Transport (Scotland) Bill: Financial Memorandum
The third item on our agenda is consideration of the financial memorandum to the Transport (Scotland) Bill, which was introduced by Nicol Stephen on 27 October. As I said on 9 November, because of the delay in publication of the efficient government plan, we cancelled the meeting that we had planned for 16 November. No doubt that was welcomed by members, but the cost of that is that we will have a lengthy meeting today. We will take evidence from bodies that will be affected by the Transport (Scotland) Bill, and from the Executive.
To help us in scrutinising the bill, I welcome from the Convention of Scottish Local Authorities Councillor Andrew Burns, who is transport spokesman for the City of Edinburgh Council, and James Fowlie, who is COSLA's policy manager. We also have representatives of Strathclyde Passenger Transport: Dr Malcolm Reed is the director general of the Strathclyde Passenger Transport Executive; Valerie Davidson is head of SPT's financial services; and Hilary Howatt is its policy development manager.
Members have submissions from SPT, ScottishPower plc, Highlands and Islands strategic transport partnership, Stagecoach Scotland Ltd, the Confederation of British Industry Scotland, Cable and Wireless, the National Joint Utilities Group and north-east Scotland transport partnership. We also have late submissions from Susiephone Ltd, Lothian Buses plc, Scottish Water Ltd, west of Scotland transport partnership and the Convention of Scottish Local Authorities. Those were sent out yesterday and last Friday.
Dr Malcolm Reed (Strathclyde Passenger Transport Executive):
Thank you for your introduction. We very much welcome the opportunity to speak to the committee and to elaborate some of our concerns about the bill and its financial memorandum. Of all the public authorities that will be affected by the Transport (Scotland) Bill, SPT is the one that is in the firing line, both generally and financially.
As the convener said, the committee has our written evidence, so we will be happy to answer questions. I start, however, by apologising for an error in appendix A to our memorandum, which is on page 23 of the papers that members have before them. Perhaps because of wishful thinking, the legend on the vertical axis of the bar graph has been inflated. It should read "£thousand" rather than "£million", for which I apologise. If it will help, we will be happy to submit a corrected version of the graph.
I will summarise some of the key issues behind our written submission. First, SPT considers that the financial arrangements that the Scottish Executive proposes for future regional transport delivery in Scotland fall far short of what will be required to achieve the bill's stated objectives. That comment applies at two levels. At the macro level, the Scottish Executive's own research has demonstrated that transport is significantly underfunded in Scotland in comparison with good practice elsewhere. In addition, at the more detailed level, the funding mechanism that the Executive proposes to put in place to support regional transport partnerships' revenue and capital expenditure does not seem to be fit for purpose. The capital and revenue funding proposals appear to reflect a lack of awareness of the realities of local government finance and of the economics of the public transport sector. The likely consequence is that, even within the limitations of planned local government spending, transport will not be able to secure the financial support that the Executive assumes will be available to support the policies of the transport white paper.
Secondly, we feel that the financial memorandum understates the direct cost of the Transport (Scotland) Bill's provisions and fails to explain how local government will be funded for the extra burdens that will pass to it after the short period of transitional Scottish Executive support. In our view, the additional transitional and on-going costs will represent a significant diversion of resources from front-line service delivery.
Thirdly, we do not feel that the white paper and the bill have paid sufficient attention to the other opportunity costs of the proposals. SPT is the only regional transport delivery organisation, and the current consultation envisages that the west of Scotland will probably remain unique in having both direct service delivery and transport planning administered at regional level. Consequently, SPT will have to manage a complex transition process while continuing to deliver public transport services and projects that affect 42 per cent of Scotland's population. That will inevitably result in competing demands being made on financial and human resources and could threaten the implementation of key projects in the current programme.
The committee will be aware that the Scottish Executive now proposes to implement its plans for a national transport agency without introducing primary legislation. In our policy evidence, we point out that all the white paper's objectives for transport partnerships and regional delivery could likewise be achieved under existing legislation, thus avoiding all the transitional costs and the substantial delivery risks that are associated with the current proposals. As a consequence, we find it difficult to see how those aspects of the bill's provisions could satisfy any objective best-value test.
