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ANNEXE K – REPORT FROM THE TRANSPORT, INFRASTRUCTURE AND CLIMATE CHANGE COMMITTEE

Transport, Infrastructure and Climate Change Committee

Report on the Scottish Government’s Draft Budget 2010-11

The Committee reports to the Finance Committee as follows—

introduction

1. The Transport, Infrastructure and Climate Change Committee is required to report to the Finance Committee on its consideration of the Scottish Government’s Budget for 2010-11, which was published on 17 September 2009.

Approach to the scrutiny of the budget

2. The Committee agreed that this year it would focus its scrutiny on the transport element of its remit and, in particular, the decision to cancel the Glasgow Airport Rail Link (GARL) project. It also agreed to examine the carbon assessment of the Draft Budget 2010-11 which was published with the Draft Budget. The report comprises four separate sections. Firstly, the report will consider the Scottish Government’s decision to cancel the GARL project. Secondly, the report will examine the wider transport issues paying attention to the funding of the Regional Transport Partnerships (RTPs) and the impact of the draft budget on the Strategic Transport Projects Review (STPR). The report will then focus on the funds allocated to active travel, a subject on which the Committee is currently undertaking a separate inquiry and finally, the report will consider the carbon assessment of the Draft budget 2010-11.

Adviser

3. The Committee agreed that Professor David Gray of the Aberdeen Business School should be appointed as the Committee’s adviser.

Witnesses

4. The Committee took evidence from John Swinney MSP, Cabinet Secretary for Finance and Sustainable Growth, at its meeting on 3 November 2009. Mr Swinney was accompanied by relevant Scottish Government and Transport Scotland officials. The Committee took evidence from the following individuals at its meetings on 27 October 2009, 6 October 2009 and 29 September 2009:

  • Amanda McMillan, Managing Director Glasgow Airport, and Stuart White, Development Director, BAA Scotland;
  • Garry Clark, Head of Policy and Public Affairs, Scottish Chambers of Commerce;
  • Derick Murray, Director, Nestrans;
  • Eric Guthrie, Partnership Director, Tactran;
  • Alex Macaulay, Partnership Director, SEStran.
  • Charles Hoskins, Director of Projects, Strathclyde Partnership for Transport;
  • Councillor Steven Purcell, Leader, Glasgow City Council;
  • Bob Darracott, Director of Planning and Transport, Renfrewshire Council;
  • Professor Jan Bebbington, Director, St Andrews Sustainability Institute, Vice-Chair (Scotland) Sustainable Development Commission, University of St Andrews;
  • Professor Stuart MacPherson, Chair, Irons Foulner Consulting Engineers;
  • Professor Susan Roaf, School of the Built Environment, Heriot-Watt University;
  • Dr Thomas Wiedmann, Director, Centre for Sustainability Accounting (CenSA) Ltd.

5. In addition, the Committee received written submissions from SPOKES, Scottish Association for Public Transport, Dr David Connolly, and Professor Iain Docherty.

6. The Committee is grateful to those who gave evidence to the Committee as part of this budget scrutiny.

Glasgow Airport Rail Link Project

Cancellation of the Glasgow Airport Rail Link Project

7. The Cabinet Secretary for Finance and Sustainable Growth announced in the Parliament on 17 September 2009 that the Scottish Government had decided to cancel the Glasgow Airport Rail Link project (GARL). He explained to the Parliament—

“The project will incur capital costs for several years. The Government has been concerned by the rise in the costs associated with the project. Those increases are due to significantly higher estimates of the costs of relocating existing infrastructure, as compared with figures that were shared with Parliament at the time of the legislation.

However, we will continue to support the capacity and signalling improvements on the rail line between Glasgow and Paisley, which will improve services to the travelling public in the area. I announce today that we will financially support other measures to improve public transport in Glasgow and the west of Scotland as part of the fastlink initiative that addresses connections to the new Southern general hospital and the Commonwealth games site.”1

8. In a letter to the Committee dated 1 October 2009, the Cabinet Secretary explained his view of the financial context in which he took the decision to cancel the GARL project—

‘[…] the Scottish Government had to take into account the significant pressures that had arisen in 2010-11, including the budget reductions imposed upon us by the UK Government, and the expectation that this pressure would grow, in line with the Treasury’s forecasts (in the Chancellor’s Red Book) of major capital scarcity in the medium term.

As a responsible administration, the Scottish Government has had to begin planning for this period of scarcity, to help ensure that available funding continues to be directed toward front line services, and one of the steps we decided to take was to cancel the branch line element of GARL.’2

9. The Committee has taken a close interest in this significant decision during its budget scrutiny. The Committee has taken a particular interest in the processes that led to the decision to cancel GARL being taken. The limited timetable for subject committees’ budget scrutiny has meant that the Committee was restricted in its budget scrutiny to taking oral evidence from some of the key stakeholders involved in GARL: Glasgow City Council, Renfrewshire Council, Strathclyde Partnership for Transport (SPT), BAA Scotland, Scottish Chambers of Commerce and the Cabinet Secretary himself.

Response to the decision to cancel GARL

10. A number of the witnesses expressed disappointment at the decision to cancel GARL. Witnesses from SPT, Renfrewshire Council and Glasgow City Council all highlighted what they considered to be the benefits associated with the project. Charles Hoskins of SPT, for example, cited the information which accompanied the private bill which authorised the construction of GARL—

“We estimated that those benefits would be in the region of 1,300 jobs during the next 30 years. I am not aware that our estimates or anything else have changed from the original statement that we made as part of the private bill.”3

11. Councillor Stephen Purcell of Glasgow City Council noted that GARL had formed part of Glasgow’s successful bid for the 2014 Commonwealth Games4 and Garry Clark of the Scottish Chambers of Commerce noted that the project’s cancellation would entail “reputational issues for Scotland as a whole”.5 Garry Clark argued that—

‘The main issue is long-term strategic connectivity. The project is one piece in the jigsaw of joining up Scotland's transport networks.’6

12. Amanda McMillan of BAA Scotland expanded on this point, telling the Committee that—

‘We are taking a step backwards by pulling away from the project and not continuing to invest jointly in creating an international gateway that is up to the required standard. I share Garry Clark's view that the airport link was a strategic move that would represent Glasgow and Scotland on the wider stage.’7

13. Some of the witnesses did, however, acknowledge the financial constraints faced by the Scottish Government. Amanda McMillan of BAA Scotland told the Committee that—

‘We are extremely disappointed by the decision to cancel the GARL project, although, as a private company, we understand the Government's financial pressures. We always recognised that GARL was a public sector project and that it would ultimately be for ministers to determine whether it represented good value for money for the taxpayer.’8

14. Garry Clark of the Scottish Chambers of Commerce told the Committee—

‘We understand the pressures that the Scottish Government is working under regarding its budget for this year and its budgets for future years. Those pressures will be shared by the United Kingdom Government and local authorities up and down the country.’9

15. He went on to argue, however, that—

‘A great deal of time, energy and expense had already been invested in developing the link, and businesses that we have been speaking to about it think that it is a great shame that the baby has been thrown out with the bath water.’10

16. Bob Darracott of Renfrewshire Council made the point that—

'One of the major selling points that we considered in Renfrewshire four or five years ago during the gestation of the project was that Paisley town centre needs every bit of support that it can get.'11

He went on to say—

"The only stop on the Glasgow airport rail link, other than the two stops at either end of it, was going to be Paisley Gilmour Street station in Paisley town centre. That would have provided direct access from the centre of Paisley to the airport, which is the major local employer. Separate economic development studies were carried out when the bill was being considered that proved that that access would be a bit of a boost for the town centre."12

17. The Cabinet Secretary himself acknowledged that the GARL project was – in his words – a ‘desirable’ project, but he explained that in the current environment of constrained capital spending, he felt he had to take a decision as to which capital project in the budget could not proceed. He explained the basis of this judgement to the Committee—

‘Essentially, the judgement that I arrived at was whether I thought that GARL was essential or desirable. I came to the conclusion that it was a desirable rather than essential project and it was therefore one that could be removed from the capital programme.’13

18. In this report, the Committee will discuss this judgement in more detail and express its views on both the basis on which it was made and note possible alternative approaches. The Committee is particularly interested in the question of transparency in the decision making process, and wishes to be assured that when tough budgetary choices are being made by ministers, such as the cancellation of GARL, there is a clear justification for such decisions and it is articulated publicly.

Reasons for the decision

19. The Committee explored with a number of witnesses the process by which the decision to cancel GARL was taken. The first issue the Committee explored was the reasons identified by the Cabinet Secretary for the decision to cancel the project. As noted above, in his statement to Parliament the Cabinet Secretary stated that he was ‘concerned by the rise in the costs associated with the project’.14 In evidence to the Committee, however, the Cabinet Secretary placed more emphasis on concerns surrounding the overall cost of the project, explaining—

‘Essentially, the decision not to proceed with the Glasgow airport rail link was taken on the basis of the affordability of the project in the context of the Government’s programme.’15

20. Later in the same evidence session, the Cabinet Secretary again emphasised that ‘the key element in this decision was the affordability of the Government’s capital programme.’16

21. When he was questioned about whether the issue in relation to the affordability of GARL related to spending in the current spending review period, rather than in the next spending review period, the Cabinet Secretary commented—

'That ignores the fact that we have a cut in our capital expenditure budget in 2010-11 of £129 million, which I am making good by protecting projects using end-year flexibility. It also ignores the fact that we have a fresh £129 million cut in our capital budget for 2011-12. That is unavoidable. We cannot start projects without having the money to complete them. I do not understand how on earth that could be sophisticated management.'17

22. The Cabinet Secretary went on to comment—

'I am making the entirely consistent argument that we have to ensure that if we start a project we can fund it to completion. Because of the profile of capital expenditure in the years to come, I do not think that that is possible.'18

23. In evidence, Councillor Stephen Purcell of Glasgow City Council denied that there had been a significant increase in the cost of the GARL project in the last few months, telling the Committee—

‘In December 2008, when ministers last made a statement about the finance of GARL, they indicated that the cost range […] was £365.5 million to £395 million. At the time, that was contained in the capital budget. Figures that were also provided by the finance secretary tell us that the amount has risen since then to £397.5 million. The increase would appear to be £2.5 million, not the £70 million that was quoted in my telephone conversation with the transport minister, and which has appeared in the press.’19

24. Councillor Purcell went on to argue that—

‘Although there might have been a debate with BAA and others about the breakdown of the £70million, we are absolutely clear that it was contained within the £210 million maximum figure that was agreed at the time of the transfer. That, to my mind, poses some very serious questions about the rationale for taking this project out of the draft budget at this time.’20

25. The Committee put to the Cabinet Secretary the suggestion that a significant increase in the cost of project had in fact taken place earlier in its development. In particular, the Committee highlighted the assertion that when Transport Scotland became the authorised undertaker for project in May 2008, the works at Glasgow airport were estimated at £16 million, but within seven months, they were estimated at £36 million to £42 million. The Cabinet Secretary told the Committee—

‘When Parliament passed the bill, the estimate for the ground works at Glasgow airport was £7.8 million. As time has passed—as Transport Scotland has become involved, and we have scrutinised the costs, undertaken some of the ground survey work, progressed the specification and engaged with BAA on all those questions—it has become clear that the costs in the original estimate were not comprehensive or robust.’21

26. The Committee notes that the estimated costs of the project had increased by the time of the handover of the project to Transport Scotland and that further significant escalation has occurred from that time to the present. It appears, however, that it is more recent increases in cost estimates that have triggered the Cabinet Secretary’s decision to look at the project as a candidate for cancellation in the context of the Scottish Government’s other capital spending commitments. The Committee will discuss the issue of why the GARL project specifically was identified for cancellation later in this report.

27. The Committee notes that in response to a recent parliamentary question22, the Minister for Transport, Infrastructure and Climate Change indicated that the expenditure that would be saved as a result of the cancellation of the Glasgow Airport Rail Link, based on latest estimated costs, would be as follows:

Financial Year 2009-10 2010-11 2011-12 2012-13 2013-14
£ Million £ Million £ Million £ Million £ Million
Forecast Capital Expenditure 48.7 62.6 37.7 23.5 3.2

Advance notice of the decision

28. A number of witnesses told the Committee that the decision to cancel GARL had come as a surprise, with no advance warning given of the announcement. Witnesses from Glasgow City Council, Renfrewshire Council and SPT all reported receiving a telephone call informing them of the cancellation of GARL approximately 20 minutes before the announcement was made to the Parliament.

29. Garry Clark of the Scottish Chambers of Commerce told the Committee—

‘It came as something of a surprise and a shock when we heard that the decision to cancel the GARL project was about to be announced.’23

30. Some of the witnesses made the point that a consequence of the lack of notice of the cancellation of GARL was the lack of an opportunity to discuss with the Scottish Government its concerns about the funding of the project or to explore alternatives to cancellation. Councillor Stephen Purcell of Glasgow City Council told the Committee that—

‘Although Glasgow City Council was a major stakeholder and interested party in the project, we were not consulted on, or invited to discuss, any of the concerns that ministers apparently had about the financing of the project.’24

31. Councillor Purcell indicated that he would have been willing to take part in discussions and cited the example of negotiations which took place with the Scottish Government when funding concerns were raised in relation to the M74 completion project.25 On this particular point, the Cabinet Secretary responded that in respect of the M74 project, three local authorities were already making financial contributions, but that was not the case in respect of GARL.26

32. In evidence, the Cabinet Secretary suggested that discussing the cancellation of GARL with interested parties in advance of the announcement being made had disadvantages. He noted that there would be an expectation that such a significant announcement should be made to the Parliament first—

‘Of course, I would not want to be in any way discourteous to stakeholders, but I think that members of Parliament will understand—because they make this point frequently—how important it is that Parliament is told first, and properly, about major decisions.’27

33. The Cabinet Secretary went on to say—

‘If, as a consequence of that decision, I have caused offence or concern to stakeholders, I regret that.’28

34. The Cabinet Secretary also argued that one of the disadvantages of a wider consultation on potential cuts to capital transport projects might have been the creation of unnecessary uncertainty regarding the future of a wider range of projects—

‘If the Glasgow airport rail link had not been cancelled, some other project or projects would have had to be cancelled, and it would have been unhealthy for the debate to focus on a range of different projects—which would perhaps have been put into play—when the Government was prepared to come forward with one specific and definitive project.’29

35. In evidence, the Cabinet Secretary suggested that he saw his role in the process as one of decision-taking—

‘Essentially, I am saying to the committee that these issues have to be resolved by ministers, who are here to exercise choice, subject of course to the constraints of the decisions that Parliament makes.’30

36. The Committee would not disagree with the general argument that Parliament should be the first to know about the cancellation of a major transport project. Likewise, the Committee would not wish to see a situation develop whereby a wide range of transport projects were publicly deemed to be at risk of cancellation.

