Official Report 213KB pdf
“The 2008/09 audit of Registers of Scotland”
Agenda item 2 is on the section 22 report, "The 2008/09 audit of Registers of Scotland." With us for this item, we have Sheenagh Adams, who is the keeper at Registers of Scotland; Andy Smith, the accountable officer and the deputy keeper; and John Clark, the chief accountant at Registers of Scotland.
No, convener. We have submitted our written evidence to the committee.
In that case, we will move straight to questions.
I know that Registers of Scotland is the only organisation in Scotland that operates as a trading fund. How did that come about? In practical terms, how does it affect how you conduct your business?
We have been a trading fund since 1996. I was not in my post when the decision was made, but the general principle is that trading funds are created for parts of Government that it has been decided will be entirely self-financing. It was thought that that would be the appropriate model for Registers of Scotland, because we can generate sufficient income from the fees that we charge for the registration activities that we carry out and the information provision that we make from the registers that we hold.
Is there any practical benefit to you in operating as a trading fund?
There is a range of practical benefits. For example, we are not covered by issues of annuality, which means that we are able to plan our expenditure over a longer period. Further, our income is dependent on the cycles in the property market, and being a trading fund enables us to plan over the length of those cycles, which means that income and expenditure can be matched over a period of time. That means that Scottish ministers can provide fee stability for the people who are transacting in property in Scotland.
If you were reliant solely on annual central funding from the Government, how would that affect your business?
Among other things, the fees would have to go up and down depending on the income that we received. Obviously, we might also be a drain on the public purse in the years in which we could not secure sufficient income.
Does the Scottish Government have any say in the amount of reserves that you build up? Can it put a cap on them, or is that for your organisation to decide?
The role of Scottish ministers, as set out in our framework document, is to set the fees that we are able to charge, which impacts on the level of income that we are able to put aside to cover the years in which we have lower income. Scottish ministers also set a financial target for me, as keeper, which is the return on capital employed target.
In what way does Registers of Scotland formally account to the Scottish Government for its financial performance?
We submit our annual accounts to the Scottish Parliament. Our accounts do not form part of the Scottish Government's budgets or accounts.
We are not part of the consolidation. We do not ask for any funds from the Scottish Government; we simply produce our annual published accounts, which are audited by auditors appointed by Audit Scotland and are available on the internet.
I am interested in how the surplus has been built up. The surplus grew from £5.7 million in 1999-2000 to £122.5 million at the end of 2008-09. Can you give us an overview of how that surplus built up?
I should start by explaining that that is not a surplus. Those figures are for the reserves that we hold, which are made up of a mixture of cash, our buildings, our information technology systems and money that has been paid upfront for the work that we have yet to do.
You indicated that, in some of the earlier years, you ended up with more income than expenditure and that, in effect, that money was reinvested. How did you do that? In 2004-05, there was a surplus of £21.6 million. What was your approach to deciding how to redeploy that sum?
In 2006, we undertook the fee review because we were keen for Scottish ministers to restructure and lower our fees. The intention was that we would run a deficit in future years to reduce the level of reserves. In addition, some of the money has gone into investing in new systems to improve our efficiency, although we have been taking efficiency seriously for many years.
You say that some of the money has gone into investment in new systems, and I think you mentioned buildings earlier. Where is that recorded in the balance sheet? Is it recorded against fixed assets or new current assets?
It would be recorded against fixed assets.
Over a 10-year period, the income and expenditure account has grown by more than £100 million but the fixed assets have grown by only just over £15 million, from £15.5 million to £32.3 million. How do you explain that?
The reserve figure that you are looking at is in fact the accumulated profits or losses that we have made since becoming a trading fund. If we make a profit at the end of the year, it is put on to the balance sheet in that reserve figure. The balance of that figure is made up of the composition of the rest of the balance sheet. Everything has to square.
I understand that part of it; I am just trying to get a feel for the figures. For example, in 2007-08, the income and expenditure account is £127.1 million, but you indicated earlier that that money is being reinvested in IT, buildings and other activities. I am trying to get a feel for what the money is being reinvested in and how that is represented on the balance sheet.
