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Chamber and committees

Local Government and Communities Committee,

Meeting date: Wednesday, May 28, 2008


Contents


Local Authority Audits 2007

The Convener:

Under item 2, we will take evidence from the Accounts Commission and Audit Scotland on the "Overview of the local authority audits 2007" report. We welcome Professor John Baillie, the chair of the Accounts Commission; Caroline Gardner, the deputy auditor general, from Audit Scotland; and Gordon Smail, the portfolio manager of local government audit in Audit Scotland.

I invite Professor Baillie to make some brief opening remarks.

Professor John Baillie (Accounts Commission):

Thank you for inviting us to brief the committee on our overview report.

Each year, the Accounts Commission requests a report from Audit Scotland on the main issues arising from the audit of Scottish local authorities. The report covers 32 councils and the 41 related local authority organisations such as the police and fire boards. Together, those bodies spend about £16 billion a year.

The overview report brings together all aspects of the commission's work—that is, the financial and governance audits, the audits of best value and community planning, the statutory performance indicators and our in-depth studies of services—and draws on them to highlight strengths and areas for improvement.

This year, the report highlights progress on services and the need for an increased focus on key areas to meet the challenges that are coming. I have six key messages that I want to mention briefly before making three specific points about the Accounts Commission itself.

The first message is that there is improved performance in a number of areas in councils. For example, further improvements were noted in council tax collection and waste recycling, where the trends remain encouraging. The proportion of council tax due and collected in the year to March 2007 was just under 94 per cent, which represents a relatively small increase on the previous year and on the year previous to that. We are now into the 90 per cents, where improving the collection rate gets that bit trickier, but the trend is still upwards, which is encouraging. Another area of improvement is the amount of waste that is recycled or composted, which was 28.4 per cent. Two years ago, it was only 17 per cent, so, again, that is an encouraging trend.

The second point involves the major changes that we said last year were likely as a result of the 2007 council elections, which used a new voting system and featured multimember wards. The early signs are that the transition has gone and is going well. Almost half—I think the figure is 47 per cent—of Scotland's 1,222 councillors are new, and they are bringing fresh ideas and impetus. However, they need to be supported in their new and developing roles, particularly in areas such as strategic leadership and scrutiny.

The third point is that councils need to significantly improve performance management so that they can show that they are improving services for local people. That is also essential to support the shift towards an outcomes-based approach, as set out in the concordat between the Scottish Government and the Convention of Scottish Local Authorities.

The fourth point is that financial accounting and reporting remain sound. Audit qualifications are rare—only Shetland Islands Council's accounts were qualified last year. Likewise, the commission's drive for better information about reserves has been successful. I am pleased to say that all councils now have policies in place that set out why reserves are held and their intended use. Reserves increased in the year to March 2007, but unallocated reserves—those for contingencies—represented less than 2 per cent of the net cost of services. We have said that the amounts that councils hold and what they do with those amounts are for councils to decide on, but they must take account of local circumstances. That remains the case.

The fifth point is about pressure on finances. For example, the implementation of single status agreements and above-inflationary increases in energy costs underline the importance of robust long-term planning, which must be risk based and sustainable.

The sixth point is that councils need to demonstrate the net benefits of community planning, other partnership working and sharing business support services.

I will finish with three points about the work of the Accounts Commission. Joint study reports that have been published in recent months, such as those on waste management and on free personal and nursing care, provide examples of our cross-cutting work with the Auditor General for Scotland. We jointly examine topics that affect local government and other parts of the public sector, including the Scottish Government. Our work on those major policy matters shows how the commission and the Local Government and Communities Committee can work together.

The commission welcomes the work that Audit Scotland does with the inspectorates and the other scrutiny agencies to minimise duplication and reduce the burden on the organisations that we audit. The Crerar report highlights the need for more streamlined scrutiny that is based on robust self-assessment and a sharper focus on service users' needs. We support that approach and welcome the role that is envisaged for the Accounts Commission in realising that aim. To that end, we arranged a meeting that was held only on Monday with the chairs and chief executives of the other major scrutiny agencies. The meeting was interesting and convivial and lots of wishes for co-operation were expressed. I was delighted that the Cabinet Secretary for Finance and Sustainable Growth took up my invitation to attend that meeting and gave us two hours of his time to participate in the discussion.

Our programme of best-value audits is contributing to better governance in councils. We have reviewed how we go about that work in advance of the next round of best-value audits, which starts in mid-2009. That should ensure that our processes remain fit for purpose and continue to contribute to improving services and governance in local government.

In aggregate, the Accounts Commission is encouraged by the progress that councils are making and looks forward to working with councils through audit to deliver greater improvements.

The Convener:

Audit Scotland's report emphasises the fact that local authorities will have to increase their focus on several key issues, such as integrating finance, workforce and asset planning. Do you have examples of the benefits that you believe councils would derive from such closer co-operation?

