Finance Committee, 28 Oct 2003

Meeting date: Tuesday, October 28, 2003

Official Report 334KB pdf

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Budget Process 2004-05 (Scottish Parliamentary Corporate Body Submission)

Agenda item 5 is consideration of the budget submission of the Scottish Parliamentary Corporate Body, as part of the committee's consideration of the budget process 2004-05. Our witnesses, whom I welcome, are Paul Grice, Robert Brown and Derek Croll. Derek Croll is with us for the first time, following his appointment as head of corporate services, so we extend a particular welcome to him. I also welcome Margo MacDonald MSP to the meeting for this item.

Members have a copy of the budget submission, together with a covering letter from the Presiding Officer. I invite the witnesses to make an opening statement, if they so wish.

The letter and appendices are fairly self-explanatory, but I would like to place them in context before asking Paul Grice to say a little more about planning for the transition to Holyrood, in which the committee previously expressed an interest.

The capital bid reflects known information already examined by the committee on the Holyrood project. I imagine that the committee will want to consider that at our next periodical report rather than concentrate on it today. The committee will have received the Presiding Officer's monthly updating letter a few days ago.

On revenue, the SPCB has said repeatedly that it would take some time after the establishment of the Parliament to reach stability in the cost of running it. The costs of running the current establishment have been fairly stable for the past couple of years. A new salary structure for parliamentary staff has been introduced following a period of using civil service pay scales. That is reflected in the budget.

When we eventually move to Holyrood, there will be changes in some revenue costs. Some of those will be transitional and one-off and some will be longer term. At the moment, the end-year flexibility has rolled forward the transitional costs that, because of the delayed completion of the building, will be incurred later but are not extra costs. We are assuming that there will be a six-month period of double running.

As the Chancellor of the Exchequer might say, we have been prudent with revenue expenditure over time. However, we are trustees for the Parliament and, in a broader context, decisions are due to be made on one or two issues such as longer-term support for the non-Executive bills unit. Not every demand can be met and, in the same way as all other organisations, we have to make decisions on priorities. Broadly, the SPCB is trying to provide services that will run the Parliament within the current envelope, subject to those observations.

Perhaps Paul Grice will say something about the arrangements for transition for the committee's enlightenment.

The first thing that I should say is that the migration strategy is yet to be agreed with the SPCB, so I will attempt to give the Finance Committee an idea of where we are going. Once the corporate body has settled on a plan, I will be more than happy to discuss it with the committee. We aim to ensure that we do not disrupt parliamentary business and that we are able to start business at Holyrood after the summer recess in 2004. That is clearly predicated on Bovis Lend Lease Ltd delivering to the current programme.

Although the building is being completed in phases—the members' block, Queensberry House and then the rest of the site—our current working assumption is that occupation will not commence until the full building is handed over to the Parliament at the end of July. In that scenario, we plan to conduct as much testing and preparatory work as building completion and health and safety considerations will allow prior to handover. In other words, we will be getting into the different parts of the building when we can and doing what testing we can. That will be significant in some areas.

We had planned to ask members and their staff to pack up in July, move all the corporate body staff at the start of August, conduct a full-scale live test in mid-August, move in members in late August, provide training and familiarisation with systems, and commence the full operation after the summer recess. That same approach could be applied at other times of the year, but the length of the summer recess provides an obvious and ideal window.

The migration is being handled and co-ordinated by an implementation unit that operates throughout the organisation. Migration is embedded into many functions of the Parliament and the unit provides a monthly update to me and to the corporate body. Many parliamentary offices have been working steadily towards migration for many months and they are well down the track. Thirty-seven out of 52 contracts for new services have been let, and the remaining contracts are in the later stages of completion. For example, the information technology network contractor started on site on 13 October with the installation of the telephone exchange and equipment taking place shortly thereafter.

The final major furniture contract is about to be let after final corporate body approval. By early next month, we expect to have two MSP rooms fully fitted out in order to allow members to select their furniture and to decide how they want their rooms to be configured. As the committee knows, discussions with the parties on the allocation of rooms in the MSP block are also now under way.

