Budget Process 2009-10
Item 3 is consideration of the Scottish Parliamentary Corporate Body's budget bid for 2009-10. As committee members know, our main focus during the annual budget process is to scrutinise the Government's draft budget. However, the SPCB's budget is top sliced from the Scottish consolidated fund, so we scrutinise it and take account of it in our final report.
I welcome to the committee Tom McCabe MSP, in his role as portfolio member of the SPCB; Ian Leitch, director of resources and governance; and Derek Croll, head of financial resources. I invite Tom McCabe to make an opening statement.
Tom McCabe MSP (Scottish Parliamentary Corporate Body):
Thank you, convener. Good afternoon, everyone, and thank you for the opportunity to present details of the SPCB budget for 2009-10. With your indulgence, I will preface my remarks on the specifics of the budget by explaining what has driven our approach to it.
The SPCB is aware that, especially in these difficult times, every pound that it spends must be justified and should be put to the best possible use. We are determined that the Parliament should continuously examine what it spends the money on, and how. We are always aware that that money comes from the Scottish consolidated fund—as you rightly say, convener—and we take the approach that, wherever possible, we should minimise our call on that fund. In the recent past, we returned £1.5 million to the fund, which demonstrates our approach with actions, not just words.
Our total budget submission for 2009-10 is set out in the letter from the Presiding Officer and shows an increase of 2.5 per cent compared with the current year. However, the directly controllable costs, which best underline our approach, will increase by 1.9 per cent in 2009-10. That increase is significantly below the latest retail prices index, which stood at 5.0 per cent until this morning—I think that it is now 4.5 per cent. It is only right to acknowledge that current forecasts are for inflation to fall significantly during 2009. However, economic forecasting is hardly an exact science, especially in these challenging economic times.
In the information that we supplied to the committee, we have highlighted comparisons with the current year's budget. A significant feature of the proposed revenue budget is the £1.6 million that has been set aside for the recommended perimeter security improvements to the Parliament. As we explain in our letter, most of that expenditure—£1.3 million—was included in the SPCB's approved budget for 2008-09 and, therefore, does not represent additional funds required. However, because the Scottish budget is approved annually, the delay in incurring the project expenditure means that we must seek budgetary approval again for the financial year 2009-10. As we made clear last year, we have specific security advice that underpins our pursuit of that project. However, it is still a lot of money and, if the committee wishes, we would be happy to provide a private briefing on the security matters that lie behind the proposal.
We thank you for the statement and now—
I have not quite finished, convener.
I am sorry. I would hate to cramp your style.
Members will note that the SPCB's budget for 2009-10 includes provision for a new members' expenses scheme, which the Parliament approved on 12 June. The new scheme increased the amount that is provided for the employment of staff, as recommended by the independent review panel chaired by Sir Alan Langlands. We have made provision in this budget for the uprating of members' staff budgets.
I mentioned earlier the directly controllable costs, which equate to £46.6 million, or 45 per cent of the budget. As I said, we are determined to pursue opportunities to contain expenditure whenever we can. In that regard, since we last gave evidence to the committee, we have agreed to: closing the facility on Sundays, which frees up £250,000; savings of 2.5 per cent on staff costs, which equates to £590,000; and bringing tour guides in-house from October 2009, which will, over time, provide an on-going annual saving of around £30,000.
We have allowed for a £1.25 million contingency fund to cover unforeseen expenditure. Experience to date tells us that that is a reasonable approach.
Our proposed capital expenditure is £2.6 million, which is £0.8 million higher than last year. As members are aware, capital expenditure can vary significantly from year to year. The 2009-10 budget includes a planned technology refresh programme for desktop PCs and software, which was last undertaken in 2003. The estimated cost is £530,000.
As members are aware, the SPCB is charged with the oversight of commissioners and ombudsmen. The budget submissions of the various bodies now stand at £7.9 million, which equates to more than 10 per cent of the overall SPCB budget. The SPCB is acutely aware of the fine balance that it needs to strike between robust scrutiny and the operational independence that those bodies were given when Parliament established them. In that regard, I am grateful for the strong support that the Finance Committee has given us in recent years to help us to adopt a robust approach in our scrutiny of their budget bids.
