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SP Paper 587 PAU/S3/11/R4

4th Report, 2011 (Session 3)

The Gathering 2009

CONTENTS

Remit and membership

Report
Introduction
Background
Committee consideration
The role of the steering group
The Scottish Government loan of £180,000
Attempts to save the company
The press release issued on 15 October 2009
Subsequent events

Annexe A: Press release issued by City of Edinburgh Council on behalf of DEMA Ltd on 15 October 2009

Annexe B: Extracts from the minutes

Annexe C: Oral evidence and associated written evidence

Remit and membership

Remit:

1. The remit of the Public Audit Committee is to consider and report on—

(a) any accounts laid before the Parliament;

(b) any report laid before or made to the Parliament by the Auditor General for Scotland; and

(c) any other document laid before the Parliament, or referred to it by the Parliamentary Bureau or by the Auditor General for Scotland, concerning financial control, accounting and auditing in relation to public expenditure.

(Standing Orders of the Scottish Parliament, Rule 6.7)

Membership:

Willie Coffey
George Foulkes
Murdo Fraser (Deputy Convener)
Hugh Henry (Convener)
Jamie Hepburn
Mr Frank McAveety
Anne McLaughlin
Nicol Stephen

Committee Clerking Team:

Senior Assistant Clerk
Jane Williams
Assistant Clerk
Jason Nairn
Committee Assistant
Jennifer Bell

The Gathering 2009

The Committee reports to the Parliament as follows—

INTRoduction

1. This report sets out the Committee’s findings in relation to the report, The Gathering 2009, which was published by the Auditor General for Scotland (AGS) in June 2010.

background1

2. Homecoming Scotland 2009 was a Scottish Government tourism initiative to encourage people, whether at home or abroad, to join in a number of celebrations of Scotland’s heritage, culture and contributions to the world. It included over 400 events and The Gathering 2009 evolved to become one of the signature events of Homecoming Scotland 2009.

3. The Gathering 2009 took place on 25 and 26 July comprising a clan gathering, Highland Games and pageant. A private sector company, The Gathering 2009 Ltd (“the company”), developed, organised and delivered the event. The company is owned equally by Jamie Sempill and Red Sky at Night Ltd, of which Jenny Gilmour is a director.

4. The event had a budget of £2.4 million which included approximately £490,000 of public sector grants plus a £180,000 loan from the Scottish Government. The three main public sector funders (EventScotland, City of Edinburgh Council and Scottish Enterprise Edinburgh and Lothians) formed a steering group with the company directors to allow them to maximise the economic benefit of the event and look after their interests.

5. The Gathering 2009 reportedly generated net additional expenditure of £10.4 million in Scotland as a whole but the company running the event made a loss of £516,000. This resulted in the company being unable to pay its creditors, which included a number of public sector bodies.

6. Following the event the Scottish Government, along with the City of Edinburgh Council (“the Council”) sought potential purchasers of the company. Destination Edinburgh Marketing Alliance Ltd (DEMA)2 stated it would be interested in delivering future Gathering events and the Council confirmed this to the Scottish Government. The Council issued a press release on behalf of DEMA, on 15 October 2009, which was misleading as it indicated that DEMA would take on the outstanding private sector liabilities of the company.

7. Due diligence work was still being carried out at the time of the issue of the press release. When that work was concluded the Council subsequently told the Scottish Government that the Council could not purchase the company or the intellectual property rights due to budget constraints.

8. On 27 January 2010, the company went into liquidation with £382,000 owed to six public sector bodies and £344,000 owed to 103 private sector organisations.

Committee consideration

9. At its meeting on 23 June 2010, the Committee received a briefing from the AGS on his report and agreed to seek further written and oral evidence.

10. The Committee received oral evidence from a number of witnesses on the following dates:

15 September 2010

  • Lord Sempill, Director, and Jenny Gilmour, Director, The Gathering 2009 Ltd

6 October 2010

  • Sir John Elvidge

27 October 2010

  • Norman Springford, former Chair, Destination Edinburgh Marketing Alliance Ltd (DEMA)

3 November 2010

  • Councillor Jenny Dawe, Leader of the Council, Councillor Steve Cardownie, Deputy Leader of the Council, Tom Aitchison, Chief Executive, and Jim Inch, Director of Corporate Services, The City of Edinburgh Council

1 December 2010

  • Rt Hon Alex Salmond MSP, First Minister and Michael Russell MSP, the Cabinet Secretary for Education and Lifelong Learning3, the Scottish Government

11. The Committee also considered written evidence on a range of issues. This written evidence is available on the Committee’s web page at:

http://www.scottish.parliament.uk/s3/committees/publicAudit/currentInquiries.htm

12. During the Committee’s consideration of the AGS report liquidation proceedings in relation to the company have been ongoing. Such proceedings are considered active in relation to the Scottish Parliament’s Standing Orders Rule 7.5.14 on sub judice. The Committee therefore wrote to the Presiding Officer and subsequently gained his permission to refer to certain specified matters within the AGS report and the Committee’s remit.

13. The Committee’s consideration focussed on five areas:

  • the role of the steering group;
  • the Scottish Government loan of £180,000;
  • attempts to save the company;
  • the press release issued on 15 October 2009; and
  • subsequent events.

The role of the steering group

14. The AGS report explained that the company sought and secured three public sector grants in June-July 2007. EventScotland, the City of Edinburgh Council and Scottish Enterprise Edinburgh and Lothians (SEEL)5 each granted £100,000 to the company.

15. Each of these public sector bodies followed their standard processes for assessing grant applications with EventScotland also performing a credit check on Red Sky at Night Ltd. No credit check could be undertaken on The Gathering 2009 Ltd as it was new and therefore had no credit history. EventScotland however undertook a credit check on the part owner of the company, Red Sky at Night Ltd, and concluded it had good credit worthiness. EventScotland shared this information with the other public bodies.6

16. The AGS explained that these three public sector bodies then formed a steering group, with Lord Sempill and Jenny Gilmour (“the Directors”), which first met in February 2008. This steering group did not have a formal remit but was an advisory group in that it could not enforce any actions or changes. The company was the event owner and was responsible for all commercial decisions.

17. The role of the steering group was to allow the public sector funders to be updated on progress with the event’s planning, to protect their interests and maximise their economic benefits.7

18. In oral evidence, Jim Inch, Director of Corporate Services of the Council explained that—

“It was common practice when staging events in the city to set up a group such as the one that participated in The Gathering. There were differences in this instance, because the group was purely advisory. In normal circumstances, the groups that we set up are more steering groups than advisory groups, because most of our events are funded jointly with other public bodies such as EventScotland, VisitScotland and Scottish Enterprise.”8

19. Jim Inch explained that councillors were not told of the work of the advisory group as—

“it would be wholly inappropriate for us to report back on every group that we set up. We were working within the boundaries that were set by the Council in terms of delivering—or assisting to deliver—an event. In this instance the event was very much run by the Scottish Government, and a private operator was involved. That was somewhat unusual in terms of the normal way of running events in the city.”9

20. Councillor Dawe (the Council leader) confirmed that she was not aware of the steering group but added that—

“As I understand it, the steering group was not something that I would have expected anybody other than officers to be involved in.”10

21. Councillor Cardownie (the Council deputy leader) confirmed that he was aware that officials were meeting other officials but was not aware that they had called themselves a steering group. As to whether the steering group had any decision-making powers he advised—

“Such groups are prohibited from making decisions—matters must be referred to the leader and to councillors so that decisions can be made. Officials work up proposals, discuss the ramifications, consequences, funding and so on, and tell us what they have concluded and what they recommend.”11

22. The Committee notes the comments of the Council that it was a unique arrangement to have an event being run by a private company that had significant Government involvement and in which the Council was being asked to participate in an advisory as opposed to a more ‘hands on’ role.12 The Committee believes that, as an advisory group, it therefore only provided limited opportunity for the public sector funders to maximise the economic benefits of the group and very little protection of their interests. It was not clear to the Committee what the reporting lines were of the steering group.

23. The Committee recommends that the remit, role and reporting lines of any public-private sector steering groups, that may be established, should be considered carefully with a more balanced approach to advisory and decision-taking roles.

Financial information provided to the steering group

24. The AGS report states that the company provided each steering group meeting with financial information regarding progress on the event, including ticket sales, marketing activities and financial projections. However, from April 2009 this did not include figures for actual income and spend to date. As a consequence, it was not possible to compare outturn figures with budgets, at any point in time, to provide assurances as to the accuracy of the financial projections.13

25. The Directors explained that they had undertaken a lot of research into the project from 2006, gathering gate information from large highland games held in the United States. They also held discussions with VisitScotland and other organisations regarding tourism data such as average visitor spend. However, the Directors noted that “if we had to take a stab in the dark on anything, it was on footfall.”14

26. In written evidence, the Directors confirmed that in their business plan of July 2007, they had forecast they would sell 7,500 passport tickets15 and 30,000 highland games tickets (of which 20,000 were assumed to be local ticket sales).

27. The Directors stated that the steering group signed off on budget scenarios and the key performance indicators that the company had to meet in order to secure the release of £300,000 public sector grant funding. This funding was released in a series of pre agreed instalments. The Directors also explained that the steering group undertook due diligence and governance work at every stage of the project.16

28. The Directors confirmed that their meetings with the steering group would always start with an update on progress in relation to budget forecasts. However whilst cash flow was discussed when appropriate, detailed cash flow documents were not presented.17

29. EventScotland confirmed that, in light of the AGS report on The Gathering 2009, it has reviewed its procedures for awarding grants and the governance arrangements around support for major events. This included the role of public partners in scrutinising the financial arrangements of the event it supports. As a result additional robust measures have been put into place to identify with partners any similar potential problems in the future. These measures have been agreed by both the EventScotland subcommittee as part of the VisitScotland Board and the VisitScotland Audit and Risk committee.18

30. The Committee notes that each public sector body had agreed with the Directors the key performance indicators that had to be met in order to receive the next instalment of the agreed grant funding. The Committee believes that an opportunity for financial rigour was missed by not ensuring that the provision of detailed financial information (such as figures on actual income and expenditure) also required to be provided as a key performance indicator.

31. The Committee notes the steps taken by EventScotland to improve financial scrutiny of any future events it supports and recommends that the Scottish Government undertakes a similar review, sharing any lessons learned with other public sector bodies.

The Gathering 2009 was anticipated to make a financial loss

32. The AGS noted that financial projections showed that the event would be loss-making except if it attracted the most optimistic gate numbers. On 1 April 2009, the Directors provided updated financial projections to the steering group showing anticipated losses of £78,000 with the minutes indicating that cash flow was an area of concern. Analysis of the post event budget information indicated that expenditure was in line with expectation, however income was significantly less than forecast.19

33. In July 2009, the Directors provided the steering group with three possible financial projection scenarios:

  • pessimistic tickets sales indicating a deficit of £223,000;
  • a likely scenario showing a £49,000 loss; and
  • an optimistic scenario indicating a surplus of £118,000.20

34. Jim Inch of the Council noted that—

“the information coming back from the Directors was good quality information. When further information was requested—when the advisory group was not wholly satisfied that it was getting all the information—the Directors returned with the necessary information to satisfy the group...There was very close monitoring of ticket sales and of the fact that income was not coming forward at the anticipated pace.”21

35. The Directors of the company explained that whilst initially in May 2008 when the box office opened there were good ticket sales—

“shortly afterwards the global recession impacted badly in the income projections, with sponsorship agreements collapsing and passport selling somewhat stalling as consumer confidence hit a 30-year low in the United States, our primary overseas market. With our revenue streams diminished, cash flow was compromised as our credit card payments were held by WorldPay...at one point, WorldPay was holding more than £250,000 of our revenue.”22

36. The AGS report explains that WorldPay had been contracted to process advance sales of passport tickets from overseas. In accordance with the signed contract, WorldPay withheld income from advance tickets sales until after the event had taken place. The Directors had anticipated that other income streams such as sponsorship would provide sufficient cash whilst it waited for payment from WorldPay.23

37. The Directors explained that it was acknowledged that the event may run at a loss but in that event they had—

“taken on the reality that we may have to carry through a loss on our business. We already had a good overdraft in position with our bank, and...there were secondary income streams post the event that were critical to the company’s performance in the future.”24

38. Such secondary income streams included sales of CDs and DVDs after the event with a budgeted income of £60,000 to £80,000.25

39. Jim Inch of the Council acknowledged that the advisory group had understood that there was likely to be a loss with the first iteration of The Gathering events. He added that—

“it is not uncommon in the development of a complex programme of events such as The Gathering for financial difficulties to emerge and for people to change tack and alter and adjust the original planned approach. In fact it is probably common in events programming and planning and does not necessitate going back to elected members.”26

40. However, Jim Inch also observed that—

“on reflection, and as the advisory group concluded, some of the company’s cash flow projects were more optimistic, even in the later stages, when it was apparent that the recession had kicked in, that ticket sales were not materialising and that sponsorship was not coming forward as had been anticipated.”

