Official Report 618KB pdf
Good morning and welcome to the 28th meeting in 2010 of the Local Government and Communities Committee. I remind members and the public to turn off all mobile phones and BlackBerrys.
Good morning. As you will be aware, there has been considerable discussion about the impact on public sector bodies of the fact that the 2011-12 draft budget sets out spending plans for just one year. In the absence of a spending review covering a three or four-year period, what impact will the budget allocation announced in the draft budget have on the ability of your organisations, local authorities and the organisations that rely on local authority funds to put in place longer-term plans to deal with the current financial situation?
Thanks very much for the invitation to come and speak to the committee again, convener.
Perhaps I could look at this from the other end of the telescope—from the consumer point of view, rather than the provider point of view. One of the points that we made in our submission was that research by Ipsos MORI found that 75 per cent of the public felt that efficiency savings could meet the deficit. I do not think that that is realistic, but the sub-text is compelling. We tend to have a debate that is too much about cuts, rather than one in which we ask whether we get value for money from the high levels of expenditure that we have in Scotland at present.
I agree with Douglas Sinclair’s final point. The whole agenda is about service redesign and the reform of public services. The problem with a one-year budget is that it is a holding situation and it does not enable anyone to plan for reform and for the future. Contractual arrangements and budget or grant settlements to organisations in the third sector that last for a short period do not enable organisations to think about building their capability and capacity, planning for the future and investing to take on the role that we want them to play in public services. A very welcome thread that says that we want the third sector to do more is embedded in the draft budget, but a one-year budget is an immediate barrier to that as it does not enable organisations in the third sector to think very clearly about the future, because they are concerned about their survival next year.
I will pick up on that point. As we are focusing on service redesign, can you say a little bit about the discussions that there have been, and the approaches that have been taken, with local authorities to ensure that you are able to deliver the services that are needed, rather than the services that you may be being forced to provide because they are all that can be afforded?
Looking at the bigger picture, there is obviously a lot of talk around community planning partnership tables, but it has not gone as far as we would probably like. At the moment local authorities are, if I can paraphrase, talking a great game on reform but introducing very little real reform and doing little thinking about how they involve what we refer to as the client group—the service users—and service providers, whether voluntary sector or private sector, and about how we make the services more efficient and more effective. They are not thinking about outcomes.
The dialogue that local authorities have with third sector care and support providers tends to be about local authorities asking for the same thing for less, but it needs to be about them asking for something different. If our starting point is to ask whether we can achieve better outcomes, personalise services and be more creative with the budget, there is a very good chance that that approach will save money, because all the things that we want to do, including building resilience and independence, promoting self-help and increasing well-being, will have an effect on the demand for public services. However, a lot of the dialogue is not around those issues. If the starting point is the need to save money, there is a very good chance that we will end up not looking at outcomes, value for money, resilience and independence.
I would rather see a user point of view than a public sector point of view. The debate between the voluntary sector and local authorities about service redesign is missing a crucial component: the user of the services. There is a sense that co-production is still being done to, rather than with, people. For example, the history of direct payments in Scotland shows that we are well behind what is happening in England. We intend to do a study on how well informed people are about direct payments. I think that the position varies enormously. What is the nature of the engagement when decisions are made about levels of direct payment? I think that that is still very top down.
I absolutely endorse Douglas Sinclair’s point. We are seeing some systems changes around personalisation, particularly in adult care and support, where the starting point is that the amount of money that goes into the pot for individual budgets is automatically 10, 20 or 30 per cent less than the cost of existing packages for the same group. The argument that personalisation is cheaper therefore becomes a foregone conclusion, because the decision right at the beginning is to spend less on it. However, on the user-driven agenda, there is evidence that shows that if people are enabled to direct their own support, what they will choose is sometimes less expensive than what a local authority or, indeed, a provider might decide is best for them. You have to let that emerge rather than assume it from the outset, otherwise the whole personalisation and self-directed support debate, which pre-dates the budget crisis, actually starts to be driven by that crisis, and the whole outcomes agenda becomes diluted by that.
I have a quick supplementary for Ms Gunner Logan. A resource has clearly been identified that will come out of the NHS budget and go to local authorities to ensure development around care services. Have there been any discussions so far about how that resource will be divvied out, and the impact that that could have on prevention in relation to more expensive services, such as hospital admissions, which people do not really want anyway? Where are we with that?
The £70 million change fund has been directed to health boards with the intention that they spend it on something new and innovative that will help in the first instance to shift the balance of care from institutional care to community care. Further, we very much hope—colleagues in SCVO have been working on this with us—that at least some of that money will come to the third sector so that it can do some of the lower-level, upstream support. It will be completely up to health boards how they spend that resource, but the positive thing about it is that the third sector will need to sign off on the plans locally. That is very positive. Seventy million quid is not a huge amount, but it is something. We are interested in how that will be followed up in terms of accountability and monitoring, because in the past change funds tended to disappear into plugging gaps. We are really keen that that does not happen this time.
We have had a lot of discussions with the health department on total place-type initiatives and pooled budgets. A number of local authorities and health boards have told us that they cannot do pooled budgets—we totally disbelieve them, but never mind. The problem with a change fund is that it is a bit of a compromise position on the attempt to drive through the change that we all want. In the present context, we would probably welcome it as a step forward, but it is a bit of a compromise, because local authorities and health boards are putting up barriers to really driving through radical change through total place initiatives and pooled budgets.
I have some general, follow-up questions. In your submission, you say that there are 137,000 paid staff and approximately 1.3 million volunteers in the sector, and that the sector manages £4.4 billion. We have the Christie commission and the change fund going on; the Convention of Scottish Local Authorities is making the case for local authorities with the Government directly; and the Cabinet Secretary for Health and Wellbeing is making the case for the health service within the Cabinet. Where is the sector and where is the consumer influence in this whole process? It does not seem obvious to me that there is proper engagement with the sector, which we all expect to be delivering. We know that it is delivering significant services now and we expect it to grow and to deliver more services in the future, but there is no discussion about the significance of the sector at any stage of the budget process, either with local government or with the Scottish Government.
We had discussions with the Cabinet Secretary for Finance and Sustainable Growth before the budget in relation to the independent budget review. We took a delegation from the sector to see him. Nigel Henderson, who is chair of Annie Gunner Logan’s organisation, was there, too. That made a strong impression on the finance secretary. The key message from the sector was in effect an offer to the Government. We said, “We can do more. We can help you. We are the solution to a lot of the problems that we’re facing at the moment.” We did not say that we are a cheap solution; we said that we are an effective, high-quality solution and that opening up the potential of the third sector would enable us to deliver some of the stuff in the independent budget review group’s report, as well as other things.
Our relationship with the Scottish Government is one thing, but given that local authorities, which are our main funding agencies, are autonomous organisations that make their own decisions, that is where our focus tends to be. I read the COSLA submission to the committee and there is very little in it that we disagree with; it raises all the same issues of early interventions, upstream investment, seeking outcomes and seeking service redesign—we could probably have written some of it ourselves. However, when it comes to hard-line funding decisions at the front end, where third sector organisations are involved, we are still seeing the sharp end of some of that. We have been here before in discussions with the committee about procurement. We have not really moved on from that.
According to the SCVO paper, the third sector budget will decrease from £35 million to £24 million over 2011-12. You might not have left the meeting with a heavy heart, but you left with less money at the end of the day.
On the way that individual local authorities are taking forward their budget, we have been aware of some good examples of some councils engaging with their community. Highland Council is a notable example, as it conducted a series of roadshows to try to engage seriously with the public about the financial difficulties that it faces.
We will hear from the trade unions later, but it should be noted that, in the public sector, local government has imposed a pay freeze for two years, with no minimum increases and compulsory redundancies. That is worse than what is happening at a United Kingdom level. The unions are not doing very well either at this time.
I am not suggesting for a minute that they are. I am simply saying that their access to Government is established within the culture of the way that Scotland is run. I am arguing that, as is the case in many other European countries, the consumer voice should be equal at the top table with the voices of business and trade unions.