37. However, a majority of the Committee31 believes that there should have been a way a framing a debate on the implications of constrained capital spending in such a way that avoided these problems, but also permitted constructive dialogue to take place with stakeholders in advance of the decision being taken on the future of GARL. For example, if the Scottish Government had concerns about the affordability of GARL, the Cabinet Secretary should have made key stakeholders aware of these concerns in advance of any decision to cancel the project, and dialogue should have taken place with stakeholders about the potential for reducing costs or providing new sources of funding. Instead the Committee regrets that this opportunity was lost.

38. A majority of the Committee32 is concerned that the Cabinet Secretary chose to bring forward a proposal to cancel a project which is the subject of an Act of the Scottish Parliament as part of draft budget proposals. It considers that, in circumstances where Ministers propose cancellation of such projects, a more appropriate approach would be to afford the Parliament an opportunity to fully debate their proposals. Such an approach would facilitate the engagement of stakeholders in the process and allow a full exchange of views and information to take place, prior to the Parliament reaching an informed decision. The Committee notes that full parliamentary debates were held on proposals to cancel both the Edinburgh Airport Rail Link and Edinburgh trams projects which had a similar statutory status.

Methodology used to take the decision

39. One of the issues which emerged in evidence was the question of how the GARL project, as opposed to any alternative transport project, was identified for cancellation.

40. The Committee asked witnesses whether they were aware of the Scottish Government expressing concerns about the state of the project during the period leading up to its cancellation.

41. Evidence from BAA Scotland mentioned an apparent ‘review’ of the project conducted around summer 2009 due to concerns about costs. Amanda McMillan of BAA Scotland explained that—

‘We were told in June that, due to concerns about escalating costs at the airport, ministers could not sanction the go-ahead of the fuel farm and that a review would be conducted. We were subsequently told that that was a standard gateway in any project of that scale.’33

42. Amanda McMillan told the Committee that, at the time, she did not believe that the review was a particular cause for concern. She told the Committee—

‘Throughout the summer, we were reassured by people that it was a normal process of review. To be honest, with that scale of public money being committed, I saw no reason to dispute that—it seemed appropriate.’34

43. She also confirmed that she had only been informed of the announcement to cancel GARL 20 minutes before it was made. The review mentioned by Amanda McMillan was not, however, referred to by any of the other witnesses. Councillor Stephen Purcell of Glasgow City Council told the Committee that he had received reassurances in August 2009 from the Minister for Transport, Infrastructure and Climate Change that there were no concerns about the project—

‘Over the summer, I heard informally that Transport Scotland was concerned about the project's future. In mid to late August, I used the opportunity of a meeting on another subject to ask the Minister for Transport, Infrastructure and Climate Change whether there were any concerns that we should be worried about. The answer was categorically no.’35

44. The Committee raised with the Cabinet Secretary the question of why Amanda McMillan of BAA Scotland mentioned a review of GARL that other witnesses appeared to be unaware of. The Cabinet Secretary told the Committee—

‘[…] there is a difference between a review and reviewing information. A review of the GARL project was not undertaken; what we reviewed were the costs of particular elements of making the GARL project happen. That was what happened over the summer of 2009 and that was, I think, what the managing director of BAA in Glasgow was making the point about in committee. It was just a rudimentary analysis of the costs of different elements of a project—work which goes on literally every day of the week to ensure that capital projects are performing as we expect them to.’36

45. The Committee has sought information from the Cabinet Secretary about the process of – in his words – ‘reviewing information’ that led to the cancellation of GARL. The Convener wrote to the Cabinet Secretary on 24 September 2009 asking for the following information—

‘The Committee would wish to receive a list of all transport projects which were considered for cancellation, what other options were considered for cutting or reconfiguring the capital expenditure on transport, and the full criteria used to assess these various options before reaching a decision.’

46. The Cabinet Secretary did not address this request for information in his response to this letter dated 1 October 2009. During the evidence session on 3 November 2009 the Cabinet Secretary was asked for more information on the process that led to the cancellation of GARL—

‘The process essentially rests on the fact that, on a regular basis, I monitor—and, even more frequently, my officials monitor—the sustainability of the Government’s capital programme across the policy spectrum. We have a clear idea of the condition, the likely start time in relation to costs and the progress of projects, and we can identify where some of the pressure points may arise.’37

47. When asked why the attention of the Scottish Government became focussed in particular on the GARL project, he replied—

‘As I was looking at the choices that would be available to us as we concluded budget discussions, the intensity of focus would have become much sharper on the GARL project. However, I was considering continually the progress of the capital budget and what decisions would have to be arrived at.’38

48. The Cabinet Secretary argued in evidence that there was no need to carry out any additional cost benefit analysis work on transport projects ahead of the decision to cancel GARL because this information already was available—

‘With each capital project, we consider all the cost benefit issues at a number of stages from early conception through developed proposal to advanced proposal. There is no need for me to carry out a cost benefit analysis on this issue because all that work has already been done.’39

49. When asked about whether the Cabinet Secretary would be willing to make available the information on which he based his decision to cancel GARL, he responded—

‘I have published an endless amount of information about the affordability of the capital programme, as has Her Majesty’s Treasury, within whose framework I have to operate. All that information is publicly available.’40

50. The Cabinet Secretary also explained during the committee meeting the reasons why he had chosen not to proceed with certain alternative proposals for funding GARL such as inclusion in the regulated asset base of Network Rail and using further accelerated capital spend.

51. The Cabinet Secretary commented in relation to the regulated asset base of Network Rail—

‘I certainly considered whether there was a possibility that the project could be taken forward through inclusion in the regulated asset base of Network Rail. The conclusion that I arrived at was essentially twofold. First, I was far from certain that it would be either possible or straightforward and practical to undertake much of the essential site preparation activity, which forms a major part of the costs of the branch-line spur that is involved, as part of the RAB arrangement.

Secondly, under the RAB approach, we do not have access to an inexhaustible amount of resource. We have asked Network Rail to undertake other things as part of the RAB, including major improvements to the Edinburgh to Glasgow rail line and the main lines to Aberdeen and Inverness. If investment resources were allocated to the project, that would obviously affect Network Rail's ability to invest in other projects.’41

52. In relation to the suggestion of using further accelerated capital spend, the Cabinet Secretary stated—

‘Regrettably, if we accelerate capital expenditure to fund GARL, it will have to be paid back and, as I have explained, the financial pressures on the Government's capital programme will grow ever more significant as the years pass.’42

53. He went on to say—

‘I have listened carefully to what MSPs have said about the possible use of accelerated capital and I am pretty certain that I heard Mr Gray say last week that the priority for accelerated capital expenditure had to be investment in social housing. I happen to agree with Mr Gray on that point. If we are to make investment in social housing a priority, we cannot also make a project such as GARL a priority.’43

54. The Committee also notes that when questioned on whether he had received a recommendation from Transport Scotland that the GARL project should be cancelled, the Cabinet Secretary said that this was not the case.44

55. It is clear to the Committee that the Cabinet Secretary’s position is that the decision to cancel the GARL project was based on his judgement of its affordability, against a background of increased costs and desire to deliver a significant saving in the transport capital programme at a time of financial constraint.

56. The Committee notes that guidance on the budget process from the Finance Committee to subject committees states—

‘Subject committees may wish to consider what evidence there is of prioritisation within their portfolios being supported by robust evaluation and performance management information.’

57. Taking this guidance from the Finance Committee as its lead, it is the view of a majority of the Committee45, that the Cabinet Secretary has failed to provide adequate information regarding the process used to reach the decision to cancel GARL for the Committee to be satisfied as to whether the decision was justified.

58. A majority of the Committee46 considers that, prior to decisions being taken on substantial changes to major transport infrastructure projects, it is essential that a robust appraisal and cost benefit analysis of alternative options takes place. Although the Cabinet Secretary has indicated that the Scottish Government monitors key financial data related to capital projects on a regular basis, the Committee is not convinced that this negates the need to conduct an appropriate level of comparative analysis in advance of major strategic transport infrastructure decisions.

59. In the absence of this information, a majority of the Committee47 is of the view that the Cabinet Secretary has failed to make a sufficient case for the cancellation of GARL .

60. A majority of the Committee48 therefore recommends that, ahead of the budget debate, the Cabinet Secretary should provide to this Committee and the Finance Committee specific details of the information and advice on which he based his decision to cancel GARL. This should include details of any form of analysis of options that was conducted by his officials, such as the possibility of securing alternative funding or re-profiling the capital spend on the project. Full information should also be provided of the process by which the estimated costs and affordability of other major transport projects were considered against those of GARL before the decision was taken to propose its cancellation.

Discussions following the cancellation announcement

61. The Committee asked witnesses about what, if any, discussions had taken place since the announcement of the cancellation of GARL regarding the potential for reinstating the project.

62. Councillor Stephen Purcell of Glasgow City Council (in evidence given on 6 October) indicated that since the announcement he has had no discussions with the Scottish Government regarding GARL, apart from a discussion at the Commonwealth Games Strategic Committee which he described as ‘not productive in terms of the detail’ and ‘simply about process’.49 He told the Committee that—

‘As a pragmatic person, I am of course happy to sit down with anyone to look at alternative phasing or funding arrangements or alternatives to the design of the project that is currently on the table.’50

63. He explained that ‘the starting point of our debate about alternatives would be an examination of the finance.’51

64. Garry Clark of the Scottish Chambers of Commerce told the Committee—

‘If it were to say that it wanted the link to go ahead but that the substantial and understandable financial pressures on Government were preventing that from happening, the business community would be more than happy to sit down with it to explore other means of funding the project, either from elsewhere in the Scottish Government budget or from third-party sources. We must all decide whether or not we want the link. We want it and are happy to discuss ways of making it happen.’52

65. Amanda McMillan of BAA Scotland did not have any specific suggestions on how the GARL project might be restarted, telling the Committee that ‘I do not think that we were afforded an awful lot of notice about the decision, so we did not have time to reflect in that way.’53

66. When asked in evidence to the Committee about whether he would be open to discussions with interested parties about the possibility of reinstating the GARL project, the Cabinet Secretary stated—

‘I have made my recommendation to Parliament. In my view, the position is absolutely clear: the Government’s preference is not to take forward the Glasgow airport rail link. I am certainly not considering the possibility of reinstating it.’54

67. The Committee notes this uncompromising position adopted by the Cabinet Secretary. This would appear to rule out discussions with stakeholders about possible options for reinstating GARL. The Committee also notes that, whilst some witnesses stated that they would be willing to discuss ideas to allow GARL to continue, it is not aware of any specific proposals which have been brought forward so far.

68. In the view of a majority of the Committee55, the position taken by the Cabinet Secretary is not a constructive one. It is concerned that, although they may not ultimately have proved viable, alternative funding mechanisms such as Network Rail’s Regulated Asset Based approach, accelerated capital expenditure or the Non Profit Distributing model have not been given serious consideration. A number of stakeholders have indicated a willingness to discuss proposals for reinstating GARL, and whilst it seems the case that no specific proposals have been brought forward, the Committee recommends that the Cabinet Secretary invites representations from stakeholders such as Glasgow City Council so, at the very least, he is aware of any proposals they might have for alternative ways of funding the project.

Alternatives to GARL

69. The Committee raised with witnesses the question of how transport links to Glasgow airport should be developed in the event that GARL does not proceed. Amanda McMillan of BAA Scotland expressed the view that—

‘Having looked at the fastlink project, our concern is that, under current plans, it will not come to the airport. That is why I said in my introductory remarks that, as it stands, it will not replace GARL.

My second concern is that we need an express service. Passengers who arrive at an airport want to get to their ultimate destination as quickly as possible. We cannot afford to have multiple stops and a route that is not as direct as possible. My concern about extending fastlink to the airport is that it does not appear that it would be an express service.’56

70. In evidence, Councillor Stephen Purcell of Glasgow City Council appeared pessimistic regarding the effectiveness of potential alternatives to GARL—

‘[…] at the moment, it is clear to me that Clyde fastlink is not an appropriate alternative to the Glasgow airport rail link. It is a regional transport project that stands in its own right, so it is correct to say that at this stage we are not discussing it as an alternative. That will be the case unless our SPT colleagues can advise us that a form of fastlink would deliver the same advantages and economic benefits that the Glasgow airport rail link would deliver. I have to say that I doubt that. I do not see how even a proper bus rapid transit system could connect Glasgow city centre and the airport within 15 minutes.’57

71. Councillor Purcell added—

‘If the conclusion is that the Glasgow airport rail link is to be cancelled or postponed, and there is an offer to consider all the other projects as some form of alternative—either an airport link or another transport project that can be funded and delivered—we are pragmatic people and of course we will want to sit down and discuss such alternatives with colleagues in Parliament and elsewhere.’58

72. The Cabinet Secretary indicated that he was willing to meet with stakeholders—

‘That is an open dialogue, which the Government is keen to have with stakeholders. I made it clear to Parliament that there are various ways in which we will progress that discussion. The Minister for Transport, Infrastructure and Climate Change has met Renfrewshire Council to discuss those issues, and we are keen to progress discussions with Glasgow City Council. There are obviously opportunities for us to make progress on those questions, and the Government will engage in discussions to bring that about.’59

73. The Committee notes the willingness of the Cabinet Secretary to engage in discussions about alternatives to the GARL project. The Committee recommends that in the event that the GARL project does not go ahead, these discussions take place as a matter of urgency.

74. The Committee agrees that Fastlink should not be viewed as an alternative to GARL. It is an important project and its merits should be considered separately. However, the Committee notes that the cost implications of the cancellation of GARL have not as yet been factored in to the Fastlink project.

Wider transport issues

75. The Committee welcomes the commitment to transport expenditure in the draft budget, noting how overall spending on transport will be broadly maintained in 2010/11.

76. The Committee recognises that the UK Government’s policies to mitigate the wider impact of the recent financial crises will have significant - and potentially enduring - implications for public spending from 2012 onwards and that Scottish Ministers will face difficult choices in setting future budgets.

77. The scale of this challenge was articulated by the Cabinet Secretary, who suggested that the Government’s capital budget faced a real term reduction of 13-18% in some years. The Cabinet Secretary also reported that the implications for the revenue budget remained unclear (until perhaps 2010) but the expectation was that revenue expenditure would also come under pressure in the future. The Cabinet Secretary stated—

‘We have to deal with the fact that the capital budget will be falling in real terms. The revenue budget issues are less clear. There are clearer capital lines than revenue lines in the budget red book.’60

78. Whilst the Committee notes the Cabinet Secretary’s remarks, it makes the observation that there is a considerable degree of uncertainty regarding the forecasts contained in the budget red book and that there is at present no agreed level of support for Scotland in future years.