The new building will have a huge impact on the organisation in a number of areas, but perhaps the most significant impact will be on visitor numbers. The higher visitor throughput will certainly contribute towards the Parliament's key principles of openness and accessibility, and will allow the Parliament a higher and, we hope, positive profile. The intention is to provide a high-quality visitor experience. Work has begun on developing an external and visitor management strategy, which will be discussed with the corporate body. Clearly, the large number of visitors that we expect in the first few years will have an impact on cleaning, wear and tear, care of the landscape, catering and many other areas. All the contracts that have been awarded for Holyrood are sufficiently flexible to enable us to respond to the impact of the expected numbers.

Recently, I have restructured the organisation to reflect the new challenges. Facilities management has been aligned with information technology so that the right people are working together in preparation for our migration to Holyrood. A new directorate has been created, focusing on access and information so that our outward-facing work has greater focus, particularly to address visitor management. In both cases, I have put experienced directors in charge and I am confident that they will be able to deliver what is needed.

Staff numbers are controlled carefully and, to echo what Robert Brown said, the corporate body will look hard at new demands and will always look at offsetting savings where possible. However, some burdens cannot be absorbed in their own right—I am thinking particularly of the challenges of running a new, larger and more complex building and the large number of visitors to it. We are working on proposals on both fronts to discuss with the corporate body, but planning for that is already reflected in our budget. As members can see from the figures, we have set aside £0.5 million in contingency for that. The corporate body will make the ultimate decisions on that over the next few months and any update will be reflected in further reports to the committee in line with the budget process.

Thanks very much. I remind members that we are dealing with the budget submission, rather than with the Holyrood progress report, which we have agreed to consider at our meeting at the end of the month.

I have a technical question to start with. Although £50,000 is a relatively small amount, why are you projecting a lesser income for 2004-05, given that what you said about increased visitor numbers suggests that there might be an increase in income?

There are two points to make on that. One of our principal sources of income is broadcast income and the corporate body made a decision that, in the wider public interest, it would not seek to charge broadcasters when we are at Holyrood—the current agreement runs until we get to Holyrood. That figure reflects that potential loss of income. Secondly, it reflects the phase that we are at. The corporate body will consider a number of options for revenue generation—for example in the shop with merchandising, or with catering. Until we are further down the path and until the corporate body has made key decisions, a sensible estimate of income cannot be made. I certainly hope that as the decisions are made and we can make more sensible projections, you will see the proposed income line rise and, as a result, the net requirement for funding reduce.

Will the visitor restaurant generate income?

The current plan is for it to wash its face—to break even. We may look at catering in the outside part of the Parliament, with high-quality external catering. We have not got to that stage yet, but there might be some franchising and other arrangements that could generate revenue for the Parliament. We will consider all those matters. Rather than make a wild guess, it is better to take the work further forward and feature better estimates in our future projections. We will consider all potential areas for revenue generation as well as deliver good services to the people who come to use the building.

Are you 100 per cent confident that the Parliament building will be completed by July next year?

The answer to that question is the same as it has been every time that the question has been asked. We cannot give guarantees, therefore I am not 100 per cent confident. The current Bovis programme, which I understand that Bovis is on in terms of the critical path, says that the building will be finished in time for handover next summer. That is the basis on which I am planning. Of course we have flexibility in the plans, because previously programmes have not been met and we have had to adjust. The migration plan can be delivered at any point in the year, but the key point is that the summer recess is obviously the best window in which to do it. If we were forced to migrate later in the year, that could be done, but we would obviously have to consider the impact on business and others, which would be more complex at a time when the Parliament was sitting.

You have said that you are not 100 per cent confident that the Parliament will be complete by the most recent estimate of July 2004. How confident are you, given that you are not 100 per cent confident?

I do not think that it would be helpful to speculate beyond what I have said, so the answer is exactly the same as the answer that I gave at the most recent meeting. I do not have anything further to say and I am not inclined to give a different figure. That date is what we are working towards. We have been clear and honest with the committee in the past. We are not giving guarantees.

I appreciate that the question might be difficult. It directly affects the issue of migration costs and double-running costs, because any further delay will mean more costs.