Professor Baillie:

In relation to financial planning, pressures on costs arise from single status agreements and equal-status agreements, demands on services such as social care and the need to make efficiencies. Unless councils not only recognise those pressures immediately as they fall due, but plan in the medium to long term to take care of them, councils could find themselves in difficulty. One of our concerns is that there should be a proper assessment of expected efficiencies—a no-kidding review of the future—that will produce some kind of plan against which progress can be monitored.

It is also important to co-ordinate all resources and make sure that everyone is marching to the beat of the same drum. It is important that the asset management is in place and co-ordinated with the financial planning and, likewise, it is important that the workforce planning is in place. A difficulty with workforce planning at the moment is that council human resource departments have to spend so much time dealing with single status arrangements that they cannot spend as much time as they would like on strategic planning for the workforce—how many people will be needed in future and for what purposes.

At this stage, it would be useful for me to hand over to Caroline Gardner:

Caroline Gardner (Audit Scotland):

I can offer a specific example that highlights why such integration is so important. A couple of months ago, the Accounts Commission and the Auditor General for Scotland published a report on the school estate in Scotland, which found that good progress had been made in investing in schools to make them fit for purpose for 21st century education. It highlighted, however, that much better information about the current condition of schools is now available than was four or five years ago, which means that local authorities need to review their strategies and priorities for investing money to replace or refurbish schools for the future.

The report also showed that councils that have already entered into large-scale private finance initiative deals sometimes have difficulty in looking ahead at the revenue consequences of those contracts. The Scottish Government makes a significant contribution towards the revenue costs of PFI contracts, but that contribution is pegged in terms of real-terms costs, which go up with inflation each year. The commission therefore highlighted the fact that councils need to look ahead in a more evidence-based way than they have so far, and that they need to look ahead for the life of the PFI contract to make sure that they plan for and can cover the associated revenue charges.

The Convener:

Single status agreements have been mentioned a couple of times, and the committee is interested in their scale and the challenge that they present. How many councils have implemented the agreements and what costs are associated with them? Are you satisfied that the councils are aware of and have planned to meet those costs?

Professor Baillie:

Approximately one third of councils have now settled their single status agreement arrangements, so quite a lot has still to be done.

So far, the costs run at about 1 to 8 per cent—quite a wide range—of employee costs. The significance of that is that employee costs are about 40 per cent of each council's annual aggregate expenditure, so that 1 to 8 per cent is quite a big figure.

Are you confident that those who have not implemented the arrangements are making plans on which they will be able to deliver?

Professor Baillie:

Caroline Gardner might have a point to make here, but I think that a residue of hard-core cases will be very difficult to settle.

Caroline Gardner:

That is absolutely fair. The councils that made an early start on their arrangements have been able to implement a single status agreement. We know that a number of them are still involved in difficult negotiations with their employees and staff, and some knotty issues are emerging in some councils. One of the problems is that case law keeps changing and councils have to reflect that changing situation as they are negotiating with their employees. That is making it very difficult for them.

A significant number of cases are at tribunal. Can we calculate how many hearings are sisted and the potential liability of councils for legal costs?

Caroline Gardner:

You are absolutely right that a large number of cases are at tribunal across the United Kingdom, not just in Scotland. That reflects the fact that, as well as unions representing their members, an increasingly large number of individual cases are being taken up by employment lawyers. At this stage, we do not know what the legal cost will be to councils, and it is very difficult to estimate their overall liability because the terms of the negotiated agreements change as negotiations continue.

We do not know what councils' liability will be.

Caroline Gardner:

The councils do not know, and we do not know either.

The Convener:

There may be cases at tribunal in England, but is there not a big difference because English councils contracted out many of their public services many years ago, so there will be a bigger impact in Scotland from the single status agreement agenda?

Caroline Gardner:

That is the case for some councils in England, but it is certainly not universally the case. I suspect that the overall impact will be proportionately larger in Scotland, but reliable figures are not available.

Professor Baillie:

Current settlements are running at just under £0.25 million a year in aggregate.

Kenneth Gibson (Cunninghame North) (SNP):

Paragraphs 112 and 113 in part 3 of the report are on sickness absence. Paragraph 113 states that sickness rates in Scotland's councils increased from 5.1 per cent in 2005-06 to 5.3 per cent in 2006-07, which means that around 13,700 council staff were off sick on any given day. Have you considered the reasons for that sickness absence rate and why there are variations in rates across the local authorities? What steps is Audit Scotland taking to help councils develop best practice and performance indicators to address the problem?

Professor Baillie:

Again, Caroline Gardner is close to the work on that, but there is something that I want to say. The sickness absence rate is one of the targets for making efficiency savings in the future. Tremendous efficiency savings could be gained if the figure was attacked and dealt with in a way that employees and councils were content with. Some 3.1 million days a year are being lost because of sickness absence, according to the report. It is clear that there is scope for efficiency savings to be made if the figure is attacked properly.