79. The Committee welcomed the Cabinet Secretary’s recognition of the importance of transport in meeting the Scottish Government’s national strategic objectives and his stated intention to achieve modal shift on the journey to work and that will make a significant contribution to climate change objectives.

80. However the Committee also noted the Cabinet Secretary’s observation, in the face of constrained public finances and with major projects in prospect like the Forth replacement crossing likely to dominate and skew expenditure, that there was a degree of financial ‘uncertainty’61 over whether any progress against national strategic objectives can be made.

81. The Committee wishes to re-emphasise the importance of transport policy and investment in underpinning future sustainable economic growth and in making a full contribution to Scotland’s climate change targets. The Committee has cause for concern about the risks of reducing transport spending for—

  • The national strategic target/indicator of achieving modal shift on the journey to work.
  • The three National Transport Strategy Strategic Objectives
  • The Scottish Government’s interim climate change targets.
  • Sustainable economic growth

82. The challenge faced by Ministers - and the reality that they will be forced to make difficult choices on spending - was also acknowledged in the evidence provided to the Committee by other witnesses.

83. Witnesses also shared the Committee’s concern about the risks of reduced public spending to key strategic outcomes. Alex Macaulay of SEStran stated in evidence, for example—

‘My assessment is that if we do not have continued investment in transport it will be difficult to get us out of the recession that we are in. It will also be difficult in respect of social inclusion and accessibility to remote rural areas.’62

Strategic Transport Projects Review

84. The Committee believes that constraints on public spending, the timing of the delivery of existing committed transport infrastructure projects (most notably the Borders Rail and the Aberdeen Western Peripheral Route), and the prioritisation of the Forth replacement crossing will adversely impact on the deliverability of the other 28 STPR projects.

85. The Committee believes that it is now inconceivable that all 29 projects can be delivered within the original timescales. The Committee heard evidence that Regional Transport Partnerships shared the Committee’s concerns on STPR, and they highlighted the risk to the delivery of Regional Transport Strategies if the STPR projects were not delivered. Alex Macaulay of SEStran indicated that he saw no prospect of moving forward important regional projects before 2016 at the earliest. He commented—

‘On the major projects that were identified in the strategic transport projects review, we all know that there are some big chunky spenders in the first few years. The net effect of that is that there will be virtually nothing left, other than the big four projects, until 2016. In effect, that means that Transport Scotland's ability to work in partnership with regional transport partnerships to move forward on the wide range of other good projects in the STPR is very limited.’63

86. In giving evidence to the Committee, the Cabinet Secretary emphasised that the STPR is not a list of major infrastructure projects, but a range of interventions grouped around three key themes (first, maintaining and safely operating existing assets; secondly, making better use of existing capacity; and thirdly, making targeted infrastructure improvements64), and that many of the STPR projects are concerned with enhancing and maintaining existing infrastructure. Nevertheless, the Committee notes that there is a significant cost associated with a number of these network enhancement initiatives.

87. The Committee would welcome a commitment by the Cabinet Secretary to prioritising STPR projects that really will make a difference to modal shift and climate change objectives (such as strategic park and ride).

88. The Cabinet Secretary also reported that the STPR would be prioritised on a spending review by spending review basis, telling the Committee—

‘We are making progress on these matters, but in each spending review we will need to revisit the programming.’65

89. The Committee acknowledges the rationale behind the cautious and pragmatic approach towards prioritising STPR projects on a spending review by spending review basis. However, the Committee would not wish to see a return to the kind of short term strategic planning that precipitated the National Transport Strategy and the STPR in the first place.

90. As such, the Committee has a number of specific observations on the future prioritisation of the STPR projects:

  • The Committee welcomes the provision in the draft budget for design and redevelopment work to bring STPR projects to a state of readiness to deliver. However, the committee would like to see more articulation of this preparatory work to gain a sense of the projects that are at an advance stage of preparation, and on which work could start quickly if funding were to become available.
  • The Committee also believes that, even in the current financial climate and acknowledging the uncertainty over future spending rounds, it should still be possible to make commitments to projects over five to seven years.
  • The Committee would like to see a list of projects drawn up (plus reserves in case of slippage or increased resources). This would require the STPR projects to go through some formal – and transparent – prioritisation. The case for such prioritising the STPR projects was also supported during the evidence given by Regional Transport Partnerships.

91. Eric Guthrie of Tactran mentioned, for example, the idea of—

‘[…] reprioritising some of the quick-win projects in the STPR. Such opportunities in part take account of the financial constraints that exist.’66

92. The Committee acknowledges that the prioritisation of STPR projects and the drawing up of a list of projects to be promoted in the medium term is dependent on the amount of available expenditure, and that much of the expenditure is likely to be spent on the Forth replacement crossing. The Committee highlights written evidence from Professor Iain Docherty on this matter—

‘With an estimated cost of around £2bn, the Forth Replacement Crossing is one of the largest single capital projects seen in Scotland. The Scottish Government has chosen to fund the bridge by conventional means and this, coupled with UK Government’s refusal to agree a long(er) term payment structure, means that for the period of around 5 years in which the primary capital payments for the construction of the project will be spread, there will be very little scope for further capital spending on transport in Scotland.’

93. The Committee would therefore welcome an explicit articulation of how much will be spent on constructing the bridge and how much will be left over for other projects during the period of time when the bridge is under construction.

94. Given the need for transparency in the decision-making progress, concerns over a return to short term decision making, and the capital spending constraints associated with the replacement Forth crossing, the Committee will give careful scrutiny to the process of prioritising transport projects in future spending reviews.

Other funding mechanisms

95. The Committee also took evidence on the possibility of exploring a range of financial mechanisms including accelerated capital expenditure and PFI for appropriate projects. Several witnesses also supported the proposal from the Calman Commission to grant the Scottish Government borrowing powers.

96. While encouraging Ministers to explore other possible sources of funding, the Committee acknowledges that while there is some scope for strategic rail projects to be be financed via Network Rail’s Regulated Asset Based (RAB) mechanism, no such equivalent mechanism is available for road and other non-rail capital projects.

97. The Committee also recognises the Cabinet Secretary’s concern that projects funded by RAB, accelerated capital expenditure and other borrowing mechanism has to be paid back, will have implications for capital and revenue spending in future spending reviews.

98. However, the Committee welcomes the fact that the Cabinet Secretary indicated he was attracted to the idea - proposed in evidence by Regional Transport Partnerships - of creating a pot of money to provide match funding for external sources such as European Structural Funds and European North Sea Area programmes as long as there is no financial penalty for the Scottish Government. The Committee recommends that the Scottish Government gives further thought to this or alternative models of funding.

Local and regional government

99. The Committee notes that Scottish Government support to local authorities will increase by £76 million in 2010-11 from 2009-10 levels. The majority of the Committee67 is not confident that this increase will be reflected in increased spending across transport authorities at a local and regional level.

100. The Committee is particularly concerned about local transport expenditure in the longer term. Witnesses from Regional Transport Partnerships expressed concerns that local and regional transport budgets might be at risk because of (i) future constraints over public spending; and (ii) because past experience has shown that transport invariably loses out to priorities such as education and social work when local authorities reallocate expenditure from their single pot.

101. In evidence to the Committee, the Cabinet Secretary acknowledged that local authorities faced difficult choices in assessing how to allocate resources—

“I am certainly aware that difficult choices have to be made on public finances. […]It is a question of assessing how resources can be used in the round to achieve the objectives that we all want to achieve. For example, we are taking steps in the direction of economic recovery. That recovery is still fragile, so our ability to ensure that we support it properly is an important consideration. Local authorities have to wrestle with all those questions, and I know from their participation in regional transport partnerships that they will be able to do that and to identify what resources can be pulled together to make the maximum impact.”68

102. In the light of these challenges, the Committee is therefore concerned about the potential threats to:

Transport elements of local authority Single Outcome Agreements (SOAs)

Regional Transport Partnerships ability to deliver the strategic objectives set out in regional transport strategies.

103. The representative from Tactran recognised that SOAs are a potential opportunity to align RTPs, saying that—

“I see single outcome agreements as an opportunity to revisit the debate about how the regional transport strategy delivery plan projects can be resourced. […] It is early days as far as that discussion is concerned, but we are working hard in that area and looking at how we can include in the action plans for single outcome agreements a number of the key regional transport strategy projects.”69

104. The Committee also noted the Cabinet Secretary’s confirmation that transport priorities feature strongly in Single Outcome Agreements:

“Transport priorities feature strongly in single outcome agreements and are signed off between the Government and community planning partnerships, so those discussions will have taken place at local level. I have had a significant amount of discussion with local authorities about their role in supporting economic recovery and have found them keen to play a positive role in that process.”70

105. In its last submission to the Finance Committee, the Committee highlighted fears over the potential tensions between local authorities and Regional Transport Partnerships. After taking evidence from three RTPs on this year’s draft budget, the Committee believes that these fears were fully justified.

106. In particular, the Committee noted the reduction in capital budgets of RTPs, following the removal of the dedicated budget line from the Scottish Government to fund the capital projects of RTPs. The Committee also noted the extent to which Regional Transport Strategies have been aligned with, and are heavily reliant on, STPR projects.

107. For example, SEStran has received 42% of the funding that it was previously allocated, with only four of the eight constituent local authorities contributing to the SEStran capital budget in 2009/2010.

108. Tactran’s capital grant amounts to £1.9m in 2009/10, the equivalent of only 60% of the budget before the dedicated budget line was removed. The Regional Transport Strategy has been costed at £980m, £680m of which will be delivered through STPR projects.

109. Nestrans, in contrast, has received 100% of the previous capital budget from its two constituent local authorities

110. The Regional Transport Partnerships who gave evidence also expressed concern that the Scottish Government’s Transport Strategy and Innovation budget has also been cut from £8.6m in 2009-10 to £6.6 million in 2010-11. This budget provides running cost support for RTPs. The Committee therefore welcomes the Cabinet Secretary’s confirmation that the reduction in this budget will have no impact on the core costs of Scotland’s Regional Transport Partnerships.71

111. The Committee also anticipates that, with an expected squeeze on public spending, Scottish local authorities will become increasingly preoccupied with delivering on ‘narrow’ transport elements of single outcome agreements at the expense of more strategic regional partnership objectives.

112. The Committee is therefore extremely concerned about the potential re-emergence of a transport ‘delivery gap’ at regional level.

113. The Committee notes the Cabinet Secretary’s view that RTPs would have to mobilise local authorities to work in cooperation on transport projects that cut across boundaries.

“The regional transport partnerships' success will be dependent on the extent to which they can work co-operatively and collaboratively with their constituent local authorities to realise a shared agenda. That is the mechanism that they must use. I understand from local government the importance that it attaches to taking the most effective steps that it can to improve the transport infrastructure.”72

114. However, evidence taken from representatives of partnerships themselves suggested that such mobilisation might be easier in some partnership areas than others.

115. The Committee therefore has serious concerns over the current model of transport delivery at local and regional level, whereby local authorities can opt in and opt out (although it is recognised that there is provision in legislation for RTPs to requisition resources from constituent local authorities).

116. It is also acknowledged that the Committee would require much more information and evidence before it could take a rounded view on the ‘delivery gap’ and the future role, responsibilities and contribution of Regional Transport Partnerships. However, the Committee’s current work programme anticipates that, prior to the end of the current parliamentary session, the Committee will undertake an inquiry that will examine the operation and effectiveness of Regional Transport Partnerships in Scotland following their introduction under the Transport (Scotland) Act 2005. This inquiry will provide an opportunity for a more detailed analysis of the issues identified as part of the budget scrutiny exercise to be carried out.

Spending priorities

117. Witnesses from RTPs argued in favour of a modest reallocation of resources to support schemes that could make a significant impact on modal share and transport’s contribution to meeting Scotland’s climate change targets.

118. For example, Eric Guthrie from Tactran said—

“In some areas, we feel that greater priority could be given to what Alex Macaulay has called the low-hanging fruit and what I would call quick wins. I suggest that one of those quick wins might be found in project 8 in the strategic transport projects review, which concerns strategic park-and-ride projects, specifically that serving Dundee. We are using our revenue budget to develop various projects in partnership with Transport Scotland, our partner authorities and—south of the Tay—SEStran...”73

119. This issue of reallocating relatively small amounts of the transport budget to help encourage modal shift was also raised in written evidence to the Committee from SEStrans which stated—

“For the SEStran area an allocation of £10 to £15m a year would make a significant difference and would allow progress to be made on projects such as Edinburgh Outer Orbital Bus Rapid Transit, Levenmouth Rail, Cross Forth Ferry/Hovercraft, Park and Ride north and south of the Forth including Halbeath, Rosyth and Lothianburn and implementation of the A801 M8/M9 Link Road in partnership with Transport Scotland.”74

120. This view was echoed by Professor Iain Docherty who said in written evidence submitted to the Committee—

“… there is substantial evidence that very small projects – such as local road improvements, bus infrastructure upgrades and improvements to the pedestrian environment, can yield benefit:cost ratios many times higher than traditional new transport infrastructure projects such as new roads and railways. This is particularly the case if non-transport benefits, such as health improvements arising from more active travel, are paid full attention in the appraisal process.”75

121. The Cabinet Secretary confirmed during evidence that he shared the view that a relatively modest amount of additional capital and revenue funding could make a significant difference to national objectives on modal shift and climate change through the prioritisation of low-cost initiatives such as strategic park-and-ride. He told the Committee—

“I encourage the regional transport partnerships to engage in constructive dialogue with their constituent local authorities—their own members, essentially—to identify the interventions that can make all the difference.

Wherever I go in the country where there is a park-and-ride system, it is full. Such measures have been fantastically successful as long as the public transport connections exist to link up with them. In my experience, those are very good interventions that deliver modal shift contribute to the reduction of emissions. They are, therefore, to be welcomed.”76

122. The Cabinet Secretary was pressed on the issue of budgetary choices and priorities in the transport strategy. He told the Committee—

“The STPR is not just about big projects; it is about how we maintain and safely operate existing assets and how we make better use of existing capacity. We may find that outcomes can be achieved in a very sustainable way as a consequence of some of these interventions. I want the committee to understand that the Government is willing to have such discussions. There is no shortage of suggestions about projects to take forward, but we are happy to consider them.”77

123. The Committee welcomed the Cabinet Secretary’s confirmation that he was open to a dialogue about making budgetary choices between large capital projects (which people want) and a larger number of smaller schemes that might contribute to strategic objectives in the short to medium term (which people also want).

124. However, the Committee recommends that the Scottish Government should give greater recognition both in the budget and its transport policy direction of the important role that local and regional transport projects and initiatives can play in delivering national transport objectives.

125. In identifying where reprioritisation within the transport budget might be focused or savings/efficiencies might be made to free up resources in the existing budget, the Committee has received evidence which identified two areas for further scrutiny – concessionary fares and the proportion of the transport budget allocated to rail.