As a result of the clear signals that were given to office-holders in the previous years' budget rounds, I am pleased to report that the budgeting process for the commissioners and ombudsmen has been relatively straightforward this year. The budget submissions from each of the office-holders were strongly justified and realistic. We can see a recognition that meeting agreed pay settlements and increments meant that non-staff costs had to be contained well below inflation. Overall, the proposed budget for the ombudsmen and commissioners shows an increase of 2.4 per cent.
Following the Crerar review, the Scottish Government is taking forward proposals to simplify the scrutiny landscape in Scotland's public sector. In conjunction with that, the Parliament has agreed to set up an ad hoc committee to consider the functions of office-holders falling within its remit. The SPCB will feed its views on the present structure and governance arrangements to that committee at the appropriate time and will be mindful of any costs involved.
I want to place on record the SPCB's appreciation for the work that was done by the chief executive and his team in preparing the SPCB's 2009-10 budget submission.
That concludes my remarks. I hope that I have managed to convey a sense of the approach that we are taking towards this budget and that we are conscious of the need for robust and continuing improvement. My colleagues and I will, of course, do our best to answer any questions that the committee might have.
As a member of the SPCB in the first session of the Parliament, I can understand the complexities of the matters that you describe. I thank you for the clarity of your presentation.
I welcome Mr McCabe back to the Finance Committee.
In the Sunday Herald, we read about the management report that members were not given any prior notice of. I believe that the report cost £23,000. Has the SPCB seen and discussed the report? If so, has it reached any conclusions on it? What are the financial implications of any recommendations in the management report? Why, in a Parliament that has, as its guiding principles, the notions of accessibility, transparency, accountability and openness, have members of the Parliament actively been denied access to a report that was about the Scottish parliamentary service?
The SPCB has discussed the report. The chief executive gave a full report to the SPCB. The report was made available in full to any members of the SPCB who wished to see it. I availed myself of that opportunity; I cannot say whether other members did likewise, but the facility was there.
On the financial implications, members are aware that any staff restructuring can have cost implications. The emphasis that lies behind the restructuring is not only to produce a more effective management team in the Parliament, but—this was not the driving force, but cost is always a consideration—to find ways in which we can rationalise costs and minimise our call on the consolidated fund. It is expected that, over time, costs will be recovered and there will be a net saving to the Parliament.
With regard to publication, I know that some members—including you, Mr Neil—have made requests to see the report, and have been given a summary of the report. In due course, the report will be made freely available to all members and to the general public. However, it is important to stress that we are dealing with people, and a negotiation process must take place. Such issues are always sensitive, and might impact on different individuals in different ways. It is important that the management team that is charged with the overall operational management is allowed to carry on its work in a way that is sensitive to people's needs and to the issues that can crop up in discussions of matters such as these. That is why the full report has not been made available at the moment.
It is important to stress that the consultants' report that has been mentioned is only one part of what lies behind the management restructuring and the corporate change programme. There are various components, such as the extensive members' needs survey that took place earlier this year. Around 100 of our 129 members took part in face-to-face interviews, which, as members know, is an extremely high response rate for any survey—I think that the rate would have been higher but for the summer recess.
The report is not a blueprint for the actions that will take place. It is a commentary on the management of the Parliament. It says some extremely positive things about the way in which the Parliament is managed, and casts the Parliament in a good light in comparison with similar establishments around the world. That said, it is important to state that by no means will the actions that are taken as part of the corporate change programme entirely mirror the recommendations in the consultants' report—it is not the sole driver of any action that will be taken.
The only part of the report that members have seen is the part that appeared in the Sunday Herald, which was the first place that members saw it. That is hardly the right way for the Parliament to do business with its own members.
Secondly, Tom McCabe said that the report will be made available in due course. Will he define "in due course"? Thirdly, I suggest that the report should be made available to members of the Finance Committee because it has a direct bearing on the corporate body's budget.
It is outrageous that the report has not been made available to all members. It would certainly be unacceptable if it was not made available to members of the Finance Committee before we are asked to approve the corporate body's budget.