Apart from fixed assets, the largest figure you will see there is cash, at the top half of the balance sheet and at the bottom half.
Net assets.
Most of it is in cash.
In that case, is it correct to say that most of that money is, in effect, being held in cash as opposed to being reinvested in assets?
Yes.
What was your approach to business planning as that cash surplus was building up? How did you view how that was going to pan out? Did you begin to take a view on what you should be doing with the cash surplus?
That relates back to the fee review. When the reserves had reached a level that would be more than sufficient for our business needs, a fee review was undertaken and reduced fees were introduced to benefit people who were transacting in property. The intention was that that would reduce our income by around 26 to 30 per cent year on year, which would reduce the cash reserves to the level that we thought was prudent for the business. That was in 2006-07. The reserves increased again between 2006-07 and 2007-08, and we had been looking again at doing a further fee review to pass on the benefit of our increased reserves to the house-buying public. However, at that stage the recession hit and our forecast showed that our cash balances would fall considerably, by more than had been planned as a result of the new fees introduced by Scottish ministers.
What are your business plan and assumptions, for example over the next five years? You are sitting at a surplus in excess of £120 million. You have reduced the fees and you expect the surplus to come down. How do you expect it to pan out over the next five years?
In our current forecast, in the most up-to-date version of our reserves policy, we would expect our reserves to fall to £38 million in 2014.
Your plan for deficits covers the next five years—up to 2014, as you just said. As a trading fund that is set up to be commercial and businesslike, obviously you have to be prudent in planning ahead. However, a total deficit of £86 million is projected over five years. Why will there be deficits for a full five-year period? Will the flatlining in the property market affect you to that extent?
There was always an intention for there to be a deficit over the next five years. Scottish ministers were aware of that in the financial targets that they would set for us, because that was the impact of the fee review. Obviously, we have done scenario planning on how we think the property market will perform. We take advice and look at the views of the Council of Mortgage Lenders, the Royal Institution of Chartered Surveyors and the Law Society of Scotland in that regard. We do our best to project what will happen. It is not for us to forecast the property market, but to apply our understanding of the market and the information that we get from other commentators to the scenarios that we prepare for our corporate plan.
Other commentators have given you an idea that you may well face the projected level of deficit, which seems quite high.
There were mixed views from commentators. In general, however, people expect a slow and steady recovery in the number of transactions that are taking place. At the end of the day, people still have to move—they change jobs, sell property on the death of a parent and so on—so there will be a slow increase in the volume of transactions. However, there appears to be no prospect of recovery to any extent in the remortgaging market, and house prices have remained much lower than they have been. Our understanding is that there will not be a boom as there has been in previous years. We are taking a cautious approach, but we review the position regularly. We are well into preparing our 2010 to 2015 corporate plan and, as I said in our written submission, we review our reserves quarterly with the board and look at our finances monthly.
So you plan to delay some previously planned investments over the next few years. Can you give us an idea of which investments you will go ahead with and which ones you plan to delay?
Certainly. On the investments that we will go ahead with, we have recently launched our automated registration of title to land system. We will continue to progress that and roll it out to encourage greater use of the system. We are replacing our internal IT systems, which are nearly 15 years old, with more efficient and robust systems. Those are the sort of investments that will continue.
Are there any planned delays? Are you thinking about delaying the subsidy for the extension of the land register?
On the IT side, we are not going ahead with an e-human resources system and we will not replace our telephony system, which is getting quite creaky. On land register extension, there was an expectation that we would put resources into that because of the level of our reserves. However, we will not be able to do that. In any event, we think that it is for Scottish ministers to take a view on how quickly they would like to see the land register extended towards completion; it has been on the go now for 30 years. Obviously, the sasine register is a lot older than that. However, as I said, it is really a matter for Scottish ministers as they consider the policy aspects of land registration.
Have you attempted to project beyond the five years what impact the deficits will have on future market prospects?
We have looked at the five years of the corporate plan, which will be carried forward to 2015. It would not be particularly sensible at the moment to try to predict beyond that, given the volatility that there has been over each quarter of the year. We are managing and looking at the situation quarterly. We are keeping up to date and projecting forward five years, rather than looking way ahead, because we think that such figures would probably not come to pass.
