the corporate body from advancing that argument with the commissioners. I understand the need to avoid intruding on the independence of the commissioners, but I am trying, from the perspective of the taxpayer, to find out who drives the budget decisions of the commissioners when they are making judgments about location, numbers of staff and so on. I would have thought that that was the job of the corporate body, but I am getting the sense that part of that scrutiny has been passed to the Auditor General.

We have looked at the commissioners' budgets for this year and have said that what they are proposing is reasonable in our eyes, but we also said that we are looking to see what can happen in the future. They may be able to work more efficiently. We asked the commissioners to consider their office locations and sharing of services as the committee asked us to do.

My concerns are similar to those of colleagues. At the moment, we have five commissioners and ombudspersons. Do you have any idea how many people are employed in their offices?

I do. I have the information somewhere in my papers. Can I come back on that question? The short answer is that there are quite a lot, but the staff numbers vary according to the nature of the job that the commissioners have been asked to do.

When we look at the figures—which I had not done previously because they had not been presented this way—we see that the cost of the commissioners and ombudsmen is about one third of the cost of the entire number of MSPs, their staff and constituency offices. That is quite a considerable amount of money for just five offices and it rings some alarm bells. Although people are more worried about our expenses than they are about those of the commissioners and ombudsmen, scrutiny needs to be brought to bear on the costs that are before us, which seem to need some sort of rationalisation.

Recently, I went to a presentation that one of the commissioners gave, at which I heard that 14 staff had recently started work in the office. It may just be me, but I do not recall that those sorts of costs were reflected in the financial memoranda of the bills that established the commissioners and ombudsmen. We have to be a bit more careful in future in our scrutiny of such legislation.

Staff numbers vary. One of the strongly put arguments of the commissioner for children and young people to the corporate body when challenged over her budget was that she was living within the financial memorandum as approved by Parliament. That was quite difficult.

I return to John Swinney's point, which is a fair one. The only way in which I can explain the situation is that—as things stand and for better or worse—all the commissioners and ombudsmen are running as independent organisations. On that basis, their budgets are not unreasonable. Prompted by the Finance Committee and reflecting its own concerns, the corporate body has said that it is sure that there are options for sharing of support services.

The corporate body is not set up as civil service departments are with a great sponsorship arm; we have a couple of people only. We were not set up to sponsor commissioners. I have done that job myself in the past so I know that it is resource intensive. There is also the issue of the independence of the commissioners and ombudsmen and the corporate body's lack of a power of direction. We decided to bring in some expertise to look at the situation in the round.

On John Swinney's point, the corporate body is not trying to absolve itself of its responsibility—it wants to help. We have some ideas about what is and what is not reasonable in terms of pressing for shared support services. We are saying that the place from where we are starting is okay, but also that there is an opportunity to do better. I hope that the committee does not think that we are being inconsistent in saying those two things. Audit Scotland has offered to help us in this process.

I will pursue the point about the corporate body's having no powers of direction. I understand why it is right for the corporate body or other institutions not to have powers of direction that would allow them to tell any of the commissioners to do this or do that. The corporate body has an obligation to approve the commissioners' budgets, however. What is to stop a commissioner from saying, "I want £10 million for my budget"? Obviously, the corporate body would say no. Implicit in the situation is the need for a certain power of direction, although we may not want to call it that. Whatever it is called, it is certainly an approval mechanism.

A couple of colleagues have raised points about office location. Why was a stiffer line not taken with the individual commissioners? Why were they not asked to look at more cost-effective locations? The location of an office has diddly-squat to do with the independence of an individual commissioner, but it may represent better value for money for the taxpayer.

I agree; the commissioners would probably also agree. We will have to resolve the issue through discussion and influence, because we do not have the statutory powers to direct. If anything, the Finance Committee has statutory powers that we as the corporate body do not have. Our responsibility is to act as a conduit, so to speak, to challenge the commissioners on their budgets and to ensure that what they propose is reasonable. We do not have sanctions such as the Finance Committee has.

I do not think that we have such statutory powers or sanctions, although we might have a sanction in deciding whether to recommend the budget.

