We move to item 3, and I welcome the minister, Ross Finnie, to the meeting. It may be helpful if I make a few points of clarification before we proceed to our questions. This is the second evidence session on our inquiry into relocation. Today, we will concentrate on the final part of our remit, which I remind those who are attending or listening to the meeting is to consider and report on
I am grateful for the opportunity to participate in the inquiry. I am also grateful to the convener for his opening statement and for the fact that the clerk wrote to me yesterday to advise me and to help to define more clearly the particular line that the committee wishes to pursue this morning.
Thank you. In that case, we will move to questions.
Good morning, minister. In the letter that you have provided to the committee, you refer to
That question—not surprisingly, coming from this committee—gets right to the heart of the matter. I am sorry, but I am going to have to go back a bit to answer the question properly.
I accept what you say about the issue being not just the cost of the move, but I am still not sure what other potential benefits you took into account in making your decision.
It was a very fine judgment. On the issue of finding an appropriate location, there was much discussion of Perth as well as Inverness. There was also the issue of the appropriateness of the location for an organisation that deals with the natural heritage, and there were questions about whether, if a decision to relocate was made—after all, the status quo was in the frame as well—the policy of dispersal would really be delivered by selecting Inverness. My view, and the collective view of ministers, was that that was the case.
Do you feel comfortable with the weighting that you gave to those other considerations as opposed to the cost?
As I said in my earlier answer, following the SNH decision the policy was further refined and other objective criteria were further specified. You will know that the policy, as it now stands, is much more clearly defined. I was comfortable with it at the time, but I accepted—as one does in relation to a policy that evolves—that further development had to take place. If one considers what was stated in black and white about the criteria that were to be applied, there is no doubt that what has happened subsequently has been very helpful in setting out more clearly the weightings that are to be given to factors other than finance, for example socioeconomic and other factors that are now clearly stated in the policy.
Do you feel that departmental officials, DTZ—which prepared the report—and SNH understood the wider potential benefits and agreed with the weightings that you gave to them?
In the same way that Sir John Elvidge was careful not to put himself into the minds of ministers when he gave evidence to the committee, I had better be careful not to put myself into the minds of civil servants. In trying to assess the fiduciary responsibility that is placed on officials, I can assume only that the absence of the other objective criteria that we have now might have been one of the reasons why the then accountable officer came to a narrower view about not meeting the value-for-money criteria.
I want to probe further some of the points that my colleague Mary Mulligan raised about the decision-making process. In your submission, you refer frequently to John Graham, who was the senior civil servant who headed the Scottish Executive Environment and Rural Affairs Department at the time, but you make little reference to SNH. We are not talking about a Scottish Executive department or even an Executive agency; we are talking about a non-departmental public body. Will you clarify the nature of the communication channel with SNH, given that the Executive was clear in one of its press statements that it was responding to requests from the SNH board when it issued its direction? It is important that we understand the relationships.
In the final stages of the decision-making process, there were discussions between my officials, senior officials of SNH and its chairman and between me and the chairman and chief executive. Those discussions were important because, as Susan Deacon rightly says, we had to be clear about the views of the board, the chief executive and the chairman when taking a decision. That is what we did—we met and discussed matters with them and exchanged correspondence, although the meetings were more crucial.
I suspect that the minister recalls, as I do, that a few years back there was at least one occasion on which there were significant problems within a non-departmental public body and ministers were asked to intervene with their power of ministerial direction. However, they steadfastly refused, on the basis that that would be the nuclear option. Significant emphasis was placed on the fact that a non-departmental public body was just that, with a separate board and chief executive, which therefore had a bearing on the relationship with the Executive and ministers.
There are two elements to consider. First, you have to go back to the policy decision at the outset. With respect, if we had followed the line that Susan Deacon has quite properly advanced, we might not have included NDPBs in the policy. The logic of that argument suggests—
I am not advancing any argument; I am trying to clarify ministers' position.