I think that I was labouring the point, because that is the point that I was trying to make: the third sector is not treated as a partner in this whole process, and if we are talking about fundamental redesign of public service delivery, that begs the question why that partnership is not in place. What expectation do you have of playing a more formal role in the Christie commission, which will bring us all the solutions next September—after the elections in May? Is there engagement with the commission?
We had some discussions with Campbell Christie about the remit and he invited Alison Elliot, who is the SCVO’s convener, to take part on an individual basis. She accepted the invitation after some negotiations about the commission’s remit. Martin Sime, the SCVO’s chief executive, will also be involved if that is required.
Do you expect the Christie commission to be taken any more seriously than the independent budget review panel?
One always hopes so. I thought that the independent budget review was really interesting—I could go down a whole side track on that. The point is that some of the things that it mentioned are already happening in the third sector. For example, on workforce issues, the IBR referred to pay freezes, head count and pensions. We are about halfway through a survey of workforce terms and conditions in the third sector, and I have some of the early findings, which the committee might be interested in: 50 per cent of third sector providers in social care and support have already implemented pay freezes in the last three years and 82 per cent of them have been unable to award a full cost-of-living increase in pay in line with inflation.
I would like to continue some chat about the Christie commission. The evidence that we have heard this morning is that people would have preferred a three-year outline budget. Obviously, the Parliament passes only an annual budget, but we have heard that a three-year vision would have been preferable. Instead of that, we have the Christie commission. The Cabinet Secretary for Finance and Sustainable Growth has said why he thinks that the Christie commission is the right way forward. Without going into the rights and wrongs of all that, what opportunities do you think that the Christie commission presents?
I hope it is. I am not entirely sure how the commission is going to work, but it would be useful to take to it illustrations of how different service models can achieve better outcomes for people and potentially cost less, too. If it is more of a forum for getting exposure for some of the things that our sector can achieve, that will be something. The report of the independent budget review group was very interesting, but it was a strategic-level document that did not get into the specifics of how public services could be different. That is our ambition for the Christie commission.
As I understand it, the key difference between the independent budget review and the Christie commission will be the recommendations for change. I had a brief discussion about that with Campbell Christie. I asked him what was the difference between the independent budget review and his commission, and he said that the commission will make real recommendations for change. We see the commission as an opportunity, as is the Labour Party’s commission on integrated care, in which David Manion from Age Scotland is one of the key players, which is ensuring that the sector has a voice in shaping a potentially significant change—depending on the result next May, of course. We see the Christie commission as an opportunity and we will work very closely with it to ensure that, as Annie Gunner Logan said, it is shaped by the third sector.
To put it another way, if the independent budget review was about the cost of things, maybe the Christie commission could be about the value of things.
And how we do things.
Yes. I can give you an example of that from a youth justice organisation in the third sector. It provides intensive one-to-one support to young people in trouble in pursuit of stopping reoffending. It is quite expensive, but what is more expensive is secure care, which would be the alternative, or prison further down the line, which would be even more expensive. That organisation is under pressure to reduce the cost of the service, because we are looking at short-term savings, rather than a longer-term view. The challenge for the provider is that if it reduces the cost, it has to reduce the inputs. It has lots of evidence to show that the reason why the service is effective is that it provides one-to-one support from highly skilled people and it has a strong supervisory layer of management for the front line. If you reduce that, the chances are that you will not get the same outcome, so you will eventually incur the costs of secure care, which is the alternative.
I have a few thoughts to add. At the end of the day, the independent budget review and the Christie commission can only make recommendations; it is up to the Government or Parliament to decide whether to accept them. My observation on the Christie commission is that, given the scale of the task, it has an incredibly short timescale in which to deliver a redesign of Scotland’s public services. Those of you who can remember the Wheatley commission will know how long that took to deal with the first major review of local government. I have a concern about the ability to do the job within the timescale.
I am delighted to hear in Mr Downie’s evidence that he has had initial conversations with Campbell Christie and that we all agree that the third sector should be a key player and perhaps a strong agent for change in the public sector and service redesign. We heard from Mr Sinclair about what he considers to be one of the barriers to reform, but I ask the witnesses to put on the public record what other barriers or impediments to service redesign and reform they see and what they would like to happen.
To return to what I said about short-termism, if we need to save money, we need to save it now, and the obvious thing to do is to start cutting budgets. The whole-system approach that we have discussed is absolutely key. That goes back to what I said about activity in one area that is funded by one budget accruing savings for another budget somewhere else. There is a huge barrier there.
One of the biggest barriers, which people have probably spoken about to various parliamentary committees, is the culture in different organisations. People think, “This is my budget, this is what I’m supposed to do and these are the outputs I’m supposed to deliver,” but they do not think about what outcomes are needed for the people in the area. That is why we need, as a step forward, a series of total place pilots, as is happening south of the border in many areas, or something similar. In that approach, the health boards and local authorities consider what they want to achieve on health, education and other matters and then put their budgets together and work to achieve solutions.
Do you agree with Mr Sinclair’s suggestion that community planning partnerships or other bodies should be put on a statutory basis to drive change? Can we rely on local authorities to change themselves if there is that culture of resistance that you referred to?
I am not sure whether it would change the position significantly if they were statutory bodies. I will certainly go away and think about it and we will come back to the committee with a view. I would not give you a quick, off-the-cuff answer because the area is too complicated.
Bob Doris talked about barriers. It will be important for the Christie commission to stick to its script and consider what outcomes we want to achieve. People’s needs do not fit into tidy institutional boxes of one organisation or another but go across them, and that is why partnership working is important. Beveridge got that right. Once we have said which outcomes we want to achieve for the Scottish people or Scottish consumers, we must consider the best structure to deliver that and maximise a joined-up approach. Then and only then do we come to the arrangements for service delivery to make that happen.
Thank you.
But we had a statement last week that makes that difficult, or creates a barrier to the shift that you want to see. The statement seemed to imply that people who want to remain in the public sector will do so. We heard, “There will be no compulsory redundancies, and by the way we are going to introduce a living wage.” Why would someone want to work in the third sector for less job security and a lower salary?
We could add that as an additional barrier. Job retention policies tend not to work. The no compulsory redundancies policy could act as a barrier to reform and change, and could export job losses to the third sector, because local authorities will decide to keep services in house. In third sector organisations, contracts will come to an end and grants will be cut because local authorities will think, “We can do this—not better, but we can do it, and we have people we need to allocate to jobs.” There is a big fear about that.
Do you not consider that the living wage should apply to people in the third sector as well?
As you know, the third sector has had issues for a number of years about contracts and full cost recovery. There is an expectation that because the third sector leverages in other support in some cases, it should do things more cheaply or below cost. It has been difficult for organisations to say, “This is the cost of delivering this contract, and this is the price that should be paid for it.” We are going to see more of that. The third sector is more than willing, in terms of the contract side, to pay within those contracts a living wage.
I am really interested in the living wage and the proposals. I take the committee back to the discussion that we had last year about the pay and conditions disparities between public sector, third sector and private sector workers. Earlier, I quoted some of the statistics from our workforce survey, but there are more. Some 40 per cent of the organisations have closed their final salary schemes to new employees and another 36 per cent have closed them to all employees. We found that 36 per cent have reduced sick pay entitlement, 61 per cent have reduced their training budgets, and 78 per cent have given broader areas of responsibility to line managers. I could go on.
I might be tempted to get into the interesting debate on the living wage, but I will try to avoid that as much as possible. I will take up a point that Annie Gunner Logan raised about the voluntary sector and the third sector trying to reduce costs through pay freezes and so on. She also spoke about pension schemes and various other things being cut back in an attempt to reduce the running costs or operational costs of the third sector where it is providing vital services. That takes us back to the issue around the consumer, where the third sector provides vital services for those who are most in need. Costs seem to get reduced by organisations based on the demand from the procurement organisation, local authority or health board.
A number of different scenarios could be painted. A lot of third sector organisations could see all this as an opportunity, given that threaded through the independent budget review and the draft budget is the recognition that, if we get all this right, the third sector will play a greater role. That is the big debate. Indeed, Annie Gunner Logan’s conference, which is being held tomorrow, is all about whether there is an opportunity to open up the third sector’s potential. After all, the sector has responded by trying to do things differently and work in different ways. For example, the SCVO’s future jobs fund consortium has successfully accessed European social fund money and, in recognition of the current circumstances, there have been a number of mergers and much more collaboration and partnership working within the sector.