126. David Connolly from MVA noted that—

“Subsidising concessionary travel represents almost 8% of the annual budget and this proportion is likely to grow as the Scottish population ages. Latest GROS forecasts predict a 15% increase in the number of 60-74 year olds over the next ten years and a 23% growth in the number of 75+ over the next ten years.”78

127. Evidence from Professor Iain Docherty argued that—

“The real impact of concessionary fares support is under-researched. It may be that there are very substantial social and other benefits that fully justify the scheme’s continuation at current levels, or indeed its expansion. However, it may also be that the benefits in economic, social and environmental terms do not exceed the very substantial annual cost.”79

128. RTPs also questioned whether levels of remuneration to bus companies through concessionary fares – specifically full discounting of fares - was providing value for money. For example, during evidence, Alex Macaulay of SEStran commented—

‘I support Derick Murray's comments about bus route development grant. I would like the Government to examine carefully what it is spending on concessionary travel. I know that the committee has debated that issue and that a review of the scheme concluded that it should continue to provide the same level of service to the customer, but the management of concessionary travel needs to be examined much more carefully to ensure that we get better value for it. We also need to link bus service operators grant to environmental objectives. There is the potential to increase spending on that, if we see benefits coming through in reduced emissions.’80

129. However, it was also recognised that bus companies see concessionary fares as bottom line income and that to restructure the administration of concessionary fares runs the risk of undermining the provision of economically marginal services at a time when the ability of local authorities to step into the gap is likely to diminish. Eric Guthrie of Tactran explained—

“The legislative position in relation to concessionary travel is that the subsidy is provided to the user and not to the operator, who should technically be no better or worse off. However, I think that, at the end of the day, the transport industry considers the concessionary payment to be revenue—bottom-line revenue, as it currently stands. My concern, and my one reservation with regard to what Alex Macaulay said, is that a reduction—if that were to be the consequence of any review of the operator reimbursement—could put at risk the existing operation of the public transport network, which would be a fundamental issue for RTP and RTS strategic objectives.”81

130. The Cabinet Secretary outlined his views on concessionary fares to the Committee, stating—

“We are focusing the concessionary travel system on benefiting members of the public, who are using it comprehensively.”82

131. The Committee would urge Ministers and Transport Scotland to ensure that operation and management of the concessionary fares scheme is effectively monitored and that it delivers best value for money, particularly as the numbers eligible for the scheme are likely to gradually increase in coming years.

132. Written evidence submitted by David Connolly and Professor Iain Docherty also highlighted the potential of freeing up revenue from Scotland’s railways in the future.

133. David Connolly noted that rail accounts for 30% of the annual transport related budget but that only 2% of all trips made by motorised modes in Scotland are made by this mode and it represents only 12% of the total person kilometres travelled on the Scottish strategic (i.e. Motorway and Trunk Road and Rail) network.83

134. Professor Docherty commented on the significant proportion of funds committed to the rail budget. In written evidence he stated—

“...further reorganisation of the railway in Scotland through vertical integration or other reform might yield important savings. Even a minor percentage saving in railway costs of say 10% would deliver sufficient headroom to maintain tens of millions of transport capital spending annually….Similarly, there could usefully be much more analysis of whether it is possible to return the overall cost basis of the railway to pre-privatisation levels.”84

135. The rail network is obviously important for the Scottish economy and any efforts to redirect funding from rail would meet with opposition from the business community in particular. However, the Committee may have the opportunity to scrutinise the funding of the railways in future programmes of work, and it may well be - as David Connolly advocates – that—

“Scottish ministers should give serious long term consideration to adjusting the proportion of future budgets which are allocated to delivering rail services in Scotland, with the aim of bringing them more into line with the economic and climate change benefits they deliver.”85

136. The Scottish Association for Public Transport outlined its position in written evidence to the Committee—

“In a tight budget situation, policy should favour investment increasing modal shift to rail and reducing requirements for operational support – but with such savings being used to lower fares relative to car use and to further increase rail investment.”86

sustainable travel and active travel

137. The treatment of active travel in the draft budget once again gives the Committee cause for concern.

138. In its report to the Finance Committee on the 2008-09 draft budget, the Committee recommended that a gradual transfer of resources be made from the relevant components of the health budget to the active travel line, in order to realise the public health benefits from investment in walking and cycling projects. In its report on the 2009-10 draft budget, noting that its previous recommendation had not been acted upon, the Committee again recommended that the Scottish Government should give consideration to increasing the active travel line in the budget.

139. The Committee notes that, despite these previous recommendations, the sustainable transport and active travel line has decreased from £11.5m in the 2009-10 budget to £11.2m in the 2010-11 draft budget.

140. The Committee also notes that in the foreword to the recent consultation on the Scottish Government’s Cycling Action Plan for Scotland, the Minister for Transport, Infrastructure and Climate Change states that his vision is that ‘by 2020, 10% of all journeys taken in Scotland will be taken by bike.’

141. However, in written evidence to the Committee, the cycling campaign group Spokes suggests that, in recent years, the total investment from all main sources has remained no higher than the equivalent of 1% of the transport budget, with the result that cycle use in Scotland has remained at around 1% of all journeys. They indicate that this compares to 5%-30% of journeys in other European countries.

142. When the Cabinet Secretary was questioned on this issue during oral evidence, he responded by suggesting, as he had when similar points were put to him during previous draft budget considerations, that funding for cycling is also provided from other areas of the budget:

‘Money is spent on supporting cycling development in a number of parts of the budget, but that is not always immediately obvious. I have made the point to the committee that we are spending money in parts of the trunk road network budgets to develop cycling infrastructure. It is possible to arrive at a compartmentalised figure for that, but such a figure does not appear in the budget document.’87

143. In their written evidence, Spokes propose that the draft budget be amended to allow for a £20m Cycle Projects Fund to be administered by the Scottish Government’s own sustainable transport team. The Cabinet Secretary responded to this proposal by saying that:

‘An extra £20 million is quite a sum of money to be wrestled with, given the financial constraints within which we are operating.’88

144. The fact that proposed spend in this area is declining at a time when one of the stated objectives of the Scottish Government is to achieve a ten-fold increase in cycling journeys, appears to the Committee to be contradictory. It considers that a reduction in the sustainable transport and active travel line suggests that the priorities of the transport agenda are, in budgetary terms, moving in the opposite direction to those outlined in the draft Cycling Action Plan for Scotland.

145. The greenhouse gas emissions reductions required by the Climate Change (Scotland) Act 2009 represent a hugely significant challenge for the Scottish Government. The Committee is of the view that, that if the Scottish Government is to be perceived as taking seriously the need to encourage modal shift to more sustainable transport modes to reduce emissions from transport, it must begin to make more practical moves towards doing so. It considers that if significant progress is to be made, new methods of delivering funding need to be developed, perhaps in the direction being argued by Spokes in its well argued submission to the Committee.

146. Whilst the Committee acknowledges the pressures on the draft budget, it is concerned at the continued gradual reduction in the sustainable transport and active travel line. It is of the view that the decline in the funding of sustainable transport and active travel line needs to be not only reversed, but significantly increased. However, the high-level nature of the information contained in the draft budget makes it difficult to identify where specific capacity exists for a reallocation of resources.

147. The Committee therefore recommends that the Scottish Government should conduct an exercise to establish what scope exists across the transport budget for reallocating resources in order to reverse the incremental decline in the active travel line. It further recommends that this exercise is conducted prior to the debate on the Finance Committee’s report on the draft budget and that the results are submitted to both committees.

148. As this is the third consecutive year in which the Committee has sought an increase in this area of spend, the Committee requests that the Finance Committee endorses this recommendation.

149. The Committee also acknowledges that spend in other areas of the budget, such as health and local government, contain elements which are designed to support initiatives to encourage active travel, healthier lifestyles etc.. However, it also notes that there appears to be a lack of information on the nature of these allocations and how effective they are in achieving these objectives.

150. The Committee therefore requests that full details of the different elements of spend across the budget which relate to active travel should be provided by the Scottish Government. It also recommends that the Scottish Government conducts an assessment of how proactive the bodies in receipt of this funding are in delivering such initiatives, and that steps are taken to ensure that a greater emphasis is placed on the need to produce tangible results.

151. The Committee also considers that there would be merit in considering how these various allocations might be spent in a more coherent and co-ordinated way and contribute more effectively towards meeting the Scottish Government’s objectives on active travel.

152. The Committee is currently conducting an inquiry into active travel which is focused on how an improved uptake of walking and cycling might be delivered. The formal remit of the Committee’s inquiry is to consider the progress being made in developing active travel; any barriers to further progress; and the further action that may be required by the Scottish Government, local authorities and other bodies to ensure that significant progress is made in the development and implementation of active travel in Scotland. The Committee will be particularly interested in establishing whether any of the barriers to progress are related to lack of available funding at a national or local level.

153. The Committee anticipates that its inquiry report, due to be published early in 2010, will help inform the Scottish Government’s proposed Cycling Action Plan for Scotland. In the meantime, it hopes that the development of CAPS will include a full and realistic assessment of the budgetary provision that will be required to provide significant progress in the development of cycling in Scotland.

carbon assesment of the 2010-11 draft budget

154. On 17 September 2009, the Scottish Government published its Draft Budget 2010-11 and also published a carbon assessment of the Draft Budget89. This is the first time a carbon assessment of the Scottish Government’s Draft Budget has been produced and the Committee agreed to scrutinise this assessment in addition to its scrutiny of the overall transport budget.

155. Last year, during consideration of the Scottish Government’s Draft Budget 2009-10, the Committee heard from the Cabinet Secretary on the complexities of producing a meaningful assessment of the carbon implications of government spending. He explained that the Scottish Government was exploring a range of options for the methodology to deliver a high-level assessment to be used as part of the spending review process.

156. In December 2008, the Committee reported to the Finance Committee on the Scottish Government’s Draft Budget 2009-10 and recommended that the Scottish Government’s carbon assessment tool must be implemented in time to be used as part of the Draft Budget 2010-11 and Spending Review 2010. 90

157. The Climate Change (Scotland) Act received Royal Assent on 4 August 2009 and the Committee was lead committee in consideration of the Climate Change (Scotland) Bill. In its Stage 1 Report published in April 2009, the Committee reiterated the point it made to the Finance Committee that a system of carbon accountability should be place at the latest in time for the Draft Budget 2010-11.91

158. During its stages through Parliament, the Bill was amended significantly and the Act now contains a requirement to produce a document setting out the impact on emissions on draft budgets.92

159. The carbon assessment of the Draft Budget 2010-11 has now been produced and in its foreword, the Cabinet Secretary states—

“This assessment provides, for the very first time, an assessment of the overall carbon impact of the Government's proposed expenditure. Undoubtedly, as with any new and ground-breaking approach, further work will be required to refine the methodology and develop the functionality of the tool.”93

160. The Committee has concentrated its scrutiny on the methodology used to develop this tool and explored the ways in which it may be used while acknowledging that this is a complex field and work is still developing in this area. The Committee took evidence from experts in the field:- Professor Jan Bebbington, University of St Andrews, Professor Stuart MacPherson, Irons Foulner Consulting Engineers, Professor Susan Roaf, Heriot-Watt University and Dr Tommy Wiedmann, Centre for Sustainability Accounting Ltd.

Methodology

Background

161. In its report to the Finance Committee on the 2009-10 Draft Budget, the Committee set out a number of steps that should be taken to assist in developing the tool and recommended that the Government consider all its proposals during the development. In addition, the Committee noted that although there will never be a single, perfect assessment tool that will prescribe policy there was a pressing need to adopt an evolutionary approach to developing a set of transparent, interrelated tools that are integrated with policy making within a carbon accountability framework.94

162. The Committee’s recommendations in relation to the carbon assessment tool are contained in paragraphs 179-181 and paragraphs 189-195 of this report however, it is worth noting from the outset that the Committee very much welcomes the efforts made by the Scottish Government in developing a carbon assessment tool in a relatively short space of time which can be applied to the 2010-11 Draft Budget.

Environmental Input-Output model

163. The carbon assessment tool developed by the Scottish Government uses an Environmental Input-Output analysis to provide a high-level assessment of the impact of Government spending on emissions. This type of assessment takes into consideration direct emissions, indirect emissions and emissions associated with the purchasing of goods and services. It provides a consumption-based estimate of total emissions relating to Government spend. However, it should be noted that the assessment does not take account of the carbon emissions or savings that arise as a consequence of the provision of public goods or services.

164. The carbon assessment project comprised two main strands of work:

  • the development of a methodology for providing a high-level assessment (HLA) of the carbon impact of total Government spend;
  • the refinement and implementation of methodologies to assess the carbon impact of individual policies and projects (individual-level assessment, or ILA).95

165. There was a general consensus among witnesses that the methodology chosen for the carbon assessment tool (the first main strand of work) was an appropriate choice although, as with any chosen model, it had its limitations.

166. In evidence Dr Tommy Wiedmann stated—

“The assessment distinguishes between high-level carbon assessment and individual-level assessment, which is a useful and important distinction. On high-level assessment, which I understand is the stage that we are at now, the method chosen is exactly the right one. Environmental input-output analysis is particularly suited to capturing economy-wide impacts, because it is a model of the whole economy, which means that all indirect effects that are triggered by Government spending are identified. It is the right basic methodology for such assessment.”96

167. The Committee took evidence on some of the specific aspects of the high-level assessment methodology, namely: the quality of data used; the fact that it takes into account not only direct, indirect and imported emissions but that it also includes induced emissions; and the methodology uses average figures for industries rather than actual emission figures.

Quality of data and presentation of material

168. A number of witnesses commented on the quality of the data used in the high-level assessment approach. The Committee also explored the issue that the figures contained in the assessment tool could be open to misinterpretation. Professor Susan Roaf explained the Scottish carbon accounting group’s concerns—

“The assessment includes 2006 data on the carbon intensity of industry and 2004 quantitative relationships between industry spend and consumption. We wondered whether that feature of the method was realistic going forward. It was asked why the Government does not use bottom-up data on fuel consumption, which should be increasingly available and might provide a more precise estimate. Those are examples of some of the questions that were raised.”97

169. She also stated—

“There are huge areas of uncertainty in the methodology as it stands. For example, we have to use UK data as proxy for imported emissions, and there are some questions about the extent to which it is a reasonable assumption to do so. It might therefore be sensible to request a description of the uncertainty around the data, where it exists in the current method, because I do not think that such uncertainty is exclusive to the carbon assessment.”98

170. Dr Wiedmann told the Committee—

“There might be a danger of people not seeing the fuller picture, for example, if they look only at the graphs. If people read the report, they will understand that the assessment for roads includes emissions from spending on road construction, but not emissions from the cars that will use the roads. If somebody just flicks through the results in the report quickly or sees only the pictures, they might not know that. That is a danger, which is why it would be good to include such points in the captions to make it really clear what we are looking at and to avoid misinterpretation.”99

Inclusion of induced emissions

171. As stated, the assessment includes induced emissions associated with the Government’s spend in relation to wages and salaries and the associated impact on emissions. The Committee heard conflicting views on whether it was appropriate to include these emissions.