41. He confirmed that as a result of the cash flow difficulties, on 19 June 2009, EventScotland provided an extra £80,000 to assist with the marketing of the event.27

42. The Directors confirmed that they made adjustments to the various income lines of the financial projections provided to the steering group as the costs started to increase and it became apparent that sponsorship wasn’t going to materialise. This put pressure on the contingency, which was eventually entirely used up in trying to cover some of the income shortfalls.28

43. The AGS report notes that as a result of these cash flow difficulties the public sector funders on the steering group agreed to adjust their payment schedules. They brought forward, to before the event, the final grant payments (which had been scheduled to be paid after the event).29

44. Unbeknown to the steering group, in June 2009 (and following discussions with the Directors in April and May 2009 of these cash flow difficulties), the Scottish Government also agreed to provide a short term loan of £180,000 to the company. The circumstances of this loan are discussed in more detail in the next section of this report.

45. The Committee is unclear as to whether the steering group members had considered the risk (financial or reputational) each public sector funder was exposed to or accountable for. This was especially important given the limited liability nature of the company.

46. Given the current financial constraints, it may be more likely that public sector bodies consider entering into partnership with private sector companies to deliver public services or events than in the past. The Committee therefore recommends that the Scottish Government provide best practice guidance on the governance arrangements and establishment of joint public-private sector steering groups charged with overseeing the delivery of projects or events. Such guidance should ensure that there is a clear understanding of the lines of accountability and the level of risk assumed by each member of the group.

47. This guidance should also set out the level and detail of financial information (including actual income and expenditure) that should be provided to such groups. Where possible the Committee recommends that the provision of such financial information should form the basis of key performance measures which must be met in order to release grant funding.

The Scottish Government also provided a grant to the company

48. The AGS report notes that in June 2008, the company sought and secured a £100,000 grant from the Scottish Government. Of this, £80,000 was to allow higher quality temporary structures to be used, as the large scale of the event was becoming clear. The remaining £20,000 was for an education programme. The Scottish Government followed its normal procedures for awarding grants.30

49. In evidence the Cabinet Secretary explained that “this money was seen as purchasing certain aspects that fitted with the Government’s objectives” and that—

“a grant is not something that we would expect to get back; the grant is for the delivery of the event and that is matched against whether the event is delivered or not.”31

50. In response to questions about the company’s limited liability status, the Cabinet Secretary explained that the fact that the company was limited by guarantee was not unusual, and it was not viewed as a major issue by the public sector funders.32

51. The Committee questioned why the Scottish Government had not joined the steering group at the time of agreeing to this grant funding.

52. The Cabinet Secretary explained that “There was a feeling that the steering group was the appropriate group of organisations that would have a day-to-day involvement with the event as it took place” and that “in this case, we were receiving information via the steering group.”33 Such information included whether the event was on schedule, planned and going to take place.34

53. However he also acknowledged that—

“the question of whether the Government should be more closely involved in steering groups for events that perhaps have a national dimension needs more consideration and I am grateful to the Auditor General for suggesting that.”35

54. The Committee notes that the Scottish Government did not join the steering group following its decision to award a grant of £100,000 to the company. Instead it relied on information provided via the steering group. As a consequence it did not have any direct input into the steering group and the Committee was concerned that it was unclear whether the information provided to the steering group was in turn the same information provided to the Scottish Government.

55. In that regard, EventScotland played a pivotal role in ensuring the good communication of information between the steering group and the Scottish Government. The Committee has concerns about the effectiveness of EventScotland in undertaking this role. The Committee therefore recommends that EventScotland clarify and strengthen its lines of communication with the Scottish Government, particularly where it is responsible for updating the Scottish Government on the delivery of a project.

The Scottish Government Loan of £180,000

56. The steering group minutes of 1 April 2009 indicated that cash flow was ‘an area of considerable concern’ with June identified as a key month. In June 2009 the steering group discussed the cash flow problems and subsequently the public sector funders brought forward their scheduled grant payments.36

57. The Cabinet Secretary confirmed that he met with the Directors on 28 April 2009 to discuss the issue of securing a company to buy the broadcasting rights for the event. At the end of that meeting the Directors had raised the issue of WorldPay withholding ticket income and explained that the company was experiencing cash flow problems. The Cabinet Secretary commented that—

“The question that arose was whether there was any possibility of underwriting the cash flow from that point through the event itself....At the end of the meeting, I said that I would consider the matter.”37

58. After that meeting, the company provided further information to the Minister setting out the potential options to the Scottish Government including event funding, assistance with approaching WorldPay to release some of the advance ticket funds and a loan.38

59. In oral evidence, the Cabinet Secretary confirmed that the issue was then discussed with Scottish Government officials. The Cabinet Secretary also informed the First Minister of his discussions as part of his normal reporting to him. The Cabinet Secretary confirmed that by around 7 May, officials had sought advice from the finance directorate as to whether a short term loan would be possible. The Cabinet Secretary stated that—

“there was no indication that a short-term loan was anything other than possible. Officials then moved forward to detailed discussion with the organisation as to its plans and its financial projections. Eventually, we concluded that the offer of a loan would be appropriate.”39

60. In written evidence to the Committee, the Permanent Secretary (who is the Principal Accountable Officer of the Scottish Government) confirmed that the loan had been provided under section 23 of the National Heritage (Scotland) Act 1983 (“the NH(S)Act”). This section provides a wide power to make payments to a range of bodies whose activities are judged likely to promote the development or understanding of cultural or scientific matters.40

61. He confirmed that section 23 has been used widely with the vast majority of the Scottish Government’s culture budget of £176million (in 2009/10) allocated under this power. The Permanent Secretary then noted that loans are regularly provided by arms of the Scottish Government (such as through Scottish Enterprise) under other legislation. The Cabinet Secretary confirmed that this was the only occasion of section 23 being used by the Scottish Government for the purpose of a loan.41

62. In considering the options presented, the First Minister confirmed that it would have been possible to provide a grant to the company. However, given the size of the assets held by WorldPay were verifiable, a loan rather than a grant seemed to be the proper way to deal with a cash flow problem.42 He confirmed that it was the Minister who had taken the decision to provide a loan to the company, stating that—

“however, given that the very real possibility was that, because of the cash-flow difficulties, the event might not take place, I cannot believe that any other minister faced with that situation would have done anything other than to secure the future of the event. If the choice is between securing the future of the event by a further grant or by a loan, then clearly the Government’s preference will be to do it by a loan.”43

63. In relation to the size of the loan, the Directors commented that—

“The eventual figure that we were looking at for the shortfall was £180,000 given the advance deposit invoices that we knew were coming in. We already knew the terms and conditions of all our suppliers, so we knew that that would be the level for which we would need to get some cover for that short period of time.”44

64. The Directors then explained that the £180,000 loan together with their £100,000 overdraft facility covered the £260,000 cash shortfall referred to in the AGS report at paragraph 30.

65. The Minister approved the offer of a loan following a meeting with the Directors on 12 May 2009.45

66. The Committee has not seen the options paper provided by the Directors to the Scottish Government on possible solutions to its cash flow problems. The evidence received from witnesses confirmed that three possible solutions were included within the options paper: further event funding; assistance with approaching WorldPay to release some of the advance ticket funds; and a loan. However, the Committee would observe that from very early on, the loan option appears to have become the only solution for the Scottish Government.

Consequences of the company not receiving the loan

67. The Committee questioned witnesses as to the consequences of the company not receiving the loan from the Scottish Government.

68. In oral evidence the AGS explained that—

“it is also important to place on record that clearly time was not on anyone’s side...because the event was committed to and was about to proceed. 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 that was delivering the event.”46

69. The Directors explained that—

“The worst case scenario would have happened: we would have had to realise that we did not have the money to put on the event. If that had happened, our list of creditors would have been substantially greater, as you can imagine. Some would not have been on the list, but there would have been the best part of 5,500 passport holders to start with. From our perspective it would have been exceptionally damaging.”47

70. The Directors however also acknowledged that they were exploring other options at the time including extending their overdraft considerably although the bank was becoming less willing to do this. Another option was injecting a similar sum of money from a sponsor or other public events companies.48

71. The Cabinet Secretary explained that—

“this loan was made to secure the future of the event...the evidence was produced that this was a cash flow difficulty and that the funds were frozen in WorldPay. There was no reason to believe that the company would run into the financial difficulties to the extent that it did. What was likely, if the cash flow position had not been resolved, was that there inevitably would have been financial difficulties with, according to the evidence of the Directors, many more creditors affected than has subsequently been the case.”49

72. The First Minister also observed that—

“there can be no doubt that if the event had not gone ahead, £10 million less would have been spent in the Scottish economy and £8 million less in the Edinburgh economy. There is no question about that, and there would also have been 280 fewer jobs in Scotland last year.”50

73. Notwithstanding the time constraints faced by the Scottish Government, the Committee is unclear whether all possible alternatives to further public sector funding were fully explored and then discounted by the Scottish Government before it concluded that additional public sector funding (albeit a short term loan) remained the only option.

Due diligence work undertaken by the Scottish Government

74. The AGS report notes that the Scottish Government did not complete robust checks of the company’s ability to repay the loan or seek information from the other steering group members regarding the company or event’s status. It also notes that the Scottish Government did not consider charging interest on the loan or asking the company to provide guarantees because it was only intended to be short term in nature.51

75. The Committee sought to clarify what investigations were undertaken by the Scottish Government into the company before the loan was agreed to.

76. The Cabinet Secretary explained that considerable interaction took place between officials and the company to discuss the difficulties and the Directors’ projections.52 Officials viewed all the information the company had provided including cash flow statements, the company’s overall budgetary position and the amount being held by WorldPay at that point in time and future projections; and the terms of the agreement with WorldPay.53

77. The First Minister explained that—

“the key information that was needed with regard to the cashflow advance was to find out whether in WorldPay a sum was indeed being held that the company could not access.”54

78. In considering whether the information the Scottish Government had should have been shared with the steering group, the First Minister explained that—

“As the AGS report makes clear the steering group was getting financial information...the steering group was not short of information. The difficulty lay not with the information that it was being provided with, but with the fact that the eventual outrun exceeded even the most pessimistic scenario which had been presented.”55

79. The Permanent Secretary at that time was Sir John Elvidge who was also the Principal Accountable Officer for the Scottish Government. He explained that whilst he was not involved in the circumstances that led to the loan being agreed to, due diligence work was usually undertaken to identify the negatives about the company. In this circumstance he noted “the company had openly said that it had a significant cash flow problem” and he therefore hypothesised that it may be less likely that a company would go through the due diligence process.56

80. The Directors confirmed that the WorldPay money was released about one week after the event and at that point the Directors decided to pay some of the other costs outstanding. This was instead of repaying the Scottish Government loan which due for repayment by 31 August 2009.57

81. The Committee questioned whether protections should have been built into the loan offer to ensure that the WorldPay money, once released, was used to repay the Scottish Government.