I sent—perhaps a bit belatedly—the committee clerk a copy of the latest version of what we have rather hilariously called our optimism survey for providers, which has been based on a similar survey by the Confederation of British Industry. It is more about trends than data and figures and, in response to Mr Wilson’s question, I should highlight some of the comments that we received. One organisation said:
Decisions about who provides a service should not be based on a preference of one sector over another—in other words, on whether the service is delivered in-house or externally by a private sector provider or the voluntary sector. First, we should ask whether there is a need for a service; if there is, we should then specify the outcomes that we want from it; and finally we should find out who is best able to provide it in terms of quality and cost. There should be no presumption that the service will be delivered in-house, by an external provider or by the voluntary sector, and we should be able to prove transparently that our decision represents best value. I do not think that there is an awful lot of that going on; instead, there is a lot of protectionism.
I am not here to engage in special pleading for the third sector. We are encouraging the public sector to discriminate and to identify services that it thinks are valuable, will achieve an outcome and will meet a need. We are confident that the third sector will come out of that process reasonably well, because of the evidence that we have shown to the committee on the quality of and outcomes from what we do and on people’s response to that. However, we do not want there to be a blanket approach, with the whole third sector or the whole public sector being either cut or increased by X amount. We are encouraging funders to discriminate, but to do so not simply on the basis of how cheap something is but on the basis of the value that it accrues for them and for the individuals whom they serve.
That leads on to the question of best value, to which a number of the witnesses have referred. As members have indicated, we have discussed the issue with regard to care provision, in particular. The committee has seen figures for the hourly cost for which the voluntary sector can provide quality care and for what it costs local authorities to provide the same quality of care. There is a big disparity between what the voluntary sector can provide and local authorities’ charges.
The difficulty is in how we drive through reform and change. Everyone around the table and in Government believes in the co-production approach that you have described and that we need to move spending towards prevention rather than acute services. All of us get that—the biggest issue for many organisations is how to deliver it. At present, the solution is for the Scottish Government to give them much heavier direction and to tell them to change.
The type of scenario that Mr Wilson describes is already happening, or beginning to happen, in adult care and support. The agenda is about choice and control; the self-directed support strategy was launched yesterday.
I absolutely agree that best value is as much about quality as it is about money. There are two elements to it. One is Annie Gunner Logan’s point about choice: in areas such as adult social care, the agenda involves empowering front-line staff to make those decisions, which is a challenge for health boards and councils alike.
In applying those business-like systems, is there not a danger that we will lose out in terms of value and quality, and the ethos of some of the voluntary organisations? As a consequence of the reduction in the investment fund, we hear that voluntary organisations should be more efficient and work more closely together, and they should jointly apply for bigger contracts to produce economies of scale. John Downie will be familiar with all that business language. If we apply that in the voluntary sector, will we reach a stage at which someone will complain not about the local authority officer, but about whoever is delivering the voluntary services for a wide area—in Stirling, for instance? What will the outcome be if some people are actually walking away?
The issue is not all about contracts. We have told local authorities and the Scottish Government that they need to protect small grant funding. Many organisations are doing a lot with a very small amount of money to protect the most vulnerable people and some of those organisations are perhaps the most vulnerable in the current provision. I accept your point about potential difficulties, but we need to consider how many organisations that receive grants of £10,000 or £20,000 from local authorities provide a good service in mental health advice, helping people to access benefits or supporting people.
The convener has put his finger on one of the great contradictions of our time. We are being told that the future is in community-based organisations, choice in the market and plenty of diversity, but third sector organisations—even some large organisations—are now under pressure to merge. We hear, “There are too many of you—why don’t you get together? Why are there 18 providers in this market?” The pressure on our sector is immense and the question in the atmosphere is why so many charities and voluntary organisations exist.
Good morning, everyone. I will return to our discussions last year, to which Annie Gunner Logan referred. It is worth making the point from last year’s evidence sessions that the care commission ratings and rankings of community care showed conclusively that independent sector providers produced higher care standards and higher service user satisfaction at a lower cost to the public purse; that has been re-emphasised this morning. It is extraordinary that some people wanted to do their best to undermine those dual benefits, but we will leave that to stick to the wall.
The question is interesting. The best-value argument for the third sector is powerful and would suggest that whatever remains in-house should come out to the third sector.
The point on the legal barriers to change is very interesting. If councils were to adopt the living wage that has been talked about—I understand that it is £7.15 an hour, whereas the statutory minimum wage is £5.93 an hour—pay would increase by £2,000 per annum for the group of workers that we are considering. If someone who was thinking of reconfiguring their services saw a living wage coming down the line, would it not make sense for them to do so before they adopted the living wage? In that way, the people who perform the service would end up not getting the living wage.
It would turn upon the proportion of the current workforce that falls below that level. In third sector care and support, the wages of some support assistants and support workers certainly fall below that level. A couple of weeks ago, I chaired a debate at the Scottish care conference in which that issue was a significant concern for care home operators, because a substantial proportion of their workforce would fall below the living wage level.
I agree. There is also the issue—I think that you alluded to it—of whether, contractually, an obligation for a rate of pay can be imposed on a provider or, indeed, whether one would want to do that, if the motivation for the new service model is to reduce costs. If a higher rate of pay was imposed, there would not be any saving at all, would there?
It depends how much of the costs are workforce costs. I hope that the evidence that I have given you from our surveys shows that workforce costs in the third sector are pretty lean and have got a lot leaner. The issue is not necessarily the hourly wage, but some of the terms and conditions around that. However, there are a lot of providers who have adjusted their wage rates downwards and who might be caught in your scenario.
I would like to add a postscript to the comments about the third sector, as I think that they raise an issue around the capacity for change in local authorities.
As we have no other questions, I thank our witnesses for their attendance.
I welcome David Dorward, chief executive of Dundee City Council, who is here on behalf of the Society of Local Authority Chief Executives; Fiona Farmer, Scottish regional secretary of Unite; Douglas Black, regional organiser and secretary of the local government services group of Unison; Alex McLuckie, senior organiser in GMB Scotland; and Joe Di Paola, from the Convention of Scottish Local Authorities.
This question might best directed to the representatives of SOLACE and COSLA.
For some time, local government—through SOLACE and COSLA—has been doing work on the likely financial impact of the UK settlement. We probably had not appreciated the knock-on effect of the UK settlement on welfare benefits, and the carbon tariff came completely out of the blue, so we are now having to build in those pressures. The combination of those additional pressures from the UK Government could total in excess of £1 million, so you are correct to say that they will have an effect.
We are operating in challenging times and we have only a one-year budget. I should say that we always have a one-year budget, but we also usually have a three-year budget plan to outline high-level spending commitments. Now, however, we have the Christie commission, which is considering the possibility of significant service redesign. We have just heard from representatives of the voluntary sector, so I would like to hear from local government and trade union representatives about their views on the degree to which the workforce should be involved as co-designers of service redesign. Do you think that the workforce should have a key role in the Christie commission?
The fact that we have the budget figures for only one year makes things difficult, as local government would ordinarily plan on a three or four-year cycle. On behalf of COSLA and the local authorities, I should say that we would always prefer to have the ability to plan on a three or four-year cycle. It is important that local authorities have the opportunity to plan forward not only for transactional service delivery but also for workforce development and capital investment. Three years is always better than one year, but that is where we are.
I would certainly hope that all trade unions are fully involved in any process that is considering the future of local government and any type of service redesign. That is not to say that that is not happening at the moment. We are engaged with authorities on a regular, indeed daily basis. We are looking at how to stave off the financial pressures and how service redesign can deliver services more efficiently and effectively. I want to see that continue and broaden.
I echo those points. There is a view that we have yet to start this redesign and restructuring process, but it is already going on. We do have questions about the commission, including on the remit—what is included and what is excluded—and the cost. We know the cost of bringing in consultants to produce reports, which has happened in many areas of the public sector, including local government. At the end of the day, many such reports are not even implemented. In many instances, if there had been direct engagement with the unions and stakeholders at the initial stages, we might have had a better outcome.