Two issues are involved. It seems to me that the corporate body has gone about as far as it thinks it can go in highlighting expenditure that it considers is not justified on the basis of its information on the commissioner for children and young people's budget. To be honest, the caveat in the Presiding Officer's letter to us is quite serious. That is one issue.

When no track record exists, it is difficult to demonstrate whether a budget is or is not overambitious. After the commissioner has been in post for a year and has demonstrated the capacity to utilise the budget, it will be much easier to challenge it.

I understand that, but the idea that a commissioner should in effect nominate their own budget is absolutely unacceptable. The process that has been put in place involves the budget coming through the corporate body. You have scrutinised the budgets of the three commissioners and you are saying, in a sense, that you can argue that the justifications or explanations that have been given are adequate for two of them. However, you seem to be saying that your position is not so secure with respect to one commissioner, which seems to me to be quite serious. A difficulty for the Finance Committee is what it should do if that is the case. Should we agree not to recommend the budget if it is not justified? Perhaps my colleagues and I will have to consider that.

A further issue arises from my letter and what John Swinney and Elaine Murray have said. Should there be explicit powers of direction in the legislation that covers the commissioners, such that it would—I presume—protect their independence but would nonetheless require appropriate accountability to Parliament not only for budgets, but on other issues such as staffing matters and the extent to which they or Parliament control the development of their remit? It seems to me that there is an issue to do with the legislation. Perhaps inadequate controls have been put in place to allow appropriate direction where that is necessary, while protecting the independence of the commissioners from inappropriate direction. Perhaps we need to reflect further on that—I would be happy to try to facilitate that reflection. There is a short-term issue for us with the budget.

I think that you are right, but we must remember that the commissioners' interrelationships are in their early days. They were set up separately and in slightly different ways, and perhaps there is an argument for trying to be as prudent as we can be in the interim. Perhaps we could revisit the matter and find out what rationalisation there can be when there is more of a track record and we have more experience of how things work.

With respect, I am not sure that I accept the argument that we should simply wait and see.

I am not saying that we should wait and see—I am saying that, in a sense, a track record is needed in order to make a judgment.

I do not agree. The corporate body has asked the commissioners to come up with a zero-based budget, so even its approach is not based on a track-record type of system. We have asked you in your budget and in considering the commissioners' budgets to carry out a fundamental review of whether they have proposed justified expenditure. If there are issues relating to whether expenditure can be justified, the Finance Committee must consider them.

I agree. However, we strongly challenged the commissioner for children and young people in particular about what she thought she needed to deliver her function and she strongly defended what she thought she could do and the money she required to do that. We have no evidence to suggest that her proposals are overambitious. After a year, once we can see assess capacity, we will be in a far better position to judge matters and we will be able to say whether she needed a budget of that size. However, we do not have evidence at the moment.

Perhaps we should move on. Elaine Murray has a question about the Holyrood project.

My question is on settlement of the final accounts for completion of the Holyrood project. Why have only 24 accounts been submitted of the 30 that were due? When will the remaining accounts be settled?

Things are progressing more or less as expected. Paul Grice will be able to say more.

It is a complex process. There has been a step change by Bovis, which has legal responsibility to submit the accounts. Bovis recently put a new person in charge—his responsibilities extend to Scotland and the north of England—and he is now driving the process. I have been pleased to see a step change in results, as accounts are now actually coming through.

The process is very detailed. Each account can have hundreds—sometimes thousands—of accompanying documents. The issue is that we need to press Bovis to settle the accounts but not to settle them so fast that we do not get the desired outcome because, ultimately, what really matters is financial settlement of those accounts. I want the accounts to be finalised expeditiously because I want to finish that work. On the other hand, a balance must be struck, so I need to give Bovis time to do its job properly.

We have been promised that we will have the remaining six accounts. Moreover, I expect to have at least another dozen accounts settled by Christmas, so we have an ambitious programme for driving the process forward. In anticipation of my appearance before the committee today, I met the Bovis director last week so that I would be able to give an update. He has undertaken not just to catch up on the backlog but to press forward on the other remaining accounts. I will have another face-to-face meeting with him before Christmas to review progress.

