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Business Bulletin 1999-2011

Minutes of Proceedings 1999-2011

Journal of Parliamentary Proceedings Sessions 1 & 2

Committees Sessions 1, 2 & 3

Annual reports

Report on the Financial Memorandum of the Creative Scotland Bill

Remit and membership

Remit:

1. The remit of the Finance Committee is to consider and report on-

(a) any report or other document laid before the Parliament by members of the Scottish Executive containing proposals for, or budgets of, public expenditure or proposals for the making of a tax-varying resolution, taking into account any report or recommendations concerning such documents made to them by any other committee with power to consider such documents or any part of them;

(b) any report made by a committee setting out proposals concerning public expenditure;

(c) Budget Bills; and

(d) any other matter relating to or affecting the expenditure of the Scottish Administration or other expenditure payable out of the Scottish Consolidated Fund.

2. The Committee may also consider and, where it sees fit, report to the Parliament on the timetable for the Stages of Budget Bills and on the handling of financial business.

3. In these Rules, "public expenditure" means expenditure of the Scottish Administration, other expenditure payable out of the Scottish Consolidated Fund and any other expenditure met out of taxes, charges and other public revenue.

(Standing Orders of the Scottish Parliament, Rule 6.6)

Membership:

Derek Brownlee
Joe Fitzpatrick
James Kelly
Liam McArthur
Tom McCabe
Elaine Murray (Deputy Convener)
Alex Neil
Andrew Welsh (Convener)

Committee Clerking Team:

Clerk to the Committee
Susan Duffy

Senior Assistant Clerk
Mark Brough

Assistant Clerk
Allan Campbell

Committee Assistant
Katie Packer

Report on the Financial Memorandum of the Creative Scotland Bill

The Committee reports to the Education, Lifelong Learning and Culture Committee as follows—

introduction

1. The Creative Scotland Bill (“the Bill”) was introduced in the Parliament on 12 March 2008.  The Education, Lifelong Learning and Culture Committee has been designated by the Parliamentary Bureau as the lead committee for consideration of the Bill at Stage 1. Under Standing Orders Rule 9.6, the lead committee at Stage 1 is required, among other things, to consider and report on the Bill’s Financial Memorandum. In doing so, it is required to consider any views submitted to it by the Finance Committee.

2. At its meeting on 18 March 2008, the Committee agreed to adopt level two scrutiny in relation to the Bill.  The Committee received written submissions from Anne Bonnar, Transition Director of the Creative Scotland Project (“the Transition Director”) and Union Representatives at the Scottish Arts Council and Scottish Screen and took oral evidence from Scottish Government officials at its meeting on 22 April 2008.  Government officials also provided the Committee with additional material following the evidence session.  All written evidence received is reproduced as an annexe to this report.  The Official Report of the evidence session can be found on the Parliament’s website, at:
http://www.scottish.parliament.uk/s3/committees/finance/or-08/fi08-02.htm

the bill and financial memorandum

The Bill

3. The Bill establishes a new cultural development body, “Creative Scotland”, through the amalgamation of the resources (including staff) and functions of the Scottish Arts Council and Scottish Screen,1 although Creative Scotland is to have “new and wider functions than its antecedent bodies”.2  

4. Creative Scotland will provide financial and practical support to “artists and creative practitioners of all kinds”3 and develop and distribute “strategic” good practice advice to individuals and organisations.  The new body will also provide advice to Scottish Ministers and will be expected to “champion” the benefits of creativity across the public and private sectors, and society at large. In all its decisions, Creative Scotland will have operational independence from Ministers (as is currently the case with the Scottish Arts Council and Scottish Screen).4

The Scottish Government – costs and savings

5. The Financial Memorandum states that the Bill “does not in itself have cost implications for the Scottish Government, local authorities or the cultural and screen industry sectors”5 and that the funding provided to Creative Scotland will essentially be the combined grant in aid that would otherwise had been made available to the Scottish Arts Council and Scottish Screen.  Over the period 2008-2011, this will amount to £50m/£50.88m/£48.04m.6 

6. In addition to this, there are one-off costs involved in the amalgamation of the two bodies.  However, the Financial Memorandum states that this work is “at an early stage and a detailed estimate of one-off costs is not yet available”.7  In terms of what the costs of amalgamation may consist of, the Financial Memorandum identifies the following—

  • professional fees;
  • costs associated with harmonising office systems;
  • staff costs associated with developing new ways of working; and possibly
  • costs connected to the relocation of office premises.

7. The Financial Memorandum states that, although the level of these costs is hard to predict, the total amount is “not expected to exceed £700,000 per annum in the coming 2 financial years”.8  The costs will be met from efficiency savings from the two organisations’ grant in aid, as required by the Scottish Government.  In addition, it is indicated that integrating the two bodies will “result in some administrative efficiencies”, but no additional detail is given.9

8. The quality of the Financial Memorandum is discussed in detail later in this report.

summary of evidence

9. As noted above, the Financial Memorandum states that the total cost of amalgamating the two organisations should not be greater than £700,000 per annum over financial years 2008-09 and 2009-10.  However, very little detail is present in the Financial Memorandum and there is only a brief explanation of how the total cost might be broken down.  The following sections of the report examine each of the main cost headings in turn.