82. The First Minister explained that preferred creditor status might have been sought but that might imply that the Scottish Government did not accept the information that it had been given. It would have also put the Scottish Government in a different position to other creditors. The First Minister however conceded that “whether it would be impossible to secure the loan against the assets of WorldPay is more interesting”. He observed that “this is one of the lessons that might come out of this affair.”58

83. Sir John Elvidge explained that—

“Putting on my formal ex-accountable officer hat on and forgetting everyone else’s interests, I think, with hindsight, that I would have liked our £180,000 to have received preferential creditor status to ensure that irrespective of whether anyone else got their money, we got ours.”59

84. The Cabinet Secretary confirmed that the public funding provided to the company was likely to constitute state aid under European Commission terms and that the funding could be provided in a way that was compatible with those regulations, frameworks and guidelines. Under the European Commission’s Temporary Framework, public funding can be awarded to an undertaking for up to a maximum of €500,000 as Small Amounts of Compatible Aid. The time frame for awarding aid under this scheme was between 1 January 2008 and 31 December 2010. The Scottish Government considered that its £100,000 grant to the company in December 2008 and the £180,000 short term loan were allowable state aid under this framework, together with the £80,000 funding awarded to the company by EventScotland as part of the Homecoming programme.60

85. The Committee agrees with the AGS comments that the Scottish Government did not complete robust checks of the company’s ability to repay the loan and regrets that such checks were not undertaken in this case. The Committee therefore recommends that the Scottish Government should review its procedures for undertaking due diligence work should it consider providing loans to limited liability companies again.

86. The Committee also recommends that, as part of any due diligence work into a private company, the Scottish Government should seek from its public sector partners any relevant financial information.

87. As the company had no assets at the time the loan was agreed to, the Committee recognises that the Scottish Government was limited in what action it could then take to protect the public money provided as a loan. Whilst acknowledging the time constraints facing the Scottish Government, the Committee still believes that all due diligence work should have been undertaken prior to agreeing to provide the loan.

The Scottish Government did not inform the steering group of the loan

88. The AGS report notes that the Scottish Government did not inform the steering group of the loan, as media pressure was intense, and the Scottish Government was concerned that a leak of information would jeopardise the delivery of the event’s economic impact.61

89. The Committee questioned witnesses as to who knew about the loan of £180,000 made by the Scottish Government to the company.

90. The Cabinet Secretary confirmed that EventScotland knew of the loan but that “it was felt that the information had gone as far as it should in the circumstances.”62

91. The First Minister acknowledged, however, that the Scottish Government should have insisted on EventScotland informing the rest of the steering group of the loan, adding that—

“we did not instruct EventScotland not to inform the steering group. However although we were not part of the steering group, formally, we should have instructed EventScotland to inform the other members.”63

92. The Cabinet Secretary agreed that the Scottish Government should have assisted EventScotland to inform the steering group of the loan. He also confirmed that there was no secrecy surrounding the loan and that “no one was told not to do things.”64

93. The Directors explained that—

“Obviously we treated it confidentially, as is the case when any limited company takes out a loan...EventScotland was informed of the loan. We let it take the lead on how it wanted to communicate that to the steering group.”65

94. EventScotland confirmed that it was verbally advised by the Scottish Government of the loan on 18 May 2009. There was no discussion about whether EventScotland should or should not disclose information about the loan, as this was a matter between the Scottish Government and the Directors.66

95. Sir John Elvidge confirmed that he was not aware of the loan. He recognised that one of the standard tests for considering notifying him of transactions is whether they are novel or contentious.

96. He then confirmed that he could not recall an occasion during his time as Permanent Secretary when someone would have found it necessary to refer to him the issue of a loan to a private company. He observed that the loan of £180,000 was a smaller transaction than many of the transactions that the Scottish Government conducts day to day.67 He also explained that it was for the finance directorate to act as a prompt to inform the Permanent Secretary if it thinks that something about a financial transaction might raise accountable officer issues.68

97. Jim Inch of the Council confirmed that—

“the advisory group was not aware that the Scottish Government had put in an additional £180,000 so when the group was considering the actions that needed to be taken, along with the Directors of the company it did not take that into account.”69

98. This he said compromised the Council’s and the steering group’s position. Jim Inch confirmed that had he known the full extent of the position he would have alerted his Chief Executive and councillors. He acknowledged that he was not sure that having all the information to hand would have made a lot of difference given the advisory nature of the steering group.70

99. Tom Aitchison, the Chief Executive of the Council, commented that it was disappointing that the Council was not told of the loan of £180,000, explaining that—

“there was meant to be a spirit of partnership and joint working. In my experience, that works best when it is based on trust, and that trust must sometimes be exercised confidentially, in a restricted way.”71

100. The First Minister acknowledged that the steering group should have been told of the Scottish Government loan and the Committee welcomes the First Minister’s recognition that this should have happened. The Committee believes that the Scottish Government should have proactively provided that information to the steering group. In that regard the decision of the Scottish Government not to have a representative on the steering group may have contributed to the lack of communication about the loan between the Scottish Government and the steering group.

101. Notwithstanding the views of the Permanent Secretary, the Committee also believes that, given this was the first time a loan had been provided by the Scottish Government directly to a private company under section 23 of the NH(S) Act, the Permanent Secretary should have also been told of the loan.

102. The Committee recommends that the Permanent Secretary also reviews the standard tests by which Scottish Government officials decide whether a transaction is novel or contentious and should be notified to the Permanent Secretary.

103. Whatever the possible consequences of not providing the loan, the Committee agrees that the process by which the loan was considered, agreed and then communicated was not transparent. The Committee would welcome a response from the Scottish Government on how it would propose to strengthen the communication between the Scottish Government and other public and private sector bodies when working together to deliver public sector events or policies.

104. The Committee agrees with the Cabinet Secretary that the Scottish Government should reconsider its approach to joining steering groups, with other public and private sector organisations, in relation to the delivery of events of national significance. The Committee would welcome clarification from the Scottish Government on how it intends to take this proposal forward.

Attempts to save the company

105. The Gathering event took place on 25 and 26 July 2009. The AGS report states that, according to the company’s unaudited accounts, actual expenditure on the event in September 2009 was £2,384,000 (which is £30,000 over the final projected costs or 1 percent). Total income was reported as £1,868,000 – a £516,000 overall net loss – or 12 percent lower than the projected income based on the pessimistic scenario.72

106. The AGS also reports that, in March 2010, the list of creditors compiled by the liquidator amounted to £726,000 with £382,000 owed to six public sector bodies and £344,000 owed to 103 private sector organisations.73

107. Event Scotland and VisitScotland commissioned an external assessment (by consulting firm EKOS) of the event’s economic impact for Edinburgh and Scotland. This report was published in September 2009 and indicated that the event generated net additional expenditure of £8.8 million in Edinburgh and £10.4 million in Scotland.74 In August 2010, the Economy, Energy and Tourism Committee received a report it had commissioned from Dr Geoff Riddington of GRID Economics on “An economic evaluation of Homecoming Scotland 2009”. The economic benefits of The Gathering 2009 were considered with the report concluding that the benefit to Scotland of The Gathering 2009 was more likely to be nearer £4.98 million.75

108. The AGS did not validate the findings of the economic evaluation by EKOS. This report also does not comment upon the veracity of the findings of the EKOS report or the report by Dr Riddington.

The Scottish Government was made aware that the event had made a loss

109. The First Minister confirmed that he met with the Directors on 14 August 2009 for a general debrief on the event and was then made aware of the company’s belief that the event had made a loss. The Scottish Government asked for comprehensive information to be provided. The Directors then met with the Minister and First Minister on 9 September at which time the extent of the losses was beginning to emerge.76

110. The First Minister explained that he was motivated to become more involved in order to secure the interests of the small creditors but also that not acting in the public interest could damage the reputation of Ministers in any Government. He explained that it is his style as First Minister to intervene directly in circumstances if he thought it could be helpful.77

111. The AGS reported that at the meeting on 9 September 2009, Scottish Government accountants were commissioned to investigate the financial position of the company. On 16 September the First Minister and Minister met with the Directors to discuss potential courses of action to protect the reputation of the event and the associated economic benefits.78

112. The Cabinet Secretary explained that he had met with the Directors again on 30 September to discuss potential courses of action—

“That discussion included the possibility of the company being purchased by other parties.”79

113. The Directors confirmed that—

“We were aware that the Government had an intellectual property (IP) valuation done on the event, in order to create a market value for the IP. That would be the asset that could be sold on, rather than the company.”80

114. In mid September Sir John Elvidge was also made aware that there was an issue with the loan repayment. He stated that—

“I became aware that Ministers were concerned that the commercial difficulties being experienced by the company could result in the company’s liquidation, with the consequent damage to the prospects of repeating the overall economic benefits derived from the 2009 Gathering.”81

115. Sir John Elvidge explained that at that time he was focussed on preserving The Gathering as a brand and an image which would be damaged by insolvency82 and not on the previous decision to provide a loan to the company—

“It was not my habit to go chasing after individual investigations of things that I knew the audit process would look at thoroughly anyway.”83

116. The Auditor General for Scotland explained that it is the responsibility of management in any public organisation to operate robust financial and other internal control processes. The external audit process is not a substitute for proper control by management. In terms of the Audit Scotland annual audit process, the £180,000 loan made to the company was one of the transactions which was included in the audit of the 2009/10 accounts. The audit confirmed that the payment was authorised by the Culture, External Affairs and Tourism Directorate within the Office of the First Minister’s Portfolio. The AGS confirmed that he would not expect the external auditor to consider the correctness of such internal decisions.

117. The £180,000 loan was also included in the auditor’s sample of bad debts which have been written off. This confirmed that Sir John Elvidge took the decision to write off the loan as a bad debt in his position as Accountable Officer for the Office of the First Minister’s Portfolio. The write off of the loan is explored in more detail later in this section.

118. The AGS also confirmed that he understood that no internal audit was undertaken by the Scottish Government in relation to The Gathering 2009.84

119. The Committee is concerned that no internal audit has ever been undertaken by the Scottish Government in relation to The Gathering 2009. The Committee believes that there should have been an internal investigation into the circumstances of the £180,000 loan. The Committee recommends that the Scottish Government reviews its processes for initiating and undertaking internal audits of projects which experience financial difficulties, are high risk or high value.

