The Gathering
The next item of business is a statement by Michael Russell, on the gathering. The cabinet secretary will take questions at the end of his statement, so there should be no interventions or interruptions during it.
17:00
As the minister who was, at the time, responsible for the issue, I would like to make a statement on matters relating to the Auditor General’s recent report on the gathering.
First of all, I say quite clearly that the Scottish Government engaged constructively with Audit Scotland’s full independent review and will carefully consider its recommendations.
The Gathering 2009 Ltd is a private company that was neither established nor contracted by the Scottish Government. As the Auditor General has set out in his report, the idea for the gathering event was originated by the company’s directors, Jamie Sempill and Jenny Gilmour. They established the company in February 2007 to design, deliver and organise the event, and during 2007 the company sought and secured grant funding from Scottish Enterprise Edinburgh and Lothian, EventScotland and the City of Edinburgh Council. Those funders followed their normal procedures in assessing and awarding those grants.
In November 2007, the Scottish Government concluded a review of progress on the delivery of Scotland’s year of homecoming—a plan that had, of course, been originated by our predecessors. As a result of that review, we refocused effort to ensure that all activity was directed at the key aim of achieving tourism additionality.
After discussions with the directors of The Gathering 2009 Ltd, the new homecoming team at EventScotland decided to include the gathering as one of the signature events of homecoming—one event among the 400 or so in a wonderful national programme. Around that same time, EventScotland, Scottish Enterprise and the City of Edinburgh Council formed a steering group, which met for the first time in February 2008 and was tasked with liaising with the company’s directors, not providing oversight.
In June 2008, the company approached the then Europe, external affairs and culture portfolio within the Scottish Government with a specific funding proposal. The Scottish Government considered the proposal in some detail and decided to award grant funding of £80,000 towards the Highland games element and £20,000 towards the educational outreach programme.
In April 2009, the directors of the company met me in my role as Minister for Culture, External Affairs and the Constitution. At that meeting, they reported some specific cash-flow difficulties resulting from WorldPay—the company that was processing ticket sale transactions from overseas—withholding income from advance ticket sales until after the event had taken place. That was normal practice, but the income that was held by WorldPay at that point totalled some £160,000 and was projected to rise to £250,000.
As the Auditor General commented to the Public Audit Committee on 23 June 2010, at that point,
“time was not on anyone’s side”.—[Official Report, Public Audit Committee, 23 June 2010; c 1820.]
Accordingly, I asked officials to investigate possible solutions.
Officials met the directors of The Gathering 2009 Ltd for detailed discussions about the WorldPay situation and the company’s cash-flow position. Scottish Government officials sought advice from Scottish Government finance specialists and concluded that the best solution was a short-term loan that would be provided under the statutory authority of section 23 of the National Heritage (Scotland) Act 1985. I agreed with that advice and approved the awarding of the short-term loan. The company was informed of that decision on 1 June 2009. The terms of the loan were that it was to be repaid within 14 days of payment being received from WorldPay, and no later than 31 August 2009.
The gathering took place over the weekend of 25 and 26 July 2009 and was, in audience and media terms, a success. A number of members of this chamber attended and praised it. A subsequent independent analysis that was carried out by Glasgow-based EKOS—a leading economic and social development consultancy—concluded that the gathering had generated 47,000 visits, with a large overseas component, resulting in £8.8 million for the Edinburgh economy and a total of £10.4 million for the wider Scottish economy, and that it had supported the equivalent of 288 annual full-time jobs.
However, in early September 2009, after failing to repay the short-term loan by the due date of 31 August, the company directors told me that they had made substantial losses on the event and that they were unable to repay the loan. I immediately commissioned officials to investigate in detail the company’s financial situation and to examine options for solutions to protect the concept of the gathering and its future economic potential. We were, of course, also mindful of the interests of the creditors, including small firms, public bodies and the Government. The process included asking VisitScotland to commission an independent valuation of the intellectual property rights that the company owned. The results of that valuation and of the Scottish Government’s investigation into the company’s financial situation were available to the Scottish Government in early October.
The Scottish Government then helped to bring together various parties who might play a key role in securing the future of the event. In that context, the principal accountable officer took a decision to write off the amounts that were owed to the Scottish Government on the basis of a judgment that the debts were not recoverable. Other public sector partners did the same. The Scottish Government fully supported those decisions and the decision, which was announced in a City of Edinburgh Council press release on 15 October 2009, that the council and Destination Edinburgh Marketing Alliance would take over the event.