On that basis, have you considered whether the investments that can be delayed at the moment will necessarily be required in the longer term? Might some of them not need to be introduced in the first place?
We had looked to acquire an additional building when the property market was still booming, but we have put that on hold and we see no prospect of it going ahead. That is one investment that has just been parked with no plans to revisit it.
You say that the acquisition of a new building was being considered when the property market was booming but has been put on hold. Given the organisation's reserves, would it not make more sense to consider buying a new building now when the property market is in the doldrums?
We do not think that we need the extra space now. The building would have been acquired on the basis that our staff numbers were likely to expand, but the recession has meant that we have controlled our staff numbers and managed them very tightly. We own Meadowbank house, which is a good-value building, and we have no plans to acquire others. We will look at the other property that we lease such as our Edinburgh customer service centre, which is in a leased building in the centre of town. We will look at whether that provides the best value for money and whether investing a bit more in Meadowbank house would allow us to move our customer service centre both to improve the service that we provide and to provide savings.
Once we come through the recession and the property market picks up, will an expansion in staff numbers be required? If so, are the existing facilities capable of coping with any future increase in staffing levels?
On staff numbers, we are currently doing twice the amount of work that we did 10 years ago with only 20 per cent more staff. Obviously, the investment that we are making in systems to move to electronic registration is designed to reduce the need for additional staff. All that I can say is that we are managing these things and considering the situation regularly. As I said, we are trying to manage staff numbers to ensure that we have the right numbers of staff. Our staff are quite expensive because of the training that they require for the complex work that we do, so we are keen to retain our experienced qualified staff and to make good use of their skills.
James Kelly referred to the cash reserves. Where are those reserves held?
When we became a trading fund, the first thing that we were allowed to do was to open an interest-bearing account at paymaster so that we would gain interest on our bank balances.
Sorry, what is paymaster?
I mean our central Government account.
So the bulk of the cash reserves is held in secure facilities.
Oh yes. The reserves are not held anywhere other than in the national loans fund.
Many of my questions were answered by your submission, so thank you very much for that. However, the issue of dividends remains a wee bit of a mystery to me, so I would appreciate some help with that. I understand that the organisation was set up with about £4 million of Government money—it is called public dividend capital—that has been repaid over a number of years with payments totalling some £33 million. How does that scheme work? Are those payments at an end or will they continue annually?
As you said, when the trading fund was set up, something like £4.4 million was invested in it by the then secretary of state; that was transferred over to Scottish ministers' ownership after devolution. Because we were a trading fund, we had to pay a dividend not on that capital, but on the actual capital sum that was employed within the Registers of Scotland trading fund. The figure that would be paid as dividend could be £7 million or £8 million a year—that money was not held in Scotland, but was returned to the Treasury.
Is that payment scheme at an end or will such payments recur year on year if there are substantial reserves?
We paid back the £4.4 million capital sum that Scottish ministers had invested in the trading fund, so we no longer had to pay the dividend to the Treasury. That means that Scottish ministers can keep fees at current levels. Even though the current recession has been very bad, we have not had to ask Scottish ministers to increase fees. Other countries have not been so fortunate. For example, in England and Wales a 30 per cent fee increase has been required over the past year and we understand that our opposite numbers in the Netherlands have had two fee increases.
All your income is accrued from activities that are undertaken entirely in Scotland, but the dividend is repaid straight back to the United Kingdom Treasury. That is interesting. I know that that is outwith your control, but I am interested in finding out more about money that is being raised in Scotland and transferred back to London.
We seek to be an efficient and effective organisation, so to that extent the way in which we seek to do our business would continue. Obviously, it would be for Scottish ministers and the Scottish Parliament to make changes to the legislation. One of the impacts would be on our ability to even out our income and expenditure over time, so there would be much more fluctuation in fees; obviously, that would impact on people transacting in property in Scotland, because the fees would have to go up and down to reflect our income.