The Scottish Government could not pay the private sector debts of the company

120. In considering the possible solutions to secure the future of The Gathering event, the First Minister confirmed that it would not have been possible for the Scottish Government to purchase a company beyond the value of that company. That was why the Scottish Government had the company valued. In addition he stated that it would not have been possible for the Government to retrospectively allocate money to a company for an event that had taken place.85

121. Sir John Elvidge explained that as the Accountable Officer at that time, he took the view that the Scottish Government could not justify spending public money for the benefit of a number of companies whose impact was in a particular geographical area. He also explained that—

“it was certainly within the powers of the Scottish Government to purchase the company and thereby take on the liabilities. However I thought that that option failed the value for money test and that it potentially raised a different kind of legal issue with European Union state aid legislation. It would have been possible to interpret such an action as a decision to find a route to channel public funds to certain companies, which by definition would have raised state aid issues.”86

122. The First Minister acknowledged that he could have given a ministerial direction against the Government’s accountancy rules but he was strongly advised against it.87 He stated that therefore, the only solution, if one was to be found, was to find or help to find an alternative purchaser for the company—

“I thought that it was a quite proper and active role of the Government to see whether interested parties were prepared to take part in that process.”88

Other public sector bodies considered taking over The Gathering

123. On 8 October 2009 the First Minister telephoned the Edinburgh Military Tattoo (“the Tattoo”) and the Council to invite them to a meeting on 12 October to discuss whether either organisation would be interested in purchasing the company.89 The First Minister explained that he decided to take a direct role in attempting to find a solution because of the event’s importance but also because the Minister was due to be away from 10 -16 October 2009 on a ministerial visit to India.90

124. The First Minister commented that the Tattoo was invited as he was aware that it was interested in diversifying its activities. The Council was contacted because, in view of the economic impact assessment, it had a substantial reason for wishing to repeat the event. In addition, many of the creditors were based in Edinburgh.91

125. Jim Inch from the Council confirmed that at the meeting on 12 October there was a discussion about the pros and cons of the Tattoo taking over The Gathering—

“but it was fair to say that the Tattoo was not overwhelmed by the prospect.”92

126. The First Minister stated that no decision had been made before the meeting and no decision could be made at that meeting. He then met the Directors following the meeting to inform them of the lack of progress.93

127. Jim Inch then explained that on 13 October, he met with the Permanent Secretary to discuss the available options. At that meeting the Permanent Secretary explained why the Scottish Government could not address the issue directly. Jim Inch then explained that the Council would like to see The Gathering repeated in future and was keen to protect the large number of creditors, many of whom were based in Edinburgh. Jim Inch confirmed that any decision on this matter would require a full council decision but that as the Council was meeting on the 15 October, it was too late for any such suggestion to be submitted to the Council for consideration. He also commented that the Council was dealing with difficult financial decisions so it would be difficult to support, unexpectedly, expenditure of the value of the creditors.

128. Jim Inch of the Council explained that, at the closing of the meeting—

“the possibility of DEMA participating in something like this occurred to me and I mentioned the prospect to him. As DEMA is an arm’s-length company, it would not have been at all appropriate for me to have said to Sir John that DEMA would take on the event…however I said that I would go away and explore whether it was an appropriate vehicle for taking matters forward.”94

129. The Committee heard that DEMA is a fledgling public-private sector organisation which has funding of £1.5 million. Ninety-five percent of this funding is provided by the Council by way of a direct grant of in-kind service such as staffing or various other expenses. DEMA employs no staff but is instead supported by Council staff on secondment. Its initial budget had shown a deficit of £300,000 but had been revised to an almost break even scenario. DEMA is limited by guarantee with six directors (two public sector and four private sector) originally appointed to the company. This was enhanced recently by the addition of two further directors.95

130. Jim Inch also commented at the meeting that there was—

“a clear indication that, if we were to proceed with that, there would need to be some way in which the Scottish Government could pass the levels of funding back to the Council. We discussed a number of avenues.”96

131. Jim Inch stated that he explicitly suggested to Sir John Elvidge that one way to transfer Scottish Government funding to the Council to meet the private sector liabilities of the company would be to enhance the capital city supplement that Edinburgh receives. He also suggested that there might be other ways in which funds could be levered between the two organisations such as through the ordinary grant arrangements. Jim Inch however was clear that—

“In my discussion with Sir John Elvidge, I made it clear to him that the Council would not step in to take over the costs associated with the creditors.”97

132. Sir John commented that the Council—

“was concerned about the fact that it had some upfront costs and would need to see some financial benefits to balance those within a reasonable period. That is why the Council wanted a discussion about what, in principle, the financial framework for a second iteration of The Gathering might be, and about whether there was a prospect of repeated support from other public bodies for a second iteration, as that would potentially have brought the Council some financial benefits, and not necessarily at a huge time distance from meeting the cost.”98

133. Sir John Elvidge also confirmed in written evidence that Jim Inch’s recollections of the ways he sought to represent the Council’s interests at this meeting was accurate.99

134. Sir John Elvidge then commented in written evidence that—

“the purpose of the meeting was for me to listen to those propositions, and, at the end of it… reflect with the Scottish Government colleagues on what he had said. Having reflected, I instructed the relevant staff to convey to the Council’s officials the offer of assistance with the costs of a future event; and I spoke to Mr Inch by telephone on 14 October to make him aware of that approach.”

135. He then confirmed that he did not revert to the other propositions (such as the capital city supplement). Sir John Elvidge explained that he sought to ensure that, in subsequent telephone conversations, the Chief Executive of the Council was aware of the issues of principle involved (that any Scottish Government funding would be for a future event) in finding an acceptable way forward.100

136. Sir John Elvidge also explained that he did not ask the Council to confirm in writing what it was undertaking to do. This was because the Scottish Government has no locus to require the Council to do anything and the Council was not accountable to the Scottish Government for what it chose to do. There were, however, written exchanges about the financial framework within which the Scottish Government might be willing to provide funding if, having bought the company, the Council were to hold a second Gathering event.101

137. Upon return from the meeting on 13 October with Sir John Elvidge, Jim Inch—

“immediately contacted our director of city development and our head of economic development…and asked them to pursue the matter with the DEMA board.”102

138. Norman Springford, the Chair of DEMA, confirmed that he was contacted by Dave Anderson, Director of City Development at the Council, on 13 October who stated to him that—

“The Council had been approached by the Scottish Government which had identified DEMA …as a suitable vehicle for promoting a future event…as a result a discussion took place about whether DEMA would be in a position to accept that appointment. It was decided that that was something that Edinburgh should support, given its likely economic benefits to the city. At no time was it suggested that DEMA would be obliged for the payment of any debt that The Gathering 2009 Ltd had incurred. Dave Anderson and I were clear on that point… The only condition or caveat that was put upon it was that DEMA may need to be aware of the obligations for the running of the future event and would therefore be obligated to produce a business plan, which was clearly in everyone’s interest.”103

139. Sir John Elvidge commented that—

“In the discussions I had with Jim Inch, it was a clear part of the understanding that the Council - via either DEMA or some other means; in all honesty, I was not interested in the set of mechanics that the Council was going to use to do this - would, by purchasing the company, inherit the liabilities to the private sector creditors.”104

140. The Committee notes that Sir John Elvidge was clear in his understanding that if the Council (through DEMA) took on the company, it would also meet the private sector liabilities of the company. Jim Inch however was clear that the Council would support a future event but could not take on the private sector liabilities of the company. The Committee cannot reconcile these two differing accounts of the same meeting.

141. This situation was exacerbated by the fact that there was no written confirmation of the decisions reached, or the circumstances in which either party would act. The Committee is concerned that it has not been able to confirm the exact nature of the decisions reached or the actions agreed at this meeting on 13 October, particularly given these discussions were key to the events that then unfolded.

142. The Committee was extremely concerned that two senior officials had inconsistent interpretations of the same meeting and so was unable to reconcile these two interpretations. The Committee therefore recommends that the Scottish Government urgently improve its procedures for minuting the decisions and actions taken at meetings between the Scottish Government, other public sector parties and private companies.

The public sector debts were written off by Accountable Officers

143. The First Minister explained that it seemed possible for the public sector to make a contribution towards this solution by writing off the obligations to the public sector on the basis that, if the company went into liquidation, the public sector would expect not to receive its money. In those circumstances, the company could be taken over, the future of the event secured and the private sector creditors could be paid.105

144. In written evidence, Sir John Elvidge explained that it was for him as Accountable Officer to consider whether it was proper to write off the debt owed to the Scottish Government. He stated in oral evidence that—

“It did not seem to me to be right to jeopardise an outcome that appeared to have public benefit simply, in a sense, to protect my own back by allowing several more months to elapse before reaching a decision I already had the evidence to reach.”106

145. Sir John Elvidge explained that he received advice from the Director General and the finance directorate about the position of the Scottish Government as a creditor. That advice was that—

“The company’s assets were liable to be swallowed up by the costs of the process of insolvency and that, in the event of insolvency, it would be improbable that any creditor could expect to see any return from the process.”107

146. The Committee heard from Sir John Elvidge that the Scottish Public Finance Manual explains that the only basis for writing off debt is that it is irrecoverable.108 Having had that confirmed, Sir John Elvidge then wrote off the Scottish Government loan of £180,000 in October 2009.

147. In order to further assist any potential purchase of the company, Sir John Elvidge explained that he shared with Historic Scotland and the Scottish Ambulance Service109 the advice that he had received that the debt was irrecoverable and the basis on which he was taking a contingent decision on write off. He explained that this meant both these organisations could then consider that analysis and exercise their own individual Accountable Officer responsibilities.110

148. Sir John Elvidge confirmed that no one in the Scottish Government could speak for Historic Scotland or the Scottish Ambulance Service in relation to writing off the public sector debt. It would be for the Accountable Officers of each organisation to be satisfied that they have the evidence to reach their own decisions on whether to also write off the debt.111

149. The AGS report notes that the Scottish Government and three public sector bodies wrote off the money owed to them by the company. In addition to the money owed to the Scottish Government, Historic Scotland and the Scottish Ambulance Service, Lothian and Borders Police also wrote off £27,204 bringing the total value of public money written off to £291,508.112

150. The Committee acknowledges that it is for the Accountable Officer, in accordance with the Scottish Public Finance Manual, to determine whether any public sector debt should be written off for accounting purposes. However, the Committee considers that, where the value of the debt outweighs the likely cost of recovery, public sector bodies should still seek to recover debts were possible.

The press release issued on 15 October 2009

151. On the morning of 14 October 2009 a meeting between Scottish Government, VisitScotland, EventScotland and Council officials was held at St Andrews House. At that meeting the Council officials were briefed to the effect that:

  • there was an imminent prospect of the company being forced into administration through the action of creditors which would discredit the event and mean repeat events could not be held;
  • The BBC had also been pursuing a story about the company’s liquidation and it would probably run on 15 October;
  • The Scottish Government and the Council had agreed an approach which would see DEMA take on The Gathering and its debts. The mechanism to implement this was still being discussed (to ensure that the debt would not fall on the Council);
  • It was therefore essential that the news release was finalised that day (14 October) and issued generally the following day confirming that a rescue package was in place in order to reassure creditors and prevent the company from going into liquidation.113

152. Stewart Argo, Media Manager at the Council, commented in written evidence—

“My understanding of the situation at the time was that the future of The Gathering was in doubt unless a news release could be issued to stave off negative media reports and action by creditors. Had the news release not gone to the BBC that evening, I had been informed that there was serious risk of the news the following day being about The Gathering having to go into administration. The belief I had was that the participants in this process were determined to avoid this, underlined by the fact that there had been discussions at very high level between the council and the Scottish Government.”114

153. Jim Inch explained that it was not until a few days after the press release was issued that “we understood the criticality of getting something out to give relief to the creditors and allow them to sit back and see what would happen”.115 In that regard, the press release “took the pressure off the creditors” allowing the Council to explore the proposed transfer of the company.116

154. On 15 October 2009, a press release117 was issued by the Council on behalf of DEMA, part of which stated that—

“DEMA will take on The Gathering 2009 Ltd’s remaining private sector obligations and, with the Council and other public sector organisations, will develop the assets and intellectual property rights to organise future events.”118

155. The AGS comments that the press release was misleading because DEMA had not agreed to take on the outstanding private sector liabilities of the company.119

The process for drafting, clearing and issuing the press release

156. The Committee learned that the first draft of this press release had been provided to the Council on 14 October by the Scottish Government. This followed the meeting at St Andrews House to discuss the issuing of a press release. Isabell Reid, Head of Communications at the Council explained that at that meeting it was clear that it had already been agreed that there would be an announcement issued on 15 October by the Council, on behalf of DEMA, on the future of The Gathering. Isabell Reid confirmed this arrangement with Jim Inch.120

157. Upon returning to the Council, Isabell Reid went to see the Council leader, who considered the press release and was concerned that it did not reflect her understanding. Therefore a meeting was arranged for 2.00 pm in the Council leader’s office with the Chief Executive, the Directors of Corporate Services (Jim Inch), Finance and City Development as well as the Council’s deputy leader, Councillor Buchanan (Convener of the Council’s Economic Development Committee and a member of DEMA) and Stewart Argo, the Council’s media manager.121

158. The Committee also received copies of the emails clearing the press release. The first email was issued at 13.57 on 14 October when Stewart Argo requested a copy of the Scottish Government draft press release. The last email was issued at 21.27 on the same day when Stewart Argo sent the Council leader and deputy leader, Councillor Buchanan, Council officials and Scottish Government officials the finalised press release to be issued at 10 am on 15 October 2009.122

159. The Committee noted that all of the versions of the draft press releases emailed to the relevant Councillors, Council officials, the Scottish Government officials and DEMA contained the DEMA wording. The Committee sought clarification from Council leader and deputy leader, Council officials, the Scottish Government and Norman Springford (chair of DEMA) on the process by which the timing and content of the press release were agreed.

