Finance Committee

Meeting date: Wednesday, November 16, 2011

Official Report 411KB pdf

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Draft Budget Scrutiny 2012-13

Item 3 is evidence on the Scottish Parliamentary Corporate Body’s draft budget for 2012-13. I welcome Liam McArthur MSP, Paul Grice, chief executive, and Derek Croll, who are here on behalf of the SPCB. I invite Liam McArthur to make a short opening statement.

Good morning, colleagues. It is a pleasure to have the opportunity to present the details of the corporate body’s budget for 2012-13 and our indicative plans for the following years. It goes without saying that the corporate body is aware that we are operating in an extremely difficult fiscal environment. We are well aware that we must strive as hard as anyone else to justify every pound that is spent. With your indulgence, convener, I will preface my remarks on the specifics of the budget with some background to our approach.

I refer the committee to the letter from the Presiding Officer and the chart on the first page of our budget submission. The chart shows the planned reductions in the SPCB’s budget over the four-year period of the United Kingdom’s comprehensive spending review, of which we advised the Finance Committee at this time last year. I pay tribute to the members of the corporate body in the previous session of Parliament, who did much of the essential groundwork and made some very difficult decisions to set us in the right direction. I am pleased to say that, after one year, we remain firmly on track to deliver the programme of savings that have been identified and that, by the end of 2012-13, we will have achieved a 12.2 per cent real-terms reduction in the corporate body’s budget. That means that we will have delivered almost all of the four-year percentage savings target for the overall Scottish budget in just half of that time.

The profile of our annual budget reductions shown in the chart is considerably steeper in the first two years of the CSR than the profile of reductions in the overall Scottish budget, as we will deliver our savings early. It levels off in the remaining two years, although it still shows a further modest real-terms saving in each of the final two years, finishing at a cumulative real-terms reduction of 13.4 per cent.

The savings have been achieved through a combination of a freeze in pay for staff members of the Scottish parliamentary service, a freeze in MSPs’ pay and expenses, staff reductions and a change management programme that has covered every aspect of the Parliament’s operations. We are confident that the planned programme of recurring annual savings will enable us to continue to meet our key service requirements. However, it is important to recognise, first, that the high level of year-on-year reductions achieved in the first two years could not be sustained in the longer term without impacting on service levels; and, secondly, that the resource reductions will inevitably constrain our ability to respond quickly to changing requirements and to deal with unexpected cost pressures. The pay freezes, which extend to 31 March 2013, provide a high degree of certainty for the SPCB’s 2012-13 budget proposals, as they cover over 60 per cent of the SPCB’s total expenditure.

I will turn briefly to one or two specific issues, beginning with the external security facility. Committee members will be aware of the letter that the Presiding Officer issued yesterday on the decision to apply for planning permission to construct an external security facility. There is an on-going staged approach. Once the planning process and the detailed design have been completed, the corporate body will consider whether to tender for the construction of the facility. Subsequently, following the completion of any tender process, the corporate body will take a decision on whether to proceed with the construction. Those final decisions are likely to be taken in the latter part of 2012, and I hope to be able to say more on the matter when we give evidence to the committee on our 2013-14 budget submission at this time next year.

As the Finance Committee will already know, we received cross-party support last year for a proposal to freeze members’ pay and expenses at the current level until 31 March 2013. The budget has been set on that basis.

On the subject of office-bearers, the SPCB is charged, as members will know, with the oversight of the commissioners and the ombudsman. The Finance Committee has rightly taken a strong interest in how we exercise that oversight. The 2012-13 budget submissions of the various bodies amount to £8.2 million, which is 2.6 per cent lower in cash terms than the equivalent 2011-12 budget, and is on track to achieve the same level of real-terms savings as the rest of the corporate body’s budget.

The SPCB is acutely aware of the fine balance that it needs to strike between robust scrutiny and the operational independence and statutory functions that those bodies were given when Parliament established them. I am grateful for the strong support that the Finance Committee has given us in recent years to adopt a robust approach in our scrutiny of those budget bids.