I presume that you would envisage more frequent review points for what the fees should be. The review of fees seemed to come out of the blue—it was not clear that a review point was imminent—perhaps because the reserves were seen to be particularly high. Is that the case, or are fees reviewed annually to ensure that they are brought into line?
We are committed in our corporate plan to doing fee reviews every second year. That does not mean that the fees will change every second year; it means only that we will do a review. In 2006-07, we reviewed the registration fees and in 2008-09 we reviewed our information fees. In the future, we plan to do fee reviews of all fees in the round. We have kicked off another registration fee review as part of that cycle. My colleagues in finance would expect to report to the ROS board on the matter as part of the current corporate planning arrangements.
If, as a result of the recession and so on, the reserves were to dwindle down to almost zero and you had to draw on resources, where would those resources come from? Would they come back from the UK Government or would they come from the Scottish Government?
Our only option would be to ask the Scottish ministers for a loan. There is no legislative provision for Scottish ministers to give us a grant or anything like that. We would have to get a loan, and it would be for Scottish ministers to set the terms on which any loan had to be repaid.
So the Scottish Government would pick up the tab, but the UK Government picks up the profits.
Yes.
Convener, may I—
Sorry, but may I clarify that that is no longer the case?
It would be. My colleagues will correct me if I am wrong, but my understanding is that if Scottish ministers were to give us a loan, the loan repayments would come back to Scottish ministers. However, that would trigger our having to pay a dividend again, not only on the money that was being invested but on the whole of the capital that was being employed in the trading fund. I understand that the current legislation would require that dividend to move out of the Scottish budget back to Westminster.
That is the hypothetical situation, but you would not be in that situation for some time, given your financial position.
We would hope never to be in that position, but we would have to see whether the Scottish ministers wanted to give us a loan or whether they wanted to raise the fees. There would be discussions about how best to move forward. However, at the moment our best assessment is that we will weather this deep recession and come out of it in 2014 with reserves that will enable us to cover any indemnity payments and go some way towards helping us out of any future recession if there were one—that is obviously not something that I could predict.
Can you tell us a bit more about the fees reduction? How significant was it? What was the average fee before you made the change, and what is the average fee now?
On an average property sale with a mortgage, after the fee review, the saving to the house buyer would be in the region of £100 on a fee of around £400. The registration fees are based on the value of the property.
So, for the average house sale, how much was the fee before the change, and how much was it after?
I estimate that the fee would have been in the region of £400 for a property to be registered along with accompanying standard security, and that it dropped to around £300.
Okay. Thank you. Cathie Craigie has a question.
Convener, you have pursued the line of questioning that I wanted to follow. However, I have another question to ask, unless Murdo Fraser wants to ask his questions now.
I want to move on to something else.
Why was the PDC repaid in full in April?
When the Scottish Government asked us to repay it, it asked whether that would have any adverse effects on our reserves. We said no and that we were in a position to pay it back, and we paid it back.
Do you know why the Government asked for it to be repaid at that time?
That is a matter for the Scottish Government.
I also have a question on the public dividend capital repayment. Were you aware at the time that that meant that the £33 million in dividends that you had paid previously would come to an end?
Yes.
Was the Scottish Government aware of that?
Yes.
Was that part of the discussion around the decision that you would repay the £4.3 million?
We were asked to repay it; we were also asked what we would be able to do with the resources that that would leave us with—the money that would have gone out otherwise. We told the Scottish ministers that we would look at fees and come back to them with a recommendation that we may be able to reduce the registration fees further. However, as I said, the recession hit before we were able to do that. Had we still been paying that dividend, our financial position would be worse than it is at the moment.
I am interested only in the dividend repayments, not the fees issue, and the fact that, in the future, there would be a barrier to any payment of dividends to the Government as a result of the repayment of the £4.3 million. Did you welcome that? Is that something on which your organisation had a view at that time?
That is not a matter for me to take a view on. We were asked to repay the capital that was invested and we did so because that was not going to have an adverse impact on our reserves. Not having to pay dividends has helped our position in the current deep recession, and we would have been able to reduce fees had the recession not hit.