Transition costs – staff

Redundancies – general
10. The Financial Memorandum does not mention the costs of any redundancies (either compulsory or voluntary) that may arise from the amalgamation of the two bodies.  However, the union representative at Scottish Screen stated that—

“…it is assumed by staff that there will be redundancies in order to meet these [transition] costs.”10

11. Officials admitted during oral evidence that the overall figure of £700,000 did include an element for voluntary redundancy11 but explained that—

“We are at too early a stage for me to give you a detailed answer about voluntary redundancies. It is possible that they will form part of the merger scheme, but that will depend partly on the structure of the new organisation and where existing roles might fit into it. It is possible that voluntary redundancies will be part of the process.”12

12. In written evidence following the Committee meeting, officials stated that—

“In relation to costs associated with any voluntary redundancies, it is not possible at present to offer an estimate of overall cost, as no proposed organisation structure yet exists for Creative Scotland.”13

13. Despite being asked to provide a range of estimates, and the assumptions behind those estimates, the Scottish Government, at this point, would appear to be unable to do so.  The Committee is deeply concerned that very little preparatory work has been done on the potential cost implications of any redundancies, and that redundancies were not mentioned in the Financial Memorandum at all. The Committee appreciates the need for sensitivity when dealing with such matters, but is firmly of the view that a range of potential costs should have been provided. 

14. The Committee considers the absence of this information from the Financial Memorandum to be a serious failing which casts doubt on the reliability of the overall estimate given in the Memorandum.  The Committee notes that the “transition plan” is still to be finalised, but considers that this work should have been done prior to the Bill’s introduction. 

Redundancies and recruitment – senior staff
15. Officials were also questioned on the issue of what will happen to senior staff when the organisations are merged (i.e. it would be expected that the organisation would have only one chief executive or director of finance etc.) and responded that—

“There would be a cost implication if there were redundancies. I cannot tell you at this point whether the chief executives or finance directors, having had their employment transferred to the new body, would be content to take on a slightly different role. If they were content to do that, redundancy would not arise—indeed, it may not need to arise at all.”14

and that—

“A figure was not put on the cost that might arise from a person now occupying a chief executive role becoming redundant. We considered the broader impact of voluntary redundancies across the organisation.”15

16. In written evidence following the Committee meeting, officials stated that £150,000 will be spent on board and chief executive recruitment.16  No further information is provided surrounding this figure, and it is therefore impossible for the Committee to ascertain how much of the £150,000 will be spent on recruiting a chief executive, or whether this will be based on internal or external competition.  However, it would appear to the Committee that, if a chief executive is to be recruited, it would be likely that at least one of the current chief executives could be offered redundancy.

17. The Committee again notes the sensitivities surrounding staffing issues, and that the transition plan is ongoing, but is deeply concerned at the level of information provided by the Scottish Government.  Indeed, the issue of senior staff redundancy and recruitment was not mentioned at all in the Financial Memorandum.  Considering the potential costs of redundancy packages for senior staff, the Committee considers this to be a serious deficiency in the information provided, both in the Memorandum and in oral and written evidence.

New ways of working, general recruitment and staff training
18. The Financial Memorandum indicates that there may be “staff costs connected to developing new ways of working”,17 but no further detail is given.  In addition, in oral evidence, officials mentioned that there may be costs related to staff recruitment and staff training.18  Again, no further information was provided in the Financial Memorandum or during oral evidence.  However, in written evidence following the Committee meeting, officials stated—

“Following further discussion with the two organisations, provision for general staff training and recruitment have been removed from estimates of one off transition costs (except insofar as they relate to the recruitment of a chief executive).  The organisations are content that they will meet the costs for these activities from their operational budgets.”19   

19. Despite this clarification, the Committee is concerned that no further information was provided regarding the “new ways of working” mentioned in the Financial Memorandum.  In relation to general staff training and recruitment, the Committee considers that clarification is required on why the Scottish Government considers that it might be necessary to recruit new staff at the same time as other staff may be being made redundant. 

Pensions
20. The submission from the Transition Director identifies pension costs as being a potential cost arising from the Bill—

“An initial review of Scottish Arts Council and Scottish Screen’s pension arrangements was undertaken in 2006, by the Government’s Actuary’s Department in London, this initial work is to be progressed.  The review will examine a number of options and their associated cost implications, which could potentially result in a liability arising.”20

21. Officials confirmed in written evidence that—

“In relation to staffing costs, the process of commissioning actuarial advice about pensions is under way but no estimates of one off costs necessary for future arrangements are yet available.”21

22. The Committee appreciates that a review is underway, but is disappointed that the Scottish Government could not provide any further details, either regarding the review, or a range of possibilities for what the cost implications of it might be.  The Committee again notes with concern that pension costs were not identified in the Financial Memorandum.