Finally, I would like to place on record the appreciation of the corporate body for the work done by the chief executive and his team in preparing the corporate body’s 2012-13 budget submission.

That concludes my opening remarks. I hope that I have conveyed a sense of the approach that we have taken to the overall budget for 2012-13 and the years to follow. My colleagues look forward to answering any specific questions that members may have.

Thank you for that opening statement. I will start by asking about capital expenditure. In schedule 2, the capital expenditure bid is £1.5 million in 2012-13, with an indicative figure of £2.313 million in 2013-14. However, no information is given on what is contained within that budget line, and no explanation is given of the indicative increase in 2013-14. Could you give us some more information?

The £1.5 million capital project budget allows us a degree of flexibility to schedule individual projects. No expenditure is committed for this year or for 2013-14, for which a figure of £2.3 million is given in the budget. Projects that could fall under that budget heading include information technology refreshes, of which some have taken place over recent years. For good and sensible reasons, including issues that members raised, there has been a pause in some of that work. Nevertheless, we will have to return to the subject in the next financial year and possibly the one after.

Further to yesterday’s letter from the Presiding Officer on the external security facility, I repeat that it would be prudent for us to retain some flexibility, depending on future decisions, to allow for costs that may arise to be met. I am confident that we will be able to do that.

It is indicated that there is planned expenditure of £685,000 for maintenance in the next financial year compared with only £75,000 in this financial year, but there is no explanation of what that extra money will be spent on. Will you provide us with some details of that?

The percentage rise looks quite incongruous against the overall trend in the budget, but it is worth bearing in mind a couple of points. The budget of £75,000 for the current year is much lower than the trend over recent years, which largely reflects priorities in the months following an election, in which the focus is very much on supporting new members and members who are returning in a different capacity to settle in. There is therefore a reduction in the amount of attention that can be given to other aspects of facilities management. I think that I am right in saying that the budget for the previous year was around £400,000, which is more in line with the £685,000 that you are seeing in the budget under consideration here.

It is also worth bearing in mind that, as the Parliament building ages, there is likely to be a general upward trend in the maintenance budget, reflecting the wear and tear of a building used as much as the Parliament, which is likely to require more on-going maintenance. The maintenance budget covers works that have been on-going for some time and which have perhaps been put a little in abeyance following the recent election.

In effect, much of the increase is delayed maintenance from this year rather than a huge upsurge in the requirement to spend money in that area.

Yes. We would certainly not want to put a halt to that on-going work for any longer than is strictly necessary. The cost could spike considerably if routine maintenance was put off for more than a year or so. Getting back on to that trend is very much the sensible approach and that is what we are seeking to do.

There is an increase of 131.9 per cent in next year’s budget for other projects. Those projects are broken down in schedule 3, but there is no separate budget line for corporate events, as there is at the moment. Do corporate events form part of the budget for other projects?

I will invite Paul Grice to comment on the details. The other projects include some of the building maintenance projects I referred to.

For a period, we identified events separately. However, we feel that events have stabilised now, so they have been built into the mainstream budget. I am talking about the more corporate events such as business in the Parliament and the festival of politics. There will be a reduction in spend on those events of around 10 per cent in real terms.

For the purposes of transparency, the building maintenance projects are simply the more significant bits of building maintenance work that we would do. We felt that it was helpful to identify those separately from what you might call the routine maintenance. Again, there is essentially an internal competitive process in which we settle on exactly which projects to do. That process has yet to begin.

I will press you a wee bit more on planned expenditure, particularly for building maintenance. That could tie in with the reduced contingency amount, because I presume that, if something unexpected came up, you would look to the contingency. How confident are you that the figures are robust? On the one hand, there is a history of buildings not being properly maintained, which stores up problems for the future. On the other hand, if you have a cycle of replacing, say, part of the roof every five years, you might in the event not need to do that, so you could make savings. Do you have a detailed maintenance programme for how often gutters are cleaned and pieces are replaced, for example?