Can I press you on that? If the Government offered to make a new public dividend capital investment so that the mechanism of paying dividends could be triggered again, would you co-operate with and welcome that?
It would be for Scottish ministers to consider whether they wanted to invest in the trading fund. I would have to check the legal position to determine whether it would be appropriate for Scottish ministers to put money into a fund that did not need it, as opposed to making a loan when it was—
That is what I am asking. Would you welcome that, and would that be—
I do not think that it is a question of my welcoming or not welcoming it. I would have to check the legal position. I can do that and get back to you if that would be helpful.
That would be very helpful. Thank you.
I presume that, from the Scottish ministers' perspective, the advantage of the situation that developed was, first, that it enabled you to reduce your fees because you did not have to pay the dividend and, secondly, that it generated a capital sum that ministers could use for other purposes.
Yes, that is correct. We were unable to reduce the fees further at that point because of the recession.
Does the fact that the money was paid back alter the way in which dividends may be paid in future? Will you be able to pay dividends in future?
There is no requirement to pay dividends because ministers no longer have capital invested in the trading fund.
So there is no requirement to pay dividends to either the Treasury or the Scottish Government.
That is correct.
How do the fees that you charge compare with those in the rest of the UK? You mentioned that fees in other parts of the UK have increased by 30 per cent, and said that the £400 figure for typical transaction costs is going down to £300. What are the comparable fees for an average transaction of a similar scale in other parts of the UK?
Before the fee review in 2007, traditionally the fees in Scotland were higher than those in other parts of the UK. That reflects the fact that the Scottish land register is at a different stage. We have had a map-based land register with a state guarantee attached to it only since the Land Registration (Scotland) Act 1979 was brought into force, whereas in England and Wales, such a register has been in operation since the 1920s. The fee review in 2007 brought the Scottish fees more into line, but the position varies. We can provide the detail of that if you want it.
You suggested that the fees were broadly similar after the fee review in 2007. Our fees in Scotland are remaining static or are perhaps reducing further, whereas the fees in England and Wales have gone up by 30 per cent. That is the figure that you quoted.
Yes.
On the face of it, there should be a 30 per cent variance.
Yes, but it will depend on how the fees have been applied. The systems in Scotland and England are different in terms of things such as discharges—
But just on average?
I will find that information for you if that would be helpful.
Thank you.
Good morning. I should say by way of introduction that I was a property lawyer in a previous life, so I have had more than my fair share of dealings with Registers of Scotland over the years—although they were mostly positive, if that reassures you.
I will make two points to give some background to the situation. First, the staff costs to which you refer are published information from our corporate plan, which was put together about a year ago. Since then, the Registers of Scotland board has discussed our future corporate plan, and we now have staff costs that show a decline over the five-year period.
So you are not paying people to sit and do nothing.
Absolutely not.
Earlier, there was a discussion about trying to predict when the market might recover and what the level of transactions might be in the future. Can you give me a flavour of how you are trying to assess the right level of staff complement and overall operating costs—IT investment, for example—by matching those costs to likely levels of activity and fee income?
With regard to on-going costs, on the IT front, we are looking for anything that will give us a return in terms of efficiency. We would consider the business case of any project of that type.
When I asked you my first question about the projected operating costs, which, according to the figures that we have, were expected to peak at £75 million by 2010, you indicated that you were looking at those costs again. Is that figure of £75 million still applicable or do you believe that it will be reduced?
I believe that that figure will be reduced. Once we have completed the corporate planning process for the next five years, we will say exactly where that sits.
Are we being told that we are not operating on the correct figures this morning?
No. The figures that we have given you are the published figures from our corporate plan. We are currently working on the corporate plan for 2010 to 2015, and the figures for that are emerging. As Mr Smith said, we expect those figures to reduce as a result of the actions that we are taking. For example, in our registration directorate, we are working with around 90 per cent of the staff that we had budgeted for. That means that we expect the staffing costs for 2010-11 to be around £43 million.
When will we be able to see your revised figures?
The corporate plan is due to be published in March, before the new financial year.
Apart from the figures that you have mentioned, will there be other significant differences?