Not necessarily, Mr Ewing. Your question is a good one, because it goes to the heart of the matter. However, what you say is not necessarily the case. In a sense, the costs have been tracked through already and members will see that most of them simply move in time and do not necessarily go up. Therefore, it does not necessarily follow that migration costs will increase if we migrate at a later date. As you well know, other costs related to the construction of the building are very sensitive as far as the programme is concerned; however, as I have said, the actual migration costs will not necessarily go up if we migrate later.

I understand the general point. However, I notice that the double-running costs of £1.2 million that were estimated for this financial year have moved by a further £1.5 million—presumably to £2.7 million. As a result, the situation seems to have added to the cost.

It is legitimate to press you on the completion date because we have had various completion dates, beginning with July 2001. Indeed, I well remember that the last predicted completion date was the end of this year. That prediction was wrong. Are you concerned about the press reports in the Scottish Daily Mail by an undercover reporter, who has found that not many people who are working on the site seem to share the confidence expressed in the advice that you have received? After all, we are sitting in a committee room, but that reporter is actually on the site. Furthermore, have you taken any steps to investigate the matter by meeting Mr Caldwell or contacting his newspaper to ascertain whether the picture that he painted and the views that he expressed have any merit?

With respect, I think that we have agreed to deal with matters related to the building's progress at a specific date. I do not think that there is much purchase in—

But the witnesses are here. Would it not be sensible for the committee to ask these questions?

No. The witnesses are here specifically to answer questions on the budget.

But this matter might directly affect the budget.

If the witnesses want to answer any questions about impacts on the budget, that is only right. However, we must not be diverted down a different route. That would be inappropriate and unfair to the witnesses.

I ask Paul Grice to comment.

In light of your comments, convener, I am not sure what I am able to answer. However, if it is any help, I reassure the committee that all the Scottish Daily Mail allegations have been investigated. Indeed, I discussed the matter with the SPCB this morning. We sought a response from Bovis Lend Lease, which has rebutted all the accusations in the newspaper report. That is as much as I could tell the SPCB this morning. As one would expect, when I heard about the allegations I asked for them to be looked at. One has to take such allegations seriously, however they are garnered and whatever spin a newspaper puts on them. I was able to report that this morning. That said, I am very conscious of the convener's comments and do not want to go any further down that track.

Fergus Ewing made a fair point about the so-called double-running costs. I ask Derek Croll to explain that matter, because it is germane.

Just—

Come on, Fergus. You have had—

Can I just clarify something?

Let Derek Croll answer your question.

My question bears on what Mr Grice was saying—

No, Fergus. It is neither fair nor reasonable for you to keep intervening. Other members wish to ask questions. You have asked a question to which Derek Croll will now respond and I think that it is reasonable to allow him to do so.

As far as double-running costs are concerned, we specify in schedule 3—which we sent to the committee—that the total double-running costs budget is £2.7 million. That cost is split over two years purely because some of it was already budgeted as part of our approved 2003-04 budget. As a result, we have deliberately not rebudgeted for those figures in the next year. In effect, the £2.7 million is our estimate of the costs when the migration happens.

For the record, I want to register my anger at the deputy convener's conduct in asking his question. The committee clearly agreed on how to approach the line of questioning, and it is outrageous that that particular question was asked when other committee members did not have the evidence in front of them.

I have two very quick questions. First, what will be the estimated staff turnover once the migration takes place? Will that situation settle down when the Parliament moves to its permanent headquarters?

Secondly, Paul Grice mentioned the project's various revenue-raising aspects, which would be very welcome. Indeed, if the building becomes the second-biggest tourist attraction in Scotland, the revenue-raising aspects might well be large. When can we expect to hear back from you on your review? While you conduct that review, will you speak to the authorities at Westminster about how they engage with tours during recesses and in the evenings? That is a revenue-raising aspect at Westminster.

We have a target for staff turnover of 8 per cent, and current turnover of permanent staff is just below that. I expect the figure to stay there or thereabouts and perhaps to drop a little when we move to Holyrood. Just as the new building will be a much-improved environment for members, I hope that it will be a much-improved environment for staff to work in.

Staff turnover is, to a large extent, determined by economic factors. We are still in a buoyant labour market and are competing with other people for very high-calibre staff. We have taken on a lot of staff specifically for the move, and we would expect those staff to drop away when we move to Holyrood. A lot of staff have been taken on in IT and facilities management, and in one or two other areas, and the idea is not to carry them beyond what we need.