I will ask Paul Grice to reply to your second question.

You make a valid point about the temptation to put off expenditure, which applies particularly in the current circumstances. The risk is that by doing that we only end up increasing the outlay in subsequent years. I think that I am right in saying that we have a planned maintenance programme over 25 years. We remain in accordance with that planned expenditure. As the chief executive pointed out, some stand-alone projects have been pulled out for transparency. They are not predictable, but they are almost inevitable, so factoring them into the budget is a sensible precaution.

Having sat on the other side of the table to take evidence from ministers about their budgets, I think that our approach to the contingency is largely in line with the Government’s approach to many of its departmental budgets. There is pressure to minimise the contingency, but some headroom to deal with unexpected expenses is necessary. In recent times, one of the biggest asks on the contingency has been from the unpredictable election outcome—believe me when I say that I know that more than most. Nevertheless, what we project is very much in keeping with previous years.

I do not have too much to add, but I will answer John Mason’s second question directly. We have a robust 25-year maintenance plan, but you make a good point. I reassure you that we do not go ahead with an identified piece of maintenance if it does not need to be done. We predict the lifespan for major bits of plant and other equipment, to have a smooth maintenance programme and to avoid the problem of storing up trouble, which you identified. However, I assure you that, if we examine items and they are functioning well, we do not replace them just because that is in the plan. That is the balance that we try to strike.

We plan annually for financial purposes, but the process of reviewing what is in the plan and looking at available resources and what needs to be done is continuous, to achieve as far as possible a smooth maintenance profile over 25 years. I assure you that, if something did not need to be done, we would not do it, even if the budget was available. We would return that budget to the contingency or use it for another piece of work that required to be done.

Liam McArthur said that the approach to the contingency was comparable to that in Government departments. Is that okay given the surprises that we have had in this building? It has produced one or two surprises, so there could be more.

I am fairly confident about the matter. You are right to say that we have had to draw on the contingency. Such events are not necessarily predictable, but they are to an extent inevitable. That is why the contingency is there. Our track record shows that we have not really had to come back to request additional resources. That might be the best assurance that I can give you. We are adopting a similar approach for the future.

As a new member, I thank the chief executive and his staff for the support that they have given us.

Sook.

I fear a parliamentary motion.

Somebody else has already done that.

The transition after the election, when a lot of new members were elected, has been mentioned. The chief executive’s colleagues have done a great job.

I was going to ask about contingency funds, but the other issue that I am interested in is that annex B includes a table that shows the ombudsman and commissioners, their budgets and the cumulative position. Can you expand on the rationale behind the different levels of reduction across those budgets? Are there any particular factors that account for the differences?

11:15

I welcome your comments about the staff and the support that they provide. As a new member of the corporate body, I have gained some insight into the amount of work that goes on against a very challenging financial background and against the background of what was a challenging election outcome in terms of the number of new members. Your point is well made.

On the office-holders and the ombudsman, the figures may vary between different office-holders, but I am confident that the overall reduction that will be achieved across them all will be in keeping with what we set out to the Finance Committee in previous years. The budget reduction will be attained, even if the way in which it is done and the speed at which it is done vary between office-holders. That reflects the different circumstances that pertain to each of the commissioners and the ombudsman.

On the commitment to look at where there can be a level of restructuring, that is something of which the corporate body is seized. The corporate body is in fairly constant discussions with different commissioners about opportunities for them not only to deliver savings but to deliver an effective level of scrutiny and their statutory duties in a way that makes more sense. For example, in relation to the Commission for Ethical Standards in Public Life in Scotland, we will bring forward proposals in consultation with the Standards, Procedures and Public Appointments Committee and with ministers on how restructuring can be taken forward. Such proposals will be cognisant of the commissioners’ operational independence and statutory functions but will be intended to, among other things, deliver savings over the spending review period.