160. In oral evidence to the Committee, the Council leader explained that—

“There certainly was a meeting in my office, but I cannot recall whether we had a piece of paper in front of us or whether we merely had a discussion. However I am absolutely sure that I was not expecting a press release to go out on the Wednesday evening or the morning of Thursday 15 October. Had I been aware that an email of that importance was going out, I would undoubtedly checked it and there is no way I could have sanctioned that paragraph going out about DEMA taking on the liabilities going out.”123

161. The Council leader also commented that—

“I was absolutely horrified when I saw that the press release had gone out before I had seen the finalised version …On the night before a full council meeting, however I am fully involved in preparing for the next day…Therefore I did not see the press release on the evening of 14 October. If the press release went out around the time we were told, it was certainly not signed off by me. I did not see it until the following morning.”124

162. The deputy leader explained that—

“I was aware of the discussions that DEMA was having. I think that the press release went out at 9.30 on Wednesday evening. I was not contacted prior to the press release going out. It appeared on the Thursday morning and both Jenny Dawe and I went to her office to find out what had happened. Jenny can speak for herself, but we were both aghast because we know that the press release was factually inaccurate. It was perhaps wishful thinking, but somebody jumped the gun: the press release should never have gone out ….Had I seen it, it would not have gone out in that form, because it was factually incorrect.”125

163. He then stated that in relation to the emails clearing the press release—

“it is conceivable that I did not see the emails, given the timing of them, later on the Wednesday afternoon. I may not even have been in the office at that time. As Councillor Dawe points out, there was a full council meeting the following morning…My silence on the press release, because I had not seen it, should not have been taken as compliance.”126

164. The Chief Executive confirmed that he could not recollect the specifics of the discussions although he was clear that—

“we could not have said categorically, DEMA will take it over, because, as Jim Inch explained that was a decision for the DEMA board.”127

165. In relation to clearing the press release, the Chief Executive explained that, as with his colleague Jim Inch—

“The press release may have hit my email inbox sometime in the early part of the evening, but I have management team meeting on Thursday morning and then it is straight into a full council meeting. I do not recall approving the press release in that way.”128

166. Jim Inch explained that no one at the meeting in the Council leader’s room could have agreed to the DEMA wording—

“because DEMA, which is an independent company, had not met to discuss the matter. If any of us reviewed the press release, we would have said, “No that’s not right”.”129

167. He explained that, in relation to clearing the press release —

“I did not see the press release throughout the afternoon, or, indeed, the next day. As a senior officer, I have a lot of work to do prior to a council meeting. It was unfortunate that the coincidence of the council meeting at that time got in the way of people picking up email traffic of that sort.”130

168. The Chief Executive explained that the press officers present at the meeting in the Council leader’s room were given the task of reflecting in the press release the wishes of the political and managerial leadership of the Council. He recollected that the press officers were clear that the DEMA wording would have to come out but acknowledged that the press officers could confirm what was said at the meeting.131

169. Isabell Reid, Head of Communications at the Council, confirmed in written evidence that at the meeting in the Council leader’s office—

“I provided an update of the meeting which had taken place at St Andrews House. The content and timing of the release were discussed in considerable detail…Dave Anderson was given delegated authority to sign off the press release on behalf of the officer corps.”132

170. Isabell Reid also stated that “at the 2pm meeting we were requested to make significant changes to the press release but none to the paragraph which stated that DEMA Limited would take on the private sector liabilities or obligations of The Gathering 2009.”133

171. Regarding the timing of the issue of the press release Stewart Argo, Media Manager at the Council, confirmed that—

“The timing was discussed at the meeting in Councillor Dawe’s office and was not countermanded….

I was clear in my mind that the meeting was convened because of the prospect that we were going to be briefing the BBC that evening and issuing a press release generally the next day confirming the details that have been given to us in the meeting at the Scottish Government. Copies of the draft press release and Q and A, prepared by the Scottish Government, were provided to each person in the meeting.”134

172. He then stated that—

“I have no recollection of being asked to change the text around DEMA taking on the Gathering; indeed, had that been the case, there would have been no ‘news’ in the news release.”135

173. Stewart Argo also set out the clearance process for the press release. He explained that—

“On leaving the meeting, Councillor Cardownie stopped briefly at my desk and gave some indication of the points he wanted covered in his quote,…I believe Councillor Cardownie left the City Chambers after speaking to me because his other contributions were phoned in via Councillor Buchanan. From memory, there were two further iterations of his quote, and some other minor changes from Councillor Buchanan, such as reversing the words ‘public-private’ in the description of DEMA in the first paragraph.

The oral approval from Councillor Dawe came shortly before I left the office at 5.15 pm (I continued my work on this at home.) As she was in the midst of preparation for Council it was a very brief conversation. The version she approved would have been the one circulated at 15.57, although as it was continually being worked on it is possible there had already been some minor changes at that point. …

Although I had not received written approvals from all the individuals involved, and not necessarily on every word of the release, I considered it sufficient in these exceptional circumstances that the following had either explicitly approved the release, commented on it and/or not raised any significant concerns: Mr Anderson, Mr Springford, Ms Reid, Councillor Cardownie and Councillor Dawe.”136

174. Dave Anderson, Director of City Development at the Council also attended the meeting in the Council leader’s office. He confirmed that —

“There were concerns that the draft release might overstate DEMA’s position and the Council leader remained concerned about the need to ensure that any resolution of the issues was at no additional cost to the Council…The section worded ‘remaining private sector obligations’ clearly did not raise alarm bells with me because I had understood that DEMA would be prepared to pick up the assets of the company, take on the databases and liaise with customers. This was based on the core assumption that the assets would incorporate significant value.”137

175. The First Minister explained that the Scottish Government had already prepared a press release in the hope and expectation that the Tattoo would take on The Gathering. A press release was then subsequently offered to the Council in discussions with officials.138

176. The First Minister confirmed that the Scottish Government’s belief was that the DEMA wording was accurate. He stated that—

“every action that the Government took indicates that we believed that Edinburgh, through DEMA, was about to embark on that course and was going to honour the terms of the press release it issued.”139

177. Norman Springford, Chair of DEMA, stated that he first received a copy of the press release at 4.20 pm on 14 October. He explained that—

“I was asked specifically to comment on the comment in the press release that was being attributed to me, and I sent back a response 10 minutes later saying that I was fine with that…I was surprised that a phrase had been slipped in to the effect that DEMA would accept the creditors’ obligations. That was a surprise but, given that the press release had been, in effect, raised by the City of Edinburgh Council on behalf of DEMA, my view was that the matter had been agreed prior to my involvement.”140

178. Norman Springford observed that it was unusual for the press release to state specifically that it was to be issued by the Council on behalf of DEMA. He commented that numerous press articles were written for DEMA but they would go out in DEMA’s name having been done by DEMA’s inhouse team, which had marketing and promotion expertise.

179. In that regard, Norman Springford felt that the Council should have consulted DEMA’s Chief Executive but—

“as he was off at the time, perhaps that is where the system fell down.”141

180. The Committee asked Norman Springford whether he had any concerns regarding the DEMA wording in the press release. Norman Springford replied that—

“As a private sector individual in the midst of a public-sector funded organisation, my view was that something had been done before DEMA’s involvement that allowed that statement to be made.”142

181. The Chief Executive explained that—

“We were up against the clock. If action had not been taken or a signal not given to those small businesses, the whole thing could have been plunged into chaos…I am not setting out to say that the process was perfect - far from it - and given my time again I would have done things differently. An error was made in relation to this, but I think that as far as the City of Edinburgh Council is concerned the basic context was honourable.”143

182. The Committee was surprised that the Council did not draft its own press release as this would have ensured that its understanding of the agreement reached with the Scottish Government was reflected in the press release. As it was, the press release reflected the Scottish Government’s understanding that DEMA would take on the private sector liabilities of the company. This wording was to have a significant impact on the creditors of the company.

183. As a consequence of the DEMA wording contained within the issued press release, the private sector creditors would have been reassured that any unpaid invoices with the company would have been paid by DEMA. The threat of legal proceedings would have therefore also been removed (although the Committee notes that the one creditor who wrote to the Council on 16 October 2009 stating they would commence winding up proceedings, subsequently reached a settlement with the Council).

184. The Committee also notes that, following the press release being issued with the DEMA wording, the Scottish Government also continued to devote its efforts to affecting that solution rather than reconsidering other alternatives.

185. The Committee notes that the Council leader and deputy leader, Chief Executive and Jim Inch could not recollect their discussions of this press release at their meeting in the Council leader’s office. The Chief Executive was clear that the press release could not confirm that DEMA would take over the company as that was a decision for the DEMA Board. However other Council officials confirmed that no changes were requested to be made to the DEMA wording. The Committee cannot reconcile these two contradictory accounts of this meeting.

186. The Committee also notes the evidence of the Council leader, deputy leader, Chief Executive and Jim Inch that they did not approve the final draft of the press release and were surprised when it was issued. This was contradicted by written evidence from Council officials which explained that the timing of the issuing of the press release was discussed at the meeting in the Council leader’s office and that clearance had been sought and received from the relevant officials and councillors. Again the Committee cannot reconcile these two different accounts.

187. The Committee has serious concerns regarding the quality of the oral evidence from the Council witnesses and does not consider their evidence to be credible.

188. The Committee also considers the Council handling of the clearing and issuing of the press release to be unacceptable. The Committee hopes that the Council will undertake an investigation into the circumstances leading to the contradictory evidence it provided. The Council may also wish to clarify its lines of accountability and procedures for clearing press releases.

The press release issued was misleading

189. Immediately following the press release, Norman Springford explained that—

“The press stated that the obligations were being met by DEMA, it then caused some embarrassment when I immediately reported that DEMA could not accept that liability.”144

190. Norman Springford explained that DEMA has a separate legal persona from the Council and that DEMA had a fiduciary duty to act in the best interests of the company. His immediate reaction to the press release (and other board members were of the same view) was that DEMA could not assume the responsibility for the private sector debt of the company. It would be illegal for DEMA to do so as it did not have the funds to cover these debts.145 He explained that without written assurances that funding would be available, DEMA would not be in a position to take on the company.146

191. Jim Inch and the Council’s deputy leader agreed with the response by Norman Springford. The deputy leader commented that “DEMA had not decided to take on the debt. What Norman said was absolutely correct.”147

192. Jim Inch explained that Norman Springford’s response to the media was provided with the Council’s co-operation to try and correct something that was clearly misleading.148

193. The Council leader explained that her immediate reaction was that the press release should not have been issued. Due to Council meetings on the 15 October, no direct action was taken by the Council on the day the press release was issued. She did however reiterate in leader’s question time that the Council would not be liable for the debts of the private company.149

194. The Chief Executive stated that there was an inherent ambiguity about whether DEMA was taking over the company although it was clear that it could not do so without additional funding. He recognised however—

“it would have been wise or appropriate to have issued a rejoinder or supplementary press release. The correct wording would have been that the Council was in discussion with DEMA to attempt to find a solution; the statement should not have implied that a solution had been found.”150

195. He then confirmed that a number of reports had been submitted to the Council explaining the whole background. He also confirmed that these were internal matters that the Council would deal with in due course.151

196. On 3 December 2009, DEMA wrote to the Council leader requesting that the Council not use DEMA’s name in any negotiations or public statements in relation to any future staging of The Gathering events until DEMA had agreed the basis on which it was being asked to be involved. In addition DEMA requested that if it was to be involved then representatives of DEMA should attend relevant meetings.152

197. The Committee is concerned by the conflicting evidence it has received regarding the clearance and issuing of the misleading press release.