We feel that the financial memorandum is inadequate, so we ask the Finance Committee to take account of our specific concerns in that respect and, perhaps, to seek further clarification from the Scottish Executive. In addition, SPT considers that the financial case has not been made for the sections of the bill that deal with regional structures, and that fundability issues and the broader economic context have not been properly addressed. We do not feel that there has been a rigorous appraisal of the full costs of that part of the proposals or a demonstration of any tangible additional benefits that could not have been secured under existing legislation. In short, options have not been fully evaluated. That seems to be a strange omission in view of the Scottish Executive's commitment to transparency and evidence-based policy making.
We hope that when the Finance Committee makes its recommendations on the Transport (Scotland) Bill, it will consider that the financial and economic justifications for the proposal warrant further scrutiny.
Thank you. I invite Councillor Andrew Burns to make an opening statement on behalf of COSLA.
Councillor Andrew Burns (Convention of Scottish Local Authorities):
I add my thanks to the committee for allowing us to give evidence this morning. We welcome the general principles of the bill. We agree that there is a need to set up the regional transport partnerships and we are grateful for the shift and growth in funding in the general transport budget; in particular, we are grateful for the shift away from road building towards public transport provision. By 2006, some 70 per cent of the transport budget will be within the ambit of public transport provision.
We welcome the general tenets of the bill and the general thrust to establish regional partnerships, but we share some of the concerns that SPT expressed. Before I mention those, I add that we feel that we are in a catch-22 situation because the consultation on establishment of regional transport partnerships is on-going and will not finish until the third week of January. All the comments that we have made in our submission, and those that I will make this morning, must be taken in that context. We do not know the final structure of the RTPs—we will not know that until early next year, so I stress that caveat.
I will not go into all the details unless I am questioned on them but, from our reading of the financial memorandum, we feel that about one year's worth of Executive transitional funding for the establishment of regional transport partnerships is too limited. Some of the points that SPT made in its evidence are repeated in ours; for example, we believe strongly that there must be a longer lead-in period. COSLA argues that transitional funding must, as a minimum, be available for the current three-year spending round, until April 2008.
We accept that regional transport partnerships are the way forward; there is no question but that they will result in significant changes to regional delivery of transport and to local government delivery of transport infrastructure and provision. However, it will take much more than one year to work through the financial requirements that will be imposed by the changes, especially on the local authorities that will make up the RTPs.
In summary, we welcome strongly the general principles of the bill, the establishment of RTPs and the shift and growth in funding, but we have concerns about transitional funding and the period for which it will be available. We urge the committee to consider carefully that period and whether—as we argue—such funding should be available for at least three years until the end of the current spending round in April 2008.
I am interested in concessionary travel. Reports that I receive suggest that the phantom passenger is the biggest problem that the transport industry in Scotland faces; companies are making a killing and augmenting their income from local authorities by saying that passengers who do not exist are using the scheme. Do you support the introduction of smart cards for senior citizens, and others who receive concessionary travel, as being the only sensible and controllable way of preventing the fraud that is currently taking place?
There is an issue about phantom passengers. SPT backs up evidence from operators with on-board surveys and we cross-check the claims that are made. There is certainly a perceived problem.
I agree that smart cards are probably the way forward, but no transport organisation in Britain—including Transport for London—has been able to make a business case for their introduction; external funding has always been required. If we want accountability and proper allocation of revenue through a concessionary fares scheme, smart cards are probably the only technical answer, but their introduction would cost a lot of money in addition to what is already being spent on the concessionary scheme.
What is your answer to the problem? It is all right to sweep the matter aside and to say that smart cards are not the answer, but what would you be comfortable with? Do you favour inspections and spot checks? All over the country, there are empty buses running for which local authorities are paying.
I declare an interest in that I will become eligible for the concessionary fares scheme tomorrow.
We will send you an application form.
We can go as far as possible with spot checks, but ultimately there must be a method of checking every journey. In that respect, there may be a difference of philosophy. Although I understand the benefits of the scheme, I do not think that the cost in loss of data and records of transaction that resulted from the move to the scheme was taken fully into account. That cost must be weighed in the balance as being part of the downside of moving to a completely free scheme.
While I was reading the evidence, I became increasingly concerned not about the policy intentions but about the amount of consultation on the financial memorandum and the uncertainty that surrounds the bill. That said, SPT did not comment specifically on whether it was consulted on the financial memorandum. How much consultation was there?