Are the on-going discussions between local authority chief executives, their administrations and the trade unions happening on a local authority by local authority basis or at a COSLA level across Scotland?
Where the discussions are happening locally, that is because of disparities in how local authorities organise their service delivery models. In other areas, authorities will have discussions at the COSLA level, particularly with trade union colleagues. For local authorities, the impact of single status is that the models used to deliver services and the way in which their workforces are organised are done on an authority by authority basis. The ability to reach agreement at Scottish level on workforce areas is restricted. That said, there are areas that COSLA is taking forward with the appropriate trade unions.
Each local authority is engaging with the trade unions on service redesign. I listened to the committee’s discussion with the previous panel and I would not want members to think that the redesign of services happened all of a sudden because of the financial position. It has been on-going for quite a long time. Councils are trying to engage more with their communities on the level and types of service that they require. There is no assumption within local authorities that we are the only people who can provide those services.
What has just been outlined is not the world that I operate in. As a trade union official, I am not involved in any situation in which we have been included at an early stage in discussions about the design of the service or the impact on the workforce. Trade unions react to decisions that have been made by councils. The idea that we are all in it together and pursuing joint solutions is not the world that I operate in. We respond to decisions that have been made without any input from the trade unions.
I will open up the discussion and give others an opportunity to respond to that. The committee has expressed concerns—formally—over a long period about the negotiating machinery in local government. The committee has heard about the imposition of equal pay agreements. We have heard about and taken an interest in 30,000 cases at tribunals. We know that a pay freeze has been imposed, which goes beyond even what the UK Government is proposing. We know that compulsory redundancies have been threatened.
Can I just say, convener—
No.
The question was about the Christie commission, convener.
Excuse me!
Can I make a brief comment? I wanted to say—
I am saying no, Bob.
Fine, convener.
I have asked for a response from the witnesses.
I was just trying to develop a line of questioning.
I wish to respond to the issues that you raise, convener, in particular the bargaining arrangements for local government. The issues that you have highlighted are indeed a big source of concern for us. We do not believe that the bargaining arrangements are working as well as they could, and the trade unions want them to be improved. An annual meeting of the council is coming up in the next week and we hope to make some progress. However, I will say publicly that we put pay imposition and lack of engagement firmly at the feet of the employers. We have tried very hard to ensure that the bargaining arrangements move forward and are maintained, but that has not happened. We put the fault with the employers.
Convener, you would expect me to respond on behalf of the councils as local authority employers. I hear what Douglas Black says, and we have had that dialogue over the past six months or more. I would also say that, quite formally and properly, the local authorities are still intent on maintaining the current bargaining arrangements. However, it is unrealistic to expect those arrangements to operate smoothly in times of difficult financial challenge for the authorities as employers. Douglas Black is right—there is an annual meeting coming up. The way forward will be to discuss frankly and properly at that annual meeting the issues that lie between us and to seek to put the grave issues that lie between us on a business footing so that we can take things forward. There is no diminution in the 32 councils’ commitment to bargain with colleagues in the Scottish joint council. You should remember that we bargain with the teachers’ trade unions in another body, and also on behalf of every other member of local authority staff, and all those bargaining arrangements remain in place.
Locally, we meet the trade unions on a monthly basis. We have agreed with them—“agreed” is probably too strong a word. We have engaged with them on the introduction of our voluntary early retirement scheme and they will be engaged in any service redesign that comes out of that before decisions are taken.
We need to be careful that we do not open up a debate on the negotiating parameters for us and the employers, but I have to say that if we were talking about partnership in the truest sense of the word, we would be involved at the earliest stages of the redesign. We are faced with certain councils coming to us after their decision has been made, and when we try to engage and then try to change things, we are told, “Sorry, you can’t do that. The council has already made the decision.”
I think we have confirmed that there is a difficult background to making progress.
My questions are on a similar theme. Mr Dorward is right to suggest that a theme ran through the previous session about the need for reform of council services. I think that somebody said that real cultural change is needed. It was argued that that is not just driven by finance but was needed anyway. It should be happening even if the budget was going up by 100 per cent. In response to one of the final questions, John Downie said, in effect, that he did not think that it was happening. He said that the Government had tried persuasion but it had not worked, and that the Government now needs to drive it through.
When we talk about redesign, alternatives and cultural change, we must look at the issue of social enterprise—outsourcing and removing core services from local authorities. If we go down the road of social enterprise, as England has done in relation to health, we raise a lot of questions about quality control and consistency across the service. I do not believe that trade unions want to take the social enterprise route to achieve cultural change.
I will address briefly the issue of cultural change. I go back to the point that I made about one-year or three-year budgets. In the work that we did with Government civil servants, we looked three, four, five and six years ahead. It remains central to our thinking that we cannot look only at a year’s figures. We must look not only at the figures for the period from now to six years hence but at how we deliver services. The issue is transformational change and looking at how services are delivered. A member of the previous panel talked about personalisation of personal social services; local authorities are looking at that area. Across Scottish local government, there is a mood for transformational change.
It has been suggested that service redesign is not driven solely by the financial position in which we find ourselves. However, in every one of the 10 years up to 2009-10, there was growth in the local government financial settlement, so the need for service redesign and shared services was not there as a driver. Suddenly we have a situation in which there will be real cuts for the foreseeable future. The Scottish Government’s economic adviser says that we will not get back to the same level of spending until 2025 or 2026, so the financial position is now a real driver.
The trade unions have not been frightened of change; it would be wrong of anyone to suggest that we have been. However, when we consider how changes are made and how services are then delivered, we have some bottom lines. As public sector trade unions, we have a strong public sector ethos: we believe in the public sector and we want services to be provided within the public sector. However, we are being presented with a myriad of changes such as outsourcing, privatisation, shared services in public-private partnerships or public-public partnerships, and joint working among authorities.
I agree with that. Shared services are part of the solution, but it will take a relatively long time for savings to be achieved. In Tayside, we have a joint committee, called Tayside Contracts, on road maintenance, catering and cleaning. It has existed since 1996 and has provided significant savings. With shared services, there is the prize of getting improved services at a lower cost. However, it will not happen overnight; it will take time to develop. In my council, I am not assuming any savings from shared services in our 2011-12 budget.
That takes us back to the issue of the one-year budget, which was raised earlier by Bob Doris. The COSLA submission puts the position on the one-year budget rather more strongly than you do, Mr Di Paola. It suggests that local government is operating in the dark. What worries me more is that the submission suggests that local government would be able to plan more effectively and perhaps avoid cuts if the budget was for a longer period. How do you manage workforce planning and so on without knowing what your budget will be?
We have said quite openly that that is more difficult in the context of a one-year budget and that we want to look at the longer term. We can extrapolate from the amounts of money that have historically been available to local government. That is not ideal, but we will continue to do that. Local authorities cannot and will not operate on a one-year basis. It is always better to have as much hard information as possible but, even if we do not have it, we will continue to plan ahead. We acknowledge, and we said in our submission, that this is a difficult situation and that we are disappointed. We will, however, continue to do what we have to do.
I realise that someone else was meant to come along and speak to the committee this morning and that there has been a late change, but you said that you had a fundamental, not an incidental, problem with the one-year budget.
We have discussed with the Scottish Government borrowing to finance the equal pay costs and spreading those costs over more than one year. We seek to do the same with redundancy costs. You are right. Apart from the human cost and the cost to services, the cost to authorities of making people redundant is very high. We are still trying to avoid compulsory redundancies, but redundancies of any description have high costs and we continue to seek a way to spread the costs across more than one or two years. David Dorward has had some involvement in that.
In Dundee we brought in an early retirement scheme in April and let it run until August for applications. That scheme, in addition to the teachers’ scheme, will probably provide 50 per cent of our savings in 2011-12. It will cost us approximately £2 million net, in the current year, to have an on-going saving of circa £7 million to £8 million per annum. A voluntary early retirement scheme that is properly funded can deliver significant savings to councils. Some councils are having to fund that out of reserves and balances. Some councils do not have the reserves and balances to do that. Some need to modify their early retirement scheme to make it less expensive, although that makes it less attractive to their employees. There is a balance to be sought there.
There may or may not be a difference between an early retirement scheme and an outright redundancy scheme—the two may be intertwined. Unison’s paper talks about tens of thousands of jobs. Was it 60,000?