Caroline Gardner:

We have considered the issue using the statutory performance indicators and best-value audits of individual councils. It is clear that there is not a single reason or set of reasons behind the figure in the report. We want to understand the problem better, so we are proposing to carry out a detailed study of sickness absence and its management in the joint programme of studies that Audit Scotland carries out for the Accounts Commission and the Auditor General for Scotland. We will consult on the matter over the summer. We expect to consider what councils are currently doing and where there is room to improve. Such an approach takes account of the fact that council services are different in different areas. The issues that teachers face are very different from those that manual workers face, and councils must ensure that their strategies reflect those differences.

Kenneth Gibson:

I know that the figures are different for different employment categories, but we are also talking about a geographical spread. I am sure that you would agree that such differences are much less easy to explain. Will you consider how health boards deal with sickness absences and what happens in the private sector to find out whether anything can be learned to manage the problem?

Caroline Gardner:

Very much so. The aim of our studies will be to look for good practice from elsewhere, whether from councils, other parts of the public sector, or the private sector.

Gordon Smail (Audit Scotland):

I confirm that we have proposed a cross-cutting study. We are responsible for almost all parts of the public sector, and we will look across it. We will consider what is happening in central Government, the national health service and local government to find out where best practice exists. How sickness absence is measured is an issue, of course; how it is measured in the public sector varies. There will be scope in our work to consider what is happening elsewhere and find out best practice.

David McLetchie (Edinburgh Pentlands) (Con):

I want to revert to the single status agreement and equal pay claims. My questions follow on from those that the convener asked.

Am I right in thinking that there are two cost implications? First, single status in the new pay grades, structures and so on will result in on-going revenue costs for councils. Professor Baillie, you mentioned that implementing the single status agreement arrangements has cost 1 to 8 per cent of staff costs to date. Secondly, perhaps as a result of the research on single status agreements, there are potential costs resulting from equal pay claims, which are fundamentally back claims and would therefore have to be financed either from councils' reserves or from a special supplementary payment on top of the existing grant. Is that broadly correct?

Professor Baillie:

It is. The single status agreement is an agreement with the unions to have everybody who does the same work on the same level of pay. Sometimes that will mean adjusting people's pay downwards over a period of five years and sometimes it will mean adjusting people's pay upwards—of course, there are people in the middle whose pay will not change. That is essentially what the single status agreement is. It is a UK-wide attempt to standardise things.

David McLetchie:

You said that the cost of that process is 1 to 8 per cent. I took it from that that it is not cost neutral but that the experience to date of councils that have reached agreement is that the overall salary bill has increased by as little as 1 per cent in at least one instance and as much as 8 per cent in another. Is that correct?

Professor Baillie:

There is an element of that, but there is also a goodly chunk of back pay for those whose settlements are now being implemented but dated back to the time when the single status agreements were reached.

I see. So there are three dimensions: current pay, back pay and equal pay claims, which are another issue.

Professor Baillie:

Yes, that is correct.

David McLetchie:

On current pay and back pay, if 40 per cent of councils' expenditure is salaries and they spend £16 billion, that probably means that £6 billion to £7 billion is spent on salaries. As 8 per cent of that is £480 million or thereabout, the cost could be as little as £60 million to £70 million—1 per cent of £6 billion to £7 billion—or as much as £500 million. Is that a fair range?

Professor Baillie:

Yes. I hazard a guess that it is unlikely to run out at 8 per cent, which is why I pointed out that 1 to 8 per cent was the range and that the cost was somewhere in between. Caroline Gardner has the detail of the figures.

Caroline Gardner:

There is a great deal of variation in the stage that each council has reached at the moment, which is why we do not think that it is possible to put a reasonable estimate on the final cost of resolving single status.

There is a particular risk that it is worth being aware of. Councils that resolve single status early generally use that as an opportunity to tackle the equal pay issues as well, but councils that still have not resolved single status have growing liabilities for equal pay rolling up as we speak. Therefore, simply letting the situation run carries a risk over and above any elements of back pay that may be required and the fact that reaching a settlement is getting more difficult because the scale of the equal pay liability is also growing over the period.

Is there enough money in the funding allocation that the Government is giving to councils for this year and over the next couple of years of the comprehensive spending review to meet the anticipated claims?

Caroline Gardner:

The councils that have already settled—as Professor Baillie said, that is around a third of them—have managed to do it within the resources that are available to them. In general, there is no reason why other councils should not be able to do that with the significant caveat that we know that it is getting more difficult because of the extent and complexity of the case law. Therefore, it is difficult to give a firm assurance either way.

Jim Tolson (Dunfermline West) (LD):

Professor Baillie, it was interesting to hear some of your comments about the changes post May 2007. I think that you said that 47 per cent of elected councillors are new. You made the good point that they bring new ideas, enthusiasm and impetus to many of our local authorities. Has the significant turnover in local authorities been beneficial overall? It may be too early to determine that. Has the support that is in place for new members been sufficient to enable them to hit the ground running? Most of the changes came about because previous elected members were offered a one-off redundancy package. Would it be helpful if the Scottish Government were to determine that there should be a redundancy package with each election to even out any inequalities that occurred with the major change in 2007?