As with other bills that we have considered, the cost of the proposed legislation will be dependent on guidance and secondary legislation, which we have not seen and on which we cannot comment. Indeed, much of the written evidence suggests that no one can comment on the costs because no one knows what they will be. How much did the Executive consult, particularly organisations such as SPT and other voluntary regional partnerships that have experience of the regional transport planning function?
We have been having general financial discussions with the Scottish Executive since the consultation process began, but we were not specifically consulted on the financial memorandum—we certainly had no input in respect of the values that are set out in the memorandum. My colleague Valerie Davidson can detail some of our concerns about the amounts, which we think have been understated. In fact, we think that there has been a complete omission from the memorandum.
Valerie Davidson (Strathclyde Passenger Transport):
SPT is concerned that the level of financial information in the memorandum is very thin and very difficult to get behind, principally because secondary legislation will be used and we do not know exactly what the orders will say.
I want to concentrate on one or two specifics in the memorandum. First, £1 million has been highlighted as a transitional cost for one year only. Given that level of detail and the workings of a transport organisation such as SPT—which is already a regional transport body—the costs will be very difficult for local authorities to subsume beyond year 1. We probably share that concern with the Convention of Scottish Local Authorities. The amount that is currently spent on transport via the local government mechanism makes it very difficult for us to argue the case for transport when we are, in effect, in competition with education, social work and other areas. As a result, it will be difficult for us to ask local authorities to contribute an additional £1 million without their receiving any additional funding. I seriously doubt that that money will come through into transport.
Although the financial memorandum says that £1 million will be made available for transitional staffing costs for SPT, it does not contain enough information for us to assess how that figure has been calculated. The Executive might be talking about simply transferring rail power staff, of which SPT has only a small number. However, those staff are supported by a raft of services that cover policy, financial, legal and other matters, which appear not to have been taken account of. When one goes down into the bill's detail, it is not clear what costs the proposed move would generate. I am concerned that the bill will cost more to implement than is suggested.
Our submission also highlights a concern that has been expressed by other voluntary partnerships, to the effect that the cost of RTPs has been significantly understated. Moreover, we feel that one aspect has been completely omitted from the financial memorandum. Paragraphs 19 and 20 on page 22 of SPT's submission focus on section 43, which seeks to amend the provisions of the Transport (Scotland) Act 2001. Those powers, which we estimate will cost about £440,000 per annum, do not appear to have been taken account of and are not referred to at all in the memorandum. Those costs may be somewhere in the detail, but we cannot identify them. What prompts our concerns about the level of detail is the fact that it is not possible to identify whether all the costs have been taken account of.
I am concerned about the following statement in your written submission:
"The revenue funding received by SPT from its contributing councils has increased by no more than 2.5% per annum since 1998".
I do not know whether that is a real-terms increase or whether the figure includes inflation. We understand that local government is expected to make a significant number of efficiency savings in the coming period and that the budget for local authorities seems to be less generous than for other parts of Scottish Executive spend.
After local government reorganisation, the areas in which councils were expected to come together were often picked off first. That is because, when the screws are turned on councils, they tend to look at the services that they provide for their own populations rather than their contribution to the greater good. I am concerned that councils might, if local government has to find efficiency savings over the next three years, be reluctant to make the contribution to the wider aspects of the regional transport authorities, which may not benefit their indigenous populations directly.
That was known as the Argyll and Bute question to people who were on Strathclyde Regional Council.
Paragraph 144 of the explanatory notes talks about costs on local authorities. It states:
"The Transport Partnerships will be encouraged, where practical, to maximise the benefit of shared services utilising, where appropriate, re-charge facilities. A Transport Partnership, for example, might utilise the legal services of one or more of its constituent local authorities rather than maintaining its own in-house service."
Do you anticipate that, rather than be replicated in every local authority area, some services will be pooled for greater efficiency?
That is another area in which we feel the financial memorandum has not drilled down deep enough. That paragraph fails to take account of the fact that what is proposed is, for most parts of Scotland, an entirely new function. What is proposed is not the transfer of an existing function, but the creation of a new regional transport planning function. Because that function will be carried out by bodies that have a separate statutory locus, they will have to be sure that the advice that they get and the services that they require are sufficient to support that activity. As the service does not exist anywhere in local government except in the SPT area, it will have to be created and will, therefore, impose an additional resource requirement on local government. Although it may be possible for partnerships to draw services from the constituent councils on an agency basis, the councils will nevertheless have to provide additional resources.