On revenue generation, as I reported previously, we have had survey work done. I would like to have further work done to get some hard numbers—not just the global number but, more important, information on who the visitors are, where they come from, what they are likely to be interested in and, therefore, what they do. We are looking to take high-quality, professional advice, and we will take somebody on to the staff—even on a short-term basis—who has good hands-on experience of major visitor attraction management. That is not a skill that the parliamentary authorities would instinctively look for; nevertheless, there is a skills gap and we need to get the best advice about how one provides a good service and looks at all revenue-generating options. There are some judgments for the corporate body to make about what it is appropriate for a Parliament to charge for. I would not want to pre-empt that at this stage. We will reflect any decisions on that in future reports to the Finance Committee.

I accept entirely your point about Westminster. Coincidentally, a couple of days ago I received a letter from somebody who had been involved in running tours at Westminster, offering to come and help. That is a gift horse that I am going to accept. That person has very relevant experience and I hope to contact them to pick their brains. If necessary, I shall follow up the matter with the parliamentary authorities at Westminster.

It is perhaps worth adding that the configuration of the staff—not so much the staff turnover—will be different for a one-site building of a greater size than the existing premises. We are considering how that reconfiguration can best be managed, regarding the existing security staff and other staff.

I have two brief questions, the first of which concerns the double-running costs. Your estimate is based on the prediction that the building will be finished in July, when there will be a window of opportunity with the Parliament in recess and fewer people around. If—God forbid—the completion date slips and we have to migrate at a less fortuitous time, when more people are around, do you not believe that there might be additional running costs associated with the difficulties of migration when everybody is in the vicinity of the Parliament for the entire six months?

My second question concerns staff pay. The increase of 8.5 per cent is quite high compared with increases in other parts of the public sector. Do you have any comments to make on that?

On your first question, a slippage could have some effect; however, our budget for double-running costs will—at best estimate—apply whenever we do it. Clearly, if there is a long period in which we can migrate, such as a summer recess, there will be a more orderly migration and that will give greater certainty about costs. If we find ourselves having to migrate over a more compressed period, there could be other costs. However, I believe that that budget will suffice for the migration even if, as you say, we have to migrate at a later date. If we face that possibility, of course I will have the budget re-examined very carefully by the implementation unit and, if there is any significant change to it, it will be discussed with the corporate body and, if necessary, with the Finance Committee.

The staff pay increase contains two elements. There is a cost-of-living increase of roughly 3 per cent and an increase of roughly 5 per cent on top of that. As Robert Brown said, we have introduced our own new pay structure, which better reflects a parliament than a civil service organisation. As part of the package, there are new performance pay arrangements, which have people moving up through the grades at different paces—faster at the more junior grades and slower at the more senior grades—according to satisfactory performance. Because we are a relatively young organisation, the great majority of our staff are towards the bottom of their pay scales, in comparison with the civil service or a more mature organisation. You would therefore expect them to move quite rapidly initially; that is what causes that increase. I expect that to stabilise over the next couple of years.

I would like clarification on a couple of points that you mentioned earlier—one on arrangements for media and press coverage and the other on overall catering arrangements. Am I right in understanding that no costs will accrue to the media organisations for their coverage of the Scottish Parliament?

Yes. An arrangement was put in place by the then Scottish Office to charge the media for the feed. I can go into more detail about that, but basically the media organisations pay shares and the BBC pays the most by far. Some organisations do not participate and therefore do not take the feed. Some time ago, the corporate body considered long and hard what it would do when it moved to Holyrood, and it took the view that, although the income was useful, openness was an important objective, as was the desire to have the maximum amount of exposure and coverage of the Parliament. In particular, it was felt that a greater prospect of a Scottish parliamentary channel would be facilitated if there were no longer a charge, and that that would also make it easier for digital and smaller broadcasters to pick up the feed.

That is the basis on which the decision was taken and the cost of that worthwhile objective is forgone broadcast revenue. The current deal only ever extended to the new building and would have had to be renegotiated in any event, and the corporate body took that decision. The short answer is yes, but I hope that I have managed to give some of the context behind the decision.

The feed apart, what about the hardware, the IT facilities, cameras and the nuts and bolts of the operation?