Professor Baillie:

I will take the points in the order in which you raised them. I could not comment on the quality of the councillors who have retired. We had fears that new councillors would arrive and not know what to do and that there would be a real risk of councils being managed less well than they ought to be, but we have been pleasantly surprised at the enthusiasm and fresh approach that the new councillors are bringing with them. They do need support, particularly on scrutiny processes, because it is important that councils have those processes properly in place as part of their governance. The councils that perform better and deliver best value more effectively have effective governance arrangements, of which good scrutiny arrangements are part. That means that people who are elected have to be on the ball in scrutinising policy decisions and considering whether the use of resources is sensible and economic. That takes training as well as experience.

Most councils are offering training. One of our concerns from time to time is the extent to which members are taking it up. The difficulty with training, wherever it is held, is that it can be offered and people can have it, but its effectiveness, which is the important thing, can be measured only by their subsequent performance. Nevertheless, the initial training is there. We would like to see all new councillors going along to training courses, because it is important and it keeps their minds open on a number of things. It is important that experienced councillors go on training courses, too—after all, nobody has a monopoly on wisdom.

I will ask Caroline Gardner to answer your question about redundancy.

Caroline Gardner:

Jim Tolson is absolutely right that as part of the changes that were introduced for the elections last May, there was a one-off offer of a redundancy payment for councillors who undertook not to stand again. The Accounts Commission does not have a role in relation to policy. The issue that Jim Tolson raised is very much a policy issue for Government, rather than an issue for the commission.

Johann Lamont (Glasgow Pollok) (Lab):

I want to raise one brief point before I turn to the more substantial issues that I want to cover in relation to single outcome agreements and community planning partnerships.

I am quite surprised that you referred to fresh ideas and impetus in councils, because I would have thought that they were hard things to test. My impression is that your organisation is all about technical testing. Is there a technical definition of the distinction between an efficiency and a cut in service?

Professor Baillie:

There is indeed—and there has been much debate and argument about it. Caroline Gardner can talk about the detail of it.

Caroline Gardner:

Since the beginning of the efficient government initiative three or four years ago, the commission has been clear that an efficiency is either getting more for the same expenditure or the flipside of that, which is getting the same for less expenditure. We are looking for councils to be able to demonstrate that, where they are planning and making efficiency savings, they can demonstrate the relationship between the input and what they get for it. A cut is different: it is where you simply spend less on something and get less for what you spend. Sometimes that is necessary, but it is not an efficiency saving—it is a cut.

Johann Lamont:

If a local authority contracted work out with a tight specification, which meant that, in effect, the cut was being borne by the service provider, would you monitor that? Would you deem that to be an efficiency, because the council was getting more for less money in the contract, although the service provider might have to cut into what it could bid in that contract? Would that come up anywhere in your measurements?

Caroline Gardner:

It would not come up in the short term, but it would come up in the long term. If the effect on the service provider was not sustainable, it would show up as being a cut—a reduction in the quality or amount of service that was provided. Again, we would expect councils to monitor that themselves.

Do you monitor the quality of service delivered by a contracted outlet?

Caroline Gardner:

We expect councils to do that themselves.

Johann Lamont:

You talked about governance and scrutiny. I refer to single outcome agreements and community planning partnerships. We know that the funding for community planning partnerships remains ring fenced for the next two years. What is your understanding of where the plans should be? How are they supposed to be scrutinised and what are the reporting mechanisms for them? Do you have a particular role in relation to the plans?

Professor Baillie:

That is one of the concerns that we have about community planning partnerships and other external organisations. The accountability for outcomes is going to have to be defined more closely so that we know who does what and when and who is responsible for what and when. We are alive to that issue and we will be looking at it. We will need to look more closely at the general issue of governance in respect of community planning partnerships. Community partnerships will continue to develop so it is important that the governance arrangements ensure that the council's view prevails.

Johann Lamont:

As I understand it, Audit Scotland was involved in devising single outcome agreements, which raises the question about how independent Audit Scotland can be in monitoring their impact. You said that local councils should understand how you scrutinise and that you should be able to scrutinise spend across the public sector. How do you envisage that happening with the single outcome agreements? For example, the single outcome agreements seem to be between central Government and local government, but there are obvious implications for health board funding, community planning partnerships and so on. What should a single outcome agreement look like? Who devised it and who will monitor it? How will councillors scrutinise it and how will it be transparent to others who have an interest in it?

Caroline Gardner:

You are right that Audit Scotland is represented on the high-level group that is developing the approach to the outcome agreements; I sit on that group on behalf of the commission and the Auditor General. Our role is not to be involved in the agreement of the individual outcome agreements, but instead to make sure that the guidance that is being used meets our expectations of accountability arrangements, performance management and public performance reporting to ensure that questions of the sort that you touched on can be answered satisfactorily both by politicians in the council and the local area and by local people.