As the Auditor General noted, City of Edinburgh Council officials and Scottish Government officials worked together closely in the days before the City of Edinburgh Council issued its press release. However, the decisions that the council and DEMA made were entirely matters for them. It was deeply disappointing that the City of Edinburgh Council was subsequently unable to follow through on its commitment, which would have assisted the private sector creditors.
Let me now address some of the specific questions that have been posed by some in the Parliament since the Auditor General published his independent report. In relation to the short-term loan, let me make it clear that there was absolutely no evidence that the company was insolvent when the loan was awarded. Directors had committed to repay the loan and there was nothing—[Interruption.]
There will be no interruptions or interventions during the statement, please.
As I said, directors had committed to repay the loan and there was nothing to suggest at that time that the company would be unable to do so. The Scottish Government made senior EventScotland officials aware of the loan—that was appropriate, and it was done. As I said earlier, there was a clear statutory authority for the provision of financial assistance. No special arrangements, directions or dispensations were put in place.
I remind the Parliament that the Auditor General stated that the Government’s decision to find a way to assist the short-term cash flow of the company such that the event could go ahead was “not unreasonable”. Let me spell out how reasonable it actually was. A failure to provide the support could and probably would have jeopardised the event and the £10.4 million that it brought to the Scottish economy. It would have cost jobs not just in The Gathering 2009 Ltd but across the tourism sector. The entire Parliament should bear that point in mind.
It was deeply disappointing that the private company that was delivering the event encountered serious financial difficulties after the event and that attempts to secure the future of the gathering failed.
We welcome the Auditor General’s report on what was a complex set of issues and we will consider the findings and recommendations carefully. We accept that lessons need to be learned. However, the Scottish Government strongly defends its decision to intervene both before and after the event took place. We will not apologise for supporting an event that generated revenue of £10.4 million for Scotland and £8.8 million for Edinburgh. The loss of that income would have been a serious blow to Scotland’s tourism industry and to Scotland’s reputation around the world. It would have cost jobs, perhaps many jobs, and damaged much of the success that we achieved later in the year.
I remind the chamber once more of what the Auditor General told the Public Audit Committee on 23 June. He said:
“it is also important to place on record that clearly time was not on anyone’s side by the summer of last year, because the event was committed to and was about to proceed. The Scottish Government ... would have taken the not unreasonable view that in order to allow the event to proceed it should assist the short term cash-flow problems of the company that was delivering the event.”—[Official Report, Public Audit Committee, 23 June 2010; c 1820.]
I conclude with a further quotation from the Auditor General’s evidence. He said:
“Given the advanced stage that the project had reached, with many tickets having been sold and many commitments having been made by providers of goods and services, it is understandable that the Scottish Government should have done as much as it could to ensure that the company got to the event.”—[Official Report, Public Audit Committee, 23 June 2010; c 1827.]
Doing as much as we could is exactly what we had to do. The Scottish Government did all that it could to ensure that the benefits of the event to Scotland and Edinburgh were delivered. That was our job. That was my job. It was done with the best of motives and to the best of our abilities. Had it not been done, the consequences would have been far worse.
The cabinet secretary will now take questions on the issues raised in his statement. We have exactly 20 minutes for those questions, after which we will move to the next item of business.
I thank the cabinet secretary for the advance copy of his statement.
The fundamental issue is whether the Scottish Government intervened as it did on the basis of a proper understanding of the financial position of The Gathering 2009 Ltd, and whether in doing so it acted effectively to protect the interests of taxpayers and creditors. The Auditor General has raised a range of issues about accountability for spending public money and the need for due diligence, which Mr Russell has acknowledged but not yet fully addressed. I will give him the opportunity to respond to some of those points.
For example, can he tell us why he did not discuss with the project’s other public sector funders the company’s attempt to secure an emergency Government loan as long ago as April 2009? Why did he not act at that stage to establish what the financial health of the company really was, when he was already aware of the cash-flow issues that the company was facing, as they had been brought to his attention by it?
How many private companies have received Scottish Government funding under section 23 of the National Heritage (Scotland) Act 1985 and how many of them have subsequently gone out of business?
Mr Russell said that he sees no need to apologise to anybody. Does he realise that that will be disappointing to the many creditors in this city and throughout Scotland who were kept in the dark over several months about the fact that the company that owed them money was in no position to pay its debts and the Scottish Government knew it? Does he not understand that an apology would have been required whatever the outcome of the Auditor General’s inquiry, because the Scottish Government’s efforts did not protect either the taxpayer or the interests of creditors?