The cameras in the chamber and committee rooms will be provided, as they are here, as part of the parliamentary estate. In terms of extra facilities, if the BBC or any other organisation wanted a studio within the media block, we would expect them to pay for that.

So the broadcasting organisations would pick up the tab for their own equipment and interviews?

Yes, but we supply the cameras and mixing equipment that are in the chamber itself.

But not in the studio facilities?

No. If they want to build a studio in the media tower, which they may well do, I would expect them to pay the fit-out costs for that.

You had another question about catering, I think.

Yes. You talked about the type of catering that will go on within the parliamentary building. Will there be a them-and-us situation? Is there to be a different cost structure for MSPs as distinct from visitors? How will it work?

That is a good question. If you will bear with me, I shall explain the different types of catering. The biggest catering outlet in the organisation will be the canteen or restaurant for staff and members. That facility will be very much like what we have here but it will be bigger. Some of my staff are not on site at the moment, so there will be more people in the new building. That will be the principal catering outlet. There will also be a dining area, broadly called the members' dining area, although we have not yet looked at the rules for who gets to eat there. The corporate body will need to consider that. There will be a public cafeteria, and there may be the possibility of outside catering. We will need to look at that.

We have not looked at pricing structures, but the current thinking is that, if you want the public canteen to wash its face, you would need to have higher prices there than in the staff and members' restaurant. All those things are matters for consideration. If you want to charge staff more, there will clearly be a lower subsidy going in, up to the point at which you can get the facility to break even. If you feel that it is right, as many organisations do, to have some degree of subsidy, that carries a price with it. The same is true of the public canteen; it would be possible to subsidise prices there, but that would come at a cost.

Those are matters that the corporate body wants to look at, and I want to be able to provide data that are as hard as possible on the costs and benefits of those various decisions. We could set the prices at anything that we choose; each option carries a cost and benefit impact. We have a broad idea of how we might replicate what we have here, up to a point, but decisions have to be taken on the pricing structures in all those catering outlets. Again, as we move closer to Holyrood, once the corporate body has taken decisions on that, any impact on the cost and revenue balance would obviously be reported to the Finance Committee. In all honesty, the judgments are quite difficult to make. There are a number of factors to consider, and I hope that I have laid out what they are, but final decisions have not yet been taken. I would want to discuss that with the corporate body.

Could there be a decision that meant that a member of the public came in and had a cup of coffee in the public canteen and paid £1.50 while Jack McConnell went into the members' place and paid 75p?

There could be—or vice versa.

Stick to tea—that is my advice.

I am interested in the work of the implementation unit, the costs for which are given in the paper. I presume that, by and large, that work is driven by the advice that is given by the contractors.

On programme, yes. Obviously, the implementation unit is looking at some 50 contracts, so it is driven by advice from a wide range of people.

Exactly. It is driven by advice. I am not absolutely certain whether this information came from the implementation unit itself or from the departments concerned, but I am told that as late as June of this year an exercise was being carried out to look at the costs, methods and procedures for migration in October and November of this year. All of us knew that such dates were nonsense, yet the implementation unit presumably incurred costs in undergoing that exercise. You have been advised that the handover period will be summer of next year, but what if that proves not to be the case? Is money being spent just now in working out game plans for summer of next year?

The implementation unit has a fundamentally important job, which is to ensure that we are focused on this major challenge. As I said, in addition to the building itself there are something approaching 50 new service contracts; pulling them all together is a major challenge, especially with the shifting position on programme that we have had. Quite frankly, the marginal cost of rolling the Gantt chart forward a few months is negligible, so I do not think that large costs are incurred through wasted effort.

What the implementation unit has always done, and what I will continue to ask it to do, is produce advice to fit a number of scenarios. I very much hope that the migration date will be next summer, but the migration team has a range of scenarios for the corporate body's final decision if it is another date. On a number of occasions, the migration team has presented to the corporate body a range of scenarios, including the ones that Margo MacDonald mentioned, because those scenarios were still in play. If new programmes require different scenarios, that is fine. However, the basic approach to moving is as I have described and does not change fundamentally if the migration date is moved backwards or forwards.