Transition costs – transition project

23. To manage the amalgamation of the two bodies, the Scottish Government has set up a Transition team, headed by a Transition Director, and based at “White Space”, at the University of Abertay.22  However, again, no mention was made of any costs related to this in the Financial Memorandum.  Officials confirmed in supplementary written evidence that the costs for the transition team would total £410,000 over the following two financial years.  This figure includes salaries, travel and accommodation, office costs, events, advisory consultants and connected services.23 

24. The Committee thanks the Scottish Government for supplying this information but sees no reason why it was not included in the Financial Memorandum.  The Committee considers this to be a serious omission that again raises questions about the accuracy and reliability of the estimates outlined in the Memorandum.

Transition costs – professional and legal fees

25. The Financial Memorandum identifies professional fees as an expected one-off cost of amalgamating the two bodies, but does not give any further details.24  In written evidence to the Committee, officials were able to state that legal and professional fees would cost £280,000 over two years, based on previous business practice.25  This figure includes provision for—

“advice and services connected to HR, tax, property, intellectual property, business transfer and general financial and legal advice.”26

26. The Committee thanks the Scottish Government for this clarification, but considers that this information should have been included in the Financial Memorandum.

Transition costs – relocation

27. The Financial Memorandum identifies “costs connected to the relocation of office premises”27 as a potential cost implication of the Bill, but gives no further information.  In supplementary evidence, officials stated that—

“In relation to premises costs, initial work has been undertaken to identify potential liabilities and relocation costs.  This work is to be further developed and will benefit from preparatory work undertaken in a location study that began in 2006 under the terms of the previous administration’s policy on the location of public bodies.  The decision regarding premises requirements will be subject to the identification of the requirements of Creative Scotland and relevant financial restraints.”

28. The Committee is concerned that any decision on the location of the new body has not yet been taken.  It is clear that the cost implications of relocating the new organisation could potentially be very high, although if the Scottish Government agreed to end one of the two current leases for the existing organisations, a saving could be made. 

29. The Committee is firmly of the view that, even if a decision has not yet been taken, the options available to the Scottish Government should have been spelled out in detail in the Financial Memorandum.  Again, given the lack of this information, the Committee is seriously concerned about the reliability of the Financial Memorandum. 

Transition costs – policy and systems development

30. The Financial Memorandum states that there will be costs associated with harmonising office systems as a result of the establishment of Creative Scotland.  However, no further information is provided.  In written evidence following the Committee meeting, officials identified a cost of £240,000 over two financial years for—

“…3 policy and strategy development projects.  Also includes provision for Creative Scotland website; design of electronic administration systems; and, communication for new organisations.”28

31. However, officials also stated that—

“Estimates are included at the annex in relation to the design of new systems, including IT and other administrative systems.  As the operational remit of Creative Scotland is still in development and the requirements with regard to systems are still to be clarified it is at present not possible to offer an estimate for system implementation costs, reflecting the potential retention of current systems and development of new;”29

32. The Committee thanks the Scottish Government for providing this extra information, but once again considers that preparatory work on the potential cost implications of harmonising office systems should have been completed prior to the Bill’s introduction, so that a range of possible costs could have been provided.

Transition costs – overall

33. As can be seen from the preceding sections of this report, the Scottish Government is unable at this point to provide any level of detail regarding the majority of the potential costs that may arise from the Bill.  Indeed, as noted above, the Financial Memorandum states that—

“Work is under way at present to prepare proposals for the amalgamation of the operations of the two organisations.  This work is at an early stage and a detailed estimate of one-off costs is not yet available.”30

34. In addition, the Transition Director stated that—

“Due to the early stage of the project the cost implications of the Bill at this time cannot be accurately quantified in terms of the range of costs to be incurred”31

35. Staff at the two organisations agree.  The PCS representative at Scottish Screen stated that, “Whether £700,000 is adequate provision for the setting up of the new organisation is impossible to say”;32 and the Unite representative at the Scottish Arts Council stated that, “It is difficult to assess whether these [financial implications] are accurately reflected at this stage”.33

36. In supplementary written evidence, officials confirmed that—

“…the transition team is preparing an implementation plan, which will set out time tables and will clarify what can be achieved in this financial year and what elements might form part of a longer term transition phase. When this plan is available, it will be possible to offer a more precise view on when exactly costs will be incurred.  For the time being, therefore, we offer estimates over two years, with the greater part of costs anticipated to be incurred in 2008/09.”34

and that—

“We are aware that the ‘twin track’ approach to this process, with the legislation and the transition planning progressing at the same time is an ambitious undertaking.  Ministers wish us to proceed in this accelerated fashion taking account of the wishes of the cultural sector and others to bring to a conclusion an extended process of debate and reform that has been continuing since around the time of the establishment of the Cultural Commission, in 2004.”35

37. The Committee concurs with the views expressed above that, based on the information available at this point, the potential costs of the Bill are impossible to quantify to any degree of accuracy.  However, the Committee would question why the essential, detailed implementation plan has yet to be completed if the establishment of Creative Scotland has been an issue for some time.

