Item 2 is a briefing from the Auditor General on the report "Relocation of Scottish Executive departments, agencies and NDPBs".
My report on the relocation of Scottish Executive departments and agencies was published on 21 September, and examines the implementation of the policy and the outcomes that have been achieved. As I am sure the committee will recall, the Finance Committee published a report on this subject in June 2004. The new Audit Scotland report complements the Finance Committee's report by providing more detailed analysis of the costs and outcomes of relocation decisions up until May this year.
Where do I start? I suppose that I should declare an interest as an Edinburgh MSP who has commented on relocation. I will try to consider what I believe relocation was meant to be about, which Mr Black has touched on. That includes matters such as efficiencies in government, which are an issue for the committee and for Scotland as a whole.
The publication of "The Relocation Guide" by the Scottish Executive last summer and the strengthening of the team at the centre in the Executive to support and guide public bodies that face relocation have been significant developments. I remind the committee of what I said a moment ago: the management of relocation has generally been well handled. Quite a number of relocations have taken place recently, but no evidence to date has shown a decline in the performance of any public body that has been affected. As I mentioned, some evidence—although it is limited—shows that some bodies have experienced benefits in the form of lower staff turnover and less sickness absence. A key conclusion of the report is that more could be done to evaluate those factors systematically, to reinforce public confidence in the policy.
You said that the Executive has said that it will publish by the end of the year an evaluation report that examines the benefits to date. Some of us might think that that is a slightly one-sided way to approach an evaluation report. You talked about the evidence on what has happened to service provision, which is obviously sketchy, because the general sense that emerges from your report is that the background data checks and background information are not available to provide a baseline.
The report did not examine the impact on individual organisations' performance. As I am sure the committee will appreciate, we are talking about a diverse range of organisations and experience. The general comment that I made a moment ago might be relevant: we have no evidence of performance being adversely affected, and in limited cases there is some evidence of improvement in sickness absence and staff turnover. The experience of individual bodies will vary quite substantially. The report is a general examination of the implementation of the policy, not an examination of the impact on individual organisations.
The Finance Committee asked the Executive to provide clearer reasons for its reaching decisions, but your report highlights the fact that there still does not seem to be any more clarity about the decisions that have been taken, although obviously you have been able to consider only a certain number of them. The Executive should provide clearer reasons, in accordance with the Finance Committee's recommendation. Is there any sense in which you see the Executive doing that?
The current situation is as I have described it. We encourage ministers to think carefully about whether they can say a bit more about their reasons when they are announcing decisions on relocation. In response to the Finance Committee's report on relocation, the Executive indicated that it would issue statements highlighting the main reasons behind the decisions.
But it has not done that for the decisions that your report covers that have been taken since the Finance Committee made its recommendation.
The decisions on four of the 12 reviews in our sample were announced after the Executive's response to the Finance Committee.
Did the Executive give any more information about why it had taken those decisions?
We are unaware that any further information was provided.
I have one final question about the position of accountable officers. Your report highlights one of the key differences between the way in which this policy is being implemented at the United Kingdom level and here. At the UK level it is for the accountable officer to make the final judgment and decision with reference to their particular responsibilities, whereas in Scotland it is a decision for ministers, and it could be argued that they have a different way of considering the issue. Would there be any benefit in moving towards the accountable officer making the decision, or would that cause problems?
The duties of an accountable officer are clear in this case. Where an accountable officer considers that a minister's decision is not supported by clear evidence that it will deliver value for money, the accountable officer may request from the minister a written instruction to implement the decision. We are aware of that happening in only one case, when the SNH accountable officer—the chief executive—requested a direction from the board, which in turn made a request to the minister, in relation to the decision to relocate from Edinburgh to Inverness. The minister gave such an instruction. We are not aware of any other examples.
I make no apology for trying to get some information about East Ayrshire from the Auditor General. Your report indicates that Ayrshire has made six appearances on the case study location review shortlists, yet it has received only one relocation, and five of the locations were in North Ayrshire. Nowhere in your report do you comment on the fact that particular areas have continued to appear on shortlists or on whether weightings or scorings are changed when a body relocates to an area. Would you like to comment on those points?
As we record in our report, nine local authority areas featured on at least half of the shortlists that were provided to ministers in the cases that we examined. Ten local authority areas did not feature on any shortlist. There is a pattern of certain areas tending to appear more frequently than others. One might expect that to happen. There is no reason why relocations should be distributed randomly, because decisions are taken according to the circumstances of the body concerned.
You make no comment on whether weightings are altered once a relocation has taken place. It appears as if that is not factored in.
In the report, we simply report the facts. In some relocation decisions, weightings changed quite a long way into the process.