We have said that it would be about 70,000 in the public sector, and about 100,000 in the private sector.
What impact would that have on local government?
The impact on local government would be huge.
In terms of the number of jobs?
Probably around 30,000 to 40,000.
What is the cost of that?
It is difficult to envisage how 30,000 to 40,000 job losses would be achieved through voluntary redundancy. We are talking about the long term, not just one year. Each year the opportunity for voluntary redundancy reduces, and the reality is that we get closer and closer to a compulsory redundancy horizon.
But you would not reject the figures that have been put forward.
I am nervous about figures. We have never quoted a figure in Dundee, for two reasons. First, the scheme is voluntary, so we do not know who will come forward and who we will accept and, secondly, we are going through other service redesigns that do not involve a reduction in head count.
Even if you halve the quoted figure, it is a significant number to fund.
The point is that no one is rejecting what has been said—they are accepting that there will be a smaller local government workforce next year, the year after and the following year. However, we are concerned to keep enough people in jobs in local authorities to ensure that we can deliver the services. We are having to match carefully the service delivery and the workforce numbers, and we must be clever about transformational change if possible to ensure that we deliver services more efficiently.
It is not as clear cut as that. Most authorities in Scotland are considering some type of retirement or severance scheme that will be attractive to their workforce. They will base their financial predictions on what they would expect to achieve from that.
There are concerns about voluntary schemes. For example, a disproportionate number of front-line and low-paid workers may be allowed to go. There is no involvement from unions in the voluntary schemes, and our experience has shown that the majority of people who end up leaving the employer as a result of those schemes tend to be front-line low-paid workers.
There was a commitment in the budget statement that job losses could be managed through voluntary redundancy or by using skills differently and being more flexible. I agree, however, with what David Black and Joe Di Paola said. To me, a job loss is a job loss, whether it is lost through voluntary or compulsory redundancy.
The Cabinet Secretary for Health and Wellbeing has been able to say that there will be no compulsory redundancies in the health service. The Cabinet Secretary for Finance and Sustainable Growth has said that as far as he is concerned there will be no compulsory redundancies for people employed directly by the Scottish Government. Is that the same in local authorities?
Absolutely not. This is a real question raised by the budget proposals. Although there is a feeling that the no compulsory redundancies statement applies across the public sector, that is not the case. That statement does not necessarily transfer down to local government. I would be interested to hear the employers’ view about sitting around the table with the trade unions and coming to a no compulsory redundancy agreement that would apply in all 32 local authorities. I would also be interested to engage with the employers about pay restraint and pay freezes. The cabinet secretary has said that there will be a £250 payment for those earning up to £21,000 a year, but that does not apply automatically in local government. We would certainly be interested in engaging with the employers on that.
Each local authority will need to look at its own situation, but many local authorities are advising me that there will be no compulsory redundancies and that they can manage 2011-12. One or two are perhaps considering that that will be difficult.
Your ambition to avoid compulsory redundancies is for a year only, is that right?
That is the only settlement that we have at this time.
The length of the settlement applies to more than just compulsory redundancies, does it not?
In terms of forward planning, yes.
If it applies to that, it applies to everything else.
We have a separate settlement in local government. The Cabinet Secretary for Finance and Sustainable Growth is responsible for the people for whom he is responsible; the local authorities are quite separate in terms of their pay arrangements. Mr Swinney’s budget statements about staff do not directly impact on local authorities at all.
There is a strict relationship between a pay freeze for the public sector and our ability to maintain our workforce levels. If we did not have a pay freeze, there would be pressure to reduce that workforce even more.
The important issue is the seeming unwillingness of employers to engage on the issue of low pay. Earlier, a living wage was mentioned. Around 10 per cent of local government workers—250,000 people, many of them part-time workers and many of them women—are on less than £6 an hour.
If local government was to implement the deal whereby those earning less than £21,000 were paid an annual rise of £250, that would affect 65 per cent of local government workers in Scotland. That shows the extent of low pay in local government in Scotland.
Alex McLuckie highlighted the issue of low pay well. Earlier, convener, you mentioned bargaining arrangements. It is right and proper that bargaining issues are dealt with through the appropriate bargaining arrangements, but we come back to the point that assertions are being made about the public sector getting no compulsory redundancy agreements and certain things for the low paid. We have to be clear that those things do not transfer to local government. Nevertheless, it would be absolutely wrong for the employers and the trade unions not to have engagement on those issues. Why should low-paid workers in local government lose out?
I suppose I should try to answer all the points that were made by colleagues, as I have done before.
I do not want to prolong the discussion. I think the point has been made. If Mr Dorward comes back in, we might go on too long.
Convener, I have to say that I do not recognise the figure that 65 per cent earn less than £21,000. We have carried out our own analysis in our council and the percentage is significantly lower than that.
What is your percentage?
It will be under 5 per cent.
That is a big disparity. I will leave you—
The difference, I believe, is that many of those staff are part time. A significant number of part-time staff are paid less than £21,000 per annum. The full-time salary is the important thing. When we looked at the issue—
We will welcome any additional information on that.
I would just like to come back on some of the things that Joe Di Paola said. I am conscious that—
No, leave them until next week’s meeting, when you will have him direct.
For the committee’s benefit, what we are talking about is low pay. What I take from Mr Swinney’s statement is that he recognises that there is an issue with low pay and that we need to deal with it. Joe Di Paola mentioned talking about the issue, but the problem is that we are not talking about low pay in local government. We are talking about low pay for everybody else, but we seem to be isolating the issue of low pay in local government.
I will try to keep my couple of questions short because I know that time is pressing for everyone this morning. My first question is principally for COSLA and SOLACE colleagues. Obviously in the past few years, COSLA has been a significant partner with the Government in helping to make suggestions such that the 32 local authorities have agreed to the council tax freeze, given various conditions. I suggest that, by and large, that has meant that local authorities in Scotland have delivered more services for the same amount of money. However, the current funding round and John Swinney’s recent budget statement have created a different picture for the council tax freeze because COSLA’s members are being asked to put in place a council tax freeze with conditions that are more significant in many ways. In particular, there will be less funding to deliver the policy. In your view, is the council tax freeze sustainable? If it is not, how can we make the leap to get out of it?
David Dorward says that I will go first.
Over the past three years the council tax freeze has been universal. The reason is fairly simple: the £70 million grant was enough of an incentive to have a council tax freeze. The deal that is on the table increases that incentive quite significantly, so that the hold-back is £426 million, and councils would receive a 6.4 per cent cut in grant as opposed to a 2.6 per cent cut in cash terms. I believe that local authorities will find it difficult not to take that level of grant reduction on board when arriving at their decisions.
Those were helpful comments from both of you. However, I asked how we can get out of the situation that we are in to ensure that our local authorities provide good-quality services in the longer term. Is a council tax freeze sustainable?
In the grant situation, we are looking at 2011-12. I go back to my assertion that there needs to be a comprehensive spending review in autumn 2011. An element of that is whether the council tax freeze grant—if that is what it now is—will be sustainable.
My second question is principally for our union colleagues. I am sure that you are all very good negotiators on behalf of your members. I am thinking of your membership in general, not just the TU representatives and senior guys like yourselves. Unfortunately, in the past, when negotiations have broken down, members have been faced with a recommendation from the unions to take industrial action of one form or another. If and when that situation is reached in current and future negotiations, is it not an awful lot less likely, given the current financial climate, that your membership at large will give you that support? They might consider the risk of financial hardship to be much more stark now than it was five, 10 or, especially, 15 years ago.
That is a statement that I have made many times in the past about industrial action. Whenever we enter any type of industrial action, it is a last resort and comes after full and proper consultation of our members. We do not do it lightly. That will continue in the future. It is an option, though. You are right—there are challenging times ahead of all of us, but at the end of the day, it is not the people sitting round this table who will say that industrial action will happen; it is ultimately our members who make that decision. It is also about the law, which we must comply with. We have to jump through various hoops before we get to the stage of industrial action.
That happens, however, based on your recommendation, Mr Black.
