Finance Committee

Meeting date: Tuesday, November 23, 2010

Official Report 488KB pdf

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Scottish Parliamentary Corporate Body (Budget 2011-12)

Under the next item on our agenda, we take evidence on the Scottish Parliamentary Corporate Body’s budget bid for 2011-12.

I welcome to the committee Tom McCabe MSP in his capacity as a member of the Scottish Parliamentary Corporate Body; Paul Grice, the clerk and chief executive of the Parliament; and Derek Croll, who is head of financial resources.

I invite Tom McCabe to make a brief opening statement.

This is a welcome opportunity to present details of the SPCB budget for 2011-12 and our indicative plans for the following years. Convener, with your indulgence, I will preface my remarks on the specifics of the budget by explaining what has driven our approach to the task of setting it.

The SPCB is aware that we now operate in an extremely difficult fiscal environment. Few will escape the impact of the fiscal contraction that we now face, and we are very aware that we must strive as hard as we can to justify every pound.

Our approach is predicated on the belief that the Parliament’s budget should reflect what happens to the wider Scottish budget. You will recall that the chief executive, Paul Grice, who is with me today, briefed the committee in October on the approach that we have taken to setting the 2011-12 budget. The figures that we present today confirm our approach in deeds as well as words. Indeed, as the indicative budgets show, we are slightly ahead of the curve. However, as the committee knows only too well, although budgeting over four years is extremely helpful, it is not a precise science, especially at the latter end.

Our total budget submission for 2011-12 is set out in a letter that the committee has received from the Presiding Officer. Excluding capital charges, our budget submission for revenue and capital expenditure shows a 5.3 per cent reduction in cash terms compared with the current year. That represents a reduction of 7.1 per cent in real terms. We plan for further cuts in expenditure over the following three years to achieve real-terms savings of 12 per cent on the current year’s baseline by the financial year 2014-15.

To try to explain our position more fully, I will focus on three areas, the first of which is directly controllable costs. We have reduced the directly controllable costs of the Scottish parliamentary service by 8.3 per cent in 2011-12. That is equivalent to a 10 per cent real-terms reduction. We have done that by achieving reductions to budgeted expenditure across all areas of the service. Those were identified by our senior management as part of a comprehensive resource planning exercise.

A critical and yet regrettable element of that will include reductions in the overall staff complement of around 50 staff by the end of March 2013. The vast majority of those staff will leave much sooner. There is also a proposed pay freeze for SPS staff until 31 March 2013, which is accompanied by a constrained benefits package and, importantly, a guarantee of no compulsory redundancies over the same period.

Secondly, on members’ pay and expenses, as the Finance Committee knows, we have received cross-party support for a proposal to freeze members’ pay and expenses at the current level until 31 March 2013, and the budget has been set on that basis.

Thirdly, as members know, the SPCB is charged with oversight of the commissioners and ombudsmen. The Finance Committee has rightly taken a strong interest in how we exercise that oversight. Following constructive discussions with all the officeholders, we have set them the same budget reduction target as the parliamentary service over the coming years. The 2011-12 budget submissions of the various bodies amount to £8.4 million, which is a reduction of 4.5 per cent in cash terms, or 6.3 per cent in real terms, compared with the equivalent 2010-11 budget. As we have often said, the SPCB is acutely aware of the fine balance that it needs to strike between robust scrutiny and the operational independence that the bodies were given when the Parliament established them. In that regard, we are grateful for the strong support that the Finance Committee has given us in recent years as we have adopted a robust approach to our scrutiny of the various budget bids.

Finally, it is obvious to everyone that we are now operating in a different, far tougher environment. The savings that have been identified have not been identified easily, and the task of managing a reduction in the size of the Parliament’s workforce is not a welcome one. It has given the chief executive and his senior management an uncomfortable time, but they have faced up to it with the professionalism that we would expect. It is only right that we place on the record our thanks for the work that has been done so far. We also put it on the record that we expect the figures that are contained in indicative budgets to be pursued in order to ensure that they are delivered in the subsequent years.