172. Dr Wiedmann was in favour of their inclusion stating—

“The inclusion of induced emissions is interesting, because I have not encountered such an approach in other national carbon footprint accounts. It tells us about the indirect consequences of Government spending on increased wages, which in turn are spent on things. The inclusion of induced emissions is valuable, but the information needs to be interpreted…”100

“..Induced emissions should be in the assessment. It is interesting to see their magnitude and effect. To get a complete picture of every pound that the Government spends, it is interesting to see direct, indirect and induced emissions.”101

173. Professor Jan Bebbington had some reservations on their inclusion from an accountability point of view given that the Government has no control over how individuals spend their salaries. She explained—

“I was surprised that induced emissions were included. As I said, accounts are about accountability and controllability. The induced impacts—that is, what people who are paid by the Scottish Government do with their money—are not controllable by the Government, which cannot say, "Here's your salary and here are the things you are allowed to spend it on." The Government cannot be accountable for how people spend their money; that is the individual's business and not their employer's business…“102

174. She went on to say that their inclusion would be neither right nor wrong saying “I would leave them out because you have some control over the other emissions.”103

175. This issue of induced emissions and the fact that some departments, for example the Health Department, may be a substantial producer of carbon emissions simply due to the fact that it has a large workforce was explored and during evidence to the Committee the Cabinet Secretary said in response—

“That is another area that we are open to discussing. A number of approaches could be taken in creating a carbon assessment tool—for example, we could use an approach that is based on individuals and the contribution of their employment to carbon emissions…

…I stress that I am more than happy to engage with the committee—formally or informally—on questions of methodology in order to determine whether our carbon assessment carries the confidence of the committee, or whether there are ways in which it could be strengthened.”104

Average industry figures

176. The methodology used is based on industry carbon intensity averages. The carbon assessment states—

“The HLA methodology is not suitable for setting annual targets for portfolios or public-sector bodies because the estimates produced through E-IO are unresponsive to short-term changes in public-sector policies, like green procurement. The analysis is based on industry averages. Only as the carbon intensities of the different industries reduce - through, for example, decarbonising the energy supply - will the carbon impact of spending be driven down. The HLA is a static analysis and does not model changes in behaviour brought about by policy measures.”105

177. When asked regarding the fact that the analysis is based on industry average figures, Dr Wiedmann said—

“Using industry sector averages in the input-output model has certain limitations. It is perfectly reasonable to use them for the high-level assessment, which considers aggregated spending and the total amount, because spending in one industry sector can affect a range of subsectors, and there will be some averaging out at a higher level. When we come to specific policies and activities, the situation might well be different.106

178. All the witnesses commented on the similar results across different spending budgets. Professor Stuart MacPherson offered a potential explanation for this saying—

“I was struck by how similar the profiles of greenhouse gas emissions per £1 spent seem to be, but I wonder whether that is partly, or largely, a function of the fact that average data were used and applied across the different areas. Perhaps there is a fairly heavy factor that tends to pull the figures towards the mean.”107

179. The Committee agrees with the concerns expressed in evidence regarding the quality of data used in the Environmental-Input-Output model and recommends that the Scottish Government give consideration as to how more up-to-date UK and Scottish data on emissions can be collated.

180. The Committee understands why average industry-wide figures have been used for this high-level assessment however, the Committee recommends that future carbon assessments contain more information on the figures used, including details of any built-in uncertainties which may exist within the figures quoted, so as to prevent any misinterpretation of these figures.

181. The Committee notes the differing views of witnesses with regard to the inclusion of induced emissions. The Committee recommends that the Scottish Government revisits this issue and considers as to whether their inclusion is the correct approach.

How the carbon assessment will be used

182. In the foreword to the carbon assessment, the Cabinet Secretary emphasised the fact that this is not the only tool needed to achieve more robust information on the impact on emissions as a result of Government spending and the implications of specific policy decisions. He stated—

“It has its limitations. To obtain a more balanced and complete picture of carbon impact, other tools (currently in development) will be needed to complement the high-level assessment. For example, carbon appraisal of individual policy measures and specific spending lines will be needed to better understand the carbon implications of individual strands of Government activity, including, importantly, their abatement potential - which is not captured in this high-level assessment. “108

183. In evidence to the Committee, the Cabinet Secretary stated—

“This is the first year in which we have carried out the carbon assessment, and I could not have been more open about the fact that I believe that it can be described as work in progress.”109

184. Given the clearly stated limitations of the carbon assessment tool, the Committee explored its potential use by the Scottish Government in achieving its aim of having a clearer picture of the carbon implications of its own activity.

185. There was general agreement among witnesses on what this tool could and could not be used for. Professor Bebbington acknowledged that this tool on its own would be insufficient to allow the scrutiny of individual subject portfolio spends and the subsequent implications on emissions. She stated—

“The overall picture is just that—an overall picture—and looks back at what has happened, whereas the individual-level assessments suggest what we should do next, given an array of different options. Because the high-level assessment is high level—it is accurate in terms of its high level and the way it has built itself—it would not allow us to create individual-level assessments.”110

186. Professor MacPherson told the Committee that—

“The assessment is not a cost benefit analysis tool to consider whether we should build a road; it is simply an account of the greenhouse gas emissions consequences of the Government's expenditure of which it is directly in control…”111

“I find it hard to understand how someone would use the data to decide which of a number of alternative courses of action they should take to minimise the life cycle greenhouse gas emissions of a policy. A bottom-up structure is needed to do that.”112

187. Professor Roaf also stated that the carbon assessment tool could only be used at the highest level budget scrutiny saying—

“I do not think that you can use this assessment as a policy-informing tool. However, it is a useful tool in showing areas in which we are not well equipped. For instance, it tells you that if you spend £1, you will create a certain amount of carbon, and if you spend less, you will create less carbon. Does that mean that the Scottish Government will say that it will spend less money because it must meet the targets? Possibly not, but the Government might consider how it could decarbonise spending, which takes us on to the question of energy and the tricky issue of how we count the energy subsectors. The tool is a fantastic stimulus to upping the game. We will have to solve such problems. However, I cannot see how it can usefully be used to make anything other than the highest-level budget decisions on policy.”113

188. Dr Wiedmann explained that the limitation of the tool is that it is a backward-looking account setting out carbon emissions based on data that is a couple of years old which means that the assessment cannot give guidance on specific policies.114 He also agreed with the view that, in addition to the carbon assessment tool, there is a need for individual-level assessments if the carbon implications of specific policies are ever to be measured. He explained—

“I agree with Professor Bebbington that both high-level and individual-level assessments are needed. There is a trade-off in terms of the required effort. It is no coincidence that the high-level assessment is a top-down approach that is quicker and simpler to do, and that individual-level assessments will take a bit longer because more data have to be gathered and so on.

Both types of assessment are essential, especially when informed decisions about specific policies need to be made. Individual-level assessments are needed, even if there is some uncertainty around them. I agree that such uncertainty should be documented, but having an ILA is better than having no estimate at all.”115

189. The Committee very much welcomes the publication of the carbon assessment of the 2010-11 Draft Budget and notes that work is still developing in this complex area. The Committee believes the Scottish Government should be congratulated on its efforts in producing this carbon assessment which is the first time a government has published such an assessment.

190. The Committee believes that, given this is the first time such an assessment has been produced, it would be beneficial for the Scottish Government to seek independent advice and an assessment of the appropriateness and effectiveness of the methodology chosen. The Committee is aware that the workload of the Committee on Climate Change is not insignificant as a consequence of their responsibilities under both the UK and Scottish Climate Change Acts. However, at a suitable opportunity, the Committee recommends that the Scottish Government seeks independent advice and an assessment of the approach taken in developing this tool from the Committee on Climate Change and from academics in this field.

191. The Committee acknowledges the high-level nature of the tool but is interested in more detail on how output from the carbon assessment might be applied to the policy development process and particularly, how it will inform the Report on Policies and Programmes due to be published in 2010.

192. The Committee recommends that the Scottish Government continues the second strand of its work on the refinement and implementation of methodologies to assess the carbon impact of individual policies.

193. The Committee considers in future years this tool should be able to be used for the purposes of looking at the carbon implications of government spend in previous years and analysing trends over successive years. It considers that this will be particularly beneficial in providing a more robust assessment of the budget as it relates to emissions reductions.

194. However, it is clear to the Committee that an annual exercise using this methodology will not at present provide an assessment that will inform spending decisions.

195. The Committee looks forward to future development and refinement of the carbon assessment tool and to observing how it influences future budgets and, importantly, the next Spending Review and welcomes the Scottish Government’s commitment to involving the Committee in the development work.

EXTRACT FROM THE MINUTES OF THE TRANSPORT, INFRASTRUCTURE AND CLIMATE CHANGE COMMITTEE

15th Meeting, 2009 (Session 3) Tuesday 2 June 2009

Budget process 2010-11 - appointment of adviser: The Committee agreed to seek approval for the appointment of a budget adviser.

17th Meeting, 2009 (Session 3) Tuesday 23 June 2009

Budget process 2010-11: The Committee agreed its approach to the scrutiny of the Scottish Government's Draft Budget 2010-11.

Budget process 2010-11 - appointment of adviser (in private): The Committee agreed a list of candidates for the post of budget adviser and agreed a ranking of candidates for the post.

18th Meeting, 2009 (Session 3) Tuesday 8 September 2009

Draft Budget Scrutiny 2010-11 - witness expenses: The Committee agreed to delegate to the Convener responsibility for arranging for the SPCB to pay, under Rule 12.4.3, any expenses of witnesses in the consideration of the Scottish Government's Draft Budget 2010-11.

Draft Budget Scrutiny 2010-11 (in private): The Committee considered and agreed its approach to the scrutiny of the Scottish Government's Draft Budget 2010-11.

21st Meeting, 2009 (Session 3) Tuesday 29 September 2009

Draft Budget Scrutiny 2010-11: The Committee took evidence on the Scottish Government's Draft Budget 2010-11 from—

Professor Jan Bebbington, Director, St Andrews Sustainability Institute, Vice-Chair (Scotland) Sustainable Development Commission, St Andrews University;

Professor Stuart MacPherson, Chair, Irons Foulner Consulting Engineers;

Professor Susan Roaf, School of the Built Environment, Heriot-Watt University;

Dr Thomas Wiedmann, Director, Centre for Sustainability Accounting (CenSA) Ltd

22nd Meeting, 2009 (Session 3) Tuesday 6 October 2009

Draft Budget Scrutiny 2010-11: The Committee took evidence on the Scottish Government's Draft Budget 2010-11 from—

Charles Hoskins, Director of Projects, Strathclyde Partnership for Transport;
Councillor Steven Purcell, Leader of Glasgow City Council, Glasgow City Council;
Bob Darracott, Director of Planning and Transport, Renfrewshire Council.

23rd Meeting, 2009 (Session 3) Tuesday 27 October 2009

In attendance: David Gray, Committee Adviser

Draft Budget Scrutiny 2010-11: The Committee took evidence on the Scottish Government's Draft Budget 2010-11 from—

Amanda McMillan, Managing Director Glasgow Airport, and Stuart White, Development Director, BAA Scotland;

Garry Clark, Head of Policy and Public Affairs, Scottish Chambers of Commerce;

Derick Murray, Director, Nestrans;

Eric Guthrie, Partnership Director, Tactran;

Alex Macaulay, Partnership Director, SEStran.

Draft Budget Scrutiny 2010-11 (in private): The Committee considered the evidence heard earlier in the meeting.

24th Meeting, 2009 (Session 3) Tuesday 3 November 2009

In attendance: David Gray, Committee Adviser

Draft Budget Scrutiny 2010-11: The Committee took evidence on the Scottish Government's Draft Budget 2010-11 from—

John Swinney MSP, Cabinet Secretary for Finance and Sustainable Growth, Philip Wright, Deputy Director, Climate Change, Jonathan Pryce, Director of Transport, and David Middleton, Chief Executive, Transport Scotland, Scottish Government.

Draft Budget Scrutiny 2010-11 (in private): The Committee considered the evidence heard earlier in the meeting.

25th Meeting, 2009 (Session 3) Tuesday 10 November 2009

Draft Budget Scrutiny 2010-11 (in private): The Committee considered a draft report to the Finance Committee on the Scottish Government's Draft Budget 2010-11. The report was agreed to, subject to a number of amendments to be agreed by correspondence

ANNEXE L – REPORT FROM THE SCOTTISH COMMISSION FOR PUBLIC AUDIT

Scottish Commission for Public Audit

1st Report, 2009 (Session 3)

Audit Scotland's Budget Proposal for 2010-11

The Commission reports to the Parliament as follows—

1. In this report the Commission reports on Audit Scotland’s audited accounts and report for the year ended 31 March 2009, its proposals for the application of end-year flexibility to financial year 2009-10 through the Autumn Budget Revision, and its expenditure proposals for the financial year 2010-11. The report, therefore, addresses three different financial years. Where the issues raised flow through all three, the Commission has mainly commented on them in relation to future expenditure proposals.

2. The report also provides a summary of the Commission’s recent work, in accordance with section 12(4) of the Public Finance and Accountability (Scotland) Act 2000 (the Act).

report on the work of the commission

3. The Commission has met formally four times in the course of 2009, examining a range of issues. Section 25(4) of the Act empowers the Commission to initiate an examination into the economy, efficiency and effectiveness with which Audit Scotland has used its resources in discharging its functions. In 2008 the Commission instructed Audit Scotland’s external auditors, HW Chartered Accountants, to conduct work to follow up a 2006 review of Audit Scotland’s approach to fees and charges. The Commission considered the findings at the end of 2008, and completed this work in May 2009 by taking evidence from Audit Scotland on its response to the recommendations.

4. In May, the Commission also took evidence from the Auditor General and representatives of Audit Scotland’s management team on Audit Scotland’s response to the Commission’s 2nd Report 2008 on Audit Scotland’s Budget Proposal for 2009-10. At that meeting, the Commission also took preliminary evidence on Audit Scotland’s budget estimate for the 2010-11 financial year.

5. In September, the Commission took evidence from the Auditor General, representatives of Audit Scotland’s management team and HW Chartered Accountants on Audit Scotland’s annual report and audited accounts for the year to 31 March 2009. It also took evidence on Audit Scotland’s proposal for the Autumn Revision of its 2009-10 budget. In October and November, the Commission took evidence on and considered Audit Scotland’s expenditure proposals for 2010-11.