I make no secret about the fact that absolutely the ideal time to move is during a long recess. However, before the building slipped to the current date, I was envisaging a move at a different time in any event. We had to redevelop—to an extent—one of those scenarios for moving during a shorter recess period. For example, we learned a lot of lessons when we looked at last October and, indeed, Easter. If you like, we might regard as an upside the expertise that the implementation unit has gathered.

I promise you that there is no conspiracy. To an extent, the implementation unit is just trying to hit a target that, hitherto, has not been still. I demand expertise, flexibility and imagination of the implementation unit so that whenever we move it is able to carry out the move well. By the way, the unit is a tiny team of about three or four people, but they are highly skilled. Obviously, the unit is crucial when it comes to making a success of the move.

I mean to imply absolutely no criticism of the unit or of its remit. I simply question how effective the unit can be over its outgoing costs. As you well know, it costs money for people to undertake these planning procedures and exercises. I just question where the responsibility for paying those costs should lie, if a number of those exercises have turned out to be wild-goose chases.

I want to move on to another issue. It is some time since I made the tongue-in-cheek remark about the Parliament building's becoming a visitor attraction and therefore needing more public toilets. I asked whether enough of those had been provided, because that will affect either the revenue expenditure or the capital expenditure—presumably depending on whether they are portaloos or properly brick built. Can we hear more about how the expenditure for coping with visitor numbers is estimated?

An earlier summary of progress on the Scottish Parliament building included an annex—which I presume came ultimately from you—on the Parliament's interim accommodation, which stated:

"For example, security costs are much higher than they would be at a mono-site location."

Does that still hold true?

I am not sure how much more I can say about the toilets. There are a certain number of toilets in the building and—

Are there enough for 70,000, which is a lot of folk?

Not all at one time. I do not think that there are plans to build any more toilets. As I said in my opening remarks, we have a big job to do in looking at visitor management in the round and we are doing that. I have restructured the organisation to support that and I am bringing in expert advice. I will discuss that with the SPCB over the coming months. If there is anything more to say, we will, of course, report that to the Finance Committee.

What about security costs?

You made a fair point about security, in which a number of swings and roundabouts are involved. I instructed a review—which has begun—of the security service ahead of the move to Holyrood, because we need to look at the issues. On the one hand, what was said in the report to which you referred still holds true, which is that a single site is simpler to secure than multiple sites. On the other hand, securing a site that will be used by many more people—

Who are getting impatient standing in line for toilets that are not there—

Yes, if that proves to be the case.

Other factors are that the building will be complex and that it is near a royal palace. Set against those factors is the opportunity in a new building to employ technology—for example, closed-circuit television cameras—to support security.

There are many factors in the equation and I cannot give you a definitive answer one way or another. What I am saying is that forces are moving in both directions. The bottom line is that we must have a security force that is able to do its job, which is to look after the safety of people visiting the building and those who work in it, such as ourselves.

When will you have a final report on the issue?

I would expect to discuss that with the SPCB sometime in the new year. As you might expect, I am also looking at opportunities in relation to the security service that are tied in to wider visitor management. Security staff are the people whom most visitors to the Parliament encounter first. I believe that the security staff have established a tremendous reputation as ambassadors. I do not want to miss any opportunity for ascertaining whether we can have enhanced roles for security staff.

The picture is very complex. We are doing a proper review that involves the unions and others. I expect to report to the SPCB on that in the new year. There may be positive or negative financial consequences from that, which would become clear at that time.

There should be financial consequences—I believe that there probably will be, because there will be more training for staff. We take the staff for granted. We get the Parliament's security staff for peanuts, given the amount of good will that they generate. If they are properly trained, graded and rewarded, we will have a more stable work force. It is true that that will cost us more, but I for one believe that that will be worth it.

If I may, I will clarify for the committee the underlying assumptions about the staff pay issue, which Dr Murray raised. The assumptions are 3 per cent for inflation and roughly 5 per cent for increments. The SPCB budget submission refers to "agreed increments", which Paul Grice hopes will stabilise. Does your budget assume 100 per cent staffing? Are you costing for that?

Yes.

You said that there is a 7 per cent staff turnover. Is anything built in to allow for a saving through the turnover?