There are two important points. First, the commission has been clear that the move towards single outcome agreements and the reporting against the 15 outcomes and 45 indicators does not in any way change councils' existing responsibilities under best value for good performance management and good public performance reporting. The commission is currently considering how the SPIs need to develop to ensure that good information about the quality, value for money and accessibility of services is reported to local people. The commission feels strongly that that element needs to be retained and developed alongside the single outcome agreements.

Secondly, the package of reporting around the outcome agreements and council-level public performance reporting are the starting point for the Accounts Commission's thinking about what the second round of best-value audits should consider. We will be looking for councils and their partners to be able to scrutinise and challenge that performance management information and the way in which it is made available to local people so that, in turn, they can hold their council and its partners to account for what they are doing.

Johann Lamont:

You are saying that there will be some process whereby there will be a check along the lines of what you have just described before a single outcome agreement can even be signed off. However, the agreements are supposed to be with the Government just now.

Caroline Gardner:

We are not involved in that process. The outcome agreements are very much agreements between the Government and local government. We have been involved in developing the guidance and the expectations around performance management and public reporting, but we are not involved in the agreement of outcome agreements, in order to protect the commission's independence, as you would expect. Best-value audits will look at the way in which councils and the Government are monitoring performance against the outcome agreements and more widely, and how they report that to the public.

Johann Lamont:

So basically you will not be able to intervene unless the agreements fail and there is a problem.

There has been a lot of concern among equality organisations that there are no compulsory elements in the single outcome agreements. We know about the problems with equal pay. Although we have had an auditing process for a long time, nobody flagged up—perhaps 20 years ago—that if someone pays their women workers a different amount of money from the amount that they pay their men workers, it will come back to haunt them.

As regards equality proofing single outcome agreements to ensure that people understand the way in which services are delivered, does your guidance specify elements that should appear in the agreements? One of the current dangers is that the agreements are like a pick and mix, so councils can pick what they want to do and will measure performance against that, but their responsibilities to other parts of the population do not feature at all.

Caroline Gardner:

The Accounts Commission is dealing with that through the best-value audit process. You will know that equality is one of the 10 characteristics of a best-value council under the guidance. In the first round of audits, we have taken a relatively low-key approach to equalities and sustainability, as councils have been developing their own approaches to mainstreaming those issues.

The second round of audits will ramp up expectations and will take a much closer look at how equalities are handled across the piece, partly through the outcome agreements but also through a range of management processes and outcomes such as the relative rates of pay of different groups of staff in various equalities groups. We do not see the outcome agreements as being the only way for things to happen, and the Accounts Commission's—

But your advice would be that, given the history of equal pay, it would be advisable for local authorities to ensure that the single outcome agreements that they are currently devising are properly equality proofed.

Caroline Gardner:

Mainstreaming leads us to that logic anyway. Each of the outcomes and indicators to which a council commits itself should take account of equalities issues. That is a statutory duty for councils, as it is for all public bodies. The Accounts Commission will approach the matter through the second round of best-value audits of all 32 councils.

You mentioned the guidance that is being produced for local authorities. Is that guidance public?

Caroline Gardner:

Yes. It is on the Scottish Government's website.

Patricia Ferguson:

I return to a point that Professor Baillie made about community planning partnerships, in which I have a particular interest. I want to clarify whether I picked up one of your comments correctly, as I might not have done. I took you to say that the council's view prevails.

Professor Baillie:

No—I rather short-circuited my thought process. I was speaking about best value, which Caroline Gardner subsequently touched on. We tend to look at the review of best value from the council's point of view. That is what I was getting at. We are assessing the effectiveness of community partnerships and their work with councils from the standpoint of how the arrangements deliver for the councils. I rather short-circuited my earlier explanation, for which I apologise.

Patricia Ferguson:

That clarification is helpful. I am also interested in the cross-cutting work that you do. It is not just local authorities that have an interest in the work of community planning partnerships and in the outcomes of that work. Will you examine the relationships of other bodies with community planning partnerships? I am thinking about health boards, the police service, the fire service and other organisations.

Professor Baillie:

The short answer is yes. You will be aware of our evidence to the Justice Committee on the police planning framework and the tripartite arrangements. Caroline Gardner will wish to fill in the detail on that answer.

Caroline Gardner:

That element will be very much strengthened in BV 2. In the first round of best-value audits, we conducted a baseline assessment of how well community planning was working, starting with the council and working out to its partners. We know that we only started to scratch the surface, however. In the overview report, the Accounts Commission finds that community planning processes are becoming better developed.