38. Issues regarding the level and quality of information supplied by the Scottish Government in the Financial Memorandum, during oral evidence, and in supplementary written evidence, are discussed in detail in the Conclusions section below.

Funds for transition

39. Although the Financial Memorandum indicates that it is not possible to give a detailed estimate of the cost implications of the Bill at present, it also states that all costs “will be met from savings from the two organisations’ grant in aid which is required by the Scottish Government”.36  Staff at both organisations expressed serious concerns about the impact this may have, especially given the potential for costs to be much higher than the figure of £700,000 identified in the Financial Memorandum.  The PCS representative at Scottish Screen stated that—

“The two existing organisations would have to meet all costs of the setting up of the new organisation by savings.  This would have implications for staffing levels and it is assumed by the staff that there will be redundancies in order to meet these costs.”37

40. The Unite members at the Scottish Arts Council stated that—

“We infer from the document that additional transfer costs (eg including those mentioned above) would need to be covered from our grant funding which is problematic in the context of a 2% efficiency savings. Our union is concerned that the lack of provision for transition costs will lead to cuts to our grant budget which will have a knock on effect on arts organisations which will in turn lead to redundancies in organisations supported by Scottish Arts Council and Creative Scotland.”38

41. Scottish Government officials, in supplementary evidence to the Committee, confirmed that—

“It is not the case, however, that the Creative Scotland transition project is being funded from cash releasing efficiency savings.  The Government’s policy is that monies released from such savings should be recycled into other core activities.  This will apply to the Scottish Arts Council and Scottish Screen as it does to other bodies.

The policy of the Government is that one off transition costs should continue to be met from grant in aid.  The allocation of such funds, other than funds provided on a restricted basis (such as those provided for the Youth Music Initiative), is a matter for the joint board (and, in due course, the board of Creative Scotland).  Consequent upon this, the joint board has agreed, at the end of March, to retain a contingency for transition costs of £1,003,000 across both organisations, and this will be reflected in their published operating plans.  This amount is approximately 2 per cent of their combined grant in aid.  As noted, above, however, no decision has yet been taken by the joint board about how to distribute these funds to different tasks associated with the transition, nor whether the contingency is sufficient to cover all costs.  In the event that a request for additional funds is made, the Government will of course consider and scrutinise any such request.”39

42. The Committee thanks the Scottish Government for this clarification, and appreciates that decisions regarding the distribution of funding are for the joint board to make.  However, it is clear to the Committee that the estimates set out in the Financial Memorandum, and in oral and written evidence, are unreliable at best.  The Committee is therefore extremely concerned that, if the transition costs are substantial, there are serious implications for the budgets of the new organisation, particularly related to staffing.

Overall level of funding

43. As previously noted, Creative Scotland will have the same grant in aid funding that would have been provided to the Scottish Arts Council and Scottish Screen.  However, Creative Scotland will have “new and wider functions than its antecedent bodies”.40  The PCS representative at Scottish Screen stated that—

“The staff feel that by giving the new body exactly the same grant in aid that the two existing bodies receive, Creative Scotland would not have any greater financial power or significance that the two existing bodies have already.  The responsibility is therefore left to an increasingly demoralised workforce to create something new and radical.”41

44. The Unite members at the Scottish Arts Council stated that—

“…the detail of Creative Scotland’s remit is still to be set.  However we understand that this will be wider than the current work of Scottish Arts Council and Scottish Screen and the budget allocated to the new organisation in 2009/2010 2010/2011 appears to be at standstill/decreasing.  The Union therefore has concerns that this will put considerable pressure on the budget for staff and on workloads.”42

45. Without a detailed breakdown of the possible costs and savings that will arise from the Bill’s passage, it is impossible for the Committee to come to a judgement as to the validity of these claims.  However, in the Committee’s view, it would be appropriate for the lead committee to raise this with the Minister, and recommends that it does so.

conclusions

46. The Committee has serious concerns about the Financial Memorandum and considers it to be the weakest that has been produced in the current parliamentary session.  The Memorandum contains no detail on the possible costs of amalgamating the Scottish Arts Council and Scottish Screen, other than giving an overall estimate, nor does it contain any of the assumptions upon which the costs might be based, or any margins of uncertainty.  Although the Scottish Government did provide some extra information, no further detail was given on certain areas (for example, costs related to the relocation of office premises and redundancies) that have the potential to result in high costs to the organisations, which may have an adverse impact on other budgets. 

47. The absence of the information identified above means that the Committee can only view the overall estimate given in the Financial Memorandum as unreliable at best.  The Committee appreciates that work is on-going in relation to the amalgamation of the two organisations, but is firmly of the view that this preparatory work should have been done prior to the Bill’s introduction, so that a range of potential costs could have been presented.