We need to bear it in mind that there is no agreement with the trade unions for anything like a three-year deal and that the decision on pay has been imposed. We are free to return to COSLA at any time to say that we want to discuss further terms and conditions of employment.
We do not go down the route of industrial action lightly. As colleagues have said, to take action nowadays we must jump through momentous hoops—not least, court challenges by the employer. In these days of austerity, our members appreciate that the choices that face them relate not just to pay increases but to pensions, job security, their long-term future and the delivery of services. People who work for local government are users of local government, of the health service and of education services.
Was the question about the council tax freeze directed to the trade unions?
Yes.
The question was whether the council tax freeze is sustainable. The answer is probably no. In the current situation, we have said that councils have been presented with Hobson’s choice. If they do not accept the council tax freeze and a cut of 2.6 per cent, they must accept a cut of 6.4 per cent, with the possible consequence that they would have to raise council tax by anything between 15 and 18 per cent to bridge the gap, which would be a suicidal option for many authorities.
I want to follow up Alex McLuckie’s point about pensions. I understand that the 3 per cent increase that he mentioned refers to civil service and NHS pension schemes. The local government pension scheme has an actuarial valuation every three years. The valuation is due in April 2011 and will be effective in April 2012. Employees already pay significantly more into the scheme than NHS or civil servants pay into their schemes. Therefore, the 3 per cent refers to those schemes and not to the local government scheme, which has a higher employee contribution rate.
That is an important point. I absolutely accept what colleagues said about the need for people in local government to have safe and secure pensions: all working people are entitled to safe and secure pensions. During the past five or six years, that is one of the few issues on which we have been able to agree with our trade union colleagues. We have consistently fought for a proper ability for the local government pension scheme in Scotland to be looked at as what it is: a properly funded scheme. That is important, because the NHS and civil service schemes, for example, are unfunded. The local government pension scheme is funded by the contributions of the employees and employers and by investments that are based on those contributions.
We heard this morning that there are three methods of reducing staff in local authorities: voluntary redundancy, early retirement and compulsory redundancy. Ms Farmer’s impression is that a larger proportion of lower-paid workers in local government seems to be taking up voluntary redundancy. Is anyone in COSLA or the trade unions monitoring the impact of voluntary redundancy and early retirement, so that they can say where the impact is being felt most? As Ms Farmer said, the taking up of voluntary redundancy by the lowest-paid workers will have an impact on front-line services.
I do not have figures on the matter, but certainly the information that is fed back to us from our local representatives is that when voluntary packages are offered, people who are in the lower-paid, front-line jobs are more likely to be accepted for voluntary redundancy, because the hit to the employer is lower.
That is not what we have found in the Dundee scheme. We have had 500 applications and have already approved 167. The average salary of the 167 is approximately £30,000.
I have a further question for Mr Dorward about one of his comments. Were you describing Dundee’s criteria for selection for voluntary redundancy, or are those criteria applied throughout the 32 local authorities that are members of COSLA?
They are Dundee’s criteria. I cannot assert that what I said is true for all 32 local authorities.
Part of the reason for our examination of the situation today was to get a general impression of what is happening throughout the 32 local authorities in Scotland. What we have had today so far is information about individual cases, including David Dorward’s comments about Dundee. He also told us about Dundee reducing the working hours of some—not all—staff. Three weeks ago, we heard evidence from a local authority representative who referred to their local authority increasing working hours for some staff. We seem to be getting different pictures, depending on the local authority.
I will kick off on that one. We have a single status agreement that is made up of different parts. Some parts are for national conditions and others can be negotiated and alternative provisions made at the local level. We bargain nationally on pay, and we would bargain on terms and conditions that apply in the national part of the agreement.
Unite supports that position. If we are talking about austerity and considering costs, we must question the cost of individual bargaining in all those employers and local councils and ask what cost savings national bargaining could generate.
I permit myself a wry smile about Douglas Black’s comment. He and I were on the same side when we negotiated the single status agreement. It was clearly set out that there was a trade-off between what could be done nationally and what could be done locally under that agreement.
I will respond to Mr Wilson’s comments about my comments about Dundee. When I talked about reduced hours, I was making a general comment; it was not about Dundee.
I will clarify a comment that Joe Di Paola made. He seemed to suggest that the trade unions were in bed with the employers on the break-up of national bargaining, which was absolutely not the case. As a matter of fact, the employers held a gun to the trade unions’ head over the introduction of single status. We had to negotiate some elements that would be national and some that would be out to agreement with the individual local authorities or the alternative would simply have been local bargaining.
The Cabinet Secretary for Finance and Sustainable Growth has indicated that any Scottish Government staff who earn less than £21,000 will have their earnings raised to offset any impact of the wider economic situation. As an aside, I note that, under single status, we have ended up with 32 different pay scales—they have multiplied over the piece.
We have always supported initiatives to improve the position of the low-paid. It is a mistake to say that that cannot be done under single status. It has been done in other areas of the public sector, such as the NHS. There are ways of addressing the issue of low pay without disrupting pay agreements as a whole.
John Wilson is correct. The differentials between higher-paid and lower-paid people in local government have increased over the years. The principal reason for that is the fact that local government settlements have been percentage settlements—2 per cent on £70,000 a year is much more than 2 per cent on £15,000 a year.
I am the last remaining person yet to sign up to the single status agreement, which worries me a bit. I remember Pat Watters in a different guise saying that single status would produce a workforce that was smaller but more highly rewarded. We are getting the smaller workforce, but we are not getting the higher reward, which is a difficulty.
Perhaps we can get the COSLA figure that everybody would agree with, if that is the source. I will allow Mr Di Paola a quick response.
Thanks very much. Colleagues and I are having an old argument in front of you. It is all good, knockabout stuff but I am not entirely sure that it adds to the discussion. The fact is that there are 32 different pay structures in Scottish local authorities, based on the single status agreement. You cannot just say, “Do that right across the country,” as there will be differential impacts. Even if you take off Alex McLuckie’s bottom two spinal column points, although that might not have any real effect in one authority, you will find that it causes inequalities in another. We have had the discussion before and we will continue to have it. I hope that we will resolve it at some point.
We need to move on and reorganise the delivery of public services, so it is important to resolve the division that we see before us.
Good afternoon, everyone. If I may, I will move the discussion on from pay issues and pay negotiations to the issue of funding and the agreement between COSLA and the Scottish Government. We have established that, in return for being given an additional £426 million, Scotland’s councils, through COSLA, have signed up to a whole set of commitments, including the council tax freeze. My question is for Mr Dorward and Mr Di Paola. Does COSLA believe that that figure is sufficient to fund all those commitments, and are all the member councils committed to fulfilling them?
The document that came out of the discussions is a reflection of the negotiations and indicates to councils the best that can be achieved. It is not an agreement with Scotland’s councils yet. The COSLA leadership went to the discussions and were present all the way through, and, along with John Swinney, Pat Watters signed the letter that has gone out to councils. I reiterate, however, that it is a matter for individual councils to decide whether they are prepared to accept the commitments on both sides of that agreement, and that the discussion document is currently with councils for agreement. That is the absolute position—there is no agreement yet.
But is it the COSLA view that £426 million would enable all your councils to fulfil those commitments? Where did the figure of £426 million come from? What is the correlation between the figure of £426 million and all those commitments?
I think that you know the correlation. The difference between a reduction in grant of 2.6 per cent—which is what is being offered in return for those commitments—and a reduction of 6.4 per cent, which is the average reduction across departments, is approximately £426 million, including the £70 million for the council tax freeze. So, the price of the agreement to deliver the commitments is £426 million.
Yes, but we know from previous cases that, broadly speaking, £70 million a year delivers the council tax freeze. Some people would suggest that £70 million was marginally generous, but we will not go into that. The issue is whether the balance of £356 million funds all the other things to which you have signed up.
There is a difference in the calculation of those two figures. You are correct that the £70 million funds a council tax freeze. The 6.4 per cent is the average cut in the public sector, and that is how the figure was arrived at. I do not believe that the conditions that were put in were costed to equate to that figure of £426 million; it just happens to be the average cut that the rest of the public sector is getting.
Right. So, according to the councils, there is no correlation between the figure that you are being given and the commitments that you are making.
I do not believe so.