We think that the focus needs to move on to partnerships demonstrating their impact on local people. As we develop the second round of best-value audits, we are considering how to move out and get under the skin of the question of how well councils are working with their partners. We are also considering how we can take advantage of the joined-up system of public audit in Scotland, in which Audit Scotland works for both the Accounts Commission, in relation to local government, and for the Auditor General, in relation to the rest of the public sector. We need to get the best out of that joined-up approach.

Patricia Ferguson:

I very much welcome that element of your work, as you check what impact community planning partnerships are having on the ground, where they matter and where they were designed to have an impact. How deep might the research go? Will you go into communities and talk to people, or will you just consider the evidence that is brought to you either by the community planning partnerships for particular areas or by local authorities? Will you talk to people who are involved in the process and to people who might like to be involved in the process?

Caroline Gardner:

The principles that the commission has approved for conducting the next round of best-value audits have service users and local citizens front and centre among the people whose perspectives are of interest. That is easy to say, but it is a lot harder to achieve in practice. Over the next six to nine months, we will be exploring how the audits should take on people's perspectives in that way, but without cutting across what councils and their community planning partners should be doing to engage with local people and to ensure that their views are taken into account in the planning and delivery of services. The commitment is absolutely clear.

Professor Baillie:

That is something that we really must do—it is an element that we must explore and implement. However, we are concerned that it is inevitably quite expensive to achieve such an approach. The challenge is to find the means of getting a reliable answer, but without spending too much public money.

It is a job worth doing.

Professor Baillie:

I agree.

The Convener:

The report identifies that the number of staff employed in local government is around 258,000, which represents a reduction of 1.5 per cent on the figures in the 2006 report. It mentions evidence that councils are achieving efficiencies by freezing recruitment and so on. How is that consistent with workforce planning? Are you confident that the opportunity is not being taken to cut the wage bill willy-nilly?

Professor Baillie:

I do not know whether the report touches on it, but part of the reason for the cut is that some employees have been transferred to organisations that work for councils.

Following housing stock transfer, for example.

Professor Baillie:

That kind of thing.

How many staff does that amount to? Is the figure significant?

Gordon Smail:

We do not have the numbers. Some staff have been transferred to the new arm's-length organisations that councils have set up. Glasgow is a good example—it has set up a trust to run all its cultural activities.

Professor Baillie:

Your question was related to—

The Convener:

It was related to consistency with workforce planning. We know from today's evidence and from previous evidence that a substantial cost to local government is its workforce, which is an area that is ripe for efficiency savings. Despite people transferring over, do you expect the local government workforce to be reduced year on year?

Professor Baillie:

I touched on that issue in my introduction. At the moment, HR departments in councils are so tied up with getting the single status agreements settled that they are unable to give the proper time and attention to medium and long-term workforce planning. We are not necessarily advocating that that workforce planning goes up, down or sideways; it is simply something that has to be done in order to meet each council's demands for services in future. Like any other core activity, one would expect efficiencies as part of that. Such efficiencies do not necessarily involve a cut in the number of people; there can be different ways of working.

The Convener:

Do we know how many care workers and social workers we have in local government, and how many we will need in five years' time? We have experienced the same situation in the health service. We were unable to deliver the services that people wanted because we did not plan. Is there an audit of the workforce? Have the gaps been identified? Who would do that work? Would the role be taken by individual councils through community planning or by COSLA?

Professor Baillie:

That is precisely our point. If you want to look five years ahead and beyond, you need to plan in detail and try to estimate the extent to which services, such as social work services, will be in demand.

Caroline Gardner:

Quite detailed workforce figures are available—that is where our figures come from. Our concern is that it is not clear that councils are consistently doing what is needed—the health service has been trying to do this—which is to look ahead five, 10 and 20 years and say, "This is what we expect to happen in the population that we serve, and here are the different ways of working that we need to take into account." It is not just about efficiency savings or cuts; it is about saying, for example, "This is the way we provide social care now."

In the future, if there are going to be much larger numbers of older people, who may expect to be able to stay in their homes for longer, how do we shift the work that care staff do and how do we work more closely with the health professions? What does that mean for professional training and development? That is another area on which we will consult over the summer; it is an area that is worthy of study so that we can get into the detail and understand what good practice looks like and how councils throughout Scotland measure up against that good practice. We know that there is a lot of variability but we do not know what the overall picture looks like.

The Convener:

But we are not prepared for the demographic trends in five years' time. We do not know how many social workers or care workers we will need or how they will be funded. In an area such as Inverclyde, where there are a disproportionate number of elderly people, the Government could decide that we need X number of social workers and X number of care workers but not be able to plan for that because the funding is currently being used to deal with the crisis that exists at the moment. Not only workforce planning but financial planning needs to take place around that.

Professor Baillie:

I started by saying that financial planning must be integrated with workforce planning and asset management planning.

Are you aware of any work that is being done in that area with the Scottish Government?

Professor Baillie:

I am not aware of any specific work on that.

Are you aware of any work that is being done by COSLA on the issue?