I repeat that we are dealing with people and the issues can be sensitive. The definition of "in due course" is that the consultants' report will be made available, along with other elements that guided the corporate change plan, when the plan has been effected. The Finance Committee and others will be able to take a view on the actions that were taken and to set that against the recommendations or the commentary in the other pieces of work.
The SPCB is elected by the entire Parliament. The four individuals on the corporate body are elected to represent members' needs and are empowered with the responsibility to assist the corporate management team in its management of the establishment. To that extent, perhaps, members have to place a degree of trust in the people whom they elected, in the full knowledge that information will be made available in due course.
Part of our responsibility as the corporate body is to help our corporate management team, wherever we can, to do its job in the best interests of not only members of the Parliament, but the people of Scotland, who ultimately foot the bill.
Members should be consulted before the report's recommendations are implemented. The time to show members the report is not after its recommendations have been implemented, but before that.
Given the sensitivity of the matters that will be discussed and implemented—given that they include people's jobs and futures—I reiterate that it is difficult to do that in a wide arena. We cannot do such things by committee anyway, and I respectfully suggest that it would be nearly impossible to do them in a committee of 129. That is the reason behind the approach.
I can say to the committee only that there is nothing sinister here. I assure you that the corporate body will be vigilant in its pursuit of the publication of all information that is available at the appropriate time.
The "Other Projects" budget line increases by 40.5 per cent from £802,000 to £1.126 million. The briefing notes include a helpful breakdown of the costs; I am interested in the budget for business continuity, which is £362,000, and the budget for the human resources change programme, which is £343,000. Will you give us a bit more detail on those?
Mr Croll and Mr Leitch will do that, but in general, the business continuity project is a pretty important piece of work that tries to ensure that we are prepared for any major unseen events that could disrupt the workings of the Parliament. Given some of the things that we have experienced in the past, it is important to ensure that, should something render this place unoperational—that is not very good grammar, but I think you know what I mean—the Parliament would be able to continue to work effectively.
Perhaps Mr Croll will deal with the first budget that you mentioned and Mr Leitch will deal with the second.
Derek Croll (Scottish Parliament Directorate of Resources and Governance):
The budget for the business continuity programme has increased by £242,000 year on year. As Tom McCabe said, it is a programme to support the Parliament in the event of disruptive incidents. The reason for the big increase is that it is moving from the stage of scoping, consultancy and bringing plans together, which has been taking place this year, to the stage of implementing arrangements to protect the Parliament, which will take place next year. That will involve a lot of off-site facilities and infrastructure to support continued operations. That is the reason for the step change in the programme.
Ian Leitch (Scottish Parliament Directorate of Resources and Governance):
As members know, the HR change programme is intended to ensure that our personnel function is properly resourced and is oriented to meet the Parliament's requirements.
Particular emphasis has been placed on support to members. All members have had the offer of support on employment issues, training, contracts for staff and setting up proper legal machinery for operating the pooled arrangements that members have in their groupings. A large number of members have taken up the offer, so there has been considerable involvement from personnel staff. That has happened on an ad hoc basis but, taking account of the members' needs survey, we realise that that is a big area of support that members require.
The HR change project has involved additional matters, such as realigning decision making. For example, until recently, directors were the only people who could dismiss members of staff—not that that happens often; it is a very infrequent event. However, plainly, we are running a business—it might be a political business, but it is a business, so we had to realign decisions to the optimum level in the staff organisation. In conjunction with trade unions and senior managers, a realignment process has taken place to ensure that the managers of the business areas manage and control those areas. That is in line with the corporate change programme, which has also been mentioned, which aims to ensure that senior management has a more strategic focus. That is one thing that has happened.
The majority of the 2009-10 budget for the HR change programme—57 per cent—comprises staff costs of £194,000, which are associated with temporary posts that have been established to manage and work on the programme. We should bear in mind that, in addition to the changes, which involve policy changes and training for staff, the regular core business must continue. Therefore, there is a bulge in the costs for the period of the programme, which will run from 2007 to 2010. A further £100,000 of the budget is for part of the capital costs of the new HR system. We have an old system that does not produce the statistical data that managers need to manage the business effectively. That information is not readily available. The procurement of the new system will straddle the financial years 2009-10 and 2010-11.