6. The Commission wishes to record its thanks to Audit Scotland and HW Chartered Accountants for their co-operation with it throughout the year.

7. In addition to the cycle of work described above, throughout the year the Commission has continued to monitor developments arising from its 2008 review of the corporate governance arrangements of Audit Scotland.1 The Public Services Reform (Scotland) Bill, introduced in the Parliament by the Scottish Government on 28 May 2009, includes provisions implementing some of the recommendations made by the Commission in that review. The Commission made a submission to the Finance Committee, which was designated as the lead committee for consideration of the Bill at Stage 1, and has continued to discuss implementation of the provisions with Audit Scotland. This will continue in the coming year.

annual report and audited accounts for the year to 31 march 2009

8. In accordance with section 25(3) of the Act, the Commission is required to receive a report on Audit Scotland’s accounts, together with a report from qualified auditors. At is meeting on 13 May 2009, the Commission took evidence on the annual report and audited accounts for the year to 31 March 2009 from Robert Black, Auditor General for Scotland (who is the accountable officer for Audit Scotland), Russell Frith, Director of Audit Strategy, Audit Scotland and Diane McGiffen, Director of Corporate Services, Audit Scotland.2

9. Further evidence was provided by Richard Gibson of HW Chartered Accountants (the external auditors of Audit Scotland), who gave the Commission assurances that he and his team had received all the information and explanations required by them to form their unqualified opinion on the annual accounts.

10. The Commission notes that HW Chartered Accountants had no issues that it felt needed to be brought to the attention of the Commission or the management of Audit Scotland. Richard Gibson confirmed that the one internal control weakness identified for improvement in the management report for the year (regarding failure to follow procedure in a small proportion of purchase order cases) was of no significant concern, and would be improved by a new ordering system which should be operational by December.3

11. The Commission sought explanations from the Auditor General and Audit Scotland management on a number of specific matters arising from the annual report and accounts and these are outlined below.

General issues

12. The Auditor General stated that, setting aside movements relating to pensions and funds carried forward through end-year flexibility, the outturn is within approximately 2% of overall budget.4 The Commission notes and welcomes the position illustrated by the accounts that the outturn at year-end was much closer to budget than in previous years, which it believes aids transparency in assumptions for forward budgeting.

13. The accounts note that efficiency initiatives generated savings of £92,000. Audit Scotland explained that these savings arose from initiatives such as reviewing suppliers and contracts. This is less than the target of £260,000 savings which Audit Scotland set for 2008-09 when it presented its budget for that year. However, Audit Scotland stated that, in addition to the documented savings, it has taken on additional work at no extra cost to support the development of streamlined scrutiny work and planning for the extension of best value audits. The value of this extra work does not appear to have been quantified.5

Income issues

14. The accounts show an 11% increase year-on-year in the fees paid by the Scottish Government and its sponsored bodies. Similarly, Scottish Water’s audit fee has increased by 6%, while the fees of other sectors fell. Audit Scotland explained that some of the fluctuation in recorded fee income in this financial year was due to the £1 million one-off fee rebate which was paid out of end-year flexibility to a number of bodies during the year. This was considered by the Commission in its 2nd Report 2008.6 More generally, fluctuation in the figures is attributed to variations in the timing and volume of audit work which is done pre-and post-31 March each year.7

Expenditure issues

15. The accounts show that expenditure on fees to appointed auditors was £354,000 more than budgeted (£6,078,000 as against a budget of £5,724,000 – an overspend of 6.2%). The previous year this line showed an underspend of 7%. Similarly, operating costs have fluctuated quite significantly over recent years, being £3,884,000 in 2008-09 – up 9.1% over the previous year’s £3,557,000, which was itself significantly less than in 2006-07 (£3,932,000) – a fall of about 9.5% (after rising by 15% the previous year).

16. Audit Scotland explained that the biggest element in the ‘operating costs’ line is for consultancy and other professional fees, where the expenditure had come closer to budget than in previous years. The accounts show a significant increase of £427,000 in legal and professional costs from £815,000 in 2007-08 to £1,242,000 in 2008-09. This expenditure in 2008-09 is significantly (18%) above the budget (£1,057,000) initially approved by the Parliament for that year, although further provision was made through end-year flexibility at the Autumn Budget Revision.

17. The Commission has previously asked about the high level of expenditure on consultants. Audit Scotland explained that the increase in 2008-09 reflected an increase in the volume of work, with a large element due to paying the Audit Commission for work it does on the national fraud initiative – work which is required every second year.8

18. Audit Scotland also elaborated on the statement in the annual report that it had applied the recommended standards from a study on central government’s use of consultants to its own internal processes. It stated that it was seeking to improve practice on identifying potential tenders for its relatively low-value consultancy contracts.9

19. The Commission welcomes Audit Scotland’s statement that it will produce a clear strategy to explain how it will routinely consider the lessons its external audit work might have for its internal management of the business.10 The Commission looks forward to seeing this work.

20. The accounts show expenditure on property leases to have increased year on year by £137,000 from £586,000 to £723,000 (up 24%). Audit Scotland explained that this fluctuation is due to rent reviews, and to the expenditure in 2007-08 being artificially low because the figure for rent reviews that year was lower than expected.11

21. The accounts report on success in paying invoices within 30 days. Presuming that the number and complexity of invoices dealt with by Audit Scotland is comparatively low, the Commission asked whether it now aims to pay invoices within the 10 days now being used as a standard by many public bodies to assist businesses during the recession. In supplementary correspondence, Audit Scotland stated that, while its system records date of issue rather than date of receipt of invoices, it estimates that in the six months to September 2009 it paid 48% of invoices within the ten day target. In the three months to September the figure was 58%.12 The Commission welcomes Audit Scotland’s confirmation that the new electronic purchase ordering system that it is about to introduce will allow it to speed up payments towards that 10-day target.13 However, the Commission believes that this is an important target in the current economic situation, and urges Audit Scotland to meet it regardless of the payment system in place. The Commission would also welcome information about the volume of invoices dealt with by Audit Scotland.

2009-10 autumn budget revision

General approach to end-year flexibility

22. The Commission recommended in its report on Audit Scotland’s budget proposals for 2008-09 that Audit Scotland examine thoroughly what it would require to move to a more consistent budgeting that did not rely so heavily on end-year flexibility (EYF). The Commission considered that this would aid transparency in budgeting and allow appropriate scrutiny of assumptions during the parliamentary budget scrutiny process in the autumn of each year. The Auditor General confirmed that Audit Scotland would seek to rely less in future on EYF and address the cumulative end-year position.14

23. As a revision to the originally-approved budget for 2009-10, Audit Scotland has sought approval to carry forward £500,000 of revenue EYF and no capital EYF. Audit Scotland stated that it is able to accommodate all capital plans within the core 2009-10 capital budget of £300,000.

24. The amount requested this year as EYF is substantially reduced from recent years. The sums being sought for 2009-10 compare to £2,483,000 revenue EYF and £40,000 capital EYF sought in 2008-09.

25. The total revenue EYF potentially available to Audit Scotland as at 31 March 2009 was £2,192,000 and the capital was £177,000.15 As a result of requesting that £500,000 of this be approved to carry forward, £1,869,000 of funding originally allocated to Audit Scotland is effectively able to be returned to the Scottish Consolidated Fund for the Scottish Government to allocate to other priorities.

26. The Auditor General confirmed that Audit Scotland had been able to make faster progress than it had expected towards the financial objectives sought by the Commission of reducing routine reliance on EYF and securing an end-year position closer to budget.

27. The Commission notes and welcomes the significant progress made on EYF this year, and looks forward to this trend being continued in future years. The Commission also welcomes the more detailed and helpful presentation of information in the Autumn Budget Revision paper on how the underlying underspend arose in 2008-09, the funds that Audit Scotland is able to release to the Scottish Consolidated Fund and what is sought by way of end-year flexibility. The Commission also welcomes the fact that Audit Scotland has produced the Autumn Budget Revision earlier this year, in response to the Commission’s request to be able to consider it in plenty of time before the formal parliamentary authorisation is sought in a statutory instrument later in the autumn.

The available revenue EYF

28. The total revenue EYF potentially available to Audit Scotland as at 31 March 2009 was £2,192,000. A list of the areas from which this is said to have arisen is included in the Autumn Budget Revision paper. Pension items contribute £784,000 to the underspend. The paper states that “the actuary is saying that the cost of pension contributions which are required to be recognised in the accounts is less than the contributions that we are required to pay over to the pension scheme”. Audit Scotland noted that it is quite possible that, in some future years, pension adjustments would be in the opposite direction and may require additional funds being sought in the Autumn Budget Revision.

Proposed use of EYF

29. On the proposed use of end-year flexibility, Audit Scotland has identified three areas of expenditure: property repairs; development of the business; and implementation of a revised performance management system. The Auditor General confirmed that all the funds sought are for continuation of projects which had been approved in previous years, and for which revised lower sums were now being sought. There are no new purposes for which EYF is being sought this year.16

30. The funding sought to implement the performance management system as part of the revised reward and competency project is understood to be a non-recurring cost for the establishment of the system and additional staff training. The £68,000 sum sought has been revised downwards from the £108,000 estimated the previous year.

31. Similarly, funding for the replacement of lifts at 18 George Street is understood to be a one-off, non-recurring expenditure item. The £47,000 sought is the contribution to completing a project started in the previous year. Although it is relatively near the end of a long lease at 18 George Street, Audit Scotland confirmed that it is contractually obliged to contribute to these repairs, rather than the cost of them falling on the landlord. Last year, EYF of £75,000 was also requested for roof repairs at 18 George Street, although Audit Scotland has now confirmed that this work has not yet been carried out and is not expected in 2009-10. The funds for this have effectively been surrendered as part of this budget revision. The Commission considers property costs further below in regard to the 2010-11 budget proposal.

32. Last year the Commission sought clarification on why Audit Scotland was proposing to use £81,000 of EYF to pilot new correspondence-handling arrangements by employing a new senior manager to centralise it, when this work already appeared to be taking place. The Autumn Budget Revision refers to the appointment of one senior manager with responsibility for correspondence handling, and states that this responsibility will now be funded from core budgets going forward. Audit Scotland explained further that this is not to deal with routine business correspondence, but matters requiring complex investigation.

33. Of the revenue EYF being sought, the largest amount is for ‘development of the business’. Audit Scotland wishes to use £203,000 in 2009-10 and £182,000 in 2010-11. This represents a reduction of £97,000 on the amount requested for this purpose last year. Audit Scotland has also said that it has responded to the Commission’s previous recommendation that development of the business should be budgeted for in the usual way rather than relying on EYF. The Auditor General emphasised that the most efficient way to fund additional pressures – such as developing the new approach to scrutiny – is to use EYF rather than the alternative of adjusting fee levels to include costs in annual budgeting.17

34. The Commission recommended in its report on Audit Scotland’s budget proposals for 2008-09 that Audit Scotland should provide a greater level of detail on the precise purposes for which any future proposed EYF would be used. Limited details of how this ‘development of the business’ money will be allocated are given in the Autumn Budget Revision paper, although it does state that it will support “additional staff including a staff secondment from a Scottish Local Authority”. In evidence, Audit Scotland stated that it is still difficult for it to profile and distinguish the one-off developmental costs from ongoing costs.18

35. The Commission acknowledges the importance of this development work, but has found it difficult to be clear on exactly how the cash will be spent. The Commission requests that, in future, Audit Scotland provides full explanation of exactly how proposed EYF funds will be spent – for example, identifying consultants’ costs and explaining the total number of staff and secondees who have been or will be appointed to assist in the development of a project, and whether they have been appointed on a fixed-term basis. This would give greater transparency to how EYF funds are being used by clarifying exactly where new cash is required, as opposed to areas where development activity is being accommodated within existing staff resources.

audit scotland’s expenditure proposals for 2010-11

36. Under section 11(9) of the Act, the Commission must examine Audit Scotland’s proposals for its use of resources and expenditure for each financial year, and report on them to the Parliament.

37. Audit Scotland’s presentation of its proposals for 2010-11 has helpfully continued in the format which allows greater comparison of headings between the budget and the audited accounts, and which shows out-turn for previous years. Audit Scotland has also provided an updated fee strategy which explains the principles and policies adopted in setting fees and charges, and considers the application of the policies to the circumstances of setting fees for the 2009-10 and 2010-11 audit years and the preparation of the budget for the financial year 2010-11.19

38. Audit Scotland’s proposed total gross administrative costs for 2010-11 is £27,687,000. Its estimated income from charges to audited bodies is £20,603,000, and the total resource requirement (expenditure which is payable out of the Scottish Consolidated Fund) for 2010-11 is £7,384,000. This is made up of a net operating cost of £7,084,000 and a capital budget of £300,000. This total resource requirement is actually £14,000 less than the initial estimate for 2010-11 that Audit Scotland provided in March 2009. The net operating cost is £8,000 lower than originally estimated and the capital £6,000 lower.

39. Overall, the net budget required from the Scottish Consolidated Fund and the total gross administrative costs for 2010-11 are both falling slightly in real terms year on year, when the standard Treasury deflator for 2010-11 of 1.5% is applied. In evidence the Commission explored a number of issues arising from the budget proposal.

Cost pressures

40. The budget proposal and fee strategy documents outline the principal assumptions underpinning the budget. Pay for Audit Scotland staff represents about 55% of its total budget and so movements have a significant bearing on the budget. Supplementary correspondence from Audit Scotland provided some detail on the outcome of the review of its remuneration strategy and its impact on budgets. 2010-11 is the second year of implementation of the revised strategy, with costs incurred as staff are assimilated onto the new pay ranges over the course of three years.

41. Audit Scotland stated that the annual pay uplift budgeted for 2010-11 is 1.5%, which is the limit set by the Scottish Government’s public sector pay guidance for 2009-10 (although Audit Scotland is not formally subject to that guidance). The actual uplift for 2010-11 has not yet been negotiated. The budget assumes that pay progression for those who qualify to move up ranges will mean that average annual awards will total 3.2%. Progression is now based on an assessment of contribution to the organisation. Audit Scotland said that its new pay system represented a marginal tightening of pay progression costs, although there would be a short-term hump caused by the cost of assimilation to the new scales and moving closer to full staff establishment.20 The total pay bill is budgeted to increase by 1.1%, which takes account of the “effect of average pay increases for our staff butis also net of planned staff efficiency savingsand benefits arising from revisions to our skill mix”.21

42. The budget proposal highlights a number of other cost pressures. One of these is lower bank interest, which appears likely to continue at a low level. Audit Scotland has budgeted for miscellaneous income of £109,000 – maintaining the lower budget set for 2009-10, However, out-turn for the previous two years was much higher at £346,000 and £321,000 respectively. It is not clear whether there may be some positive variance again.