198. The Committee acknowledges that had the DEMA solution been workable it would have been to the benefit of the private sector creditors. However, it agrees with the Chief Executive of the Council that the Council should have acted immediately and clarified publicly the DEMA wording in the press release.

199. The Committee hopes that the Council will review its communication procedures with DEMA in relation to promotion of events involving both parties.

Subsequent events

200. The Committee learned that Councillor Buchanan153, the deputy leader and Norman Springford met informally at a dinner on 16 October. There was a brief discussion of the events surrounding the press release, including the statement by Norman Springford that DEMA could not take on the liabilities of the company.

201. The DEMA Board met on 21 October, at which DEMA discussed the press release. The Board confirmed that as a private company with limited financial resources it could not take on the liabilities of The Gathering 2009 Ltd.154 Jim Inch explained that this decision was taken as the Scottish Government had not made clear how it was going to achieve the transfer of money between the two organisations.155

202. Jim Inch wrote to the Permanent Secretary on 30 October to seek a meeting to discuss the basis of the proposed transfer of funding to assist with the debts of the company. Following receipt of a response, Council and Scottish Government officials met on 4 November to explore how the transfer of funds might be achieved and to explore the options available. Following that meeting an email was received from the Scottish Government outlining the options available.156

203. Jim Inch explained that the Scottish Government had to find itself a sufficiently robust way of transferring the funding but that the mechanism of increasing the capital city supplement had been discounted.

204. Sir John Elvidge stated that “an addition to the Capital City Fund would not have had the vital characteristic of the funding offered to the Council, that it should meet the requirement that Scottish Government funding could only properly relate to the costs of a future repetition of the Gathering event.”157

205. These discussions culminated in a letter dated 12 November from the Scottish Government to the Council offering financial support of no less than £380,000 for a future Gathering event. This offer was subject to the submission of a satisfactory business plan and the agreement of Scottish Ministers.158

206. Jim Inch explained that the risk to the Council of accepting the Scottish Government’s approach was far too high. The Council therefore changed tack and agreed to commission its own evaluation of The Gathering brand. The purpose of this evaluation was to determine whether the Council should buy the brand and its intellectual property rights (rather than the company itself).159

207. The AGS report comments that this report concluded that the valuation of the company’s intellectual property rights was outweighed by the list of creditors. The Council concluded that, based on its budget constraints, it could not take any further action and wrote to the Scottish Government confirming this on 26 January 2010. The company was placed into liquidation on the same day.160

208. The Committee notes that in the period between the Gathering event on 25-26 July and the issuing of the press release on 15 October 2009, there was considerable activity by the Scottish Government and the Council to try and save the future of The Gathering.

209. However, once the press release was issued and it became apparent that DEMA could not take on the private sector liabilities of the company, there did not appear to be any similar sense of urgency to try and save the event. It would appear to the Committee that, during this time, all other possible alternatives to try and secure the future of the Gathering event were not being actively pursued.

210. The Committee acknowledges that from November until late January 2010 a valuation of the company’s intellectual property rights was commissioned by the Council. However it also notes that a similar exercise was carried out by the Scottish Government in early September. The Committee is unclear why the results of the Scottish Government valuation were not shared with the Council so it could have reached its final decision earlier than in late January 2010.

211. The Committee recommends that the Scottish Government consider how it might share such information with other public sector bodies should similar circumstances arise again.

The Chair of DEMA resigned

212. The Committee learned that on 6 November 2010, Norman Springford resigned as chair of DEMA. He explained that —

“The reason for my resignation was that Councillor Tom Buchanan was on the point of issuing a letter on local government paper replacing me as chair. He did not have authority to do that, because DEMA is a private limited company.”161

213. In written evidence Councillor Tom Buchanan stated that, at the DEMA board meeting of 21 October, he was asked to approach Marcia Campbell of Standard Life to see whether she would be interested in joining the board of DEMA. Following the meeting Councillor Buchanan drafted a letter inviting Marcia Campbell to join the DEMA board but also sought comments from Ms Campbell on whether she would be interesting in replacing Norman Springford as Chair of DEMA when he stood down.162 Councillor Buchanan then sought comments from the Council’s Economic Development Officer (who is the Chief Executive of DEMA) on his draft letter.

214. The Chief Executive of DEMA replied with his comments, recommending that Councillor Buchanan omit mention of the potential future role as Chair. The Chief Executive also then sent the original draft letter to Norman Springford seeking clarification as to whether it reflected the discussion at the DEMA Board meeting on 21 October.163

215. Norman Springford explained that in his mind the intention of the letter was clear; that—

“I had embarrassed the Council, the Government or whoever and it was time to go.”164

216. He commented that he believed that Councillor Buchanan was an honourable man who would not have taken those actions without the involvement of someone else. Norman Springford stated that although he was annoyed, he did not wish any embarrassment to caused—

“It was a privilege to act as interim chair of DEMA and I did not wish any harm to befall DEMA or the city.”165

217. Councillor Buchanan confirmed that, following discussion with the Council’s deputy leader, he contacted Norman Springford to emphasise that there was no intention of instigating his resignation and asking him to change his mind. Norman Springford explained that having made the decision to resign, he would not change his mind.166

218. The letter to Marcia Campbell was not subsequently issued.

219. The Committee notes the events that led to the resignation of Norman Springford and thanks him for his evidence.

Annexe a: press release ISSUED BY THE CITY OF EDInburgh council on behalf of DEMA Ltd on 15 October 2009

Thursday 15 October 2009

Issued on behalf of Destination Edinburgh Marketing Alliance by the City of Edinburgh Council

NEW FUTURE FOR GATHERING

A repeat of one of the most successful visitor events in Scottish history is now a real possibility with the news that the private-public organisation Destination Edinburgh Marketing Alliance (DEMA) is to take over The Gathering 2009 Ltd.

An independent economic impact assessment carried out by EKOS Ltd shows that the Gathering attracted 47,000 people. It also generated £10.4m in revenue for Scotland and £8.8m in Edinburgh. The report highlights that 73 per cent of visitors would be likely or very likely to visit a future Gathering within the next four years.

Norman Springford, as chair of DEMA, said: “The board of DEMA views this as a really exciting development for us and our city, and will see us build on our successful working with the Scottish Government and the Council which led to Edinburgh Inspiring Capital being entered into the Clipper Round-the-World yacht race. Such private and public partnerships have enormous potential for promoting the capital and the nation to people across the globe. We are delighted and honoured to accept this new responsibility and we will now move towards more detailed discussions with the Scottish Government and other partners on the investment in, and delivery of, this project.”

Cllr Steve Cardownie, the city’s Festivals and Events Champion said: “This is a wonderful opportunity for the city, following on from the fantastic event held in July as part of the Homecoming celebrations. I’m very pleased that we’ve been able to lend our support in facilitating the quick action to secure a longer-term arrangement for this event. Future gatherings promise to be even greater and a much welcome boost to the city’s economy, and the next event in 2012 will further underline the many reasons to visit Edinburgh in Olympic year.”

DEMA will take on The Gathering 2009 Ltd’s remaining private sector obligations and, with the Council and other public sector organisations, will develop the assets and intellectual property rights to organise future events. A key next step for DEMA will be to begin preparing a detailed business case considering the options for a 2012 event.

Although a success in terms of visitor numbers and economic impact, the private company that ran the Gathering 2009 has encountered financial difficulties. This deal will ensure creditors are paid as well as securing the event for the future.

Co-Director of the Gathering 2009, Lord Sempill, said: “We are proud to have delivered an event that was such a great success for Scotland and delighted that future Gatherings are a real prospect. Our dream was to secure an event that would prove, as we have always believed, that there is a great public appetite for occasions that celebrate Scotland’s history and heritage. Unfortunately, due largely to events outwith our control including an unprecedented global financial crisis, our income streams were lower than we expected and we have been unable to satisfy all of our creditors.”

Scottish Government Culture Minister Michael Russell said: “The Scottish Government, along with EventScotland and VisitScotland, is fully supportive of this agreement to secure the future of the Gathering, which has proved itself to be a new and exciting way of celebrating our culture, heritage and shared links around the world. At this time of economic recovery, it is vital all Scottish interests now pull together to capitalise on that international interest and build on the success highlighted in the independent economic impact report.”

Notes to Editors

The independent economic assessment of the impact of Gathering 2009 from EKOS (available at eventscotland.org) shows that 47,000 people – 51 per cent from outwith Scotland - attended with a high level of satisfaction on their experience in Edinburgh, and overall the Gathering generated £10.4 million of revenue for Scotland on a ratio of £21 for every £1 of public investment.

The Scottish Government has agreed not to seek the recovery of a loan of £180,000 to The Gathering 2009 Ltd, in order to secure the future of The Gathering as an event and the associated economic benefits. For the same reason, Historic Scotland and other public bodies have decided that they will not seek to recover the amounts that they are owed.

Contacts

City of Edinburgh Council (on behalf of DEMA):
Lynn McMath / Isabell Reid
Lindsay Taylor for general DEMA enquiries only)

The Gathering Ltd – Roddy Scott

Scottish Government – Jane Robson

EventScotland – Leon Thompson

Annexe b: extracts from the minutes

12th Meeting, 2010 (Session 3) Wednesday 23 June 2010

Section 23 report - The Gathering 2009: The Committee received a briefing from the Auditor General for Scotland on his report entitled "The Gathering 2009".

Consideration of approach - The Gathering 2009 (in private): The Committee considered its approach to the Auditor General for Scotland's report entitled "The Gathering 2009". The Committee agreed to invite the Directors of The Gathering 2009 Ltd, Sir John Elvidge, former Permanent Secretary, Scottish Government and the Minister of Culture, External Affairs and the Constitution to give evidence at future meetings. The Committee also agreed to write to the Accountable Officer and the Chief Executive of the City of Edinburgh Council on a number of issues raised during discussion.

13th Meeting, 2010 (Session 3) Wednesday 8 September 2010

Consideration of approach - The Gathering 2009 (in private): The Committee considered its approach to forthcoming oral evidence sessions on the Auditor General for Scotland's report entitled "The Gathering 2009".

14th Meeting, 2010 (Session 3) Wednesday 15 September 2010

Section 23 report - The Gathering 2009: The Committee took evidence on the Auditor General for Scotland's report entitled "The Gathering 2009" from—

Lord Sempill, Director; and Jenny Gilmour, Director, The Gathering 2009 Ltd.

The Gathering 2009 (in private): The Committee considered the evidence received at agenda item 2 and agreed to seek further written evidence from the witnesses on matters raised during discussion. Linda Fabiani MSP declared that the grant of £100,000 provided from the Scottish Government to the Gathering 2009 Ltd on 15 December 2008, was funding given over from her portfolio whilst she was Minister for Europe, External Affairs and Culture.

16th Meeting, 2010 (Session 3) Wednesday 6 October 2010

Section 23 report - The Gathering 2009: The Committee took evidence on the Auditor General for Scotland's report entitled "The Gathering 2009" from—

Sir John Elvidge.

Consideration of evidence and approach - The Gathering 2009 (in private): The Committee considered the evidence received at agenda item 2. The Committee considered correspondence from the First Minister and agreed, by division: For 5 (George Foulkes, Murdo Fraser, Hugh Henry, Mr Frank McAveety, Nicol Stephen) Against 3 (Willie Coffey, Bill Kidd, Anne McLaughlin) Abstentions 0, to endorse its previous decision to invite the First Minister to give oral evidence to the Committee at a future meeting. The Committee then agreed to invite the former Minister for Culture, External Affairs and the Constitution, the City of Edinburgh Council and Mr Norman Springford to give oral evidence at future meetings.