The Government set itself an objective, as Mr Russell has laid out, of saving the company, and it failed. The Scottish Government needs to learn the lessons of this failure, as Mr Russell said, but he needs to say sorry, too.
A range of interests are involved, including the interests of the event, homecoming and the entire Scottish tourism sector. I have made it entirely clear that our sympathy lies with anybody who has suffered in these circumstances, but I have also made it clear to members—I am sorry that Mr Macdonald did not listen to this—that the situation would have been far worse had we not acted in the way that we did. There would have been very substantial damage not just to the credibility of the gathering and its ability to take place but to the entire homecoming event and the entire tourism sector, which found homecoming the most valuable thing that it could have had in the year of the Labour-created credit crunch.
In all those circumstances, Lewis Macdonald and the entire Parliament need to look at what would have been the effect if we had not acted. We often hear from Labour criticisms ex post facto. The reality is that this Government is facing up to its responsibilities again and again and ensuring that circumstances in Scotland are such that people can succeed.
I will make a final point about money. The company had already provided its figures to a number of agencies and others and had received funding from them. My discussion with it in April 2009 was about a short-term cash-flow issue, which was covered by receipts that it guaranteed. The Government and I acted not only properly but out of necessity in those circumstances.
I thank the cabinet secretary for advance sight of his statement, which raises a number of fresh questions. Audit Scotland stated that the Scottish Government carried out no background checks on the company and did not check on the company’s ability to repay the loan, yet today the cabinet secretary said that there were detailed discussions about WorldPay and the company’s cash-flow position. Which is correct: the position stated by Audit Scotland in its report or the position put forward by the cabinet secretary today? They cannot both be correct.
What discussion took place with the company about ticket sales at the point of the loan being given? It is clear from the Auditor General’s report that ticket sales were slow and that the steering group was concerned about that. If ticket sales were slow, why was expenditure on the project not cut back? One did not have to abolish the project; one could have cut back on expenditure to reflect the low ticket sales.
Audit Scotland stated that the steering group had no knowledge of the loan. The cabinet secretary has said today that EventScotland, which chaired the steering group, knew about the loan. Which of those two statements is correct? Can the cabinet secretary please clarify the matter?
I am familiar with the old trick of endeavouring to raise fresh questions after a range of questions have been asked. Let me be clear: I said, and I repeat, that officials met the directors of the company for detailed discussions about the WorldPay situation and the company’s cash-flow position. At no moment could it be said that the company was anything other than a private company operating in the private environment.
The company received—[Interruption.] If I may be allowed to finish. It received public funding for specific tasks. That is why funding was granted by other agencies, and I have made it clear that that is what happened as far as the Scottish Government was concerned. The company was not being run by the Scottish Government; it was receiving public funding for specific tasks.
Come on.
Come on.
If members do not understand that, their knowledge and experience of government is incredibly limited—as we know it to be, and it will remain that way if they continue to make such misapprehensions.
As far as WorldPay was concerned, we were sure that the situation was as it had been presented to us, and a short-term loan was given. That was entirely proper in the circumstances. I repeat: officials met the directors of the company for detailed discussions about the WorldPay situation and the company’s cash-flow position. That was the basis on which the loan was granted.
I thank the minister for the advance copy of his statement. Unfortunately, he failed to address any of the fundamental questions that the Auditor General raised in his report or in his evidence to the Public Audit Committee. The minister has instead chosen—like the First Minister did last week—to take one remark by the Auditor General out of context, as if it is a complete exoneration of his actions.
He seems keen to agree with the Auditor General’s comment that
“The Scottish Government, I guess, would have taken the not unreasonable view that in order to allow the event to proceed it should assist the short term cash-flow problems of the company”.
However, does he also agree with the Auditor General’s comment that
“it is fair to say that the Scottish Government could have completed a more thorough assessment of the company's ability to repay the loan”?—[Official Report, Public Audit Committee, 23 June 2010; c 1820.]
Does he agree with the Audit Scotland report’s finding that
“The Scottish Government did not complete robust checks of the company’s ability to repay the loan”?