We will be considering IT costs; the move to the international financial reporting standards system will change the figures as well, because of the way in which we will be required to account for some of them. Obviously, we will send you a copy of our corporate plan at that time.
Earlier, you spoke about investing in your staff and said that, because of the specialised nature of the work, you were keen to retain them. When it comes to setting salaries for the top staff in your organisation, who determines that? Are you bound by civil service rules or does your board set the levels?
The board has no role to play in setting salaries. We are civil servants and our salaries are set by the rules that are made by Scottish ministers. The three of us who are present before you today and the other deputy keeper are all members of the senior civil service, and our salaries are set by the Scottish Government's decisions on senior civil servant salaries. The salaries of the other staff members are agreed with Scottish ministers under the rules that they set.
Who decides on the annual performance bonus? Your line manager?
That is also set within the rules that are agreed with Scottish ministers. We have moved away from performance-related pay in its traditional sense to consider different options for rewarding performance, such as the awarding of smaller, in-year amounts. That is all accounted for in the split between ordinary salaries and performance-related pay that is agreed within the framework that is set by Scottish ministers.
In your move away from performance-related pay, you have an annual salary, but you also have an annual bonus—
There are no annual bonuses. We have moved away from that. This was the last year of that system.
Other than the salary, then, there are no additional payments. Is that correct?
There can be small in-year payments. If a member of staff has produced a particularly good piece of work and, for example, a customer has commented on how well they have performed, they might get a small token of appreciation, such as a voucher or a box of chocolates under our people@RoS strategy or our values and practice scheme. That rewards them instantly instead of giving them a very small bonus at the end of the financial year.
I assume that the Morrison's along the road does good business.
Obviously, we follow proper procurement procedures.
Which means you probably end up paying twice the market value for the chocolates.
As I said, the pay of those of us who are senior civil servants is worked out on the same basis as that of senior civil servants across the Scottish Government. Obviously, there is an opportunity for performance-related pay. Bonuses have never been a feature of civil service pay, but there has been performance-related pay. That is set by the Scottish Government, and we have no control over that, either as managers or as part of the Registers of Scotland board.
The figures that we have been provided with show that the IT costs range from £13.8 million in 2009-10 to £7.6 million in 2013-14. I am not looking for precise figures, but how does that split between capital and revenue?
The costs that you have been given are on the income and expenditure account, so they relate to running costs.
I do not quite understand. How much of the £13.8 million in 2009-10 relates to capital and how much relates to revenue?
There is no capital within that. That is purely running costs.
If it is purely running costs, what is it made up of?
It is made up of support costs—the costs of having our IT provider support our old system and introduce new systems. It is a service charge as opposed to the capital charge, which comes on to a balance sheet.
Are there any consultancy fees in that?
No.
So it is just a one-off £13.8 million.
It is a payment to one supplier—BT—for a 10-year contract, which we are halfway through at the moment.
That seems like quite a long time to have a contract. When did the contract start?
It started in December 2004. Before then, we dealt with approximately 20 different IT suppliers. We decided, because we were due to refresh our IT systems and completely replace our desktop, that it was a good idea to have one supplier as that would be more efficient. After the due procurement process and so on, we employed the services of BT.
I take it that there was a tendering process in 2004.
Yes.
Without going through all the nuts and bolts of it, what were the main points in the tendering process? How did you establish that BT was giving you the best deal?
A specification was drawn up covering what we required to be delivered and that was put out to tender. We then assessed which provider would offer the best value for money.
On what basis did you decide that it would be best to have a 10-year contract?
I cannot recollect the exact reason for that. I can only surmise that it was to give stability, because there was a programme of work to be completed and we wanted to have certainty and stability so that we could build up a relationship with the supplier.
I was not in the Registers of Scotland when the contract was let. Our position was different then, but I have been told by colleagues that there was obviously going to be a high level of investment in systems that would take several years to develop—for example because we were only the second country in the world to have an automated registration of title to land system. That is not something that you can buy off the shelf; it has to be developed to suit the Scottish legal system. I think that 10 years was felt to be a sensible period because such a major level of investment was involved and because very new technology was being brought in on the mapping side as well as on the IT platform side.