Progress is still slower than I would have liked—I will be honest with you—but I have seen encouraging signs in the past two or three months. It is significant that the accounts that are flowing through are coming in under the estimated final cost. That is, of course, the ultimate test.

Do you expect the six remaining accounts to be settled by Christmas?

Altogether, I expect to have another 18 accounts—those six remaining accounts plus another 12—by Christmas. That is the programme that Bovis undertook to deliver at our meeting last week. I hope to be able to report that Bovis has done that.

I notice that, in one or two cases, problems with paperwork have obviously delayed signing off of a final account. However, for one account, the report states:

"Company no longer exists; new owners will not respond to request in terms of to whom final account should be addressed to."

Just as a matter of interest, what happens under such circumstances?

That is a good question. The report that has been provided to the committee is an unadulterated version of what I get, so it includes all the annotations that have been made by our project team. I apologise if we have given too much detail, but I wanted the committee to understand the process. Ultimately, if we cannot find someone to whom we can pay the money, we will return the money to the consolidated fund.

So we still have that money—it has not been paid to Bovis.

Yes. The money sits with us. That is not the worst problem to have, but the amounts of money involved are modest. I am not sure—Derek Croll is our expert—but I suppose that there will come a point at which we will have exhausted due process and, if we cannot find someone to whom we should pay the final retention, the money will be netted off. I doubt that that will change the fundamental picture—regrettably—but every little helps. However, we obviously have a responsibility to pay moneys that are owed. If we can find the proper organisation, we have a legal obligation to pay the money. Obviously—to be serious about the issue—we are making efforts to find whether a company exists to which we should make the payment. If we do not find such a company, we will return the money to the consolidated fund.

That adds another point of intrigue about the contents of the consolidated fund, which has occupied our attention for some time.

Pursuing the line of questioning that Elaine Murray started, I want to ask about the three payments to O'Rourke Scotland Ltd for which the invoices were

"Returned … due to standard of supporting paperwork."

Was that the first occasion on which the invoices were presented?

The issue is not so much the invoice—we have a particular format for that. We are talking about thousands of pieces of paper and documents. A process of negotiation takes place. It is the job of project managers on the project team to say whether the paperwork is in order, although I must be careful not to absolve Bovis of its legal responsibilities; throughout the project, it has been a challenge not to take over Bovis's role, which would be inappropriate under the contractual arrangement. The process of going through the paperwork involves many iterations and the information that the committee has is just a snapshot. I did not redact the comments in order to allow members to see and understand what happens. The process sometimes goes on for days or weeks until I can be assured that the paperwork is sufficiently well documented or in the right order.

How long has that process been going on in relation to O'Rourke Scotland?

I cannot tell you that because the matter is handled at project management level, but I could find out for you.

I would be grateful for that. I am interested in the matter because it strikes me that the concreting work was a pretty early part of the project—it is not work on the colour of the emulsion, if I can be so technical. I am surprised that debates and discussions continue about signing off such contracts so far into the process. The concreting must have been finished years ago.

Yes, although, in some ways, that is maybe one of the issues. We need to get all the paperwork in the right order so that we can follow change requests through to authorisation and so on. The process is complex. Obviously, I do not see the great bundle of paperwork, so rather than say any more in general terms, I can let you have a specific note on the O'Rourke contracts to explain how long the process has been going on and perhaps to shed a bit more light on exactly how it works.

I ask because section 5.1 of the proforma contract that Bovis issued to trade contractors states:

"The Trade Contractor shall submit to the Construction Manager within 30 Working Days after Practical Completion of the Project"

the request for payment. The concreting work finished literally years ago.

Practical completion of the project was earlier this year.

Right.

We have had debates about the date for practical completion, which is something that the architects certify.

When was that date?

I think it was in February this year.

I have a short follow-up question on the bills that are still unsettled for the Holyrood project. Are we expected to pay interest on them?

No.

Nora Radcliffe described as "prudent" the increase in the contingency fund from about £600,000 to £1.5 million. Schedule 3 states that the reason for the increase is

"to meet unexpected new cost pressures."