And I am not trying to put words in your mouth. You emphasised the independent nature of NDPBs and asked about the material that we used to make the decision. Irrespective of the relationship with ministers and the structure of such bodies, NDPBs and others were brought within the mischief of the policy. There could be no question or doubt that a relocation could be triggered by any of the factors, such as the expiry of a lease, and that that policy would impact on NDPBs. That is the starting point. As regards delivering the policy, in the final analysis, ministerial direction, the board's views and trying to achieve the policy were, of course, all taken into account.
Does Susan Deacon want to carry on?
I am conscious that we want to ask about other things, but it is important that we understand the relationships. In many other instances, ministers put considerable weight on the fact that the boards of such bodies ought to take operational decisions. Does the minister regard the decision to relocate SNH as an operational decision? Given that you raise the wider point that NDPBs are included in the scope of the policy, but the question has been raised that perhaps they ought not to be, has the line been drawn in the wrong place?
That was the policy decision and I defend the policy.
It is not within the scope of the committee to look at policy, so we will move on. However, I pick up on an aspect related to Susan Deacon's questions. I refer the minister to page 41 of the Auditor General's report "Relocation of Scottish Executive departments, agencies and NDPBs", where it states:
As I said in response to Susan Deacon, throughout the whole of that period my department and I had exchanges with SNH officials, including its chair and its chief executive. We had conversations, both by telephone and in meetings, in which the only issues that we discussed were the materials that were produced as a consequence of our further request and the views of senior SNH officials and SNH board members. The whole point of those conversations and exchanges was for us to receive those views so that we could assess and consider them.
Minister, we have a common cause in searching for value for money. You said:
I think so. I do not wish to trample on other people's toes, but I cannot recall from my 22 years in local government—I know that Andrew Welsh was also involved in local government—that best value was about purely the cheapest option. I am quite clear that that was not the case. If Andrew Welsh is asserting that it is now the case, I am not in a position to respond.
I am interested in that answer. Can we be assured that the Executive has a detailed and comprehensive cost-benefit analysis of the relocation policy? Where can that analysis be found?
Do you mean for the relocation policy as a whole?
Yes. You said that value for money is defined such that it is not always about the cheapest option because various categories need to be looked through. Are you satisfied that the Executive now has a sufficiently comprehensive view of value for money to deal with other relocations?
I think that we need to be careful. Our questions must be about the specific written authority rather than the application of the policy across the whole Executive.
I do not wish to fall out with Andrew Welsh—my purpose is to be constructive—but we start from different premises. My understanding is that value for money permits other factors to be taken into account, but Andrew Welsh has clearly asserted that that is not the case. That places me in very real difficulties. I crave your indulgence on the matter, convener; I need someone to clarify the issue.
The difficulty with Andrew Welsh's question is that it would be better put to the minister with responsibility for relocation rather than to the minister who is before us.
That responsibility lies with the Minister for Finance and Public Service Reform. It seems to me that I must have been harbouring a complete misapprehension during my 22 years in local government if value for money meant that I could select only the cheapest option. That is certainly not what happened in my authority or in any authority, other than, perhaps, Andrew Welsh's authority.
I assure the minister that it is not my intention to embarrass him or to act in such a fashion. I was simply trying to clarify exactly what process is now involved.
For the relocation of the SNH headquarters, the efficiency gains were the general efficiencies involved in running an office. Where the SNH headquarters should be located was a secondary issue; the primary issue was that the two SNH headquarters buildings should be co-located. That principle was not disputed by any part of SNH. The fact that the headquarters were spread over two sites was generally regarded by SNH as an accident of history. One would certainly not have begun with such a set-up in locating an organisation's headquarters.
Would the beneficial long-term efficiencies not have been provided by the other possible relocation sites, such as Stirling or Perth?
That is possible. That is why those locations were considered. On balance, across the range of issues, our view was that the policy objectives would be best achieved by relocating the organisation to Inverness.