There might be, but the problem with turnover is that we often have to plug a gap with short-term staff, who tend to be more expensive. Again, swings and roundabouts are involved, which is the case for any organisation that runs at less than 100 per cent staff complement. If, at a distant post-Holyrood point in the future, I could confidently predict a level of staff occupancy of less than 100 per cent, we might take that into account in the budgets. However, the prudent course just now is to budget in the way that we have done.

It is noticeable that the increments are bigger than the pay increase, particularly because for the following year you are back down to roughly 3.5 per cent for staffing. Are the increments a one-off deal or are they likely to recur each year?

I return to the answer that I gave before. We have, after a long consultation with staff and discussion with the unions and the corporate body, moved to a performance pay arrangement, which broadly reflects what the Executive—our major competitor for staff—does. By performing to a high level, which we expect, staff move automatically through the pay range.

When I say that we have a young staff, I am not necessarily talking about their age; I mean that they are new to the Parliament, unlike in local authorities or the civil service. Arguably, to some extent we are getting our staff quite cheap, because there are more of them towards the bottom end of the scale than one would find in an older organisation. Therefore, now that we have introduced the system, we expect staff to move rapidly through it.

This will perhaps echo a bit of what Margo MacDonald said. I do not accept her point about paying peanuts, but I accept her general point about wanting to reward staff for working well, and we have high-quality staff. We must always strike a balance between what is a reasonable amount to pay and what we expect of our staff. We expect much of our staff and they generally deliver very well. There will be a short-term effect as a result of the arrangement and we would expect the position to stabilise. As people get to the top of the scales, large increases throughout the organisation will generally become less frequent. We are talking about a short-term phenomenon.

But you are basically confident about the following year, because there is a noticeable difference as the figure goes back to 3.5 per cent.

Clearly, the figures are predictions, because we are talking about performance pay. They reflect the advice that I have had from the personnel department, which has considered the matter carefully. The system is brand new. If I have reason to depart from the figures, that will feature in forward programmes or when I come back to the committee. That is the best answer that I can give, sitting here gazing ahead a couple of years. We have a budgeting process and if, as we firm up estimates for future years, there is a need to adjust them, we will make a bid to the committee. As I sit here, the assumption seems reasonable, based on what we know about our staff and what we know about the performance pay system.

Further detail on that would be helpful. Do you have a projection for EYF this year, given that your budget is so dependent on using EYF to balance the books? How do you see the amount of EYF being reduced once you have moved over to the new set-up?

I guess that that question is for me. The EYF in the current budget relates to 2002-03. We have not predicted what EYF there might be from the current year. I expect that there will be some, but until we get there I am reluctant to forecast that.

But you are halfway through the year. You must have some sensible idea of where EYF stands.

We are currently running at about a 5 per cent underspend against the budget for the five months to date.

How does that compare with last year?

It is closer to budget than last year. We were probably at about 6 or 7 per cent at this stage last year.

There has been a trend towards getting expenditure closer to budget. That has not been helped by the unique circumstances of the move, but we had hoped for such a trend and I would expect it to continue. Uncertainties will be created by the move year, but beyond that we are gradually getting closer to budget. I cannot remember the exact figures, but I am sure that 5 per cent at this stage is closer than we were in the equivalent period last year.

Is it possible to get a future projection of EYF and information on what steps you are taking to reduce the underspend that leads to EYF?

We are still at a relatively early stage in the year. If we can give a reasonably firm prediction later in the year, I will be happy to supply it. We always want to spend under our budget; we do not seek to spend the full amount. On what we are doing to improve our spend against budget, the biggest single improvement is work by Derek Croll and his team on improving the profiling of expenditure. At the crudest level, people just take the annual budget and lop it into 12 pieces, but we all know that expenditure is quite lumpy. The finance team has been working with the spending bits of the organisation to try to improve the situation. The corporate body and I, and others, have learned as we have gone along about the areas where there is significant underspend and the areas where we have got it right. We just have to try to learn each year and get better. The big effort that we have made to help people to profile in a more sophisticated way is starting to pay dividends and I expect that to continue to improve.

I put on record my appreciation for Paul Grice's answer and reassurance on the Scottish Daily Mail reports. That confirms that the committee and the corporate body can deal with real-world issues in real time, which is a healthy signal.