I want to ask about relocation packages being altered midway through the relocation process. I cite the example of the Accountant in Bankruptcy, which decided midway through the process that it needed larger premises, but did not go back to the basic criteria in order to allow new bids by authorities.
As I mentioned a moment ago, we did not look in detail at individual relocations, although in appendix 3 we record some basic information about individual bodies. May we say more about the issue to help the committee?
I can expand slightly on the appendix. We were aware that there were some challenges to the way in which the AIB examined specific locations once it had selected the general location of Ayrshire. The evidence that we saw suggested that there was a robust exchange between the Executive and the organisation about what had been done. We did not challenge every detail of the process or review it, as the organisation and the Executive appeared already to have reviewed it.
I am trying to make a point about the transparency of the system. If an organisation changes the square footage of its premises midway through the process, it should go back to basics so that everyone is on the same wavelength.
We say in the appendix:
So we do not know whether it will go to North Ayrshire, South Ayrshire or East Ayrshire.
Presumably, the organisation or the Executive will be able to advise you whether a final decision has been taken.
You said that wider benefits have not been measured so far. Is there a reason for that? Is it difficult to measure such benefits?
We recognise that measuring the socioeconomic benefits of a relocation is extremely challenging. My colleagues and I do not suggest for a moment that every relocation should be subject to an extensive evaluation, but we believe that more could be done than has been done in the past. We include in the report a case study of the evaluation that was undertaken of the relocation to Galashiels of the Scottish Public Pensions Agency, which should give a lot of reassurance to the Parliament and the public, as it indicates that the move was successful. For that reason, one of the key recommendations in the report is that the Executive should think about whether further evaluation of the more significant moves in particular could be undertaken.
We would obviously like the cost per job and so on to be calculated as accurately as possible, so why is there such a wide range of estimates? How difficult is it to estimate savings and costs?
In my opinion, it is reasonable to expect that the Executive, working with the agencies, should be able to provide a robust costing of the implications of relocation and of the outcome, after the event. Unfortunately, that has not been the case so far, which is why one of the report's recommendations is that the Executive should consider preparing firmer costings with the agencies involved.
I have great difficulty with this, because it looks as though the cart was definitely put before the horse—perhaps even before the horse existed. It sounds as if the removal service worked, but not much else seems to be have been planned properly or thought through. The policy seems to have been introduced on a somewhat ad hoc basis, without safeguards or measurements of efficacy.
For clarification, are you referring to the direction to Scottish Natural Heritage?
It is Ross Finnie's letter authorising the official to take
The Executive would be better placed to answer that question, but it strikes me that the formal, administrative wording of the letter is typical of what one might expect to see in a ministerial letter to an accountable officer authorising the officer to proceed.
It sounds as if what transpired was a reshuffling exercise, in which half the transfers came from other public organisations. Would that be a correct assertion?
It is certainly true that a significant number of posts were not filled by people transferring with the organisation and that quite a number of those posts were filled by people from other public bodies. We make the point in the report that that might have had consequences for those other public bodies through the loss of key staff and the need to advertise and fill their posts. However, it is possible—and, indeed, probable in some cases—that the consequential filling of vacancies meant that there were socioeconomic benefits for the receiving area generally. Unfortunately, there is little evaluation evidence to say what happened one way or another.
I just get the queasy feeling that a policy decision was taken without the consequences being thought through, hence the difficulties that have transpired. If the way in which decisions were made represents a general approach by departments or a general approach to government, it is not a good form of decision making. I am deeply concerned that the processes were not gone through and the analyses were not performed before the policy was implemented. If that is the case, it is extremely worrying.
That is not really a question, so you do not have to answer.
If I may respond to the comment, I ask the committee to bear in mind that there has been only one request for ministerial direction so far. The implication is that accountable officers in charge of other public bodies were not concerned about the relocation policy to the extent that they felt it could not be delivered in a way that achieved value for money.
I have a number of questions for the Auditor General. I read his report with interest and have listened to his briefing. I will declare a dual interest in the matter. The announcement on the policy was made seven years ago, at which time—in a previous life—I was involved in drawing up the policy. Indeed, in deciding to locate the new Food Standards Agency Scotland in Aberdeen, I took the first decision under the policy. Since that time, I have followed the matter with considerable interest and have continued to support the principle that underpins the policy. It is therefore a matter of some disappointment to me that I have become one of the most vocal critics of the implementation of the relocation policy.
The organisation submitted its review to ministers in October 2002. That review ranked West Lothian, Stirling and Perth as the best options. The SNH board had rejected Inverness on the grounds of its position in the SNH office network, its distance from key partners and the proportion of staff that the board felt might leave the organisation. Ministers requested that further work be done, which was co-ordinated by the sponsor department. The organisation was not greatly involved in the costings and analysis that were undertaken before the final decision was taken and it has not fully accepted the rationale on which some of the assumptions were based.