17th Meeting, 2010 (Session 3) Wednesday 27 October 2010

Section 23 report - The Gathering 2009: The Committee took evidence on the Auditor General for Scotland's report entitled "The Gathering 2009" from—

Norman Springford, Former Chair, Destination Edinburgh Marketing Alliance Ltd (DEMA).

Consideration of evidence - The Gathering 2009 (in private): The Committee considered the evidence received at agenda item 2 and agreed to write to Audit Scotland on issues raised during discussion.

18th Meeting, 2010 (Session 3) Wednesday 3 November 2010

Section 23 report - The Gathering 2009: The Committee took evidence on the Auditor General for Scotland's report entitled "The Gathering 2009" from—

Councillor Jenny Dawe, Leader of the Council; Councillor Steve Cardownie, Deputy Leader of the Council; Tom Aitchison, Chief Executive; and Jim Inch, Director of Corporate Services, City of Edinburgh Council.

Consideration of evidence - The Gathering 2009 (in private): The Committee considered the evidence received at agenda item 3 and agreed to write to Councillor Tom Buchanan, The City of Edinburgh Council and Sir John Elvidge on matters raised during discussion. The Committee agreed the claim for witness expenses from Lord Sempill.

20th Meeting, 2010 (Session 3) Wednesday 24 November 2010

Section 23 Report - The Gathering 2009: The Committee considered its approach to correspondence on the Auditor General for Scotland's report entitled "The Gathering 2009" and agreed, by division: For 5 (George Foulkes, Murdo Fraser, Hugh Henry, Mr Frank McAveety, Nicol Stephen) Against 2 (Willie Coffey, Anne McLaughlin) Abstentions 1 (Jamie Hepburn), to issue a further letter to the Permanent Secretary.

21st Meeting, 2010 (Session 3) Wednesday 1 December 2010

Section 23 report - The Gathering 2009: The Committee took evidence on the Auditor General for Scotland's report entitled "The Gathering 2009" from—

Rt Hon Alex Salmond MSP, First Minister of Scotland; and

Michael Russell MSP, Cabinet Secretary for Education and Lifelong Learning, Scottish Government.

Consideration of evidence - The Gathering 2009 (in private): The Committee considered the evidence received at agenda item 3 and agreed to write to the City of Edinburgh Council, Destination Edinburgh Marketing Alliance Ltd, the Scottish Government and EventScotland on matters raised during discussion. The Committee also agreed to consider a draft report, in private, at a future meeting.

2nd Meeting, 2011 (Session 3) Wednesday 26 January 2011

Section 23 Report - The Gathering 2009 (in private): The Committee agreed its approach to written evidence and agreed to consider a revised draft report on the Auditor General for Scotland's Report entitled "The Gathering 2009", in private, at a future meeting.

3rd Meeting, 2011 (Session 3) Wednesday 2 February 2011

Section 23 Report - The Gathering 2009 (in private): The Committee considered a draft report on the Auditor General for Scotland's Report entitled "The Gathering 2009" and agreed to consider a revised draft report, in private, at a future meeting.

4th Meeting, 2011 (Session 3) Wednesday 9 February 2011

Section 23 report - The Gathering 2009 (in private): The Committee considered a draft report on the Auditor General for Scotland's report entitled "The Gathering 2009". The Committee agreed the report, subject to revisions to be agreed by correspondence, and the arrangements for its publication.

Annexe c: oral evidence and associated written evidence

Please note that all oral evidence and associated written evidence is published electronically only, and can be accessed via the Public Audit Committee’s webpages, at:

http://www.scottish.parliament.uk/s3/committees/publicAudit/index.htm

12th Meeting, 2010 (Session 3) Wednesday 23 June 2010

ORAL EVIDENCE

Robert Black, Auditor General for Scotland.

14th Meeting, 2010 (Session 3) Wednesday 15 September 2010

ORAL EVIDENCE

Lord Sempill, Director and Jenny Gilmour, Director, The Gathering 2009 Ltd.

16th Meeting, 2010 (Session 3), Wednesday 6 October 2010

WRITTEN EVIDENCE

Sir John Elvidge, former Permanent Secretary to the Scottish Government - 9 September 2010 (59.4KB pdf)

ORAL EVIDENCE

Sir John Elvidge

17th Meeting, 2010 (Session 3) Wednesday 27 October 2010

WRITTEN EVIDENCE

Lord Sempill and Jenny Gilmour, former Directors of The Gathering 2009 Ltd - 15 October 2010 (998KB pdf)

Sir Peter Housden, Permanent Secretary to the Scottish Government - 22 October 2010 (206KB pdf)

ORAL EVIDENCE

Norman Springford, Former Chair, Destination Edinburgh Marketing Alliance Ltd (DEMA).

18th Meeting, 2010 (Session 3) Wednesday 3 November 2010

WRITTEN EVIDENCE

Correspondence provided by Norman Springford, former Chair, Destination Edinburgh Marketing Alliance Ltd (DEMA) - 27 October 2010 (133KB pdf)

ORAL EVIDENCE

Councillor Jenny Dawe, Leader of the Council; Councillor Steve Cardownie, Deputy Leader of the Council; Tom Aitchison, Chief Executive, and Jim Inch, Director of Corporate Services; City of Edinburgh Council.

21st Meeting, 2010 (Session 3) Wednesday 1 December 2010

WRITTEN EVIDENCE

Sir John Elvidge, former Permanent Secretary to the Scottish Government - 17 November 2010 (79.5KB pdf)

Auditor General for Scotland - 18 November 2010 (67.2KB pdf)

Dave Anderson, Director of City Development, City of Edinburgh Council - 17 November 2010 (119KB pdf)

Stewart Argo, Media Manager, City of Edinburgh Council - 17 November 2010 (210KB pdf)

Isabell Reid, Head of Communications, City of Edinburgh Council - 23 November 2010 (115KB pdf)

Councillor Tom Buchanan, Convener of the Economic Development Committee, City of Edinburgh Council - 26 November 2010 (179KB pdf)

ORAL EVIDENCE

Rt Hon Alex Salmond MSP, First Minister of Scotland; and

Michael Russell MSP, Cabinet Secretary for Education and Lifelong Learning, Scottish Government.

OTHER WRITTEN EVIDENCE

Tom Aitchison, Chief Executive, City of Edinburgh Council - 30 July 2010 (2.76MB pdf)

Sir Peter Housden, Permanent Secretary to the Scottish Government - 30 July 2010 (170KB pdf)

The Daily Telegraph FOI request 1- 4 August 2010 (688KB pdf)

The Daily Telegraph FOI request 2 - 4 August 2010 (342KB pdf)

Michael Russell MSP, Cabinet Secretary for Education and Lifelong Learning - 23 September 2010 (204KB pdf)

Sir Peter Housden, Permanent Secretary to the Scottish Government - 30 November 2010 (63.4KB pdf)

Michael Russell MSP, Cabinet Secretary for Education and Lifelong Learning - 21 December 2010 (110KB pdf)

Alan Johnston, Chair, Destination Edinburgh Marketing Alliance Ltd (DEMA) Part 1- 22 December 2010 (468KB pdf)

Alan Johnston, Chair, Destination Edinburgh Marketing Alliance Ltd (DEMA) Part 2- 22 December 2010 (220KB pdf)

Alan Johnston, Chair, Destination Edinburgh Marketing Alliance Ltd (DEMA) Part 3- 22 December 2010 (239KB pdf)

Sir John Elvidge, former Permanent Secretary to the Scottish Government - 29 December 2010 (62.3KB pdf)

Paul Bush OBE, Chief Operating Officer, EventScotland - 5 January 2011 (63.6KB pdf)

Jim Inch, Director of Corporate Services, City of Edinburgh Council - 5 January 2011 (1.24MB pdf)

Sir Peter Housden, Permanent Secretary to the Scottish Government - 20 January 2011 (158KB pdf)


Footnotes:

1 Information in this section is taken from the AGS report entitled The Gathering 2009. Audit Scotland. (2010) The Gathering 2009. Available at: http://www.audit-scotland.gov.uk/docs/central/2010/nr_100623_the_gathering.pdf
[Accessed 21 December 2010].

2 DEMA is a private company, limited by guarantee, which is specifically charged with the destination promotion of Edinburgh. It is an alliance of key partner organisations including the Edinburgh Chamber of Commerce, Festivals Edinburgh, VisitScotland, Scotland Enterprise and the City of Edinburgh Council.

3 Between February and December 2009 Michael Russell MSP was the Minister for Culture, External Affairs and the Constitution, whose portfolio including The Gathering 2009 event. Michael Russell MSP is now the Cabinet Secretary for Education and Lifelong Learning. This report therefore refers to “the Minister” when referring to events surrounding The Gathering 2009 but to “the Cabinet Secretary” when referring to written or oral evidence provided to the Committee.

4 Rule 7.5.1 states that a member may not in the proceedings of the Parliament refer to any matter in relation to which legal proceedings are active except to the extent permitted by the Presiding Officer.

5 The role of SEEL has subsequently been taken on by Scottish Enterprise.

6 The Gathering 2009, paragraph 12-13.

7 The Gathering 2009, paragraphs 20-21.

8 Scottish Parliament Public Audit Committee, Official Report, 3 November 2010, Col 2101.

9 Scottish Parliament Public Audit Committee, Official Report, 3 November 2010, Col 2101.

10 Scottish Parliament Public Audit Committee, Official Report, 3 November 2010, Col 2098.

11 Scottish Parliament Public Audit Committee, Official Report, 3 November 2010, Col 2100.

12 Scottish Parliament Public Audit Committee, Official Report, 3 November 2010, Col 2112.

13 The Gathering 2009, paragraph 24.

14 Scottish Parliament Public Audit Committee, Official Report, 16 September 2010, Col 1890.

15 Passport tickets to the event included entry to the Highland Games on both days and a seat at the Clan Pageant.

16 Scottish Parliament Public Audit Committee, Official Report, 16 September 2010, Col 1885.

17 Written evidence from the Directors of The Gathering 2009, 15 October 2010.

18 Written evidence from EventScotland, 5 January 2011.

19 The Gathering 2009, paragraph 35, 37, 38 and Appendix 1: The Gathering 2009 timeline.

20 The Gathering 2009, paragraph 49 and exhibit 4.

21 Scottish Parliament Public Audit Committee, Official Report, 3 November 2010, Col 2104.

22 Scottish Parliament Public Audit Committee, Official Report, 16 September 2010, Col 1885.

23 The Gathering 2009, paragraphs 27-28.

24 Scottish Parliament Public Audit Committee, Official Report, 16 September 2010, Col 1893.

25 Scottish Parliament Public Audit Committee, Official report, 16 September 2010, Col 1899.

26 Scottish Parliament Public Audit Committee, Official Report, 3 November 2010, Col 2110.

27 Scottish Parliament Public Audit Committee, Official Report, 3 November 2010, Col 2104-5.

28 Scottish Parliament Public Audit Committee, Official Report, 16 September 2010, Col 1908.

29 The Gathering 2009, paragraph 34 and exhibit 3.

30 The Gathering 2009, paragraph 17.

31 Scottish Parliament Public Audit Committee, Official Report, 1 December 2010, Col 2301.

32 Scottish Parliament Public Audit Committee, Official Report, 1 December 2010, Col 2301.

33 Scottish Parliament Public Audit Committee, Official Report, 1 December 2010, Col 2302-3.

34 Scottish Parliament Public Audit Committee, Official Report, 1 December 2010, Col 2304.

35 Scottish Parliament Public Audit Committee, Official Report, 1 December 2010, Col 2302.

36 The Gathering 2009, paragraph 34 and appendix 1.

37 Scottish Parliament Public Audit Committee, Official Report, 1 December 2010, Cols 2307-8.

38 Scottish Parliament Public Audit Committee, Official Report, 15 September 2010, Col 1904.

39 Scottish Parliament Public Audit Committee, Official Report, 1 December 2010, Col 2308.

40 Written evidence from the Permanent Secretary, Scottish Government. 30 July 2010.

41 Scottish Parliament Public Audit Committee, Official Report, 1 December 2010, Col 2315.

42 Scottish Parliament Public Audit Committee, Official Report, 1 December 2010, Col 2315.

43 Scottish Parliament Public Audit Committee, Official Report, 1 December 2010, Col 2310.

44 Scottish Parliament Public Audit Committee, Official Report, 16 September 2010, Col 1910.

45 Written evidence from the Cabinet Secretary for Lifelong learning and Culture, 23 September 2010.

46 Scottish Parliament Public Audit Committee, Official Report, 23 June 2010, Col 1820.

47 Scottish Parliament Public Audit Committee, Official Report, 16 September 2010, Col 1909.

48 Scottish Parliament Public Audit Committee, Official Report, 16 September 2010, Col 1915.

49 Scottish Parliament Public Audit Committee, Official Report, 1 December 2010, Cols 2310-11.

50 Scottish Parliament Public Audit Committee, Official Report, 1 December 2010, Col 2324.

51 The Gathering 2009, paragraphs 31-32.

52 Scottish Parliament Public Audit Committee, Official Report, 1 December 2010, Cols 2328-29.

53 Written evidence from the Cabinet Secretary for Education and Lifelong Learning, Scottish Government,
21 December 2010.