If no such checks were carried out, how can he say that
“there was absolutely no evidence that the company was insolvent when the loan was awarded”
to quote from his statement, especially as he made absolutely no effort to check whether the company was solvent? By the minister’s failure to do that he has let down not only the Scottish people but the many Scottish businesses that have been left out of pocket and that are rightly angry about the way in which they have been treated.
The purpose of the short-term loan was quite clear. I have addressed many of the points that the Auditor General raised, and I have made it clear that there are lessons to learn from the project. However, if that loan had not been given, the event would not have taken place, as a result of which there would have been considerably more damage. None of the questions that I have yet been asked has addressed that point.
Opposition members are very good with 20:20 hindsight, but it is fortunate for the Scottish people that they are not running the country, because the country cannot be run in hindsight.
We come to back-bench questions. Quite a few members wish to ask questions. If we are all speedy, we can get them all in.
Is it not the case that the gathering and the wider homecoming celebrations were initially devised by the previous Labour-led Administration and that, as at May 2007, nothing had been done to progress the programme of events, leaving this Scottish National Party Government to pick up the pieces?
That is substantially true. Very little was done, right across Government. All of us who came into government that year discovered that there had been many fine words but very little detailed planning. I could quote curriculum for excellence, for example, but I will not.
We had to get on with the situation, however, and we refocused this excellent project on real, achievable goals. The homecoming turned out to be an immensely successful contribution to Scottish tourism last year, as masterminded by my friend Mr Mather. It was obvious at homecoming events, again and again, that the tourism sector viewed them as essential. If we had followed the course of action that members from around the chamber have, with hindsight, urged on me, that would not have been true.
Why was due diligence not carried out on the capacity of The Gathering 2009 Ltd to pay back the loan that it requested from the Scottish Government at the point at which it asked for that loan? That issue is raised in the Auditor General’s report, which makes it clear that a deficit was seen as possible from the outset of the company’s operation. On what date did the Scottish Government accept that The Gathering 2009 Ltd was trading insolvently and was unable to pay its creditors? Why does the minister not understand that that issue is crucial to the 103 small businesses that were cruelly let down by the failure of a company that the Scottish Government tried to get other public sector bodies to buy weeks after the event?
The Scottish Government knew in the autumn that the company could not continue. The company was not trading insolvently when it went through this process.
I find Sarah Boyack’s position absolutely extraordinary, because the jobs that would have been lost are in her constituency. She was at the gathering and saw it take place. Even though she knows that if it had not taken place, the result would have been catastrophic not just for the event but for the homecoming, she continues to argue the point. It is quite clear that at the time of the discussions about the short-term loan, the gathering was a work in progress, but it was in progress. All the partners were involved in it and the independent company that was delivering it, which had been contracted to do certain things, was doing those things.
The date on which I or anyone else discovered that the company could not fulfil its promises was in early September. That was made clear in the Auditor General’s report, and I am happy to confirm it.
According to paragraph 34 of Audit Scotland’s report,
“The steering group members were not informed of the Scottish Government loan.”
EventScotland was represented on the steering group—indeed, the group’s chair was from EventScotland—but, in his statement, the minister said:
“The Scottish Government made senior EventScotland officials aware of the loan—that was appropriate, and that was done.”
Those two statements cannot both be true. Who is telling the truth?
I have made it absolutely clear that we made senior officials in EventScotland aware of the loan. That was appropriate and that was done. The wider question is how much more widely that information should have been made known. It is obvious that at the time, given the commercial nature of the event, it was quite proper to share the information with EventScotland but not to share it more widely. It would not have been helpful to share it more widely.
I am surprised that Murdo Fraser pushes the point so hard. What would have happened if the event had been jeopardised at that stage? He must answer that. Jobs would have been lost, the homecoming would have been damaged and there would have been collateral damage in the tourism sector in the north, south, east and west of the country. I have still not heard a single member address that issue.
From the minister’s statement, it now seems that, regardless of the trading conditions of the company, the Government’s position is that it would have provided it with any loan to secure the continuation of the event. That raises considerable issues about the use of taxpayers’ money.
Why was due diligence not carried out? The statement of accounts of the company to which the Government provided the loan show that a loan of £39,000 from the directors of The Gathering 2009 Ltd to Panalba Ltd, which is owned by the same two directors, was outstanding. Was the minister aware that that £40,000 loan was outstanding?
The minister says that he followed the advice of officials on the use of the National Heritage (Scotland) Act 1985, but that relates to how a loan could be made rather than to whether a loan could be made. Will the minister confirm the options that were presented?
Quickly, please.