The minister mentioned the general efficiencies involved in running an office. Can he define that more specifically?
The general efficiencies come from the co-location of the offices. Not even SNH argued for anything other than that. The specific efficiencies are about labour market and other operational costs.
How long term are those long-term efficiencies? What timescale was envisaged for achieving them?
I do not know. I think that we were looking at a period of 10, 20 or 50 years, although the figures that were before us did not go that far. The initial figures went to 10 years and beyond that to 15 years. We believe those to be longer-term efficiency gains.
The written answer to parliamentary question S2W-213 referred to
We believe that we could achieve those efficiencies over the piece, given the combination of factors and the way in which the office would operate. That was our view.
My question is also about those efficiencies. "Efficiencies" is a word that is often used to cover a multitude of sins. Like several committee members and many others, I share the concern that is raised in the written evidence that has been provided by the accountable officer for the minister's department and, indeed, by the chief executive of SNH. My concern is about the impact that the loss of so many experienced members of staff has had on the organisation's efficiency. Clearly, that impact was also on the mind of the SNH board when it first raised concerns about the relocation.
I am certainly not aware from recent discussions that I have had with the chairman and those that my deputy minister has had with the chairman, the chief executive and members of SNH that the move has had any deleterious effect on SNH's delivery of its functions and achievement of its targets. I am certainly not aware of any difficulties with its financial controls. I do not think that the accountable officer said that such difficulties existed, although he might have referred to the possibility of difficulties.
The written evidence that we received from the accountable officer contained a summary of the relevant options, comments, risks and benefits that were put to ministers before the decision was taken. One significant risk that was identified was
I repeat that in recent meetings between me, my deputy minister, officials and SNH's chief executive, chairman and members, we have had no report that SNH cannot deliver on its programme or meet its targets or that any financial difficulties have accrued.
Did Robin Harper try to catch my eye? Is his question on that point?
My question was not on that point but on a previous point, so I will leave it.
Members have no more questions on that subject, so we will move on to the potential synergies of Highland relocation.
I am clear about the fact that in our discussions with SNH, we were well aware of the nature of the jobs that the relevant members of staff undertook, their respective qualifications and so on. Given that, we could discuss with SNH the potential for synergies, which we believed existed. That conversation was obviously slightly difficult, because although SNH agreed that the move was a possibility, it was not SNH's preferred solution. Nevertheless, the conversation was held, so we explored the matter. We did not assert that simply because an office was in Inverness, synergies would exist. Much more consideration was given to the personnel and their qualifications and the matter was discussed seriously before the assertion was made.
Did the relatively high number of SNH staff already located in Inverness weaken the case for further dispersal of SNH jobs to Inverness as opposed to another location?
No. One factor was the nature of the jobs—their level, responsibilities, type, scope and spread. In achieving a spread at any level, we considered the opportunity to locate in a place such as Inverness posts with a broader range of responsibility in natural heritage. We believed that, irrespective of the number, the range of jobs that was undertaken in Inverness would be substantially widened by giving effect to the policy.
The response to question S2W-213 also says:
Not that I am aware of. The answer that you quote was given in response to a question about why Inverness was chosen. No sub-policy existed. There was a presumption against relocation in Edinburgh, but the policy was not refined. I refer to my earlier remarks about where it is appropriate to locate an organisation such as SNH.
Why was that reason, rather than the synergy issues on which the convener questioned you, cited almost as justification for moving SNH to the Highlands?
Natural heritage sites are found throughout Scotland, which is a great feature of the Scottish landscape. There is no question but that the Highlands have a substantial proportion of those sites, so location of such an enterprise in the area is appropriate. The remark was not intended to imply that a sub-policy of direction to a particular area existed; it merely concerned dealing with the appropriateness of a location in each case on its merits.
The answer to parliamentary question S2W-213, to which Margaret Smith referred, says:
I am not tempted to go down the line of extending that argument to say that all national bodies should be located in Edinburgh. I am sure that that was not in the member's mind as she developed her articulate and cogent argument, but I say respectfully that that might be its logical conclusion. As the policy presumption is against relocation to Edinburgh, that is a difficulty.