I have no other questions, convener, but I note that a 10-year contract seems a bit unusual, particularly for IT.
I will stick with that issue for a moment. Throughout the UK, IT projects in the public sector have been fraught with problems over the years, with costs escalating beyond control. For an organisation of your size, £13.8 million per year seems a very large sum of money for your IT needs. I presume that you have your own staff working on computers in the building.
We do not have our own staff working on the systems although staff obviously use the desktop. We have a small IT department whose role is to be the intelligent client by helping to specify our systems and manage the contract with BT. We are a major user of IT in the Scottish public sector. In respect of mapping, we are the major map user and we hold well over a million titles on the register. We deal with more than 500,000 registration applications each year and several million information requests, so we are very big users of IT.
Okay.
I am trying to understand the figures that we have before us today from your corporate plan and those for your overall income and operating costs. Am I right to say that your operating expenses in 2008-09 were around £66 million?
That is correct.
Am I also right to say that, according to your corporate plan, your operating expenses this year have gone up to more than £74 million?
That is right.
So there is a double-digit increase in your expenses when your income has come down substantially. Can you explain that?
As I have said, those planned figures—they are forecast figures—were drawn up a year ago and things have changed over the year. For example, we update—
Sorry—you are saying that they were drawn up a year ago, but the document was published in March.
The figures were compiled last December.
But published in March.
Yes.
Okay. You compile the figures in December each year, so you will be able to give us the figures for this year imminently.
In draft, yes.
That is very helpful. However, the economic crisis was very much upon us last December, so I would be interested to hear your explanation of the double-digit increase in your costs.
The biggest of the planned figures for 2009-10, which was staff costs, was £45 million.
You planned an increase from £66 million to £74 million.
Yes, and the largest figure was staff costs. As has been said, we are running a complement of below the planned number of full-time equivalents.
Why did you plan that?
It was based on our estimate of how the property market was going to perform and the level of intakes that we expected at that time.
Let us be clear. In December last year, you expected a significant increase in staff costs based on your view of the property market. Is that what you have just told me?
No, I do not think that that is what I have just told you. A lot of the work that we are doing is work that we already have in the building. We have quite a lot of first registrations and transfers of part that we do not deal with on the day they come in because they take quite a long time to progress. For example, we cannot do a lot of the work on transfers of part until the Ordnance Survey has gone out and mapped the area. There is a time lag. So, we have a considerable amount of work that staff are working on and we have a target of moving towards a position where we have no casework that is older than six months. The staff who are working on that are fully employed.
What do you expect them to be?
We expected the staffing expenditure figure, for example, to be around £45 million, but the outturn this year is now expected to be around £42 million as a result of the actions that we have taken to control staff numbers and not to expand in areas where we thought that we might have to expand.
Do you have an overall outturn figure that we could compare to the estimate that was published in March? The published figure in your corporate plan was £74,226,000. Can you give us a current estimated figure?
Yes. As I said, we update the in-year figures quarterly. The latest quarter covers the six months to the end of September, and we estimated our overall operating costs to be £72 million, not £74 million.
So, instead of a 12 per cent increase, there has been a 10 per cent increase in operating costs over the past year. Is that correct?
Yes.
And you believe that to be justified in the current economic climate, given the level of activity in your organisation.
Not all our costs are completely variable—a lot of them are fixed and we cannot do anything about them. I agree with what you are saying. In an ideal world—
The costs last year were £66 million and you expect that, this year, they will be something over £72 million—is that correct?
There has been a large increase in our IT costs, but the figure that you have been given of £13.8 million will turn out at just below £13 million.
I am just trying to understand the figures. You expected an overall cost figure of £75,359,000 for 2010-11. Can you tell us your current estimate of that figure, in December 2009?
It is £69 million.
Okay. Thanks very much.
I thank our witnesses for their contributions this morning. It is a long way from welfare rights in Glasgow to keeper of the Registers of Scotland, Sheenagh.
And to convener of the Public Audit Committee.
Yes. It was nice to see you again. Thank you very much.
Next
Section 23 Report