Finance Committee, 27 Feb 2001

Meeting date: Tuesday, February 27, 2001

Official Report 182KB pdf

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Reporter

We now move on to consideration of a reporter on the Scottish Parliament building at Holyrood. Members will remember that Ken Macintosh was appointed originally, but he is no longer a member of the Finance Committee and is not available to act as a reporter for us. The Audit Committee has received a letter from Paul Grice about costs and inflation, which has been circulated to committee members. I invite members to make any comments that they might have on the letter and to consider who might be appointed as our reporter. David Davidson is not present today, but he has said that he would be quite happy to act as the reporter.

I missed the appointment of Ken Macintosh. Could you please outline the remit of the reporter? Is it merely to monitor current events, or will there be any involvement in trying to learn lessons retrospectively?

The remit is specifically not to consider the backward-looking audit, which was the job of the Audit Committee. Ken Macintosh's remit was to consider carefully, on a continuing basis, the implications for our budget of what is happening with the Holyrood project—which is interesting, given the contents of the letter that we have just received. The reporter's remit is to take a close interest in what is happening to the costs of the project.

I do not know how Mr Gorrie feels about this suggestion but, given that he has a continuing interest in the subject, he might be our reporter. He probably has more expertise in the matter than most committee members.

Everyone knows that I have taken an interest in the issue. I accept the fact that the building is going ahead at its present site, and that the issue now is to get the best building possible within our resources. If the committee wants me to act as reporter, I would be happy to do so. However, if David Davidson has a particular yen to be the reporter, I do not want to put his nose out of joint.

Are there any other comments?

Given that David Davidson has a strong view on the matter, perhaps we should agree that he should be the reporter. Can we comment on this letter?

Yes. Go ahead.

What has occurred is fascinating and has certainly passed me by. I am an enthusiast for Holyrood, which places me in a different position from that of almost every other member of the SNP, and certainly from that of Donald Gorrie, and I want the job to be done properly. However—and I hope that this does not put Paul Grice's nose out of joint—I do not think that the fix that appears to be emerging from this memorandum is at all acceptable. The idea that we should apply a differential inflation factor when assessing a budget has been consistently thrown out of court by officials who have appeared before us and with whom we have agreed. We want to know what differential inflation is, but we do not want a differential deflator to be applied to any part of the budget.

When construction inflation rises at 10 per cent, it is in no way acceptable for us just to net that out and call it real terms. That is not making the Holyrood project accountable to the Parliament. The idea that when the budget has risen by a substantial amount, we can call that inflation, net it off and say that the cost really is £195 million, is not what we agreed on before. It is not what I voted on in the Parliament and it is certainly not what this committee understood would happen. David Davidson might want to examine that idea closely. We should not create a precedent and allow that to become the norm.

The letter says that standard practices are being followed with regard to the construction of public buildings for which the total amount required for inflation cannot be known in advance.

The key point is that at no point in any part of the budget should we net off inflation using anything other than the gross domestic product deflator. Here, it is suggested that we use the Building Cost Information Service Ltd national all-in tender price index, which is of dubious reliability and would be absolutely new to the Scottish budget. Does that mean that we must use the BCIS national all-in tender price index—which is not a public sector calculated index—for every construction project in the rest of the budget? I am bemused at the way in which this idea has been presented. It is quite new to me.

The letter says that the index is nationally recognised. However, I think that you are right. If we appointed David Davidson as our reporter, I am sure that he would want to examine the matter.

Did we not vote on a maximum cost of £195 million, and did not the Executive and the Scottish Parliamentary Corporate Body make it absolutely clear that that figure would not be exceeded? Now, we find that that figure will be exceeded, but that the additional money will be called inflation. That is bizarre. Maybe David Davidson can consider that in detail.

The difficulty is that a specific project must be dealt with realistically, and the reality is that the construction industry's inflation is X. I am surprised that there is not also a local factor. There is so much building going on in Edinburgh at the moment that getting businesses to tender at reasonable prices must have been a nightmare. However, I agree with Andrew Wilson that the matter needs to be examined.

The last time that we discussed the Holyrood project, on 31 October, we spent a considerable amount of time discussing the £14 million for extra construction costs, which came under a different heading and was not subject to the same controls. Ken Macintosh, as our reporter, referred to the matter. That money now seems to be being used to cover inflation, if I read this memorandum correctly. We need confirmation that the price will not rise beyond £195 million, because the other costs that were not specified will now be taken up by inflation. We need more clarity.

I missed the earlier discussion. Is it the committee's view that £195 million means £195 million? I am not an expert on the meaning of the Executive's motion, as I led the debate against it. However, my understanding was that the £195 million meant £195 million: there was no rubbish about inflation, real charges or anything else. Did the committee take a different view, that the £195 million meant £195 million plus various imponderables?

It would be legitimate to interpret the £195 million as meaning £195 million in real terms. When general price inflation rises, that should be accommodated, as the rest of the budget will rise by the same amount. I do not agree that we should allow an unusual price index to be used—no doubt for the first and last time—for this specific part of the budget, just because construction inflation is rising faster. Throughout the debate and the discussions, we mentioned the fact that the construction price inflation was high. People know that; it is not news. I think that it is questionable to employ a new index at this late stage. An inflation index can be used, but it should not be the one that is suggested in the memorandum.

Ken Macintosh stated:

"The £195 million is a capped figure—which cannot increase unless an increase is specifically approved by Parliament—but the £14 million is subject to the Executive's negotiations and increases can be found from the Executive's budget."—[Official Report, Finance Committee, 31 October 2000; c 797.]

That is not totally clear to me.

Is that £14 million not for the road around the Parliament building?

Sorry?

That £14 million is not included in the Holyrood project. It is for the road and the landscaping.

Yes.

There has been a fair bit of wriggling on this hook of £195 million. I seem to recall that, the previous time that we debated it, the £195 million was described by Paul Grice as a target figure. We need to have a reporter in place as soon as possible to report back to us on the issue.

We have appointed David Davidson as the reporter, and he can pursue the matter.

At the beginning of the final paragraph on page 2 of the letter from Paul Grice, we are told that

"the Parliament had not explicitly agreed that the £195m should be treated as a real terms target".

The clerk has pointed out that, when we receive the draft budget from the SPCB, we can pursue the matter further, independently of anything that David Davidson might report back to us.

We now move into private session for agenda item 8.

Meeting continued in private until 12:22.