When we started SPT after reorganisation, we tried to create a fairly lean structure; however, we found quickly that we could not rely on council provision for certain specialisms and services, first, because they were not priorities in their own service plans and secondly, because there could be conflicts of interest such as arose, for example, in relation to property issues. Whatever the intent is and whatever recharging basis is adopted for supporting the activities of the regional transport partnerships, within a short time most regional transport partnerships will likely find that they require to provide a good number of the services at their own hand, simply in order to discharge their statutory duties.
Does COSLA have any comment on the opportunities for pooling services?
I accept that there are chances for pooling resources. I speak from my experience of the City of Edinburgh Council's establishment of Transport Initiatives Edinburgh Ltd, which is now known as TIE. We have pooled and utilised resources from the City of Edinburgh Council. However, I concur with what Malcolm Reed said about the need for specialised resources for specialised projects, which cannot be pooled from individual local authorities. TIE has had to establish a legal support system that is wholly separate from that of the City of Edinburgh Council.
We did not want, and would rather have avoided, such duplication, but the nature of the projects in which the arm's-length organisations and the RTPs might be involved is such that it is almost impossible to pool certain types of resources. I am sure that there is potential for making efficiencies, but we should not underestimate the difficulties in providing the necessary support for the large and complex infrastructure projects that the RTPs are likely to deal with.
An important project for my area is the Waverley line, which is also a priority project for the City of Edinburgh Council. In effect, the partnership that is the promoter of the Waverley line and TIE, which promotes the city's many other projects, are two separate entities that put a burden on local authorities. A disproportionate burden has been put on the Scottish Borders Council, which has had to up its staff so that it could take on the increased burdens of that project. Could not an RTP, which would have a bigger centre, drive through such projects more efficiently and more cost-effectively than its constituent parts?
I accept that 100 per cent—that was a good example. However, I reiterate that even if efficiencies can be gained by having one RTP deliver projects such as trams or the Borders rail link, the RTPs will still require specialised legal support and other specialised services. I agree that there exists the potential for efficiencies, but it will not be possible to draw down from local authorities all the required resources. The RTPs will need to develop individual and specialised services in-house at significant cost.
I had intended to let Ted Brocklebank ask his question, but he has gone away to sort out the Waverley line.
I hope that he is not away to dig the line.
Perhaps both Malcolm Reed and Andrew Burns can respond to this question. Earlier, Malcolm Reed made three points rather gently but quite lethally. First, you said that the RTPs will divert resources from front-line delivery. Secondly, you said that the bill does not meet the principles of best value, which I am sure Andrew Burns might want to comment on. Finally, you said that options have not been fully evaluated. Will you expand on any of those criticisms?
I will attempt to do so.
On the lack of evaluation of other options, we pointed out in our policy evidence to the Local Government and Transport Committee that the Transport (Scotland) Act 2001 already provides Scottish ministers with the power to require public authorities to draw up joint transport plans. In many ways, that is a better power than the one that is proposed in the Transport (Scotland) Bill because it allows ministers to require, for example, transport-hungry organisations such as hospital boards or local enterprise agencies to be engaged in regional transport plans. We have found it difficult to engage such organisations in effective regional transport planning. In a sense, the power that the bill will provide already exists.
Also, local government has plenty of powers of general competence to set up the sort of joint working that is envisaged under the bill. Despite reports to the contrary, there has been no failure on the part of local authorities to work together in delivering transport plans or projects—the existing voluntary partnerships are testimony to that.
We do not need legislation to do what is already good practice and we are concerned that the bill has not been thought through in terms of best value. There is a case for re-examining the option of using existing powers so that we can see what value would be added if the existing powers proved to be insufficient. There is a case to be answered on that.
Shall I respond to the question too?
I am anxious to avoid the situation whereby both groups of witnesses respond to every question.
My question is on the funding of the RTP organisations, which the SPT submission says will have a prudential borrowing power. From my reading of the bill, I am not entirely clear that that is the case, but let us assume for the sake of argument that such a power is provided if one reads schedule 1 along with the various acts that are cited. The SPT submission makes the fair point that prudential borrowing is meant to have a revenue stream to pay the interest.