48. Due to the lack of detailed information, especially around the set of assumptions behind the figures, and the range of possible costs, the Committee questions whether the Financial Memorandum does provide a “best estimate” of the costs of the Bill.  The Committee is also concerned that it does not appear to comply with the Scottish Government’s own internal guidance on Financial Memoranda.43  The Committee understands that Ministers are formally responsible for signing off the accompanying documents and, therefore, strongly recommends to the lead committee that it pursues the issues raised in this report during its forthcoming evidence session.

49. It is properly the place of the lead committee to follow up issues related to this specific Financial Memorandum during its scrutiny of the general principles of the Bill.  However, the Finance Committee intends to take up the issue of the quality of Financial Memoranda in general with the Scottish Government, initially through correspondence with the Minister for Parliamentary Business and the Cabinet Secretary for Finance and Sustainable Growth.

Annexe – written evidence received on the financial memorandum

Submission from the Scottish Government Bill Team

Thank you for your email of 23 April, which seeks information further to that included in the Financial Memorandum for the Creative Scotland Bill.  You seek in particular information about the one off transition costs associated with the implementation of the Bill, which I offer below.  I would wish to emphasise that estimates and ranges of estimates noted below are offered prior to a decision of the joint board of the Scottish Arts Council and Scottish Screen and Ministers about the structure of the proposed organisation, and – as a consequence – represent neither the policy of the Scottish Government nor a decision of the joint board.  The exception to this is the running cost of the transition project team in this financial year, which is confirmed.

The joint board expects to consider a detailed plan for transition implementation, including a budget, by September, and for implementation to begin thereafter.  Such implementation will have regard to any substantive amendments relating to the functions and operations of Creative Scotland that may be made during the course of the Parliament’s consideration of the Bill.

Transition costs  

  • At present, it is expected that transition costs may arise in the following general categories:
  • Staff and other costs of transition team;
  • Professional and legal fees;
  • Policy and systems’ development and implementation;
  • Arrangements for voluntary redundancies;
  • Recruitment of chief executive and board members;
  • Arrangements for pensions; and,
  • Premises (relocation) costs.

Following further discussion with the two organisations, provision for general staff training and recruitment have been removed from estimates of one off transition costs (except insofar as they relate to the recruitment of a chief executive).  The organisations are content that they will meet the costs for these activities from their operational budgets.   

Estimates of possible costs

The estimate offered in the financial memorandum was the result of initial discussions with the newly appointed transition team for Creative Scotland, based on their first consideration of possible costs.  Following further analysis, and consideration, we are now able to offer further developed costings and some breakdown of categories.  Work on this continues as a transition plan is finalised.

The table at the annex notes a number of estimates and, in some cases, ranges of possible estimates in categories of expenditure over this and the next financial year.  If the organisation is to be established early in the next financial year, it is anticipated that the greater part of the costs identified in the annex will likely be incurred in the present financial year, although precise timings are yet to be confirmed. 

We are aware that the ‘twin track’ approach to this process, with the legislation and the transition planning progressing at the same time is an ambitious undertaking.  Ministers wish us to proceed in this accelerated fashion taking account of the wishes of the cultural sector and others to bring to a conclusion an extended process of debate and reform that has been continuing since around the time of the establishment of the Cultural Commission, in 2004.

The table also includes some background information.

In three categories of expenditure we are not presently able to offer an analysis of possible costs.  These are as follows:

  • Estimates are included at the annex in relation to the design of new systems, including IT and other administrative systems.  As the operational remit of Creative Scotland is still in development and the requirements with regard to systems are still to be clarified it is at present not possible to offer an estimate for system implementation costs, reflecting the potential retention of current systems and development of new;
  • In relation to staffing costs, the process of commissioning actuarial advice about pensions is under way but no estimates of one off costs necessary for future arrangements are yet available. In relation to costs associated with any voluntary redundancies, it is not possible at present to offer an estimate of overall cost, as no proposed organisation structure yet exists for Creative Scotland; and,
  • In relation to premises costs, initial work has been undertaken to identify potential liabilities and relocation costs.  This work is to be further developed and will benefit from preparatory work undertaken in a location study that began in 2006 under the terms of the previous administration’s policy on the location of public bodies.  The decision regarding premises requirements will be subject to the identification of the requirements of Creative Scotland and relevant financial restraints.  

Timing

We have to date worked on a general planning assumption that Creative Scotland may be established at the beginning of financial year 2009/10, or shortly thereafter.  Accordingly, we have assumed that one off transition costs will fall principally in 2008/09 and 2009/10.  As noted above, however, the transition team is preparing an implementation plan, which will set out time tables and will clarify what can be achieved in this financial year and what elements might form part of a longer term transition phase. When this plan is available, it will be possible to offer a more precise view on when exactly costs will be incurred.  For the time being, therefore, we offer estimates over two years, with the greater part of costs anticipated to be incurred in 2008/09.    