Much as I am enjoying this exchange, I would like to understand—
I understand perfectly. It cannot be said that natural heritage is the exclusive domain of rural Scotland. Major natural heritage and environmental issues exist in the heart of every city. Nevertheless, the aim was to move location. Let us be clear: the first port of call in the DTZ report was the status quo, but it was not the policy objective to maintain the status quo. There are some bodies that it would be inappropriate to move out of Edinburgh or Glasgow, but it was not inappropriate to locate SNH in Inverness; SNH would not be particularly disadvantaged by operating in a rural setting. Nevertheless, it was not our intention to imply in the written answer that SNH could operate only in a rural location.
Having heard the answer to my question and to my colleague Margaret Smith's question, I am still confused about what the Executive meant in its response to parliamentary question S2W-213 by stating that SNH was
There are other organisations that we decided not to relocate because their particular circumstances and organisational profiles meant that it was inappropriate to move them. Not everything is relocated—there is an assessment process. For bodies that are being moved, the question is whether it is appropriate to take them out of the city centre to a much more rural location. There was nothing inappropriate about a natural heritage organisation having its principal offices in Inverness and the Highland area.
The written answer to parliamentary question S2W-213 states:
I understand from SNH that its relocation to Inverness has not impeded its ability to recruit staff, although the relocation impeded certain people's ability to move with the organisation.
There has been no loss of expertise.
That is my understanding.
I seek clarification of the statement that the "profile and nature" of SNH meant that it was suitable for relocation to Inverness, which causes me a difficulty. In the initial terms of reference for DTZ , did you express a view on its considering suitable areas for the relocation of SNH?
SNH sent a specification to DTZ, which arrived at its conclusion of Inverness on narrower financial grounds. Inverness was included in the assessment.
Surely DTZ's assessment and your final decision were based on different sets of criteria.
DTZ was not taking the decision; it was providing advice.
Yes, but it was making a recommendation.
It provided advice.
So what was the point in expending that time, effort and public money?
It was perfectly proper to do so. The committee is properly exploring what other issues ministers would take into account on receiving advice, whether that is external professional advice that is paid for or advice from civil servants. We do not always take such advice, but we have to be clear about the grounds for not doing so. This case gave rise to issues of ministerial direction.
We will move on to issues of guidance on written authority.
We asked the permanent secretary whether
I am in absolutely no doubt that the then accountable officer, John Graham, made it clear to me that if ministers were minded to select Inverness, his professional judgment was that, in relation to his fiduciary activities as accountable officer, he could not say that the best-value criteria were satisfied. That caused me to have regard to what the statute said and to have a discussion with officials and others to be clear in my mind about the ramifications of his position. My response was to take what he said very seriously.
I am asking about the timeline. Were you made aware of the possibility of a request for a written authority before or after the announcement of the move to Inverness?
Before.
Minister, you said that the process through which the ministerial direction was issued was perfectly sound. None of us would question the statement that it was a perfectly sound process, but it is highly exceptional—I think that I am right in saying that only three other ministerial directions have been issued in the eight years of devolution. Some of us are still struggling to understand what balance of forces led you to exercise a power that is used so sparingly elsewhere. I find it particularly difficult to understand why, although the senior civil servant said, "Don't do it," the chief executive or chairman of the board said, "Don't do it," and an independent report said, "Don't do it," and ranked the Inverness option fifth and although warnings were given that three quarters of the staff would not relocate if the Inverness option was implemented—broadly speaking, that proved to be the case—you decided to take full responsibility for the expenditure of more than £20 million of public money. It is important for the committee to understand why the decision to relocate SNH to Inverness was felt to be so important that you had to take that exceptional decision and use that exceptional power.
First, DTZ did not say, "Don't do it." Let us be clear that advice ranking is not the same as saying, "Don't do it."