Most of the transport schemes that local authorities will undertake are ones that the private sector will not undertake. That is simply because there is not enough income to pay for them, effectively. Private sector bodies might get into trouble if they get involved in a prudential borrowing scheme. You said that you were seeking clarification from the Executive on that point. Have you received any such clarification yet?
We have received no clarification about that as yet. We are still in discussion with the Scottish Executive. The issue has been on-going for some time. We have reached the stage when contract awards cannot now be made, because SPT has no security of funding. That will delay transport delivery.
So unless you get another source of income—unless somebody else is prepared to put in the money—the schemes cannot go ahead. Is that what you are saying?
That is correct.
I have a question on funding the partnerships. The explanatory notes state:
"if the Transport Partnership is unable to decide"—
with respect to the share of expenses to be paid by each constituent council—
"then the relevant shares will be prescribed by the Scottish Ministers by order."
Do you know what is meant by "unable to decide"? Does that relate to a majority vote by the members of the partnership? What constitutes a decision by the partnership as to what the relevant shares are? If a partnership does arrive at a decision, does that represent a legally binding requirement on councils or members to pay the money?
That is still the subject of consultation through the separate consultation document on the funding and governance of the regional transport partnerships, which has just been issued. We might be wrong, but our assumption is that the allocation within RTPs will be decided by majority voting. That seems to be the principle that is embodied in the consultation document.
We are slightly lost with regard to the fact that the system that is described in the consultation document is the system that we have at the moment. We are a requisitioning authority. Frankly, it is difficult to make the system work. Whatever the statute says, such things inevitably come down to informal political negotiation.
It is very difficult to get a budget that exceeds the willingness of the least wealthy partner to pay. There have been situations when some councils in the SPT area have indicated a willingness to pay more but, because we have to operate with all 12 councils, our increase has been held back to what the smallest, or least well-resourced, council can afford. We do not think that the Scottish Executive has thought through the practicalities or the realities of local government finance or what mechanisms will be available to the new partnerships so that they can draw down from their constituent councils funding that is not already available to SPT. In our experience since local government reorganisation, that has not been a particularly robust method of funding public transport.
Wendy, do you have a supplementary question?
I am aware that time is pressing. I will try to suggest a way forward, based on what we have heard so far. I want to steer completely clear of the policy dimensions, because the remit and focus of this committee is on the financial dimensions.
That said, we have heard of four areas in which there are big, outstanding questions. First, we ended on the point about requisitioning through precept and the meaning of the proposed legislation and the implied process in that regard. Secondly, there is the issue of whether it is practically possible to conceive of the prudential borrowing regime being made use of by the new regional transport partnerships. Thirdly, there is the issue of the adequacy of the transition costs and the time horizon over which they should operate. Fourthly, there is the Strathclyde-specific issue of bus-related functions and the exemption for Argyll and Bute.
Might it be possible for us to write to the Executive, in advance of Executive witnesses coming before us, saying that those are the four issues in which we have a specific interest, and that we would be grateful if it could provide us with a memorandum dealing with those issues well in advance of our meeting?
We might also want to alert the Local Government and Transport Committee to that, but we cannot prejudge the outcome until we have heard what the Executive has to say. However, it would be helpful if the Executive responded on those four issues.
I have one final observation. We have been here before but, given the complexity of the issue, the clerks might want to reflect on whether they need a little expert support in writing up our response on the financial memorandum to the Local Government and Transport Committee. No other committee of the Parliament would try to handle matters of this technical complexity without a little support. I do not expect the clerks to answer that today. I just think that they should be invited to reflect on whether they need some assistance in writing this up.
Four financial issues have been highlighted. I propose that we alert the Executive witnesses and the Local Government and Transport Committee to them and see what comes back.
I could add at least one more issue, which is uncertainty. I remember that in Strathclyde there was an issue about being able to commit to projects or secure banking continuity. There is an impact issue for outgoing authorities in the context of taking transport projects forward.
The Executive witnesses are due after this discussion. I presume that they will have noted the issues that you raised—they will certainly be able to read them in the Official Report—and that we can question them on those issues.
On timescales, the Local Government and Transport Committee is looking to take evidence from the Minister for Transport on 21 December. We may want to take time over preparing our report and wait for written answers. I take your point about specialist advice.