Has the Government expressed the view in the negotiations that there is a correlation between the £426 million and your commitments? Does the Government think that the commitments are fully funded? Did it say so?
I am not in a position to answer that, as I was not at the negotiations. I am not being coy, but I am not prepared to say something at second hand when I have no direct knowledge of whether it was said in the discussions.
Some of the commitments on education interest me. They are in your domain—I accept that the number of police officers is a more indirect commitment. There is a commitment to maintain the pupil teacher ratio in primary 1 to primary 3, and commitments on teacher posts, employment and so on.
For some of the commitments there is a matching commitment from the Scottish Government. For example, there is a commitment from the Government to ensure that funding will be provided to police forces in order to retain the existing number of police officers.
I accept that, but my question was on the education of children, which is wholly within your domain. I accept your qualifications on policing, but we are not talking about that; we are talking about COSLA’s commitments, and the commitments of councils, to the Government on the delivery of education, for which you are wholly responsible. You signed up to the commitments in the previous concordat, and you have failed miserably to fulfil them. Why should we believe the concordat any more?
I was going to finish by saying that an extra £15 million will cover the protection of the number of teaching posts. Part of the deal set out by the Scottish Government is to maintain the existing pupil teacher ratio.
But that is maintaining a pupil teacher ratio that represents the failure to implement the previous agreement. All that you are doing is sustaining failure. That is not taking anything forward, is it?
I can tell you only what is in the deal.
I know what is in the deal, but it does not seem to be much of a deal when all that you are doing is reinforcing failure. You failed to honour the deal the last time round. Is that not a fair comment?
I would not say that we have failed, universally, to honour the deal.
Well, many councils must have failed to honour the deal because we did not get progress, we did not get the free school meals and we did not maintain teacher numbers throughout Scotland. Somebody failed somewhere.
Many councils used the free school meals money to introduce breakfast clubs, for example. That gave a greater focus on providing meals to children in deprived areas.
I absolutely agree, and some of the children of constituents in my area received exactly that. However, that was not what you signed up to. That is my point.
The Government seems to have confidence in local authorities, or it would not have offered another deal. An offer lies on the table, which our councils will pick up—or not, as the case may be.
You talk of constraints. However, the preface to this discussion was that we were in an unprecedented situation. I think that Mr Dorward spoke of 10 years of real funding increases. On page 13 of the COSLA paper, I am told that—and we have heard it many times on this committee—cumulatively over the past four years, our councils have made more than £1 billion of efficiency savings. We keep being told how those savings are “cash-releasing” efficiency savings. If you have accumulated £1 billion-worth of cash-releasing efficiency savings, how come you did not maintain teacher numbers? How come you did not produce all those school meals? When you had all that cash-releasing stuff sloshing around, why on earth was it not employed in fulfilling the core commitments to which you had signed up in your agreement with the Scottish Government? Would you not have thought that those would have the first call on all those great efficiencies that you had managed to achieve?
That is painting a very black-and-white picture. What has to be said—
I am a black-and-white fellow. It is a sensible point.
The environment in which local government and the public sector are working is constantly changing. I go back to the fact that 50 per cent of our funding gap is a result of increased demand on services such as social care, children’s services and education services. All the efficiencies that you mentioned have been used to support the very significant increases in demand on those services and to achieve the council tax freeze for the past three years, which was quite a significant element of the concordat.
But earlier you told us that you have budgets that are increasing in real terms. You said that the present situation was unprecedented in the past 10 years. Your council tax freeze was fully funded and, cumulatively, you managed to make more than £1 billion in cash-releasing efficiency savings. Should not all the demands have been met out of all those great savings? The cash-releasing efficiency savings were not top-sliced—you got to keep them—were self-certifying and were incapable of being audited properly by Audit Scotland.
The cash-releasing savings were part of the settlement. Previously, an assumption was made that local authorities would have 2 per cent efficiencies when the grant settlement was determined. That is unlike the situation with the current settlement, whereby efficiencies of 3 per cent have been assumed but not top-sliced off the grant settlement. If we make efficiencies of 3 per cent, we will use that money to make savings or to redesign services. There is a distinction between that arrangement and how grant was calculated previously, when an assumption that 2 per cent efficiencies would be achieved was made when the grant was distributed.
Mr Swinney has been telling the Parliament for years that there has been no top-slicing—I have heard that for at least three years in a row. It is a proud boast of Mr Swinney’s that there is no top-slicing of efficiency savings and that you get to keep all your money, so there seems to be a major variance in perception.
With respect, you are being extremely selective.
You are the one who wrote it.
But you missed out the last part of the paragraph, which says that the fact that we have prioritised efficiencies means that
Yes, but some of the efficiency savings that we keep hearing about are ones whereby more is achieved for the same as opposed to the same being achieved for less. If more is achieved for the same, by definition, rising demand will be met using the same amount of money.
Yes. Local authorities have made those savings year on year.
With those savings, you were able to deliver more for the same, or the same for less. That is what an efficiency saving is. Is that right?
All in all, we achieved a council tax freeze.
No, no. That was separately funded.
The savings that you are talking about are for the five-year period from 2005-06 onwards.
It was a four-year period, actually. It is in your submission.
Sorry; it was the four-year period from 2005-06. The savings do not match up to those that were made during the period of the concordat, to be honest. The figures for the efficiency savings come from 32 individual efficiency statements that were drawn up by the 32 directors of finance who recorded the efficiencies.
Well, that is excellent, because you had an on-going commitment to save 2 per cent per annum even before the current financial crisis. Since you have been so successful in the past, we can look forward to even greater success in the future.
The tighter the budgets get and the higher the reduction in anticipated funding from the Scottish Government, the more difficult it becomes to make those efficiency savings and keep them going on a cumulative basis. I come back to the point that I made earlier about why it is so important to look at redesigning services and to work with our partners to reduce our costs in that way. Although the efficiencies that we have made to date were achievable, we cannot hope to keep finding those efficiency savings over and over again. They are only one part of the equation for a balanced budget.
I could not agree with you more, but you agreed to that, so we expect you to deliver it.
Mr Dorward, you said that money is coming to local authorities to maintain the number of police officers, and that £15 million has been ring fenced to protect the number of teacher posts as far as possible.
It is not ring fenced.
No, it is within the overall settlement; it is not ring fenced.
So once again, we are in a situation in which something might or might not happen.
If a local authority signs up to protect teacher posts, I expect that that is what will happen. Also, a local authority has greater control over the number of teachers than it does over the number of police officers.
Okay. We will leave that one sticking to the wall for a moment or two.
As Joe Di Paola said earlier, teachers agreements are tripartite agreements. I assume that an independent review of the McCrone agreement would be set up by the Scottish Government, but it would have to include all those who are party to teachers’ pay negotiations. I assume that, but I do not have the details to give you.
But it is part of the agreement with COSLA.
It is part of that agreement.
COSLA does not know who will be responsible for it.
That has not been agreed yet. The arrangements are not in place.
But it has been agreed that there will be an independent review.
Yes, indeed.
But COSLA does not know who will be responsible for putting it in place. There is supposed to be a report in June 2011.
I am not sure what you mean by “putting it in place”. We will be having discussions with the Government about that very soon.
Last week, for example, the cabinet secretary announced that the Christie commission was about to get under way and would report in June 2011. This independent review is going to report only one month later, but no one seems to know how or when or what its remit might be.
There will be discussions with Government colleagues and civil servants within the week about this commission.
Those will take place this week.
Within the week.
That will be very interesting. What is the likely remit of the review?
I do not know. I think that, 10 years on from the publication of “A Teaching Profession for the 21st Century”, the review will examine all aspects of the McCrone agreement. At the moment, all aspects of the agreement will be examined, so nothing has been excluded from the review.
There must be a remit that will be given to whoever will be part of the review.
I am not aware of the remit at the moment.
That is very interesting.
I am not able to give a figure at the moment, although I can refer your question to my finance colleague, who had been going to be here today. Finance is not my area of expertise, so I will refer that question to my colleague.
The cut might be bigger than 2.6 per cent if all these items are still to be costed and considered as part of the discussions?
I apologise, as I can answer only from my experience. For my council, there is not a significant additional cost. There is some element of cost, but it is not significant and does not add greatly to the 2.6 per cent. I have no overall COSLA figures for the cost.