43. Another pressure arises from the extra costs for external appointed auditors for work related to the introduction of International Financial Reporting Standards (IFRS) to the local government sector from 2010-11. The Commission sought to examine how these additional costs would work through the budget. The fee strategy document states that the 2009-10 budget included an assumption that fees to auditors would rise by 6% to cover work on opening balance sheets and shadow accounts in the central government and health sectors. There will be continuing effects on the budget as the IFRS-related work rolls through the various audit sectors. Audit Scotland confirmed that the 6% addition to central government and health costs is expected to continue into the first full audit of IFRS-based accounts, and then will reduce to about 3%. It is not wholly a one-off increase that will subsequently be removed because IFRS-based accounts are expected to continue to require more work than those prepared under previous practice.22 Audit Scotland confirmed that there is a less formal requirement for IFRS shadow accounts or an audit of these for the local government sector, which is allowing it to permit auditors to agree the work required on a case-by-case basis.

Efficiencies

44. The Commission asked whether, given the pressure which salary costs and these other pressures exert on the budget, Audit Scotland can continue to constrain its overall budget in the way it has this year.

45. The cost pressures identified are offset by efficiencies outlined in the budget proposal document. Audit Scotland stated that it has incorporated efficiency savings of £540,000 in the budget for 2010-11, amounting to 2% of the 2009-10 gross expenditure budget. Some of these have been achieved through reduced-price supply contracts. It has also applied a 2% efficiency to the uprated fees paid to appointed auditors. The budget also includes staffing efficiencies of £266,000 in 2010-11 achieved through various initiatives including changing the skill mix required for particular tasks. These will be recurring savings.

46. The Auditor General, however, emphasised that efficiencies will be increasingly difficult to identify in the future. The bulk of costs are those for staff and essential goods and services to run the business, which has to fulfil statutory obligations to deliver certain audit work to an acceptable standard.23 He stated that, “Without revisiting fundamentally the nature and scope of audit work, it is difficult to see ways in which we can generate large cash savings in future years.”24

47. Audit Scotland emphasised rationalisation of its property costs as a specific area which would be targeted to achieve future efficiencies. This is an area about which the Commission has enquired repeatedly, specifically in relation to significant contributions to repair works which have been discussed in the context of carrying forward end-year flexibility. Audit Scotland confirmed that it is subject to a number of long-term leases. The first of these ends in 2012, with others in 2014 and 2015. It is, therefore, beginning to plan now for 2012 to be the start of a phased rationalisation, with the first phase being consolidation of three Edinburgh offices into the two existing George Street bases.25 This phased review is intended to look not only at direct property costs but also at issues such as the way in which audit is delivered, travel to work patterns and the next procurement of external audit contracts from private firms.

48. Audit Scotland also highlighted the savings it had made in energy usage as a result of upgrades of its IT equipment. However, rising fuel costs had meant that this had so far not resulted in any net savings. It stated that it was in the process of looking at supply options, and aimed to benefit from lower energy costs as a result of office rationalisation in due course.26

49. The Commission sought to clarify details on the number of staff employed by Audit Scotland, as various documents show the average number of staff in post or the total whole-time equivalent staff complement, with agency staff and secondees in addition. Some also show figures net of posts funded by end-year flexibility. The annual accounts state that the average number of whole-time equivalent staff employed by Audit Scotland increased by 15 from 278 in 2007-08 to 293 in 2008-09. Similarly the number of agency and seconded staff increased from 14 to 20 year on year. This rise was partly explained by improved filling of vacancies. Audit Scotland stated that the staff complement has remained “fairly constant over the past four or five years at 297”.27

50. Supplementary correspondence states that Audit Scotland’s overall staffing establishment for 2009-10 was 298 whole time equivalents (with 287, 295 and 297 for the preceding three years respectively) and for 2010-11 is 295 (including board members and posts funded by end-year flexibility). However, the budget proposal states that the complement for 2010-11 remains the same as for 2009-10 at 292, omitting the board and EYF-funded posts. The Commission recommends that Audit Scotland presents staff figures in future in a consistent manner across documents, with full explanation of what is included or not, in order to improve transparency and allow informed discussion about efficiencies.

51. The different staffing figures appear to show a gradual increase in staff resources over the last few years. However, evidence to the Commission suggested that there are a number of issues around the potential for improved productivity. The budget proposal document states that some staffing efficiencies have already resulted from restructuring business groups, and Audit Scotland confirmed that it has looked at some areas where it can change the skill mix required and the components of the job.28 It is not clear what scope there is for further revision of the skill mix, or how the approach which Audit Scotland takes to allocating different grades of staff to audit work compares with others such as private sector audit firms. The Commission requests further information from Audit Scotland on any work it has done to analyse the skill mix it uses compared to other audit sectors, including the private sector.

52. The Auditor General also said that the “work that is being undertaken on improving our audit methodologies and linking into the scrutiny review” is helping to reduce the burden on audited bodies.29 The budget proposal outlines the new scrutiny co-ordination responsibilities that Audit Scotland has taken on. The Accounts Commission has said that streamlining scrutiny has resulted in 25% less scrutiny contact days over the last two years. Audit Scotland’s budget proposal also states that one objective of the corporate plan is to “deliver more streamlined audit” as a result of examining and co-ordinating overall scrutiny of public bodies. Developing this revised scrutiny approach is an additional cost for Audit Scotland in the immediate term. However, it is not yet clear whether it expects this work (particularly the work on shared approaches to risk assessment) to feed through in time into reduced audit contact time and costs and, if so, what effect this can be expected to have on future budgets. The Commission requests that Audit Scotland keep it informed of progress on this.

53. A related issue is the longer-term impact of the Scottish Government’s public sector simplification programme. Changes in the landscape of Scottish public bodies have so far only marginally affected the number of bodies audited each year, and Audit Scotland has explained that there is no linear relationship between the number of bodies (or, indeed, the total spend of the audited bodies) and the costs of audit. The Commission has previously heard that some of the bodies abolished did not prepare separate annual accounts, so this has had no effect on audit costs. The removal of other bodies has not yet had an effect as the need to audit historic accounts for them has not yet ended. Some new bodies have also been established. The planning assumptions about how continued public services reform will affect Audit Scotland’s costs in the medium term are, therefore, not yet clear.

Context and future trends

54. The annual accounts state that 2008-09 has been “the most challenging external economic environment” since Audit Scotland was established. While the retrospective nature of audit means that this has not yet had a direct effect on it, Audit Scotland acknowledged that “we are entering quite unprecedented times with regard to the performance of the economy and the conditions that are going to apply more widely in the public sector”.30

55. Audit Scotland explained how it had benchmarked its salary scales with appropriate comparators, mainly in the public sector rather than in the accountancy profession in general, during its pay system review. Although it competes widely for graduate recruits, it considers that using “any other comparator would quickly become unaffordable” as private sector salaries tend to run ahead of its own.31

56. The Commission recognises that expected public finance constraints in the next few years may have an impact on Audit Scotland. In this context, the Commission makes a number of recommendations.

57. In previous years the Commission has expressed interest in details of how Audit Scotland assesses the impact of its work. The annual accounts highlight “£40 million in cumulative overpayments and savings now identified” in the national fraud initiative. This commentary is one good example of highlighting the impact which robust and well-directed public audit work can have. It is particularly important during a period of public finance constraints that the impact of funding public audit work appropriately is understood. The Commission appreciates the difficulty of directly quantifying the impact of audit work, and acknowledges the evidence Audit Scotland has given it to date on its work in this area. However, the Commission recommends that Audit Scotland should redouble its efforts to identify and present in an appropriate manner the contribution it makes to efficient management of expenditure across the public sector.

58. Secondly, the discussion above on cost pressures and the staffing and accommodation efficiencies which can help to offset pressures covers several issues of a strategic nature. The budgetary impacts of these will develop over more than one year. Similarly, the public finance context is expected to be very tight for several years. The Commission, therefore, requests that Audit Scotland considers and reports back to it on how it can engage constructively with the Commission on all of these strategic issues beyond the immediate annual budget process. The Commission requests, in particular, detailed consideration of the property rationalisation strategy and of the staffing efficiencies which can arise from the three main issues outlined (development of skill mix, scrutiny reform and public sector simplification).

59. Finally, the way in which the budget is constructed, and the dynamic of a number of key influences on it, mean that several budget lines routinely have the potential to fluctuate significantly year-on-year. For example, this year the Commission has heard evidence that—

o The proposed budget for legal and professional fees remains at a high level for 2010-11, and Audit Scotland has confirmed that a substantial sum for the national fraud initiative appears every second year.

o The capital budget for 2010-11 is unchanged from the previous year and is said to be primarily for the continued programme of IT upgrades. However, IT spending is cyclical and the capital budget has been subject to significant variation in previous years.

o In considering the annual accounts, significant year-on-year variation in the operating costs and fee income from audits has been noted.

60. Similarly, there are other areas in which costs clearly influence the budget perspective for more than one financial year. For example, in the course of evidence this year Audit Scotland has explained that—

o Some of the effects on future years of the revised remuneration structure are already known.

o The fee strategy provides indicative figures which will affect budgets for the 2011-12 financial year as well as 2010-11.

o The additional costs of IFRS-related work will flow through the different audit sectors and then reduce again.

o Some assumptions about fees payable to appointed auditors may be set for the life of the five-year contract. Audit Scotland has indicated that it will consider whether the principal assumptions underpinning the approach to the fee strategy can be simplified in future.

o Some end-year flexibility funding is sought for two years at a time. Authorisation is being sought in this year’s Autumn Budget Revision for spending on developing the business to be taken forward to 2010-11 rather than simply used in the current financial year.

61. The Commission appreciates that these are complex issues subject to other influences which cannot be predicted with certainty, and that some elements may be contingent or uncertain. However, the factors outlined in paragraphs 59 and 60 above show the ongoing rationale for a longer-term perspective on Audit Scotland’s budgeting. In addition, the current economic context demands a strategic focus on budget trends across the public sector. The Commission, therefore, recommends that Audit Scotland should consider and report to it on how it can in future present budget proposals that cover a longer-term perspective than previously – for example, by routinely providing a provisional or indicative budget for the financial year subsequent to the one for which formal approval is being sought.

conclusion

62. The Commission draws the Parliament’s attention to the observations and recommendations contained in this report. It considers that these recommendations will, in particular, encourage progress towards a more strategic understanding of Audit Scotland’s budget requirements. The Commission requests that Audit Scotland provides a formal response to this report, detailing the action it intends to take to address the recommendations.

63. Taking account of these comments, the Commission recommends that Audit Scotland’s proposal for total net expenditure of £27,687,000 and total resource requirement from the Scottish Consolidated Fund of £7,384,000 for the year 2010-11 be approved by the Parliament. In doing so, the Commission also recommends approval of Audit Scotland’s request for £500,000 of revenue underspend to be carried forward by means of end-year flexibility through the Autumn Budget Revision

Extracts from the minutes

1st Meeting, 2009 (Session 3) Wednesday 13 May 2009

Audit Scotland’s response to the Commission’s 2nd Report 2008 on Audit Scotland’s Expenditure Proposals for 2009-10, and Audit Scotland’s provisional budget estimate for 2010-11: The Commission took evidence from—

Robert Black, Auditor General for Scotland, Russell Frith, Director of Audit Strategy, Barbara Hurst, Director of Public Reporting, and Diane McGiffen, Director of Corporate Services, Audit Scotland.

Economy, efficiency and effectiveness examination of Audit Scotland: The Commission considered correspondence from Audit Scotland in relation to follow-up work by the auditors of Audit Scotland on the economy, efficiency and effectiveness examination of Audit Scotland’s fees and charges, and took evidence from—

Robert Black, Auditor General for Scotland, Russell Frith, Director of Audit Strategy, Barbara Hurst, Director of Public Reporting, and Diane McGiffen, Director of Corporate Services, Audit Scotland.

2nd Meeting, 2009 (Session 3) Wednesday 16 September 2009

Audit Scotland Annual Report and Accounts for the year to 31 March 2009 and Auditor’s Report on the Accounts: The Commission took evidence from—

Robert Black, Auditor General for Scotland, Russell Frith, Director of Audit Strategy, and Diane McGiffen, Director of Corporate Services, Audit Scotland,

and then from—

Richard Gibson, HW Chartered Accountants, External Auditors to Audit Scotland.

Audit Scotland’s Autumn Budget Revision 2009-10: The Commission took evidence from—

Robert Black, Auditor General for Scotland, Russell Frith, Director of Audit Strategy, and Diane McGiffen, Director of Corporate Services, Audit Scotland.

3rd Meeting, 2009 (Session 3) Wednesday 28 October 2009

Decisions on taking business in private: The Commission agreed to take agenda item 3, and future consideration of a draft report on Audit Scotland’s Budget Proposal for 2010-11, in private. The Commission also agreed to consider a paper from the Secretary on extending the contract of the auditors of Audit Scotland in private at a future meeting.

Audit Scotland’s Budget Proposal for 2010-11: The Commission took evidence from—

Robert Black, Auditor General for Scotland, Russell Frith, Director of Audit Strategy, and Diane McGiffen, Director of Corporate Services, Audit Scotland.

Audit Scotland evidence (in private): The Commission considered the evidence heard to date to inform the preparation of its report on Audit Scotland’s Budget Proposal for 2010-11.

4th Meeting, 2009 (Session 3) Wednesday 11 November 2009

Auditors of Audit Scotland (in private): The Commission considered a paper from the Secretary on extending the contract of the auditors of Audit Scotland. The Commission agreed to offer the auditors a one-year extension to their contract.

Audit Scotland’s Budget Proposal for 2010-11 (in private): The Commission considered a draft report on Audit Scotland’s budget proposal for 2010-11. The Commission agreed the report subject to revisions.

VOLUME 3: ORAL EVIDENCE AND ASSOCIATED WRITTEN EVIDENCE: SUBJECT COMMITTEES AND SCPA


Footnotes:

1 Scottish Parliament, Official Report, 17 September 2009, Col 19753.

2 Scottish Government. Letter from the Cabinet Secretary for Finance and Sustainable Growth to the Convener of the Transport, Infrastructure and Climate Change Committee dated 1 October 2009.

3 Scottish Parliament Transport, Infrastructure and Climate Change Committee. Official Report, 6 October 2009, Cols 2180-81.

4 Scottish Parliament Transport, Infrastructure and Climate Change Committee. Official Report, 6 October 2009, Col 2183.

5 Scottish Parliament Transport, Infrastructure and Climate Change Committee. Official Report, 27 October 2009, Col 2208.

6 Scottish Parliament Transport, Infrastructure and Climate Change Committee. Official Report, 27 October 2009, Col 2208.