We could do with more information on that. Also, in 2007-08, we will bump up the contingency by another £1 million, which is explained as being to allow for higher winding-up allowances following the general election. It might be interesting to know how many MSP departures you are budgeting for, but my real question is why we are pushing up the contingency fund so much.

Part of the reason is that the previous year's contingency was artificially depressed for various reasons that I will ask the technical experts to explain. The figure of 2.5 per cent of the budget is a reasonable level for a contingency fund. The advantage of having such a fund is that it takes speculative bids out of the ordinary budget. We have considered what we might want to do and what might come up or events that we cannot account for; then, we have arrived at a figure that is slightly less than we think the total might be over the year and asked for that as a contingency.

You have included elsewhere a 10 per cent increase in property costs, and running cost increases have been covered. I am struggling to think of a prudent reason for pushing up the figure by almost £1 million.

The contingency fund allows us to consider projects that we may or may not wish to go ahead with and to pick up on things like unexpected litigation. We take all those unknowns out of the ordinary budget and put them into the contingency. We might want to do something different with visitor services. That is not budgeted for because we have not decided that we are going to do it, but the contingency gives us the opportunity to do it next year if we want to. If we have an unexpected run of early retirements, we can also pick that up out of the contingency.

As an accountant, I hanker for a balance sheet as well as the financial reports. How much are the current depreciation reserve and the contingency reserve? On the notional interest, what outstanding debt is that interest servicing?

The depreciation and notional interest charges are very much a factor of the Holyrood building. Depreciation is charged on the costs of the building. For the bulk of the building, depreciation is charged at 2 per cent per annum because the building will be depreciated over 50 years. Plant and machinery such as lifts and heating and ventilation systems have various asset lives of between 10 and 25 years.

The notional interest charge is part of Government accounting. It is designed to be equivalent to a shareholder return and it is purely a factor of the assets on the balance sheet. It is based on the average of the opening and closing balances and is charged at 3.5 per cent.

Do you agree that it would be appropriate to report the balance sheet valuation to the Finance Committee so that we can understand what is happening year on year?

We could certainly publish accounts. The resource account is published every year and the current year's accounts will be available at the end of November or beginning of December.

What is the explanation for the variation in notional interest?

It has come down since the 2005-06 budget principally because the valuation of the Holyrood building is slightly lower than we forecast and the asset lives of some plant and machinery are slightly longer than we forecast so the depreciation rates are a bit lower.

You said that the contingency exists as a fund for unexpected projects. As I understand it, the Scottish Civic Forum applied to the corporate body for funding. Is that the kind of project you mean? What would have been the cost impact and the budget impact of agreeing that funding?

That is the sort of thing that might be considered, but we had to consider whether that is appropriate expenditure for the corporate body. I think that the decision was that it was not appropriate for the corporate body to fund that particular project.

Had the corporate body approved that funding, it would have been in a budget line and not in the contingency. The matter was considered some time ago, so the decision was made in plenty of time for proposing the budget. Had the corporate body taken a different view, the expenditure would have featured in the budget as a specific budget line.

The contingency has to cover everything, including things that arise in the middle of the year. It contains a lot of notional items but, obviously, it is intended to cover things that are not predicted. It contains some things that we think might happen although, obviously, not everything that we think might happen is included. It is not good practice to put everything in the contingency, so there is a risk-based assessment. The project that Mark Ballard mentioned does not feature in the contingency because of the view that the corporate body took on it. If the position changes, funding will have to be found from the contingency.

The notes on the SPCB budget submission state, on page 3, that the budget proposal from the commissioner for children and young people mentions an amount of money for participation. Given the financial difficulties that the Scottish Civic Forum is facing, are the corporate body or the commissioners and ombudsman likely to face any additional costs for participation in work that was carried out on their behalf by the Scottish Civic Forum?

They did one or two bits of work for the Parliament, but I think we paid for that. Parliament has a budget for participation and a lot of work is done through committees, the Gaelic office and the education service, all of which are budgeted for separately.

There are no further questions, so I thank the witnesses for coming along and contributing to our budget discussions.