Could what you say be because your local authority has already achieved most of these requirements?
That could be the case.
But your experience is not necessarily typical of the picture in the other 32 local authorities.
I cannot say that it is not typical.
But it is possibly not typical.
It is clear to us that the measures that we have discussed with the Government will mean a drop of 2.6 per cent in cash terms in the revenue funding to local authorities compared with 2010-11 figures. The comparison figure is the average cut in revenue budget for all other non-protected public services, which we reckon will be 6.4 per cent. The total of £11.5 billion equates to a 2.6 per cent cut—there is no dubiety about that—and the comparison figure is 6.4 per cent.
That figure must be an average so, for local authorities that have not yet met some of these conditions, the cut will be bigger than 2.6 per cent.
It may be, but the difference will be marginal. The cut will get nowhere near 6.4 per cent. If there is a marginal difference, it will increase the figure by a few basis points.
We also discussed the redesign of services. Local government is managing vacancies, taking through an early retirement process, possibly reducing hours, possibly introducing career breaks and looking at voluntary redundancy. I accept that the pay bill is your biggest single outlay, but I presume that other budgets are also reducing in terms of what you procure, what you purchase and what you serve. How do we ensure that services are redesigned and not reduced as a result of all those measures?
Some services, such as child protection, will not be reduced at all. Indeed, they may have to be enhanced. Some authorities are looking at the prioritisation of services, and that is what we will need to do. As local authorities, we may determine that we have to stop some non-statutory, non-core services altogether. Those might be relatively small services, but that must be the view that is taken—we have to consider all services in terms of service delivery and what is required in the local community. I imagine that there will be cuts to some services, and that we will have to reduce our current level of service. It will vary across all councils and all services. In child protection, I have given you an example of a service where I would not expect there to be a cut. Because of the demand, we are investing more money in children’s services.
I am very sympathetic to that argument, but if you have to enhance some services at a time when cuts are being made, there will be bigger reductions elsewhere.
That is a truism.
Mr Di Paola, you mentioned “non-protected” budget lines in response to Patricia Ferguson. What are the non-protected budget lines?
If any protection is given for any part of the public sector, that will impact differentially on other parts of the public sector. If health was protected in a way that differentially impacted on local government, that would be the fact of the matter. My point was an extrapolation of Ms Ferguson’s point about services within authorities. If we take the public sector in totality, if one part of the organic whole is protected in any way, other parts of the public sector will take a disproportionate hit. I was speaking in that context.
One of the benefits that we saw in the settlement was that local government’s share was protected. There was a fear before the settlement was made that health would somehow be protected at the expense of all other elements of the public sector, including local government, so the cuts to local government could have been greater than 2.6 per cent. That is a general point about the protection of local government services. To some extent, that has happened.
In terms of evaluating what is a good agreement, yet another factor in the negotiations was the share to be taken by local government. We have learned and been advised that that share has been marginally protected. The share going to local government is marginally down, in fact—it is not up or maintained.
My understanding is that 6.4 per cent is the average reduction in all elements of the Scottish Government block, except the NHS and local government. It is the average cut that the rest of the Scottish block is receiving. That is where that figure has come from, and it has been applied by the cabinet secretary, in that it is the percentage cut that local government will share if individual councils do not sign up to the deal.
We might wish to take the matter up with the cabinet secretary.
What is your view on the impact of an 18 per cent decline in capital funding?
The cut, as we understand it, is 17.9 to 18 per cent. That cut might have limited effect in 2011-12 because, by its very nature, capital involves long-term planning. My fear is about what effect that cut will have in the longer term if it continues at that level or worsens. Councils will certainly have to review their capital plans given the reduction in the grant, although the grant figure is not the sole source of funding for our capital programmes. We have prudential borrowing and we can use capital receipts, although we are all having to revise downwards our capital receipt estimates in light of the current financial position and our ability to sell surplus land or buildings. The reduction will have an impact on the capital programme. Over one year, the impact may be limited, but my worry is what level of capital resources we will have over the longer term. Most local authorities appreciate that the public sector capital programme is a key element of keeping employment in their area, particularly in the construction sector, and have therefore tried to maintain their capital programmes as far as possible. Certainly, that is what we have done in Dundee.
Can you put a figure on the number of public and private sector jobs that might be affected by that kind of cut?
I could not do that at this time.
At this time. So, you could at some stage.
I would have to ask finance colleagues whether any work of that sort has been done. I will ask the question.
One way in which to address the shortfall—Mr Dorward referred to this—is through borrowing. Clearly, local authorities will have different levels of outstanding debt. What is your view on that, including on the opportunities for borrowing?
We are governed by the prudential code that the Chartered Institute of Public Finance and Accountancy brought in. It is up to each council to look at their level of current borrowing and the affordability of any future borrowing. Where we can demonstrate that there will be savings from new building—for example, if it allows us to rationalise schools—any resulting saving allows us to borrow. I know of some councils where that will still happen, despite the cut in grant and the financial position that we all face. There has also been a 1 per cent increase in the Public Works Loan Board rate, which will have a marginal effect in 2011-12 but will increase the cost of our borrowing in the longer term. With every passing year, those increased finance charges will have an effect on our revenue budget, but I believe that the effect in 2011-12 will be minimal.
Interest rates are very low at the moment. If they started to rise, at what stage would you start to have a problem?
That is a crystal-ball question.
Let me ask a proper question. Has the Government discussed with COSLA and individual local authorities the present borrowing situation and how the reduction might impact on capital programmes? The council that can borrow the most may not be the one that needs to spend the most. Is there a way of managing that? Is that discussion taking place?
I am not aware of that discussion.
It is each local authority for itself.
Yes.
COSLA set up an infrastructure task group last year, which comprised directors of finance and other interested professionals. The group looked at a whole range of capital-related issues. I am happy to take the question back and try to find out what conclusions, if any, were reached in that context.
Were minutes of the meetings made available?
I do not know.
It might be interesting to see where the discussion went on that.
Historically, prior to prudential borrowing, we used to get consents from the Scottish Government. Councils, which might not require the consent one year but might the next, could trade those consents. Prudential borrowing decisions are taken individually by each council. The level of debt of each council varies, as does its level of need, so decisions are very much made on a council-by-council basis. Individual councils decide on the level of prudential borrowing that they can afford to enter into. The austerity that we are feeling on capital through a reduction in grant and a reduction in capital receipts, which has bitten earlier than the reduction in grant, means that we have started to look at alternative methods of capital funding. I know that tax-incentive funding is one area that some councils are looking at to try and supplement the reduction in capital capacity.
I listened to the Minister for Housing and Communities last night say that he wanted to make more land available for housing and that he would encourage the public sector to make that land available, possibly with a lead-in time so that it would make the land available now but get the receipt for it in five or 10 years when, hopefully, the market will be better. Have you discussed that?
No. Local authorities have a very significant asset management planning regime under which they are looking at all their assets, such as buildings, land and fleets, and reviewing what they need to carry forward. We are trying to do that in a pan-public sector way, so we are dealing not just with local authorities but with health authorities, the police and so on. The outcome of that is that we will be releasing buildings and land. Unfortunately, if we flood the market at one time, particularly a market that is not keen to buy or develop, we will have a problem. We are trying to work out a strategy for how to release those assets.
Are there any more questions from the committee? No.
There is money in the system. There is a scheme in place to assist councils in coping with the impact by spreading costs associated with equal pay over more than one year.
In addition, in closing their accounts, local authorities will need to have made a provision for what they estimate to be the equal pay claims.
From the trade union point of view, we are beginning to see some councils settling, but I think that it is more a trickle than a flood. The issue has been kicking about for a few years now—certainly we have been here on a number of occasions talking about the logjam. I am heartened to see that there is money in the system. An old-fashioned saying of mine is, “We want our money and we want it now.” If the money is in the system, it would be very helpful if we could turn that trickle into a flood and get the issue of equal pay in local government dealt with. A cost is still there for the councils, but if it is dealt with and got out of the way, that is one less worry for them and our members will receive payment for their inequality of treatment in the past.
Okay. I thank you all for your attendance today and the valuable time that you have given us.
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