Thank you. I seek further clarification on the device of ministerial direction. Over the years, in other contexts, ministers have described the use of a direction as the "nuclear option". How frequently is a ministerial direction sought or required because an accountable officer has said that a decision does not represent best value for money?
A ministerial direction is not frequently sought. Where an accountable officer has sought and been given a ministerial direction, the legislation provides for the direction to be copied to the Auditor General for Scotland. In that way, I am made aware of the situation in order to determine whether any value-for-money considerations result from the decision. My office has seen hardly any such directions. Although they are not completely unknown, they are infrequent.
Thank you. I move on to address a wider point about the length of time it takes—or has taken in the past—for the decision on a relocation to be reached. You spoke earlier about the impact that such delays can have on staff morale and organisational performance.
Organisations that are subject to review have to go through a clear and explicit process relating to their own circumstances. A number of factors may affect how long the process takes and what the outcome is in terms of the choice of location. It would be unrealistic to expect there to be a standard timescale for that process because of the need for careful and sometimes time-consuming assessment. We have not identified a standard timescale and it might be difficult to establish a one-size-fits-all timescale, given the wide variation in the size, structure and roles of individual bodies.
The Registers of Scotland is an example of an organisation in which there has been considerable external and internal assessment of the possible costs, benefits and consequences of relocation—two sizeable appraisal studies have been conducted. In ploughing through those reports, I have felt that the cost of conducting the appraisal studies must in its own right be not insignificant. Have you examined that issue in considering other relocations? In other words, have you examined the cost of the appraisal and assessment process, and do you think that it represents value for money, especially if at the end of the process a political decision is taken that appears not to have been made on the basis of the independent advice?
We have not looked at the case of the Registers of Scotland because it has not yet been decided and it was not one of our samples. I apologise that we cannot help the committee with information on that.
I would like to pursue the issue that Margaret Smith raised earlier regarding the explaining of decisions. I realise that you cannot comment on something that is live but, given what you have said in your report and what the Finance Committee has said previously about the need for decisions on future relocations to be justified—including the decision regarding the agency to which I have referred—is not it right and proper, if not essential, that in making any announcement about an agency, the Executive should be transparent about the reasons for its decision? Does not the fact that appraisal studies—such as those for the Registers of Scotland—have shown that there are significant costs and risks even in partial relocations make it all the more important that the Executive justify its decision if it acts against the independent recommendations?
I agree with Susan Deacon. Particularly in cases of ministerial choice in which a high-ranked location was not selected, it is important to encourage the Executive to give fuller details of the reasons for its choice than have been given in the past. One of the recommendations in my report is that the Executive could do more to improve transparency by ensuring that the reasons for choosing a particular location over others that were on the shortlist are articulated clearly at the time of the announcement.
Finally, I have a couple of questions on the overall policy. Your report makes it clear that the Executive has no overall targets for the number of posts that will be relocated or considered for relocation. Given that we are seven years into the policy, that the decisions have affected more than 3,000 jobs, and that more than 4,000 jobs are under review, would it be appropriate for targets to be established sooner rather than later so that we know when the relocation process may stop? Of course, that assumes that the Executive wants to achieve an appropriate balance between Edinburgh and other locations throughout the country.
If I may say so, that is getting close to a policy matter on which it would be inappropriate for me to comment. We make the point that the policy in England includes a target for dispersal of jobs and that explicit guidance and criteria have been issued there on the areas to which jobs should be relocated. However, I acknowledge that the circumstances in Scotland are different. The general concern that Susan Deacon expresses would be addressed best by the Scottish Executive.
In your work, have you found any evidence that the Executive is investigating fully the scope for relocation within its set criteria, but within Edinburgh and the Lothians? One of the criteria relates to social needs and deprivation. Of course, many parts of Edinburgh and the Lothians have significant concentrations of deprivation: I would be interested to see, for instance, a proposal for a relocation from Charlotte Square to Craigmillar. Is the Executive considering such options, which would fulfil several of the criteria while involving considerably less cost and disruption, as the movement of staff would not be so great?
As the committee will know, we examined only a sample of relocations. The only relocation in our sample that relates to Susan Deacon's point is that of VisitScotland, for which ministers have selected the regeneration area of north Edinburgh. We have a limited amount of evidence that the Scottish Executive is sensitive to that issue.
I express my sympathy with the concerns that Susan Deacon has expressed.
If I may say so, that question is wider than the scope of the study that we are discussing. If I heard the question correctly, Mr Harper is asking whether the Executive's general approach is to have a structured framework within which it acquires and uses information.