Professor Baillie:

Work is certainly being done by COSLA on all sorts of issues just now. Caroline Gardner knows the detail of that.

Caroline Gardner:

The Scottish Government's work on the Scottish futures project, which goes back a couple of years, has been examining the impact of the demographic changes that have occurred both on the demands on public services and on the questions that are thrown up about how we provide them. The fact that there is a growing number of older people and a decreasing number of younger people means not only that more older people need services, but that there are fewer young people available to become care workers, health professionals and so on.

The commission has identified a concern at a level down, at the point at which individual councils, working together or on their own, can start to put their plans in place. They should be identifying the money that they expect to have available over the next period, the staff that they think that they will need and the training, development and recruitment that they need to put in place for them, as well as the people that they may need to attract into their areas to provide services. We think that that is not happening consistently enough so far.

So we will probably have to depend on imported workers because we have not planned ahead.

Caroline Gardner:

That has certainly been the trend so far. We know from our best-value audits that some councils are already doing good work to grow their own workforce locally. There are some strong examples of that in individual best-value audits. We would like that work to be done much more consistently and, as Professor Baillie said, we would like it to be linked to the other elements of the business that councils need to manage. Gordon Smail may want to add to that.

Gordon Smail:

I will just add a point of detail. The convener asked specifically about what is being done. Paragraph 121 of our report reflects the work that COSLA is doing with the Society of Local Authority Chief Executives and Senior Managers, the Scottish Government and the Society of Personnel Directors in Scotland around the crucial issue of effective planning for the future. There is some work going on there.

Kenneth Gibson:

One person's efficiency saving is another person's cut. To an Administration, it is almost always an efficiency saving, whereas, to an Opposition, it is almost always a cut. What level of variance is there in efficiency savings? What incentives, if any, exist to encourage local authorities to make greater efficiency savings while, at the same time, maintaining or enhancing the level of service delivery?

Caroline Gardner:

As you will know, we have seen a shift this year towards local authorities being able to retain the efficiency savings that they make and reinvest them in services. Councils would argue that that gives them a greater incentive to ensure that efficiency savings are made as well as the ability to make some of the bigger-scale changes that we have been talking about—to identify priority areas and genuinely reinvest in them. However, the commission's view is that councils' plans for doing that must be transparent and must take account of the longer-term implications that Ms Lamont talked about earlier. That is not easy to do—we know that—but it is important to be able to demonstrate that councils are investing in priorities. That must not be lost sight of.

Kenneth Gibson:

Local government welcomes the fact that it can reinvest the efficiency savings of 2 per cent instead of having 1.5 per cent top-sliced, but is there any incentive for councils to exceed the 2 per cent target? Local authorities might think that they have to make a saving of 2 per cent year on year and that, if they made a 3, 4 or 5 per cent saving in one year, which could be reallocated to front-line services, they would get chased if, because of that, they did not make a further efficiency saving in the following year. What mechanisms are in place to ensure that councils do not think that and that they secure real improvements as soon as those can be delivered, rather than delaying them for the reason that I have suggested?

Caroline Gardner:

There are two points to make. First, we know that councils are facing a number of financial pressures. We have talked a lot this morning about single status agreements. There are also rising fuel prices, which affect a range of aspects of services, and other things that councils need to take account of within relatively constrained resources. That is the case across the public sector. There is an incentive for councils to consider ways of taking out money that is not spent on essential services, or which can be spent better, and reinvesting it.

Secondly, the commission's work on the best-value audit process is picking up centrally the theme of the use of resources. The commission is looking at councils' overall plans for ensuring that they get the best from their money and that they can demonstrate that to the citizens and taxpayers to whom they are accountable.

Johann Lamont:

I return to the question of efficiencies. Is it not a contradiction to say that although efficiencies are about providing a better quality of service for less money, local authorities must make blanket 2 per cent efficiency savings across all their departments? If councils are saying to every department that they must make 2 per cent efficiency savings, they are not assessing the quality of the service against how much it costs—they are presuming that there must be a saving. Is it bad practice to have a blanket 2 per cent efficiency savings target across all departments?

Caroline Gardner:

We certainly think that it is more effective for a council to consider, service by service and area by area, where there is the most potential to make efficiency savings. The potential for such savings will not be the same across the piece. Councils will know the areas where they have already made a lot of efficiency savings or significant changes.

If a local authority sent out a memo to all its departments to say that, given that authorities are now particularly incentivised to find efficiencies, departments are obliged to find 2 per cent savings, would that be deemed bad practice?

Caroline Gardner:

Which approach to take is a policy decision for each council, but the more effective ways of finding savings that we have seen in best-value audits involve councils considering where there is likely to be the most scope for savings, rather than making a blanket cut.

Johann Lamont:

Earlier you made the distinction between an efficiency and a cut. With an efficiency, you get the same for less money or more for the same amount of money. It cannot possibly be acceptable to insist that individual departments all have to find the same level of efficiencies. If they do not find such efficiencies, there is a cut in their budget from the centre, which they have to find a way of managing.

