Holyrood Project
The second item on our agenda is the Holyrood project. As members know, we appointed Ken Macintosh as our reporter on the issue. Some weeks ago, he gave the committee an interim report and he has now circulated his written report. Ken, do you want to say anything about the report before we consider it?
I will not add anything to the report, but I would like to highlight some of the points that it makes. I hope that much of what is in my report will be familiar to members. Now that the progress group is up and running and is in charge of scrutinising the Holyrood project, the whole process has become much more transparent and open.
The report is for the benefit of members of the committee. It is also designed to help us question the members of the Scottish Parliamentary Corporate Body, who are our next witnesses. I am not looking back at the reasons for the rise in costs—that work has been done by the Auditor General, by John Spencely and by Muir Russell, among others. My concern is the implications for the Finance Committee of the future costs of the project.
I draw members' attention to the eight recommendations that Robert Black made in his report. The SPCB has accepted all eight and has implemented them or is in the process of implementing them. Members might want to ask the SPCB exactly how those recommendations are being progressed.
In the report, I highlight the areas that I think the committee should keep a close eye on. Those areas include the way in which the project's officers manage risk factors and break down risk in the project, as well as worries about construction cost inflation, especially in a city such as Edinburgh. Another important issue is the specific risk of construction—in other words, the fact that many of the contracts have not yet been awarded and we do not know at what price they will come in.
As far as scrutiny of the project is concerned, the most fundamental worry is the reporting of costs. The good news is that the progress group receives reports every two weeks, so we can be confident that we are getting the information that we need about the project and that we will be alerted if anything happens.
I say in my report that not much progress has been made on fees. I also have a particular concern about the timetable, about which there seems to be a lack of clarity. I am not concerned that the project is not on schedule, but I am concerned that there seems to be a misunderstanding about when the project will be completed. In April 2000, Parliament agreed to a motion that stated that the project should be completed by the end of 2002, but completion means different things to different people. The Parliament building will not be ready for MSPs to move into—which is how I understand completion—until April 2003. We must keep a close eye on the timetable. John Spencely, among others, was very dubious about our ability to deliver the project by the end of 2002.
I also make a point in the report about the ancillary costs of the Parliament. Those are the costs of road realignment, landscaping and so on. As members might or might not know, those costs are outside the capped budget of £195 million, which is unfortunate. The costs to which I refer are under a different heading and are not subject to the same limitations and controls as the other costs.
At the end of the report, I make a couple of points about the structure of the project. There have been some changes to the financing of the project, which are laid out in David Steel's letter of 5 September to the convener. There was not much point in my adding to that—members are quite capable of reading the letter. One concern that I would like to raise with the SPCB relates to the point that is made in the Presiding Officer's letter about money that is to be set aside for contingency purposes, because the letter does not say what such a contingency might be. I assume that those are not additional contingency funds for the Holyrood project.
A letter from the Minister for Finance has now been circulated; I apologise for not circulating it previously. I needed to bring some points to the attention of the minister and hoped to arrange a meeting with him. He agreed to a meeting, but events were such that the meeting did not take place. I decided, therefore, that it would be best for me to write to the minister. In my report I pick up what he said in his reply, but I wanted members to see the full text of the letter.
If members have questions, I will be happy to deal with them. However, the report is designed mainly to help members in putting questions to the SPCB.
We should try to avoid duplication and deal with matters that relate directly to the SPCB when we reach agenda item 3. If colleagues have questions for Ken Macintosh, they should ask them now.
From the first discussion that we had about the remit of Mr Macintosh's role as reporter, I was under the impression that the committee was anxious to understand the implications that the project will have for the Parliament's budget and the Executive's spending capability. Will he say something about that in a future report?
I have thought about that issue and have addressed it in the final sentence of my report. The budget for the Holyrood project comes under the SPCB budget. It has its own heading in the Government's budget and has been and will be approved by Parliament in the normal manner. I am not sure what I can add to that. It is obvious to all members that any money that is spent on the Holyrood project is money that could be spent elsewhere, but the £195 million has no direct implications for any other budget. As I have made clear, the extra £14 million has implications for other budgets. The £195 million has to be found, but I think that the increase has been found through the spending review—it certainly has not taken money away from any other area.
Is there any danger that an overrun might cause a problem? You cannot know the answer to that for certain, but have you been assured on that point?
If there was an overrun—there is no sign that there will be one—the Executive would have to examine it and present a revised budget to Parliament. The Executive certainly would not speculate on budgets several years ahead.
In his letter to Ken Macintosh of 4 October, which we have just been handed, Jack McConnell stated:
"If there were to be future changes in the budget for Holyrood, they would be reflected in the draft budget that we presented."
Such a draft budget would flag up any areas that the committee had to consider.
I want to ask about something in the report that is not immediately clear to me. The last paragraph says that
"all money to be spent on the Holyrood project must be approved through the normal budget process."
However, it has always been my understanding—which is confirmed by your report—that some of the roadworks that are associated with the project will be the responsibility of the City of Edinburgh Council. How does that fit in with the normal budget process?
In a sense, the normal budget process for such roadworks would be the approval of money for local government for such works. The answer that the Minister for Finance gave to my letter suggests that discussions are continuing with the City of Edinburgh Council. All councils have to take responsibility for roads in their cities. Some of the money for those roadworks might come out of the usual roads budget, so there will need to be extra provision for them. That is matter for discussion.
Secondly, when talking specifically about the £14 million, the report says that
"the fact that this section of costs comes under a different budget heading and is not subject to the same controls is not a very satisfactory situation."
What is your understanding of the controls to which that spending will be subject?
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.
Obviously, that is not entirely satisfactory because it means that the figure is flexible. Also, because the figure comes under a different heading, it will be more difficult to monitor the costs. I am not concerned that there will be no scrutiny—the costs will be scrutinised by the progress group, which will scrutinise all the costs that are associated with the Holyrood project and report back to Parliament. However, it is not satisfactory that some of the budget should be treated one way and some treated another way.
It would be appropriate for the committee to keep an eye on that £14.126 million to try to ensure that it does not increase, if at all. Obviously, the responsibilities of the new Minister for Finance and Local Government will be of assistance in that regard.
The figure of £14.126 million includes a contingency cost for risk allowance. As the answer to a parliamentary question makes clear, the figure of £14.126 million is an estimate. However, it will have to be closely scrutinised—perhaps even more closely than the £195 million.
Am I correct in understanding that part of that £14.126 million is a contingency allowance?
Yes.
Paragraph 14 of the report states:
"Construction management is designed to help keep costs down and ensure value for money, but leaves the client with less certainty over the final budget."
I appreciate that the client is the Scottish Parliamentary Corporate Body, rather than the Scottish Parliament, but I—and, I believe, Parliament—had the impression that the final budget was set. Are you able to clarify that? Would it be better to seek clarification from the Scottish Parliamentary Corporate Body?
Perhaps, instead of "final budget", it should say, "final cost". The final budget has to be approved by Parliament, but the client is left with less certainty over the final cost of the project. Until more contracts are in, it is impossible to be certain that the cost projections will be reached. At the moment, I believe that only about a quarter of the contracts—about 11—have been allocated. The Scottish Parliamentary Corporate Body can comment on the matter. It will be able to be far more certain about what will happen with the projections once the contracts for cladding have been awarded.
Do you know when that will be?
By Christmas.
I thank Kenneth Macintosh for his report. No doubt we will hear from him again soon.