That concludes my remarks. I hope that I have given a flavour of the approach that we have taken. I, and my colleagues who are with me, will try to answer any questions that the committee may have.

Thank you. Having served as a member of the SPCB during the first session of the Scottish Parliament, I am well aware of the formidable task that the SPCB faces in these troubled financial times, and I thank you for your statement.

I invite questions from members.

The Scottish Government has indicated in its pay policy that it wishes to give some relative protection to those on lower pay, and £21,000 is the threshold that has been set for that. Was any consideration given to giving some protection to lower-paid workers in the Parliament?

Yes. It was probably remiss of me not to mention that. We have adopted the same approach. Any workers who are paid less than £21,000 will receive £250.

Sorry, I did not realise that from what you said. Thank you. That is all I wanted to ask.

The corporate body has outlined a four-year budget. Why did you do that and not just go for a one-year budget?

We said that we would try to mirror what is happening in the Scottish budget. There was a comprehensive spending review, and we did not think that things were going to improve any time soon. We thought that, if we planned appropriately as far ahead as we possibly could, there was more likelihood that we would achieve the savings, we would give people enough notice of the changes that were going to happen, we would have a much better chance of ensuring that the parliamentary service is focused on our core business, and we could deliver the things that we are supposed to deliver as a Parliament by utilising the advance information as much as we could.

In your response to Mr Chisholm, you said that you are protecting those who earn less than £21,000 by giving them a flat-rate increase of £250. Do any parliamentary staff get less than the living wage of £7.15 an hour?

I do not think so.

I do not think so. We can check the detail.

So nobody would be caught in that category.

I note that the commissioners and their staff are affected by the same cutbacks, but there seem to be slight differences in the budget reductions that the various commissioners have had to undertake. In particular, I note that the Scottish Information Commissioner has the lowest reduction of all. Is there any particular reason for that?

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As I said earlier, we set the same targets for the commissioners as we set for the parliamentary service. Over the period, we expect that those targets will be met. Clearly, there are a number of reasons why the figures can be slightly adrift between the parliamentary service and the commissioners in the first year. A large amount of the savings in the parliamentary service have been achieved through a reduction in staff numbers, and the parliamentary service clearly employs an awful lot more people than any of the commissioners do. Therefore, it is difficult in year 1 for the commissioners to get the level of saving from staff reductions that the parliamentary service could get, but we have been very clear with the commissioners that over the period we expect them to achieve the same targets that have been set for the parliamentary service.

In addition, we anticipate some reasonably significant savings from shared services and the amalgamation of existing property from bringing different bodies together. We could have included those figures, but we felt that that would be wrong. We are very confident that the savings will be achieved, but until such time as we have them properly battened down and confirmed, we do not think that it is right to produce them, particularly in the figures that are before you today.

However, the Information Commissioner’s staff budget has not changed, the human rights commissioner’s staff budget is rising and the other three staff budgets are falling. What is the explanation for that?

They offered the opportunity of the voluntary early retirement/early severance package that we offered, but they had no volunteers. We were left with the position of pushing ahead with compulsory redundancies or allowing the opportunity for natural turnover, which is obviously better for the staff and is, frankly, cheaper for the public purse. I think that the corporate body felt that at least a bit more time should be given. That explains the year 1 position. However, as Mr McCabe explained, there is no question but that over the period those savings will have to be delivered. On balance, the corporate body felt that it was right to give an extra bit of time in those circumstances.

I guess that one of the big assumptions in your budget is the rate of natural turnover. I appreciate that you have put it at 3 per cent, which is lower than the 5 per cent that you experienced in the most recent year. What drives you to the conclusion that that level is prudent? I do not think that anyone will complain if it is 4 per cent rather than 3 per cent, but clearly there is a big problem if it is 2 per cent rather than 3 per cent.