Caroline Gardner:

It is not the commission's role to set policy on how councils find efficiencies, but I agree that it is likely to be much more effective to find efficiencies by looking at the areas where there is likely to be more scope for them.

In the past two or three best-value reports that the commission has considered, there have been a number of services that have not had their competitiveness benchmarked for 14 years or so. Those services might be as efficient as they can be, but, by looking at what is required, there might be scope to do things differently and make savings that are real efficiencies and do not affect either the quality of the service or the terms and conditions of the workers. The commission thinks that that would be the better way of finding and achieving efficiency savings.

Patricia Ferguson:

My questions are an extension of Johann Lamont's. We have heard that local authorities are incentivised to make efficiency savings. I realise that there are definitions of cuts and efficiency savings, but what is to prevent local authorities from saying that they are just going to make cuts, because they will get to keep the money anyway and will carry on within the framework that they have? How can you ensure that local authorities are differentiating in the way that your definition of cuts and efficiencies leads you to think that they should differentiate?

Caroline Gardner:

The best-value audit includes a strong element on the use of resources, which we are beefing up for round two, which starts next year. We ask whether local authorities understand how much money they have to spend over the next period, what pressures they need to manage within that money and where there is scope to make efficiency savings. Equally important, we ask whether they are making that information transparent through their duty of public performance reporting to the local people who pay for and depend on services. That is what the best-value audit is looking for. How councils achieve the efficiencies is a matter for them, but they must be accountable for that to local people.

Patricia Ferguson:

Will people who use council services—as we all do—be able to make that distinction? If a service just does not get provided any longer, will they know whether that is a cut or whether it involves an element of efficiency savings? How would a lay person know?

Caroline Gardner:

That is part of the overall duty of public performance reporting, which is not consistently done well enough, as the commission says in the report. It is a critical counterpart to the single outcome agreements.

David McLetchie:

I have a couple of questions on the issue of free personal and nursing care, which is highlighted on pages 36 and 37 of your report. On the vexed question of assistance with food preparation, you refer to

"Ambiguities in both the legislation and guidance".

I am with you on the guidance that has been issued, but the interpretation of the legislation, which is the governing matter, is another question. When councils such as the City of Edinburgh Council and West Lothian Council took independent legal advice from counsel, they were given unequivocal guidance that led them to stop charging and to pay out substantial amounts of money in refunds.

Professor Baillie:

What is the question?

Are you aware of the independent legal advice that councils such as the City of Edinburgh Council and West Lothian Council received?

Professor Baillie:

Yes.

They received unequivocal advice that led them to stop charging and to pay money back to people.

Professor Baillie:

Yes.

Are you aware of any council having taken similar independent legal advice that came to a different conclusion?

Caroline Gardner:

We will come back to the committee on that point. The team that worked on the issue is not part of the panel that is before the committee today, and I do not want to mislead the committee. We will drop the clerk a note in response to the question that Mr McLetchie has asked.

Professor Baillie:

It is a little while since the report on free personal and nursing care was published but, if I remember rightly, councils' different views on the issue that the member has raised were considered in our discussions.

I understand that. My concern is whether the legislation is ambiguous. I made the point that those councils that took independent legal advice on it were given such unequivocal answers that they paid money back to people instead of charging.

Professor Baillie:

Both councils came to the same view in light of the legal analysis that they received.

Exactly. I would like you to clarify whether other councils have received a different legal opinion.

I have a related question. Are you aware that some councils refused to take independent legal advice because they feared the outcome?

Caroline Gardner:

We are aware that some councils chose not to take legal advice, as you indicate. We do not know the reasoning behind that decision.

No, but we can make a good guess. Are you aware that COSLA refused to take independent legal advice on the matter on behalf of all councils, although the rules are exactly the same throughout Scotland?

Caroline Gardner:

Again, you are right factually.

Are you aware that COSLA refused to sponsor a test case that would have had the matter decided definitively by the courts?

Caroline Gardner:

Factually, that is correct.

David McLetchie:

Basically, certain councils that have taken independent legal advice have been advised unequivocally that charging is wrong. On the basis of that advice, they have ceased charging and paid money back to people who have been wrongly charged, which is perfectly proper and correct. As far as we are aware, everyone else is burying their head in the sand and hoping that the issue will go away.

Professor Baillie:

That is one summation of the position.

I would very much like to hear an alternative summation, but it would probably not be appropriate for me to ask you to give it.

Caroline Gardner:

The Accounts Commission and the Auditor General chose to conduct a study of free personal and nursing care because of the difficulties to which David McLetchie has referred. They have made recommendations to Government for resolving the ambiguities and differences of view that exist.

The report that you published in January was good on the inconsistencies in the guidance that has appeared. At issue is whether there are any inconsistencies in the law.

I thank the witnesses for their time this morning.

Meeting suspended.

On resuming—