Given your unique experience in that regard, what lessons do you think could be learned for how to handle such a decision-making process in future, bearing in mind the committee's remit and interest?
It is like many issues that have developed as the thinking of the committee and ministers has evolved. I hesitate to say it in the presence of the Auditor General, who is occasionally somewhat critical even of the purely financial criteria that we set, but we have developed criteria for other objective measurements. We were slow to develop those in parliamentary terms and, much more specifically, in Executive terms.
Are you implying that, had the current process and criteria been in place then, the welter of independent advice and opinion would have been materially different? Am I reading too much into your response?
It would not necessarily have been different, but it might have been easier for accountable officers and everybody else to understand the decision with greater clarity because they would have been referring to a specific document and specific evaluation criteria that had been laid down in writing.
Are you saying that if the better definition had been available, the written authority might not have been required?
I am now in danger of getting into the principal accountable officer's mind, just as Sir John Elvidge was reluctant to get into my mind when he gave evidence, for which I was duly grateful on reading the Official Report of that meeting.
I am trying to understand the process. I am not sure whether it would have been appropriate for you to do this but, when you received the accountable officer's report, did you seek to clarify with him the wider parameters and implications that you were taking into account? If you did, did your clarification have an effect?
The decision-making process was entirely shared with Mr John Graham in his capacity as head of the Environment and Rural Affairs Department. However, I am bound to say that it was not for me to suggest that, in discharging his particular and defined responsibilities, Mr Graham ought to have taken account of wider criteria that are not in the Public Finance and Accountability (Scotland) Act 2000. I respected his professional judgment. If our roles had been reversed, I would not have expected him to tell me how to interpret the statute.
In that case, and given the number of relocations that have taken place, are you surprised that the situation that arose in relation to the SNH relocation has not arisen in other instances?
In a sense I am surprised, because there is a risk of such a situation arising when we pursue a policy of intervention to secure an outcome that is different from the outcome that might normally occur. However, as I have said repeatedly, it is my view that because the policy has evolved and is much more clearly set out, so that it is much easier to weigh the financial cost of relocation against socioeconomic and staff considerations, it is easier for politicians and accountable officers to make a judgment. That is my view and I would not want to anticipate the view of an accountable officer, but I think that the clear setting out of the policy has helped the process and lessened the likelihood of the situation arising again.
I want to be absolutely sure about this. You said clearly that you were made aware of the possibility that there would be a request for a written ministerial instruction well before the move to Inverness was announced. How were you made aware of that possibility? What guidance were you given and by whom in the period between being made aware that a written instruction would be sought and the making of the announcement?
I was notified by John Graham, who made clear to me what his professional position would be if ministers were minded to support the move. I was aware of the provisions of the 2000 act, but I wanted to refresh myself on precisely what they meant, so I sought guidance. It might interest members to learn that I was interested in the ramifications of a request for a written ministerial instruction.
I want to clarify something that you said in response to a question that I asked, because it is an important point. You said that if you had taken the advice of DTZ, you would have opted for the status quo. However, that is not an accurate reflection of the position. In his letter to the committee, the accountable officer of the Environment and Rural Affairs Department said:
In answer to the question that you have just asked, that is right. However, I think that your earlier question related to the likelihood of ministers arriving at decisions that might require them to issue directions. In my answer to that question I tried to make the point that the very nature of the policy was such that DTZ could leave aside the status quo. Why was the status quo left aside, given that it is the best financial option? It was left aside because the policy dictated that it had to be left aside because there is a presumption against being in Edinburgh.
Basically, though, we can agree that there were three other non-Edinburgh locations that ranked higher than Inverness and which you could have chosen.
In purely financial terms.
No, not in purely financial terms, actually. The head of department makes clear that the ranking was a result of the combination of the financial and non-financial analysis.
I am not denying that.
Were you provided with any indication by the principal accountable officer that if you had opted for any of those other three locations, he would have found it necessary to seek ministerial direction?