I have a brief question on the balance sheet, which is in schedule 5 to the SPCB's budget submission. I understand that the figure is a snapshot but, at 31 March this year, the creditors figure was slightly more than £14 million, which is projected to go down to about £10 million. The note says that that includes retentions and accruals, but can we have a bit more information, even if it is broad, about the components of the debt to creditors?
The figure will come down from last year end to this year end principally because the Holyrood retentions are being unwound during this year. The final payments to contractors, which were accrued last year, have been paid and are out of the balance sheet. Beyond that, the figure stays fairly flat between 2008-09 and 2009-10.
I am still wondering why there is a figure of about £10 million.
About half of that is accruals—anything that is paid after the year end that was due in the previous year. For example, it includes expense claims that are received after 31 March and are accrued back to the previous financial year. Also, for the first time, we have incorporated an accrual for holiday entitlement, as the international financial reporting standards require that to be reflected in the balance sheet. The figure for that is about £1 million. There are also trade creditors, which is fairly standard, and an element for tax and national insurance, which are paid at the following month end. A further element is about £2.5 million that is, in effect, the offset of the cash—the consolidated fund is shown as a creditor, which is really just part of Government accounting.
That is helpful. Within that £10 million, there will be a small element for outstanding bills to normal traders. What are the broad terms of the Parliament's payments policy? In the current economic context, is the corporate body revising the policy with a view to making payments more quickly?
I can safely say that, from day 1, the current corporate body has put an emphasis on ensuring that we pay our creditors timeously and within the agreed time limits. The percentage of creditors that we pay within 30 days has increased significantly. From memory, it is now about 96 per cent, which is a significant increase on previous performance. The corporate body has made the point strongly to the management team that, especially when businesses could be under pressure, we in the public sector have an obligation to ensure that they receive their money timeously and that they are not put under undue pressure because they are waiting for it.
I am grateful for that. It is interesting to hear that the Parliament is performing better than the Scottish Government. To use Mr Neil's words, it would be a scandal if that were not the case.
The submission states that the corporate body has "exercised considerable pressure" to restrict its budget, which
"has required difficult choices to be made".
Can you give us an idea of what those difficult choices were?
I referred to some of them in my opening remarks. There was a strong and lengthy debate over closing the facility on Sundays. We felt that the empirical evidence strongly justified that move, which saved £0.25 million, which is a fair amount of money in anybody's terms. We also examined the way in which we manage the filling of vacancies and the overall number of staff that we employ, which has shrunk slightly. That has produced a £590,000 saving. That is never easy—it is always easier just to carry on as usual. It would be nice to employ everyone if we could, but we are not in the business of doing that. Such measures are never easy, but they have generated meaningful savings.
The changes to the Parliament tours will, over time, save money. Some people were pretty content with the existing system, so it would have been easy simply to continue with the contract. However, we examined the contract and decided to make the change, not because we wanted to expand the internal empire, but because we could continue to provide a good service at a lower cost.
You have made those difficult choices, but the events budget has gone up by almost 33 per cent and you are going to review specific proposals for 2009-10. Why is there such a large increase in that budget?
There may be several reasons for that. One of the pressing ones is the demand from members. As members know, the Parliament can become very busy some evenings. If you want to go to a particular event, you sometimes have to seek it out because so much is going on. That reflects the fact that corporate Scotland, the third sector and members are excited about the Parliament and see it as an attractive place. People want to come to the Scottish Parliament and they see merit in holding events here, rather than somewhere else. However, that produces pressures. We are perhaps approaching capacity and we will have to think about the way in which events are scheduled in the future. Some thought has already been given to that. One of the biggest drivers of the increase is, in short, that the Parliament is a popular place and is becoming more so. We see that as a good thing rather than a bad thing, but it must be managed.
I draw the session to a close. I thank our witnesses—Tom McCabe, Ian Leitch and Derek Croll—for their evidence.
We will have a short suspension to allow our next set of witnesses to arrive.
Meeting suspended.
On resuming—