So far, we have been given a devastating critique, which has been backed up by comments from COSLA, Highlands and Islands strategic transport partnership, NESTRANS and others. What would be an ideal way forward, if you were starting with more of a blank slate than we currently have?
As far as the west of Scotland is concerned, we do not think that anything is wrong with the present arrangements. They work effectively. The minister has commended the level of public transport delivery in the west of Scotland. Given that as recently as 1999 the Scottish Executive went into the whole issue of regional structures, I am at a loss to understand what has changed so much in four years that it wants to shake up the local government map yet again.
The situation in other parts of Scotland is different, and I would not presume to speak on their behalf, but the fact that voluntary partnerships have been able to do so much on the basis of co-operation shows that that approach can add value. I am not persuaded that moving to a statutory partnership will add any value when the underlying purpose of the statutory partnership—the delivery of a regional transport plan—is already available under the Transport (Scotland) Act 2001. Rather than shaking everything up again, the best and most effective approach in terms of delivery would be a period of stability to let local government get on with the job and start delivering what is already in the pipeline, which seems to accord with ministers' priorities.
As the convener said, any reorganisation, no matter how benign, is a distraction. I know from experience exactly what he is saying. In Strathclyde we lost an important rolling-stock deal simply because we could not offer the covenant to the financial sector that would have been available had we had continuity and an ability to plan more than two or three years in advance.
Recognising the discontinuity between costs that you take on board and the wider economic advantage to local authorities and central Government, do you see any advantage to the economy in general in making the move?
No, because, as we said in our evidence, the bill fails to address the chronic underfunding of public transport in particular, and transport in general, in Scotland. The Executive's own evidence has pointed out that we are spending about 50 per cent less in capital and about 20 per cent less in revenue than is spent according to examples of good practice elsewhere. We must address that problem. Moving the deck chairs around does not get to grips with the real issues that affect passengers, people who want to ship freight and the people who want modern communications in Scotland. To me, it seems that we are starting at the wrong end of the problem. If we can get the financing right, the rest will follow. Reorganisation should not be an excuse for lack of funding.
As there are no other questions for our present witnesses, I thank them for coming along. I am reflecting on Wendy Alexander's suggestion. It would perhaps be useful to have a limited evidence session from the Executive today, for clarification, and to seek a more detailed session with the Executive witnesses in due course. I will try to reschedule the process to allow for that. Is that acceptable to members?
Members indicated agreement.
The second part of this agenda item is evidence from the Scottish Executive officials who will talk about the Transport (Scotland) Bill. We have with us Jonathan Pryce, the head of the transport strategy and legislation division; Frazer Henderson, the bill team leader; and Claire Dunbar-Jubb, the group accountant for the roads policy and group finance division of the Scottish Executive's Enterprise, Transport and Lifelong Learning Department—which is a rather long title.
You have heard the previous evidence. We would like now to address some issues that require clarification and perhaps invite you back for a longer session of evidence taking. It is only fair to give you the opportunity to make some opening remarks before we move on to that limited questioning. Are you willing to come back for a further session, in a week or two weeks' time, once we have got some clarification, especially on the issues that Wendy Alexander raised?
Jonathan Pryce (Scottish Executive Enterprise, Transport and Lifelong Learning Department):
We are grateful for the opportunity to talk to you about the financial provisions of the bill. If the committee would find it helpful for us to come back, we will certainly do so. I will make some general points to start off. I am sure that you will want to follow up some of the questions that we heard you ask earlier.
As you know, the bill has three main aims: to put in place new regional delivery structures for transport infrastructure and services; to improve the regulation of road works; and to provide a discretionary power to enable the Scottish ministers to run concessionary travel schemes at their own hand. It is worth emphasising the fact that the Scottish Executive already provides support for existing voluntary transport partnerships. There is no intention to diminish the level of that support as a result of the bill.
The financial memorandum concentrates on the additional costs of the transport partnerships that we believe may arise in the transitional year and the additional costs that the partnerships may wish to incur in getting their regional transport strategies off to a flying start. We do not believe that, in the longer term and directly as a result of the provisions in the bill, there will be significant additional costs to the partnerships and local government over and above those for which the Executive already provides support to the existing partnerships and to SPT.