I do not know whether there are any specific points in relation to the budget but, looking at the list, I am certainly aware that there is variation—although not huge variation—in the figures. The best explanation of that is that, although the office-holders are all on track to deliver the overall levels of saving over the spending review period, the speed at which and the way in which they will arrive at that point will inevitably vary.

Can you confirm that the office-holders are engaged in discussions with you about how they can deliver the savings and that there is nothing that the Finance Committee needs to be aware of and should note at this point about the pressures that the process might place on particular office-bearers?

It is right that you raise that concern, which my fellow corporate body members and I have raised with officials, who are the ones in direct contact with the commissioners and their staff. There is no point trying to screw the commissioners to the floor to secure savings, if the result of that is that they are unable to carry out the functions that Parliament has set them up to carry out. I am very confident that that is not the case, but we will certainly continue to have that issue at the front of our minds as discussions continue.

The Standards, Procedures and Public Appointments Committee and Scottish ministers will have an input into some of the restructuring and, if there were any fears that what we were doing was likely to prejudice the operational independence and functioning of the commissioners, they would be the first to let us know.

Before I ask the witnesses a question, convener, I raise a concern with the committee about some comments that appeared in the papers at the weekend about our committee adviser. I am not sure whether you are aware of them. There was an article in which a spokesperson for John Swinney relayed views rejecting our committee adviser’s opinion. That being the case, would it be pertinent for you to write to John Swinney on behalf of the committee seeking an assurance that, when our adviser gives us advice that challenges him and his budget, that will not be dismissed? I just wanted to take the opportunity to flag that up.

In relation to—

Just a second. That is not relevant in any way to the business that the committee has before it.

Well, I have raised it. My reason for doing so is that I will now get into pointed questions with the SPCB.

In these times of austerity, with pay freezes across the board—not just for MSPs but throughout the public sector—was any consideration given to the additional £171,000 that is being offered up for additional ministers? Rather than give that increase, was it considered whether the money could come out of the existing ministerial budget? The budget includes £1,230,000 for ministerial salaries. How big an increase is that as a percentage of ministerial salaries?

We have heard about projects and capital programmes. Has consideration been given to providing money to create an Office for Budget Responsibility-style scrutiny body in the Parliament?

The structure of the Cabinet and ministerial positions is a matter for the Government. We are entirely comfortable that the changes can be accommodated within the budgets that have been set. The outcome of the election, which by any measure was fairly unpredictable, resulted in additional costs, such as winding-up allowances, as well as savings, such as a reduction in Short money. There are swings and roundabouts as a result of the outcome of the election. The structure of the Government is a matter for the First Minister and the Government; it is certainly not for the corporate body to pronounce on that. We are comfortable that the figures remain within the overall settlement. The trend that we are achieving is a pronounced reduction in the budget in the first two years of the spending review period and then modest reductions thereafter.

On your question about a scrutiny body, my understanding is that the Parliament has set up an office precisely to provide support to members in holding the Government and, indeed, the corporate body firmly to account. I was a member of the Finance Committee in the previous session of Parliament when an unusual alliance of me, Alex Neil and Derek Brownlee formed to press the case for such an office. I should also give Tom McCabe an honourable mention in dispatches. There was a consensus that the role needed to be performed more robustly. That was not simply because we had a change in Government, but because, after the first two sessions of Parliament, such a body was seen as a necessary support in rebalancing the debate between the Parliament and the Government in relation to budget scrutiny. I have been supportive of the efforts in recent years to put that in place. I hope that the issue that the member raises is now seen as being more adequately addressed than it was previously.

Ministerial and MSP salaries are two good examples of items in the corporate body’s budget that the corporate body accepts are decisions for for Parliament and then funds. Parliament ultimately decides on ministers and pay. The corporate body has historically—and quite understandably—not taken a policy view on the matter and it is important to see the salaries in that context. As Liam McArthur rightly pointed out, the corporate body simply accepts and deals with the outcome of elections.