54 Scottish Parliament Public Audit Committee, Official Report, 1 December 2010, Col 2330.

55 Scottish Parliament Public Audit Committee, Official Report, 1 December 2010, Col 2330.

56 Scottish Parliament Public Audit Committee, Official Report, 6 October 2010, Col 1983.

57 Scottish Parliament Public Audit Committee, Official Report, 15 September 2009, Col 1928.

58 Scottish Parliament Public Audit Committee, Official Report, 1 December 2010, Col 2318-19.

59 Scottish Parliament Public Audit Committee, Official Report, 6 October 2010, Col 2005.

60 Written evidence from the Cabinet Secretary for Education and Lifelong Learning, Scottish Government,
21 December 2010.

61 The Gathering 2009, paragraph 34.

62 Scottish Parliament Public Audit Committee, Official Report, 1 December 2010, Cols 2311-12.

63 Scottish Parliament Public Audit Committee, Official Report, 1 December 2010, Cols 2312 and 2314.

64 Scottish Parliament Public Audit Committee, Official Report, 1 December 2010, Cols 2313.

65 Scottish Parliament Public Audit Committee, Official Report, 15 September 2010, Col 1918.

66 Written evidence from EventScotland, 5 January 2011.

67 Scottish Parliament Public Audit Committee, Official Report, 6 October 2010, Col 1982.

68 Scottish Parliament Public Audit Committee, Official Report, 6 October 2010, Col 1981.

69 Scottish Parliament Public Audit Committee, Official Report, 3 November 2010, Col 2102.

70 Scottish Parliament Public Audit Committee, Official Report, 3 November 2010, Col 2111.

71 Scottish Parliament Public Audit Committee, Official Report, 3 November 2010, Col 2117.

72 The Gathering 2009, paragraphs 38-39.

73 The Gathering 2009, paragraph 64.

74 The Gathering 2009, paragraph 45.

75 An economic evaluation of Homecoming Scotland, August 2010, GRID Economics, Table 9, available at:../eet/index.htm [Last accessed at: 29 December 2010].

76 Scottish Parliament Public Audit Committee, Official Report, 1 December 2010, Col 2332.

77 Scottish Parliament Public Audit Committee, Official Report, 1 December 2010, Col 2343.

78 The Gathering 2009, Appendix 1: The Gathering 2009 timeline.

79 Scottish Parliament Public Audit Committee, Official Report, 1 December 2010, Col 2335.

80 Scottish Parliament Public Audit Committee, Official Report, 15 September 2010, Cols 1921-22.

81 Written evidence from Sir John Elvidge, 9 September 2010.

82 Scottish Parliament Public Audit Committee, Official Report, 6 October 2010, Col 1987.

83 Scottish Parliament Public Audit Committee, Official Report, 6 October 2010, Col 1984.

84 Written evidence from Audit Scotland, 18 November 2010.

85 Scottish Parliament Public Audit Committee, Official Report, 1 December 2010, Col 2334.

86 Scottish Parliament Public Audit Committee, Official Report, 6 October 2010, Col 1993.

87 Scottish Parliament Public Audit Committee, Official Report, 1 December 2010, Col 2354.

88 Scottish Parliament Public Audit Committee, Official Report, 1 December 2010, Col 2334.

89 Scottish Parliament Public Audit Committee, Official Report, 1 December 2010, Col 2336.

90 Scottish Parliament Public Audit Committee, Official Report, 1 December 2010, Col 2334.

91 Scottish Parliament Public Audit Committee, Official Report, 1 December 2010, Cols 2333, 2337-38.

92 Scottish Parliament Public Audit Committee, Official Report, 3 November 2010, Col 2121.

93 Scottish Parliament Public Audit Committee, Official Report, 1 December 2010, Col 2334.

94 Scottish Parliament Public Audit Committee, Official Report, 3 November 2010, Cols 2121-2122.

95 Scottish Parliament Public Audit Committee, Official Report, 27 October 2010, Cols 2034-2038.

96 Scottish Parliament Public Audit Committee, Official Report, 3 November 2010, Col 2129.

97 Scottish Parliament Public Audit Committee, Official Report, 3 November 2010, Col 2125.

98 Scottish Parliament Public Audit Committee, Official Report, 6 October 2010, Col 2003-04.

99 Written evidence from Sir John Elvidge, 17 November 2010.

100 Written evidence from Sir John Elvidge, 17 November 2010.

101 Scottish Parliament Public Audit Committee, Official Report, 6 October 2010, Col 1989-90.

102 Scottish Parliament Public Audit Committee, Official Report, 3 November 2010, Col 2124.

103 Scottish Parliament Public Audit Committee, Official Report, 27 October 2010, Col 2032-33.

104 Scottish Parliament Public Audit Committee, Official Report, 6 October 2010, Col 2002.

105 Scottish Parliament Public Audit Committee, Official Report, 1 December 2010, Col 2340.

106 Scottish Parliament Public Audit Committee, Official Report, 6 October 2010, Col 2008.

107 Scottish Parliament Public Audit Committee, Official Report, 6 October 2010, Col 2001.

108 Scottish Parliament Public Audit Committee, Official Report, 6 October 2010, Col 2011.

109 Both were creditors of the company, owed £73,565 and £11,738 respectively
(source: The Gathering 2009, exhibit 6).

110 Written evidence from Sir John Elvidge, 9 September 2010.

111 Scottish Parliament Public Audit Committee, Official Report, 6 October 2010, Col 2006.

112 The Gathering 2009, paragraph 53 and exhibit 6.

113 Written evidence from Stewart Argo, City of Edinburgh Council, 17 November 2010.

114 Written evidence from Stewart Argo, City of Edinburgh Council, 17 November 2010.

115 Scottish Parliament Public Audit Committee, Official Report, 3 November 2010, Cols 2141.

116 Scottish Parliament Public Audit Committee, Official Report, 3 November 2010, Col 2135.

117 The full text of this press release can be found in Annexe A.

118 This text is referred to as ‘the DEMA wording’ in this section.

119 The Gathering 2009, paragraph 59.

120 Written evidence from Isabell Reid, City of Edinburgh Council, 23 November 2010.

121 Written evidence from Isabell Reid, City of Edinburgh Council, 23 November 2010.

122 Written evidence from the Chief Executive, City of Edinburgh Council, 30 July 2010.

123 Scottish Parliament Public Audit Committee, Official Report, 3 November 2010, Cols 2148.

124 Scottish Parliament Public Audit Committee, Official Report, 3 November 2010, Cols 2143-44.

125 Scottish Parliament Public Audit Committee, Official Report, 3 November 2010, Cols 2139.

126 Scottish Parliament Public Audit Committee, Official Report, 3 November 2010, Cols 2149.

127 Scottish Parliament Public Audit Committee, Official Report, 3 November 2010, Cols 2143-44.

128 Scottish Parliament Public Audit Committee, Official Report, 3 November 2010, Cols 2149.

129 Scottish Parliament Public Audit Committee, Official Report, 3 November 2010, Cols 2141.

130 Scottish Parliament Public Audit Committee, Official Report, 3 November 2010, Cols 2149.

131 Scottish Parliament Public Audit Committee, Official Report, 3 November 2010, Cols 2144-45.

132 Written evidence from Isabell Reid, City of Edinburgh Council, 23 November 2010.

133 Written evidence from Isabell Reid, City of Edinburgh Council, 23 November 2010.

134 Written evidence from Stewart Argo, City of Edinburgh Council, 17 November 2010.

135 Written evidence from Stewart Argo, City of Edinburgh Council, 17 November 2010.

136 Written evidence from Stewart Argo, City of Edinburgh Council, 17 November 2010.

137 Written evidence from Dave Anderson, City of Edinburgh Council, 17 November 2010.

138 Scottish Parliament Public Audit Committee, Official Report, 1 December 2010, Col 2349.

139 Scottish Parliament Public Audit Committee, Official Report, 1 December 2010, Cols 2348.

140 Scottish Parliament Public Audit Committee, Official Report, 27 October 2010, Cols 2033-34.

141 Scottish Parliament Public Audit Committee, Official Report, 27 October 2010, Col 2038.

142 Scottish Parliament Public Audit Committee, Official Report, 27 October 2010, Col 2039.

143 Scottish Parliament Public Audit Committee, Official Report, 3 November 2010, Col 2141.

144 Scottish Parliament Public Audit Committee, Official Report, 27 October 2010, Col 2036.

145 Scottish Parliament Public Audit Committee, Official Report, 27 October 2010, Col 2034.

146 Scottish Parliament Public Audit Committee, Official Report, 27 October 2010, Col 2046.

147 Scottish Parliament Public Audit Committee, Official Report, 3 November 2010, Col 2147.

148 Scottish Parliament Public Audit Committee, Official Report, 3 November 2010, Col 2154.

149 Scottish Parliament Public Audit Committee, Official Report, 3 November 2010, Col 2152.

150 Scottish Parliament Public Audit Committee, Official Report, 3 November 2010, Col 2155-56.

151 Scottish Parliament Public Audit Committee, Official Report, 3 November 2010, Col 2145.

152 Written evidence from DEMA, 22 December 2010.

153 Councillor Buchanan is Convener of the Economic Development Committee at the Council and a member of DEMA

154 The Gathering 2009, paragraph 60.

155 Scottish Parliament Public Audit Committee, Official Report, 3 November 2010, Col 2136.

156 Scottish Parliament Public Audit Committee, Official Report, 3 November 2010, Col 2135.

157 Written evidence from Sir John Elvidge, 29 December 2010.

158 FOI request by Simon Johnson, 4 August 2010.

159 Scottish Parliament Public Audit Committee, Official Report, 3 November 2010, Col 2137.

160 The Gathering 2009, paragraphs 62 and 63.

161 Scottish Parliament Public Audit Committee, Official Report, 27 October 2010, Col 2048.

162 Norman Springford had been appointed Chair of DEMA on an interim basis.

163 Written evidence from Councillor Tom Buchanan, The City of Edinburgh Council, 26 November 2010.

164 Scottish Parliament Public Audit Committee, Official Report, 27 October 2010, Col 2065.

165 Scottish Parliament Public Audit Committee, Official Report, 27 October 2010, Cols 2050.

166 Written evidence from Councillor Tom Buchanan, The City of Edinburgh Council, 17 November 2010.