On the regulation of road works, the intention is to provide funding to enhance the capabilities of the existing road works register, to provide training and information on the enhancements to those engaged in operating the register and to establish the office of the road works commissioner. You will also be aware that the Executive has made a substantial increase of around £100 million per annum from 2006-07 in the support for concessionary travel. That increase is not conditional on the powers in the bill, which provides the flexibility to allow Scottish ministers to determine later who should take responsibility for concessionary travel. For that reason there are no costs directly attributable to concessionary fares in the bill, although we refer to the overall concessionary travel bill in the financial memorandum. We are happy to respond to questions.
One of the problems that we have is that in relation to at least a couple of elements, items in the bill are still out to consultation, so there is a great deal of uncertainty. The Executive's financial guidance note 2003/01 on the preparation of financial memoranda states:
"Where a Bill proposes powers, or implementation is dependent on the detail in secondary legislation (or further primary legislation), it may not be possible to be precise. In these cases, the Memorandum should say so. But this should be supported by an outline of what the current intentions of the Executive are, what the financial implications of these intentions will be, and what the effect of varying the major assumptions will be."
You have not given us even a range for some of the costs, which we might reasonably have expected to have been provided.
Having taken account of the fact that we are still engaged in consultation, we have tried in the financial memorandum to estimate reasonable provision from the Scottish Executive budget for the costs of transition. I do not pretend that we have got those costs exactly right. We tried to overestimate rather than underestimate transitional costs. I apologise if we have not given you the sensitivity ranges. We have to take account of what we think the regional partnerships will need to spend on preparing their regional transport strategies in their first year to ensure that the funding is available in a period when they might not have their funding arrangements with the local authorities fully in order and to ensure that reasonable provision is made for transitional costs relating to staff, which we do not anticipate to be particularly high.
But we have heard from COSLA that it anticipates that transitional costs will stretch over more than one year and it is difficult to see how the transition can be achieved within a single year. We heard from SPT and COSLA that specialist staff—whether providing technical expertise or legal or other support—need to be in place in order for the new regional partnerships to carry out their functions effectively and separate their functions from that of any local authority.
One of the things that make analysing the figures complicated is the fact that we could have different models of transport partnership in different parts of the country. The regional partnership in the west will build on Strathclyde Passenger Transport and the vast majority of staff from SPT will be subsumed within the regional partnership. It will therefore include the specialist functions to which you refer. I am not anticipating additional costs for the specialist functions in the west. The consultation paper states that there is the prospect of another four regional partnerships in other parts of Scotland. We are not clear that those partnerships will take on transport powers from the local authorities. That decision will be in the hands of the local authorities. If those regional partnerships are not Executive delivery bodies, they are unlikely to have significant costs, I believe, in relation to their specialist functions, although they will need to staff up for the strategic planning function.
You have not left much scope for them to have significant costs or significant staff requirements, according to the financial memorandum.
We have assumed that the staffing for the existing voluntary partnerships will continue at those levels. As I said, there will be additional funding, at least in the first year, for the preparation of regional transport strategies.
So five members of staff will be sufficient. That is the figure in the document.
Yes, that is the figure in the financial memorandum.
My question is a supplementary to the first point that the convener made. One of the problems that we have with the concessionary travel scheme is that, because statutory instruments do not come to this committee and because there are no financial memoranda for affirmative SIs, as far as I am aware, using that mechanism evades the purpose of having a financial memorandum in the first place. I am not saying that that is why it is being done that way, but the end result is the same; what could be a fairly significant part of expenditure is not subject to the scrutiny that is normally given to a financial memorandum.
I understand your point. That should be adequately addressed in the regulatory impact assessments that need to be conducted on any secondary legislation that has an impact on business.
My first question is about the level of consultation that existed—on the financial memorandum specifically, as opposed to on the policy intent. For example, we have written evidence from NESTRANS, which says that although
"the financial assumptions … set out in the Financial Memorandum accompanying the Transport (Scotland) Bill are not drawn from any previous consultation they have sought to take account of the running costs of some of the existing voluntary Regional Transport Partnerships."
We also heard from Susiephone Ltd, which did not feel that it had been consulted and which had not been approached formally, despite the fact that it runs the current road work register.
I am a bit puzzled that there seems to have been a lower level of consultation with those bodies that are already undertaking some of the functions. I appreciate your comment that the financial memorandum is supposed to cover the additional costs rather than the existing costs, which are already funded. However, I would like your advice on the way in which those organisations have been consulted, specifically about the financial aspects of the bill.