With regard to the financial scrutiny unit, I simply reinforce Liam McArthur’s comments. Obviously, we are very pleased to have introduced the service but, over the coming years, we will work, particularly with the Finance Committee, on developing it. Given that the committee is the service’s principal customer, I hope that we can build on what we have started. I certainly see it as having a central function going forward.

Although, as you say, it is a decision for Parliament whether ministers get their pay rise, who sets ministerial salaries and the percentage that any rise should be?

Scottish ministers’ salaries are set with reference to UK ministers’ salaries. As for annual uplift, my understanding is that ministers have not taken their annual pay rise for at least the past two or three years. Obviously, that is a matter for them but, as I have said, the salary is set with reference to UK Government salaries.

It is the same with MSPs, whose salaries are pegged to MPs’ salaries. We might feel moved to take decisions on that in future, but the mechanism for MSPs’ and ministers’ salaries is fairly clear.

They might not have taken their annual uplift, but have they not devolved some of their responsibilities with the creation of other ministerial positions?

You could compare the current ministerial structure with that prior to the election, but I think that ministers, with some justification, would make a comparison with the previous Scottish Executive. Ministerial and departmental structures have evolved; in any case, it is a matter for the First Minister to take the lead on and Parliament to sanction. It is then up to the corporate body to make those decisions happen. It is always humbling to see the limits of your powers but, in this case, we have to respond to what Parliament decides.

My understanding is that, before the Parliament was established, the idea was for MSPs to have the same salaries as MPs. However, the Prime Minister of the day decided to set MSP salaries at 87.5 per cent of MP salaries. I also point out that there were 22 ministers in the first two Administrations compared with 16 in the previous Administration and 19 in the current one, and that the ministerial salary freeze has been in place for four years.

The subject that I wanted to raise has more or less been covered. Indeed, the more it has been discussed, the more I realise that I know where most of the bodies are buried and that I had better not say too much.

Even though members are in the middle of a two-year pay freeze and there has been a longer—and indeed continuing—ministerial pay freeze, some people might be surprised to find that the budget line for MSP pay is going up. Can you confirm that that rise has been caused entirely by the appointment of additional ministers; that that is a decision for the First Minister alone; and that the corporate body will follow that decision with the established salary levels?

As you say, this ground has been covered in earlier questions. It is not a matter for the corporate body, which simply responds to the decisions of Parliament. After all, the First Minister will decide how to structure the Government, but the Parliament still needs to sanction that decision. The corporate body is left to respond, which is what it has done.

11:30

Before I move on, I welcome the clarification that the Scottish Government compares well with the previous Scottish Executive and Westminster. I think that John Pentland got a wee bit mixed up talking about pay uplifts when we have a pay freeze that is expected to continue.

Given that we have focused on administration, I note that, with regard to MSP staff and office costs, the amount of Short money has been reduced from £562,000 to £439,000. Just as the SNP and the Government have increased, the Opposition has been somewhat reduced. Is the reduction in Short money entirely due to the lower number of Opposition MSPs?

Yes.

Thank you.

Earlier, we discussed certain audit issues and noted that audit fees are being increased by 2.6 per cent. However, Audit Scotland has planned for an average reduction of 7.75 per cent in fees across most sectors of audit. Why is there a wee bit of disparity in that respect?

That is a very interesting point. Our budget has been based on our expectation of audit fees. I do not think that, compared with previous years, what we will be asking Audit Scotland to do will vary to any extent in future years and we have built into the line an expectation of a modest increase in line with inflation. Nevertheless, given your comment about Audit Scotland, we would be very interested to discuss with that organisation any implications for the fees that we will incur for the work that we ask it to carry out. We will certainly use the opportunity of this exchange to go back to Audit Scotland for a response. The committee can rest assured that, in light of intentions with regard to overall fees, we will seek a reduction in the charges that we incur. For the time being, though, I simply repeat that the current figure in the budget is our best estimate of likely increases in line with inflation.

Thank you for answering the committee’s questions.

At the start of the meeting, we agreed to take items 4 and 5 in private.

11:32 Meeting continued in private until 11:46.