That would be the accountable officer.
Yes, I beg your pardon.
In his response to you, Sir John Elvidge tended to comment on decisions that ministers had made rather than decisions that ministers did not make. In saying that, I think that I accurately recall his evidence.
With regard to the decision-making process, you helpfully clarified to us that, before you announced your decision, John Graham had made clear to you that, were you to opt for the Inverness option, he could not support that in terms of value for money. I am asking a purely factual question about whether you were told that if you opted for any of the other options, he would have reached a similar view.
No. The matter did not quite arise in those terms. It arose in the context of the emerging understanding that ministers were minded to make that decision. As soon as that became clear to John Graham, he very properly said, "If ministers are so minded, I must make you aware." That was the chronology in which the matter arose. Other locations had been discussed. I presume that he would have taken the opportunity to do what you suggest had it been necessary, but it did not arise.
Having gone through this process, do you feel that the guidance that you were given with regard to the repercussions of your receiving a letter from the accountable officer seeking ministerial authority was adequate, in the circumstances?
I think that it was. I think that the matter was handled properly. John Graham ultimately wrote the letter, but he made clear to me, in a conversation that was not of a casual nature, that he was not having the conversation in his role as head of the department but that he was wearing the hat of the accountable officer and that he was drawing my attention to his inability, in the terms that he subsequently used in his letter. Because I was conscious that the matter was serious, my immediate response was to seek—either from him or from others—clarity about what exactly that meant. As I said earlier, I refreshed my knowledge of the statute and considered the ramifications. I also wanted to be clear about the grounds on which John Graham was arriving at that decision. I was well satisfied about the professional nature of the way in which the matter was put to me. It allowed me to give full consideration to the ramifications.
After the request had been made and you had given ministerial authority, was there any need for you to have any further guidance as to what might follow from that—including, in a sense, your appearance before this committee?
No, I do not think so. As I said to Robin Harper, one of the issues that I wanted to clarify related to the effect of having to give that guidance. Clearly, the issue was to do with whether there was a possibility that, by taking this action, ministers were putting themselves into the shoes of the accountable officer. That was a matter that I wanted to have clarified. It was made clear to me that the professional position of the accountable officer was, "That is my position. I need an instruction if you want me to proceed. If you give me an instruction, then you, minister, take responsibility for issuing that instruction and the Audit Committee and the Auditor General will be made aware of that." However, in terms of the specific duties relating to the delivery of the new premises in Inverness, the accountable officer was not prevented from proceeding on the basis that he had received an instruction. That was an important point for me as it was one of the material considerations with regard to where a minister ended up after having issued such an instruction.
How much freedom of action did you have? Yours was not the only ministry that was involved in the decision and you were not responsible for the policy. Who was calling the shots? Was the decision taken in Cabinet? Was it entirely your decision or, in the end, were other ministers involved in taking the decision?
In a decision of this nature, particularly given the potential for there being a need for a ministerial direction, the decision was taken with collective responsibility. However, I am the minister responsible for the department and I take responsibility.
The Auditor General's reports are agreed documents. In respect of this report, John Elvidge was the key accounting officer with regard to getting agreement on the report, which would have been agreed with the central relocation unit and SNH, as appropriate, but not necessarily with your department. You are effectively saying that SNH was given the opportunity to comment on the further work that was done, but that does not tie up with the agreed report—
No. I cannot quite remember the precise question, but I was not suggesting that SNH commented in the sense that it was asked to comment on the finished piece of work before it was finalised; I was saying that SNH was not excluded from the process and that there was engagement with SNH's chief officials. If they say that they were not formally asked to comment, that is correct. However, I am saying that there was a continuing engagement between me and my officials, and the chief executive, chairman and members of SNH.
Okay. That concludes our evidence-taking session. I thank the minister for his time. I hope that our report will be able to clarify the process and help to strengthen the written-authority process, which adds value in terms of public accountability.
Meeting closed at 11:29.
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