One figure from our papers leapt out at me. It concerns the fact that rates are markedly higher than was expected. Is it possible to say how much more than expected those rates are? That is not clear from the schedule in front of me. Why were the rental savings not factored in earlier?

Until the rates valuation is fixed by the City of Edinburgh Council, that figure will not be finalised. We provided the best professional estimates that we could. As is obvious if committee members think about it, the rates figure is a little arbitrary in a sense. The rates that come in feed into the uniform business rate and get reallocated across Scotland. If a higher figure comes in here, more can be put out elsewhere—the thing is adjustable. Rates are not a total cost to the public sector budget in the same way as they are for a private organisation. To an extent, one is a bit more relaxed about the ultimate rates figure, although there are accounting issues. I will ask Derek Croll to speak about the rental side.

What exactly does Jim Mather mean by rental savings not being factored in?

Schedule 3 deals with recurring costs. Opposite the entry "Property" is shown a further recurring cost of £1.3 million. The wording beside that reads:

"Higher estimated rates of £4m p.a. partially offset by savings in rent etc."

Once the Parliament has moved to Holyrood, we will obviously not be paying rent, because it will be our own building. We are currently paying rent.

Yes, but my question is why that was not factored in earlier.

It is factored in.

The rates component is impossible to factor in totally until the rates are fixed; we have always known the figures for rents.

I am still struggling with this. The table in schedule 3 says:

"Higher estimated rates of £4m p.a. partially offset by savings in rent etc."

Is that £4 million per annum the total rates estimate?

Yes, that is the current estimate of rates. As Robert Brown said, until we get to Holyrood, we will not know the figure for certain. The figure was provided by our property advisers, and we are working on that basis.

I shall look at the Official Report of the meeting later to see whether I can get some clarity on that. I am totally confused at the moment.

I take your point on that.

The sum is relatively trivial, but I was interested from the overall point of view of non-domestic rates being so dramatically high throughout Scotland over the next three years. I was looking for some tangential input on that.

The rates are tied to the value of the building, which is why we have to wait for that figure to be finalised. We have taken some professional advice to allow us to budget for the rates. The current estimate that we are using remains £4 million.

Derek Croll was talking about EYF a few minutes ago. My figures are perhaps a bit different from his. Although 5 per cent EYF comes to around £13 million, I think that last year's EYF figure was about £40 million.

That includes a lot for capital on Holyrood. The underspend on the Holyrood project also gets carried forward through EYF.

So you are just looking at the revenue side.

Yes. That is by far the most meaningful way to do things. If we include capital, it just distorts things unmeaningfully.

How far down the road of commercialisation are you prepared to go? You are talking about employing a high-powered marketing expert. What are your thoughts on that?

I would not say that he is a high-powered marketing expert; he is somebody who has run visitor attractions. There is sometimes no substitute for getting in somebody who has actually done the job. Marketing is part of that, but it is more about how to run a visitor attraction. We have some fantastic staff in place, but we could do with that bit of extra input, at least for a period.

I do not think that I have ever used the word "commercialisation", but the corporate body has to reach quite a difficult judgment on what is a wider parliamentary issue. We are not like any other visitor attraction; we are a Parliament, and there are issues that need to be considered. Ted Brocklebank made some points about the cost of cups of tea in the Parliament and so on, and those things are actually quite important. On the one hand, the context must be one of protecting the public purse, which suggests that we look to generate income in all areas where we can. On the other hand, we are a Parliament that has openness and accessibility as guiding principles. That suggests that we make things as cheap as we can, if not free. There is a balance to be struck. Ultimately, it is like a political judgment, which, rightly, will be made by the corporate body. What I need to give the corporate body is more information about what each decision might cost in terms of costs and revenue. It will then have to come to a view. I suspect that whatever principled view is arrived at might have to be adjusted in the light of experience.

Do you envisage people paying to come into the Parliament to see it?

I do not think so. It is about what they do when they get in.

Is there any possibility that the expert whom you are bringing in has had anything to do with that magnificent dome that they had south of the border?

No.

That is another reassurance that I am pleased to hear.

I thank the witnesses for attending. We will move on to agenda item 6. We agreed to move into private session to consider our draft report on the financial memorandum to the National Health Service Reform (Scotland) Bill.

Meeting continued in private until 13:07.