If any other business finds itself experiencing the same cash-flow difficulties as the company to which the minister says that he had to provide the loan, will it be given the same treatment?
It is quite clear that Jeremy Purvis knows nothing of the circumstances in which Government operates—[Interruption.]—nor do the Labour members who just laughed.
It would be quite impossible for such a loan to be made unless there was statutory authority for doing so. Advice was given on the matter. On the basis of that advice, I regarded the provision of a loan as the best possible option, and I do not back away from that. There was no other way.
To deal with the ridiculous phrase “secret loan”, which I am glad has now been dropped, there is no way that loans can be made in secret from Government; it is complete nonsense. The reality is that it was done in a proper way, by statute and completely legally.
Jeremy Purvis began his question with another piece of nonsense. He said that the Government would have provided a loan “regardless of the trading conditions of the company”, which is complete nonsense. The company was a work in progress; work was being done. There were agencies working with it that were contracted to do things for the Government and for others. In those circumstances, there was every indication that the gathering would be delivered.
The gathering, of course, was delivered. Members on every side of the chamber attended it and commented on how successful it was and how well it had gone. The reality is that I knew of the difficulties, as others did, only in early September 2009.
I ask members to keep questions and answers short and sharp from now on.
Does the former Minister for Culture, External Affairs and the Constitution agree that the tone of the Opposition attack on the gathering sits in the same dreary category as Labour’s dismissal of homecoming as a “damp squib”? Does he agree that Iain Gray’s gratuitous turn of phrase on the gathering at First Minister’s questions last Thursday denigrates the kilt, clans and traditional Scottish culture?
I think it does. I entirely agree, and I will go further; I have always found Rob Gibson to be very helpful. The convener of the Public Audit Committee made a very dismissive remark in his interrogation on the gathering about tying tartan round things, which was an unfortunate way to look at it.
I am at ease with my own culture, as I hope every member in the chamber would be. I do not fully understand the self-loathing that comes across in some of the statements.
The minister tells us that the gathering generated £8.8 million for the Edinburgh economy. That is certainly a very large amount of money over a two or three-day period. I find it astonishing, therefore, that such an event can run at a loss.
I want to ask specifically about the secret loan, because it was indeed a secret to the steering group. The steering group was set up to work in partnership with the public organisations and the private company. Why did it not know about the loan until after the event?
There was no secret loan. The loan was made in the appropriate way by statutory authority and communicated in the way that it should have been. There was commercial confidentiality involved in the work of a private company; I am sorry that the member does not understand that, but her track record—and that of her party—on understanding any of this is severely defective.
The minister will have read—although Cathie Craigie has not—paragraph 35 of the Audit Scotland report, which states:
“Financial projections showed that the event would be loss-making except if it attracted the most optimistic gate numbers. The company directors considered a loss was acceptable in the first year as they intended to carry on the company after the event, with a view to holding a similar event in the future.”
The gathering, although loss-making, generated huge amounts of money for tourism businesses, and there is talk of a homecoming in the future. Does the minister believe that a gathering will be part of that, due to the huge support that such an event gives to tourism businesses in the face of austerity from successive Westminster Governments?
The homecoming was an undoubted success, and I regret that there have been so many attempts to tarnish it by members in the chamber.
I will quote—very briefly, Presiding Officer, because I know that you want me to be brief—two individuals. John Shevlin, the manager of the Macdonald Holyrood hotel, reported in January 2009 that all his 156 rooms had been booked for the period around the gathering by members of clan Donald from North America. He said
“Although we expected there to be an increased interest because of Homecoming, we never thought there would be as much as this”.
There are members in the chamber who would not have wanted that hotel to have a single room booked because they are—in retrospect—against the decisions that were made.
I find the second quotation rather touching. Betsy Mitchell Shepherd, from California, said—[Interruption.]
Order, Mr Purvis.
Yes, I can hear that Jeremy Purvis is getting overexcited; I advise him to calm down. He should hear this quotation and reflect on it.
Betsy Mitchell Shepherd from California, who attended the gathering said:
“My ancestors came to the US from Dunoon in 1889 and I’ve always been truly proud that I am of Scottish descent ... The joy and excitement I felt ... filled my heart and soul with happiness.”
If only there was something like that in the chamber, rather than the grudging, curmudgeonly attitude towards the gathering and the homecoming. [Applause.]
Order. That concludes the statement and questions on the gathering. I apologise to those members I was unable to call.