Funds for transition

In your email of 23 April you note that the financial memorandum states that “all costs associated with transition will be met from the 2 per cent efficiency savings that are required by the Scottish Government”.  That is not an accurate interpretation and perhaps I can provide some clarification.

The financial memorandum states:

“These costs will be met from savings from the two organisations’ grant in aid which is require d from the Scottish Government”

In common with all Scottish public bodies, the Scottish Arts Council and Scottish Screen are, during the period of the present spending review, seeking 2 per cent annual cash releasing efficiency savings.  The Scottish Government is working closely with the Scottish Arts Council and Scottish Screen to pursue these targets.  When information is available about efficiencies achieved in relation to the present target, it will be published.  It is not the case, however, that the Creative Scotland transition project is being funded from cash releasing efficiency savings.  The Government’s policy is that monies released from such savings should be recycled into other core activities.  This will apply to the Scottish Arts Council and Scottish Screen as it does to other bodies.

The policy of the Government is that one off transition costs should continue to be met from grant in aid.  The allocation of such funds, other than funds provided on a restricted basis (such as those provided for the Youth Music Initiative), is a matter for the joint board (and, in due course, the board of Creative Scotland).  Consequent upon this, the joint board has agreed, at the end of March, to retain a contingency for transition costs of £1,003,000 across both organisations, and this will be reflected in their published operating plans.  This amount is approximately 2 per cent of their combined grant in aid.  As noted, above, however, no decision has yet been taken by the joint board about how to distribute these funds to different tasks associated with the transition, nor whether the contingency is sufficient to cover all costs.  In the event that a request for additional funds is made, the Government will of course consider and scrutinise any such request.

Staffing costs

In the course of the evidence session on 22nd April we were asked to provide figures for staffing costs for the two organisations in financial year 2008/09.  In relation to the Scottish Arts Council, the budgeted figure is £3.975 million.  For Scottish Screen, the budgeted figure is £1.351 million.  Both figures are based on a range of assumptions regarding staffing levels and present Scottish Government pay remit guidance.

Also, for completeness, we said in the course of our evidence that there are 30 people employed at Scottish Screen.  There are in fact 36 full time equivalent posts; but a total of 39 individuals working full and part time, and on a job share basis.

In the course of this morning’s evidence session before the subject committee, I was asked whether we would be willing to offer the information here also to that committee and for that information to be made public.  In a spirit of helpfulness, I assented to those requests. 

On reflection, I can see that these decisions are essentially a matter for the Convenor of your committee.  We would be grateful if you could let us know of the Convenor’s view on this, and presume that you will liaise in this with the Clerk of the subject committee.  We are conscious that there was discussion at the Finance Committtee about whether all the information here should be made public, due to senstivities around staffing issues.  We expect too to be asked for information from the subject committee and will liaise with you about this.

Greig Chalmers
Head of Creative Scotland and broadcasting team

Annex

Transition to Creative Scotland: estimates of costs 2008-2010

Category Estimates (inclusive of VAT) Notes
Transition team running costs £410,000 Includes salaries, travel and accommodation, office costs, events, advisory consultants and connected services.  Transition project is scheduled to complete at the end of 2008/09, but this figure includes a contingency for ‘spill-over’ into 2009/10. 
Legal and professional fees £280,000 Estimate based on previous business practice.  Includes provision for advice and services connected to HR, tax, property, intellectual property, business transfer and general financial and legal advice.
Policy and systems’ development £240,000 Includes provision for 3 policy and strategy development projects.  Also includes provision for Creative Scotland website; design of electronic administration systems; and, communication for new organisations.   
Board and chief executive recruitment £150,000 Costs based on cost of equivalent 2004 recruitment exercises, plus inflation. 

Submission from the Creative Scotland Transition Project, the Scottish Arts Council, and Scottish Screen

Consultation

1. Did you take part in the consultation exercise for the Bill, if applicable, and if so did you comment on the financial assumptions made?

Yes, while the transition team did not exist when the draft Culture (Scotland) Bill was published for consultation, the Scottish Arts Council and Scottish Screen have been closely involved in the consultation and commented on financial assumptions and all other developments connected to the Bill.

2. Do you believe your comments on the financial assumptions have been accurately reflected in the Financial Memorandum?

Yes, the financial memorandum reflects the extensive preparations under way in the Scottish Arts Council and Scottish Screen to bring about close working, in anticipation of Creative Scotland’s establishment.  As the financial memorandum notes, there are other costs that it is not yet possible to determine – in particular in relation to pensions and potential premises relocation.  An initial review of Scottish Arts Council and Scottish Screen’s pension arrangements was undertaken in 2006, by the Government’s Actuary’s Department in London, this initial work is to be progressed.  The review will examine a number of options and their associated cost implications, which could potentially result in a liability arising.  This is a matter that we have been working on with the Scottish Government and which we will continue to work on to seek the best value solution.   

3. Did you have sufficient time to contribute to the consultation exercise?

The timeframe was sufficient for a response to be made.