Yes.
I cannot give an assurance on that one way or another. I am sure that practice in that regard varies enormously in the Executive.
It would be interesting to know more about that.
On the relocation policy, the new framework that was established by the guidelines that were produced last year is more robust than anything that existed previously. In exhibit 8, we attempt to summarise the guidance that the Executive put in place, which includes the provision of a range of information on staff costs and accommodation and property costs.
We are having a morning of confessions, so, like Susan Deacon, I confess to having been involved in relocation decisions. Margaret Jamieson referred to Ayrshire; it is also the case that very few public sector jobs have come to West Lothian. It is interesting that Stewart Stevenson is attending the meeting, because the areas that he and I represent regularly compete to have the lowest figures—perhaps with the exception of the islands. Therefore, I am interested in the figures.
Mark MacPherson will help us by talking about exhibit 16.
In all cases, a broadly similar process was followed and similar criteria were used, as we said. In exhibit 16, we show the extent to which organisations considered access to labour and access to stakeholders. In some cases, there was a combined assessment of those factors and consideration was given to access to key contributors to the organisation's business. Exhibit 16 shows that there was variation in the weighting that was given to such factors.
It is interesting that you should use that example. We will move on.
In our most recent discussions with the Executive's relocation policy team, we were told that the team had had more meetings recently but had always kept in contact about developments. We did not examine the extent to which such discussions influenced the Executive's strategic approach to relocation, so I cannot tell you much more about that. The Executive is undoubtedly better placed to offer you more detail.
I am looking at exhibit 11, on running costs and savings. I might be missing something, because I can see only what is in that exhibit, but it strikes me that it shows running costs and savings in detail in relation only to relocations to Dumfries, Tiree, Inverness, Galashiels and Ayrshire. However, we are not looking at any running costs or savings associated with relocations to Glasgow, which your report says account for 60 per cent of the relocations.
As I mentioned when I was introducing the report, one of the major problems that we had in our analysis was to do with the general absence of reliable cost information for any of the relocations that have taken place so far. The Audit Scotland team attempted to get a sample of organisations for which the information might be available. The six organisations in exhibit 11 were chosen principally because they were the organisations that could provide us with some information. We would have much preferred to have used a larger and more representative sample, but we found that difficult to do. Mark MacPherson can expand on that.
We selected a sample that would be as representative as possible of the time involved, the size of the organisations and so on. When we considered the base information that was available, we noted that two of the organisations for which we had information had relocated in Glasgow. One of those was Learning and Teaching Scotland, which is located in Dundee and Glasgow. It moved its Glasgow location from one place in the city to another. The other organisation was NHS Education for Scotland, which has not finalised its decision about which building it is going to use, which means that there is no cost information about it yet. In a sense, we had a limited palette from which to work. We had identified Glasgow locations to use as part of our sample but the information was still incomplete by the time we performed the analysis.
One of my concerns is that 60 per cent of the relocations go to one place. Because of the changes, 50 per cent of the criteria will now be based on socioeconomic factors, which means that it is likely that the trend for relocating bodies in Glasgow will continue. However, at the moment, we still have no data about whether relocations to Glasgow have represented value for money.
That is correct. It is for that reason that we are encouraging the Executive to improve the information that it gathers and reports in relation to future moves.
Can I ask about exhibit 17?
Do you have many more questions?
I have just a couple.
As I said, the treatment of redundancy costs is not the easiest factor to explain. As Margaret Smith pointed out, when calculating the cost per job, the cost of redundancy payments are—in line with Treasury guidance—excluded. That is because, at the level of national accounts, a redundancy payment is treated as a transfer payment. For pure economic analysis, it is not a true cost.
How do redundancies fit into the decision-making process? Do they not fit into it at all, because of Treasury rules?
The Scottish Executive produced its relocation guide last summer. The Executive clearly says that the one-off set-up costs of a relocation should be assessed—that is, the costs that occur in the months following a move to a new location but which are not expected to recur. Those costs might include redundancy payments. The approach strikes me as entirely reasonable.
This session has taken some 21 minutes longer than I had anticipated. I appreciate that members are very interested in the issue, but I ask that we wait until agenda item 9, when we will consider our approach.
You are correct to suggest that ministers and accountable officers are not required to give reasons at that point. However, there is a statutory requirement to inform the Auditor General so that I, in turn, may inform Parliament that a direction has been made. As a result, the direction is in the public domain and is transparent. Any party could ask questions if they so desired.
I thank the Auditor General for giving us a briefing and for answering our questions. I also thank Mark MacPherson for his help. As I have said, we will consider our approach to this issue under item 9.