You are talking about the vacancy assumption.

Yes.

Historically, the rate has been 5 per cent, so 3 per cent is quite a significant tightening. It is clearly a judgment call, but 3 per cent feels about right. If the rate was 2 per cent, that would clearly put pressure on the pay budget. However, we have done some sensitivity analysis that suggests that we could cope with that. The short answer is that we would simply have to make reductions elsewhere. However, we feel that we could manage the sums involved. For example, it might mean delaying a project or making some other savings, but we felt that this was a time to make a prudent tightening of that assumption. I certainly think that 5 per cent going forward would have been too optimistic. Only time will tell, but we have generally been able to predict these things. I think that 3 per cent is a fair judgment call, but it is no more than that.

On the points that David Whitton raised in relation to the commissioners and ombudsmen, I do not want to become a kind of pub bore on a subject that I have raised at previous evidence sessions. However, you have helpfully given us an overall breakdown in the comparison with previous budgets. Would it be possible for you to give us a separate comparison not just with previous budgets but with the actual expenditure? Particularly with regard to the newer commissioners and ombudsmen, we have been told in the past that some of the issues around levels of spend have been because they are settling in and establishing new things. I want to be quite clear that none of the set-up or start-up costs that we were told were transitory have been baselined into the budget and that the squeeze has not been applied to that higher budget. Is it feasible for us to be given an outturn comparison?

Yes, I think that we could do that. However, it would be safer to get back to you than to quote figures here today.

That is absolutely fine.

My final question is another that it might be easier to answer in writing. I accept the explanation that has been given for why the staff cost numbers have not moved, which is reasonable, but I was struck by the fact that there is to be quite a substantial increase in the running costs of the Scottish Human Rights Commission, which are to increase from £165,000 in 2010-11 to £222,000 in 2011-12. That seems to be quite a significant jump. Can you explain what is going on there?

That relates to the research costs for a specific piece of work that the commission is undertaking—a comprehensive mapping exercise on human rights in Scotland.

On the proposed reduction in staff-related costs, I note that the explanation in your submission mentions

“more cost effective corporate training arrangements and reductions in the budgets for job related training”.

More than anything, I seek reassurance because when times are hard, training and staff development are often the first things to go, which is often a false economy. How has that been approached?

I will preface the chief executive’s remarks by saying that we are taking a lot of money out of the corporate body’s budget, so we will have to do things differently. There is a strong determination that we continue to protect the core services and avoid making the organisation of less worth than it was, but I simply do not think that it is possible, when budgets are being reduced by such an amount, for some difference not to be felt in the way in which the organisation goes about its business.

Mr McCabe makes an important point, which sets the context.

I can give you an assurance that the training and development budget remains reasonably substantial. The difference going forward is that it will be much more clearly focused. You will see that, as part of our plans, we will have to move people around the organisation, especially if we are to deliver on the no compulsory redundancy guarantee. A really important part of that is to have enough budget to help people to acquire new skills so that they can perform those roles. Although the budget is more modest, I think that it is still adequate and it will be carefully targeted, particularly at staff who need to reskill. Tom made the more important, wider point.

Spending on education and outreach is not separated out in the papers that we have. I think that one of the jewels of the Parliament is its accessibility and the outreach work that it does specifically on education, which is targeted at different levels of society. Can you give me some comfort that such work will carry on and keep our Parliament as it is known?

There is a very strong desire to maintain the Parliament’s engagement activities, but it is only fair to say that we need to achieve very substantial savings in subsequent years, so a review of all the Parliament’s activities is under way. I understand that there will be areas in which individual members have particular concerns, which we would want to do our best to take account of, but I think that it would be unhelpful if we simply gave everyone warm words and made false promises.

As there are no further questions and our witnesses do not wish to make a final statement, I thank them for their evidence.

We will have a short suspension to allow the next witnesses to take their places.

15:53 Meeting suspended.

15:56 On resuming—