Costs

4. If the Bill has any financial implications for your organisation, do you believe that these have been accurately reflected in the Financial Memorandum?  If not, please provide details.

We consider that the financial memorandum reflects the work being undertaken to establish the cost implications of the Bill, which due to the early stage of the project at this time cannot be accurately quantified in terms of range of costs to be incurred.

5. Are you content that your organisation can meet the financial costs associated with the Bill?  If not, how do you think these costs should be met?

Based on the information we have at this stage, the budget available is not unreasonable.  Due to the early stage of the project the cost implications of the Bill at this time cannot be accurately quantified in terms of range of costs to be incurred.  If other costs arise, such as in relation to relocation or pensions etc, we will discuss these matters with the Scottish Government and seek their assistance in seeking a best value solution. 

6. Does the Financial Memorandum accurately reflect the margins of uncertainty associated with the estimates and the timescales over which such costs would be expected to arise?

At this stage, we consider that the memorandum reasonably reflects the margins of uncertainty.

Wider Issues

7. If the Bill is part of a wider policy initiative, do you believe that these associated costs are accurately reflected in the Financial Memorandum?

We do not think this question is relevant in this case, as the single purpose of the Bill is to establish Creative Scotland.

8. Do you believe that there may be future costs associated with the Bill, for example through subordinate legislation or more developed guidance?  If so, is it possible to quantify these costs? 

None in addition to those described above.

Anne Bonnar
Transition Director
Creative Scotland Transition Project

Submission from UNITE union members, Scottish Arts Council

Consultation

1. Did you take part in the consultation exercise for the Bill, if applicable, and if so did you comment on the financial assumptions made?

No.

2. Do you believe your comments on the financial assumptions have been accurately reflected in the Financial Memorandum?

N/A

3. Did you have sufficient time to contribute to the consultation exercise?

N/A

Costs

4. If the Bill has any financial implications for your organisation, do you believe that these have been accurately reflected in the Financial Memorandum?  If not, please provide details.

It is difficult to assess whether these are accurately reflected at this stage.  The Memorandum does not itemise transition costs such as possible relocation costs, redundancies etc which would be additional to the estimated £700K.

5. Are you content that your organisation can meet the financial costs associated with the Bill?  If not, how do you think these costs should be met?

No. We infer from the document that additional transfer costs (eg including those mentioned above) would need to be covered from our grant funding which is problematic in the context of a 2% efficiency savings. Our union is concerned that the lack of provision for transition costs will lead to cuts to our grant budget which will have a knock on effect on arts organisations which will in turn lead to redundancies in organisations supported by Scottish Arts Council and Creative Scotland.

Our current operating overheads are very low (please let me know if you would like me to provide details of this) and it is not clear how Creative Scotland would be able to fulfil its remit if no additional funding was made for additional transitional costs. 

6. Does the Financial Memorandum accurately reflect the margins of uncertainty associated with the estimates and the timescales over which such costs would be expected to arise?

No. Until the remit of Creative Scotland is clear it is not possible to estimate what these might be.  At the time of writing we do not think the timescales have been set, and perhaps cannot be until the final Bill has gone through, and the detail of Creative Scotland’s remit is still to be set.  However we understand that this will be wider than the current work of Scottish Arts Council and Scottish Screen and the budget allocated to the new organisation in 2009/2010 2010/2011 appears to be at standstill/decreasing.  The Union therefore has concerns that this will put considerable pressure on the budget for staff and on workloads.

In addition there are currently differentials between the current pay and benefits structures for Scottish Arts Council and Scottish Screen which is likely to have an impact on Creative Scotland’s staffing budget.

Wider Issues

7. If the Bill is part of a wider policy initiative, do you believe that these associated costs are accurately reflected in the Financial Memorandum?

8. Do you believe that there may be future costs associated with the Bill, for example through subordinate legislation or more developed guidance?  If so, is it possible to quantify these costs?

It is not possible to quantify these costs at this time.

Gillian Shaw
Arts Development Officer
Scottish Arts Council
UNITE Union Representative

Submission from PCS union representative, Scottish Screen

Consultation

There was no consultation process carried out with the staff of Scottish Screen, though we assisted in gathering contacts for a stakeholder survey of the film, television and other related industries.

Costs

The costs given in the financial memorandum are that Creative Scotland will receive the same grant-in-aid that was received by the Scottish Arts Council and Scottish Screen.  As the Creative Scotland Bill makes very little reference to the screen industries, it would be impossible for us to say how this money may be apportioned in the future.  Staff at Scottish Screen are of the opinion that the new body will not necessarily recognise the economic or cultural importance of the screen industries, and this would have implications for some screen-related activities that might not easily fit into an ‘Arts and Culture’ mould.  Work, for example, on audience development projects or visual artists working in video might gain higher significance and therefore have larger budgets in the new regime.  However, other work that has little to do with Arts and Culture such as attracting feature films projects to Scotland, or training production assistants would not be seen as ‘creative’ and therefore would receive little support.  The staff at Scottish Screen, especially those that deal with the industry, continue to be concerned about this.