I was a bit concerned about paragraph 143 on page 71 of the financial memorandum, which states:
"No increased costs for local authorities are anticipated as a consequence of the establishment of Transport Partnerships."
Given the uncertainty that surrounds the nature of those partnerships, how confident can you be in making such a statement?
I shall try to take your points in order. Please pick me up if I miss out anything on the way.
We have consulted quite extensively overall on the general policy, and the Local Government and Transport Committee has heard from witnesses that we have done a pretty comprehensive job of keeping in touch with people. We have not issued any formal written consultation on the provisions in the financial memorandum, although we have had some general discussions with COSLA and we have a reference group that consists of COSLA representation, Strathclyde Passenger Transport and the existing voluntary regional transport partnerships. In the course of those discussions we have touched on financial issues, but we have not, as you rightly point out, actually gone out and said, "Here is a draft of the financial memorandum. Can you give us comments on that?" We are continuing to engage with all those organisations as the bill moves forward to ensure that we can take account of the financial implications.
You mentioned Susiephone Ltd. We did not intend to omit that company, but it is small and works with the road authorities and utilities committee (Scotland). As a result, we thought that we had covered it the company in that context.
On the question whether there would be any specific additional costs for local authorities, the financial memorandum highlights our belief that it is a reasonable proposition that, in the long term, the bill's provisions will be at least cost neutral and could lead to savings for local authorities through economies of scale. However, much of that will depend on certain decisions by partnerships.
How long do you mean when you say "in the long term"?
That depends on what you think is a realistic timescale for partnerships to take decisions to transfer functions into stronger regional bodies.
We will come back to the witnesses, but I will take two more questions.
The Executive claims repeatedly that transport spending is a key element of economic development spending. However, I do not think that that is mirrored in the financial memorandum, which does not contain anything that might be called a cost justification. For example, there is no mention of economic growth and the derivatives of additional income such as council tax, business rates or whatever that would come about as a result of the bill.
The financial memorandum concentrates on the bill's direct provisions and does not highlight the extent of the increase in transport funding in the Scottish budget. Between 2002 and 2008, that budget increases by 100 per cent or more. As a result, there has been and will continue to be very significant growth in transport spending.
Evidence that we heard earlier suggests that this is not so much a zero-sum game as a negative-sum game. I would feel more comforted if the financial memorandum could pinpoint any additional flow of revenue, even if it were going to the Westminster Exchequer.
If I understand you correctly, you are asking whether we could provide any analysis of the general increase in gross domestic product and growth in business and the economy that would arise from that transport spend. That would be extremely difficult to quantify.
Indeed, but that is the basis for cost justification.
I am not sure that even Jim Mather would require every financial memorandum to contain a statement about how the proposed legislation would contribute to growth in GDP.
I was asking for more prosaic measurements than that, convener.
What is the witnesses' gut reaction to earlier evidence that best value, capacity for diverting from front-line delivery and other options have not been fully evaluated? I know that we will get some more detail on that matter.
The framework in the bill will provide an opportunity to improve transport delivery in Scotland and will enable the rest of the country to take a more collective approach to more regionally based transport planning and delivery. To some extent, it will bring matters closer to the current situation in the west of Scotland. The proposals will enable councils even in that part of the country to pool some of their roads functions and secure better provision of bus services and the infrastructure that goes with them.
But the partnership in the west of Scotland, which, in a sense, led the way in Scotland, submitted to us half an hour ago that those were three principal concerns among many. If SPT is concerned, how does that give other parts of Scotland the confidence with which to follow a broadly similar model that will benefit the whole of the country? We agree that the direction is right; the questions concern how we get there, what it will cost and the implications for morale, confidence and future direction. If the key organisation that has done a lot of that feels uncertain, what message does that send to the rest of Scotland?
A time of change creates uncertainty and concern for everyone who is involved. I understand why staff at Strathclyde Passenger Transport will be unsettled by the prospect of change and the move to a regional partnership in the west. I know that staff in the Scottish Executive are, to some extent, unsettled by the move to a transport agency. However, that is something that we have to manage through.
I thank our witnesses. As agreed, we will come back to you for another session. In the meantime, we will write to you with several issues on which we want a response before our next session. We are looking to have that session a fortnight from today, but we will get back to you to set a date.