The two existing organisations would have to meet all costs of the setting up of the new organisation by savings.  This would have implications for staffing levels and it is assumed by the staff that there will be redundancies in order to meet these costs.  As there has been no decision made on the location of the new organisation, and there seems to be no provision made for the leasing of additional property, we assume that some savings will be made by the non-renewal of a lease on one of the two properties.  So whether £700,000 is adequate provision for the setting up of the new organisation is impossible to say.

Wider Issues

When the new body, Creative Scotland, was initially discussed, it was assumed that it would have a greater and more significant remit than the two existing bodies.  Creative Scotland was expected to herald a new and exciting period for Scottish creativity, and the issues of culture and creativity were supposed to be of paramount importance for all aspects of Scottish life – business, industry, health, education, tourism, Scotland’s international presence, and more.  The staff feel that by giving the new body exactly the same grant in aid that the two existing bodies receive, Creative Scotland would not have any greater financial power or significance that the two existing bodies have already.  The responsibility is therefore left to an increasingly demoralised workforce to create something new and radical.

A potential additional source of funding, currently administered by Scottish Enterprise for creative industries, could potentially be moved within the remit of Creative Scotland in order to strengthen the creative industries in Scotland. These are the businesses that Scottish Screen staff currently deal with every day, and these businesses need a funding body who understands their role and their potential in an every increasingly competitive market.

Belle Doyle, Locations Department Manager, Scottish Screen
PCS union representative

1 Creative Scotland Bill, Policy Memorandum, paragraph 2. Available at:
http://www.scottish.parliament.uk/s3/bills/07-CreativeScotland/b7s3-introd-pm.pdf

2 Policy Memorandum, paragraph 2

3 Policy Memorandum, paragraph 8

4 Policy Memorandum, paragraph 8

5 Creative Scotland Bill. Financial Memorandum, paragraph 62.  Available within the Explanatory Notes, at: http://www.scottish.parliament.uk/s3/bills/07-CreativeScotland/b7s3-introd-en.pdf

6 Financial Memorandum, paragraph. 63

7 Financial Memorandum, paragraph 65

8 Financial Memorandum, paragraph 65

9 Financial Memorandum, paragraph 63

10 PCS Union Representative, Scottish Screen.  Written submission to the Finance Committee.

11 Scottish Parliament Finance Committee. Official Report, 22 April 2008, Col 395.

12 Scottish Parliament Finance Committee. Official Report, 22 April 2008, Col 395.

13 Scottish Government Bill Team.  Written submission to the Finance Committee.

14 Scottish Parliament Finance Committee. Official Report, 22 April 2008, Col 396.

15 Scottish Parliament Finance Committee. Official Report, 22 April 2008, Col 396.

16 Scottish Government Bill Team.  Written submission to the Finance Committee.

17 Financial Memorandum, paragraph 65

18 Scottish Parliament Finance Committee. Official Report, 22 April 2008, Col 394.

19 Scottish Government Bill Team.  Written submission to the Finance Committee.

20 Anne Bonnar, Transition Director for the Creative Scotland Project.  Written submission to the Finance Committee.

21 Scottish Government Bill Team.  Written submission to the Finance Committee.

23 Scottish Government Bill Team.  Written submission to the Finance Committee.

24 Financial Memorandum, paragraph 65

25 Scottish Government Bill Team.  Written submission to the Finance Committee.

26 Scottish Government Bill Team.  Written submission to the Finance Committee.

27 Financial Memorandum, paragraph 65

28 Scottish Government Bill Team.  Written submission to the Finance Committee.

29 Scottish Government Bill Team.  Written submission to the Finance Committee.

30 Financial Memorandum, paragraph 63

31 Anne Bonnar, Transition Director for the Creative Scotland Project.  Written submission to the Finance Committee.

32 PCS Union Representative, Scottish Screen.  Written submission to the Finance Committee.

33 Unite Union Members, Scottish Arts Council.  Written submission to the Finance Committee.

34 Scottish Government Bill Team.  Written submission to the Finance Committee.

35 Scottish Government Bill Team.  Written submission to the Finance Committee.

36 Financial Memorandum, paragraph 65

37 PCS Union Representative, Scottish Screen.  Written submission to the Finance Committee.

38 Unite Union Members, Scottish Arts Council.  Written submission to the Finance Committee.

39 Scottish Government Bill Team.  Written submission to the Finance Committee.

40 Policy Memorandum, paragraph 2

41 PCS Union Representative, Scottish Screen.  Written submission to the Finance Committee.

42 Unite Union Members, Scottish Arts Council.  Written submission to the Finance Committee.

43 Scottish Government, Finance Guidance Note 2004/06: Financial Memoranda.  Available at: http://www.scotland.gov.uk/Topics/Government/Finance/fgns/fgn0406