7 Scottish Parliament Transport, Infrastructure and Climate Change Committee. Official Report, 27 October 2009, Col 2208.

8 Scottish Parliament Transport, Infrastructure and Climate Change Committee. Official Report, 27 October 2009, Col 2206.

9 Scottish Parliament Transport, Infrastructure and Climate Change Committee. Official Report, 27 October 2009, Col 2212.

10 Scottish Parliament Transport, Infrastructure and Climate Change Committee. Official Report, 27 October 2009, Col 2212.

11 Scottish Parliament Transport, Infrastructure and Climate Change Committee. Official Report, 6 October 2009, Col 2181.

12 Scottish Parliament Transport, Infrastructure and Climate Change Committee. Official Report, 6 October 2009, Col 2181.

13 Scottish Parliament Transport, Infrastructure and Climate Change Committee. Official Report, 3 November 2009, Col 2263.

14 Scottish Parliament. Official Report, 17 September 2009, Col 19753.

15 Scottish Parliament Transport, Infrastructure and Climate Change Committee. Official Report, 3 November 2009, Col 2258.

16 Scottish Parliament Transport, Infrastructure and Climate Change Committee. Official Report, 3 November 2009, Col 2263.

17 Scottish Parliament Transport, Infrastructure and Climate Change Committee. Official Report, 3 November 2009, Col 2276.

18 Scottish Parliament Transport, Infrastructure and Climate Change Committee. Official Report, 3 November 2009, Col 2277.

19 Scottish Parliament Transport, Infrastructure and Climate Change Committee. Official Report, 6 October 2009, Col 2177.

20 Scottish Parliament Transport, Infrastructure and Climate Change Committee. Official Report, 6 October 2009, Col 2177.

21 Scottish Parliament Transport, Infrastructure and Climate Change Committee. Official Report, 3 November 2009, Col 2269.

22 S3W-28167 the Minister for Transport, Infrastructure and Climate Change–written question from Jeremy Purvis, 28 October 2009.

23 Scottish Parliament Transport, Infrastructure and Climate Change Committee. Official Report, 27 October 2009, Col 2207.

24 Scottish Parliament Transport, Infrastructure and Climate Change Committee. Official Report, 6 October 2009, Col 2174.

25 Scottish Parliament Transport, Infrastructure and Climate Change Committee. Official Report, 6 October 2009, Col 2175.

26 Scottish Parliament Transport, Infrastructure and Climate Change Committee. Official Report, 3 November 2009, Col 2265.

27 Scottish Parliament Transport, Infrastructure and Climate Change Committee. Official Report, 3 November 2009, Col 2260.

28 Scottish Parliament Transport, Infrastructure and Climate Change Committee. Official Report, 3 November 2009, Col 2260.

29 Scottish Parliament Transport, Infrastructure and Climate Change Committee. Official Report, 3 November 2009, Col 2261.

30 Scottish Parliament Transport, Infrastructure and Climate Change Committee. Official Report, 3 November 2009, Col 2264.

31 Rob Gibson, Shirley-Anne Somerville dissented.

32 Rob Gibson, Shirley-Anne Somerville dissented.

33 Scottish Parliament Transport, Infrastructure and Climate Change Committee. Official Report, 27 October 2009, Col 2217.

34 Scottish Parliament Transport, Infrastructure and Climate Change Committee. Official Report, 27 October 2009, Col 2218.

35 Scottish Parliament Transport, Infrastructure and Climate Change Committee. Official Report, 6 October 2009, Col 2173.

36 Scottish Parliament Transport, Infrastructure and Climate Change Committee. Official Report, 3 November 2009, Col 2260.

37 Scottish Parliament Transport, Infrastructure and Climate Change Committee. Official Report, 3 November 2009, Col 2259.

38 Scottish Parliament Transport, Infrastructure and Climate Change Committee. Official Report, 3 November 2009, Col 2259.

39 Scottish Parliament Transport, Infrastructure and Climate Change Committee. Official Report, 3 November 2009, Cols 2262-2263.

40 Scottish Parliament Transport, Infrastructure and Climate Change Committee. Official Report, 3 November 2009, Col 2264.

41 Scottish Parliament Transport, Infrastructure and Climate Change Committee. Official Report, 3 November 2009, Col 2264.

42 Scottish Parliament Transport, Infrastructure and Climate Change Committee. Official Report, 3 November 2009, Col 2266.

43 Scottish Parliament Transport, Infrastructure and Climate Change Committee. Official Report, 3 November 2009, Col 2266.

44 Scottish Parliament Transport, Infrastructure and Climate Change Committee. Official Report, 3 November 2009, Col 2270.

45 Rob Gibson, Shirley-Anne Somerville dissented.

46 Rob Gibson, Shirley-Anne Somerville dissented.

47 Rob Gibson, Shirley-Anne Somerville dissented.

48 Rob Gibson, Shirley-Anne Somerville dissented.

49 Scottish Parliament Transport, Infrastructure and Climate Change Committee. Official Report, 6 October 2009, Col 2176.

50 Scottish Parliament Transport, Infrastructure and Climate Change Committee. Official Report, 6 October 2009, Col 2187.

51 Scottish Parliament Transport, Infrastructure and Climate Change Committee. Official Report, 6 October 2009, Col 2175.

52 Scottish Parliament Transport, Infrastructure and Climate Change Committee. Official Report, 27 October 2009, Col 2213.

53 Scottish Parliament Transport, Infrastructure and Climate Change Committee. Official Report, 27 October 2009, Col 2212.

54 Scottish Parliament Transport, Infrastructure and Climate Change Committee. Official Report, 3 November 2009, Col 2270.

55 Rob Gibson, Shirley-Anne Somerville dissented.

56 Scottish Parliament Transport, Infrastructure and Climate Change Committee. Official Report, 27 October 2009, Col 2215.

57 Scottish Parliament Transport, Infrastructure and Climate Change Committee. Official Report, 6 October 2009, Col 2197.

58 Scottish Parliament Transport, Infrastructure and Climate Change Committee. Official Report, 6 October 2009, Col 2198.

59 Scottish Parliament Transport, Infrastructure and Climate Change Committee. Official Report, 3 November 2009, Col 2269.

60 Scottish Parliament Transport, Infrastructure and Climate Change Committee. Official Report, 3 November 2009, Col 2278.

61 Scottish Parliament Transport, Infrastructure and Climate Change Committee. Official Report, 3 November 2009, Col 2279.

62 Scottish Parliament Transport, Infrastructure and Climate Change Committee. Official Report, 27 October 2009, Col 2246.

63 Scottish Parliament Transport, Infrastructure and Climate Change Committee. Official Report, 27 October 2009, Col 2235.

64 Scottish Parliament Transport, Infrastructure and Climate Change Committee. Official Report, 3 November 2009, Col 2280.

65 Scottish Parliament Transport, Infrastructure and Climate Change Committee. Official Report, 3 November 2009, Col 2280.

66 Scottish Parliament Transport, Infrastructure and Climate Change Committee. Official Report, 27 October 2009, Col 2248.

67 Rob Gibson, Shirley-Anne Somerville dissented.

68 Scottish Parliament Transport, Infrastructure and Climate Change Committee. Official Report, 3 November 2009, Col 2284.

69 Scottish Parliament Transport, Infrastructure and Climate Change Committee. Official Report, 27 October 2009, Col 2233.

70 Scottish Parliament Transport, Infrastructure and Climate Change Committee. Official Report, 3 November 2009, Col 2285.

71 Scottish Parliament Transport, Infrastructure and Climate Change Committee. Official Report, 3 November 2009, Col 2285.

72 Scottish Parliament Transport, Infrastructure and Climate Change Committee. Official Report, 3 November 2009, Col 2285.

73 Scottish Parliament Transport, Infrastructure and Climate Change Committee. Official Report, 27 October 2009, Cols 2239-40.

74 SEStrans. Written submission to the Transport, Infrastructure and Climate Change Committee.

75 Professor Iain Docherty. Written submission to the Transport, Infrastructure and Climate Change Committee.

76 Scottish Parliament Transport, Infrastructure and Climate Change Committee. Official Report, 3 November 2009, Cols 2286-7.

77 Scottish Parliament Transport, Infrastructure and Climate Change Committee. Official Report, 3 November 2009, Col 2282.

78 David Connolly, MVA Consulting. Written submission to the Transport, Infrastructure and Climate Change Committee.

79 Professor Iain Docherty. Written submission to the Transport, Infrastructure and Climate Change Committee.

80 Scottish Parliament Transport, Infrastructure and Climate Change Committee. Official Report, 27 October 2009, 2245.

81 Scottish Parliament Transport, Infrastructure and Climate Change Committee. Official Report, 27 October 2009, 2249.

82 Scottish Parliament Transport, Infrastructure and Climate Change Committee. Official Report, 3 November 2009, Col 2287.

83 David Connolly, MVA Consulting. Written submission to the Transport, Infrastructure and Climate Change Committee.

84 Professor Iain Docherty. Written submission to the Transport, Infrastructure and Climate Change Committee.

85 David Connolly, MVA Consulting. Written submission to the Transport, Infrastructure and Climate Change Committee.

86 Scottish Association for Public Transport. Written submission to the Transport, Infrastructure and Climate Change Committee.

87 Scottish Parliament Transport, Infrastructure and Climate Change Committee. Official Report, 3 November 2009, Col 2280.

88 Scottish Parliament Transport, Infrastructure and Climate Change Committee. Official Report, 3 November 2009, Col 2280.

89 Scottish Government. (2009) Draft Budget 2010-11 and Carbon Assessment Report. Scottish Government. Available at: http://www.scotland.gov.uk/Publications/2009/09/17093831/0 and http://www.scotland.gov.uk/Publications/2009/09/17102339/0 [Accessed 17 November 2009].

90 Scottish Parliament Transport, Infrastructure and Climate Change Committee. 2009 (Session 3). Report to the Finance Committee on the Scottish Government's Draft Budget 2009-10.

91 Scottish Parliament Transport, Infrastructure and Climate Change Committee. 2nd Report, 2009 (Session 3). Stage 1 Report on the Climate Change (Scotland) Bill (SPP 249)

92 Climate Change (Scotland) Act 2009, (2009 asp 12) section 94.

93 Scottish Government. (2009) Carbon Assessment of the 2010-11 Draft Budget. Scottish Government. Available at: http://www.scotland.gov.uk/Publications/2009/09/17102339/1. Foreword.

94 Scottish Parliament Transport, Infrastructure and Climate Change Committee. 2nd Report, 2009 (Session 3). Stage 1 Report on the Climate Change (Scotland) Bill (SPP 249). Paragraph 83.

95 Scottish Government. (2009) Carbon Assessment of the 2010-11 Draft Budget. Scottish Government. Available at: http://www.scotland.gov.uk/Publications/2009/09/17102339/2Introduction. Paragraph 2.

96 Scottish Parliament Transport, Infrastructure and Climate Change Committee. Official Report, 29 September 2009, Col 2115.

97 Scottish Parliament Transport, Infrastructure and Climate Change Committee. Official Report, 29 September 2009, Col 2115.

98 Scottish Parliament Transport, Infrastructure and Climate Change Committee. Official Report, 29 September 2009, 2140.

99 Scottish Parliament Transport, Infrastructure and Climate Change Committee. Official Report, 29 September 2009, Col 2131.

100 Scottish Parliament Transport, Infrastructure and Climate Change Committee. Official Report, 29 September 2009, Col 2116.

101 Scottish Parliament Transport, Infrastructure and Climate Change Committee. Official Report, 29 September 2009, Col 2122.

102 Scottish Parliament Transport, Infrastructure and Climate Change Committee. Official Report, 29 September 2009, Col 2117.

103 Scottish Parliament Transport, Infrastructure and Climate Change Committee. Official Report, 29 September 2009, Col 2123.

104 Scottish Parliament Transport, Infrastructure and Climate Change Committee. Official Report, 3 November 2009, Col 2289.

105 Scottish Government. (2009) Carbon Assessment of the 2010-11 Draft Budget. Scottish Government. Available at: http://www.scotland.gov.uk/Publications/2009/09/17102339/2. Paragraph 27.

106 Scottish Parliament Transport, Infrastructure and Climate Change Committee. Official Report, 29 September 2009, Col 2123.

107 Scottish Parliament Transport, Infrastructure and Climate Change Committee. Official Report, 29 September 2009, Col 2129.

108 Scottish Government. (2009) Carbon Assessment of the 2010-11 Draft Budget. Scottish Government. Available at: http://www.scotland.gov.uk/Publications/2009/09/17102339/1. Foreword.

109 Scottish Parliament Transport, Infrastructure and Climate Change Committee. Official Report, 3 November 2009, Col 2288.

110 Scottish Parliament Transport, Infrastructure and Climate Change Committee. Official Report, 29 September 2009, Col2138.

111 Scottish Parliament Transport, Infrastructure and Climate Change Committee. Official Report, 29 September 2009, Col2131.

112 Scottish Parliament Transport, Infrastructure and Climate Change Committee. Official Report, 29 September 2009, Col2118.

113 Scottish Parliament Transport, Infrastructure and Climate Change Committee. Official Report, 29 September 2009, Col2124.

114 Scottish Parliament Transport, Infrastructure and Climate Change Committee. Official Report, 29 September 2009, Cols2140-41.

115 Scottish Parliament Transport, Infrastructure and Climate Change Committee. Official Report, 29 September 2009, Col 2141.

1 Scottish Commission for Public Audit. 1st Report, 2008 (Session 3). Review of the Corporate Governance of Audit Scotland (SP Paper 160). Available online at: http://www.scottish.parliament.uk/s3/committees/scpa/reports-08/scpar08-01.htm

2 Audit Scotland Annual Report and Accounts Year ended 31 March 2009 : http://www.scottish.parliament.uk/s3/committees/scpa/documents/0809Accounts.pdf

3 Scottish Commission for Public Audit. Official Report, 16 September 2009, Col 224.

4 Scottish Commission for Public Audit. Official Report, 16 September 2009, Col 209.

5 Scottish Commission for Public Audit. Official Report, 16 September 2009, Col 219.

6 Scottish Commission for Public Audit. 2nd Report, 2008 (Session 3). Report on Audit Scotland’s Budget Proposal for 2009-10 (SP Paper 171). Available online at: http://www.scottish.parliament.uk/s3/committees/scpa/reports-08/scpar08-02.htm

7 Scottish Commission for Public Audit. Official Report, 16 September 2009, Cols 213-4.

8 Scottish Commission for Public Audit. Official Report, 16 September 2009, Col 222.

9 Scottish Commission for Public Audit. Official Report, 16 September 2009, Col 222.

10 Scottish Commission for Public Audit. Official Report, 16 September 2009, Col 218.

11 Scottish Commission for Public Audit. Official Report, 16 September 2009, Col 222.

12 Correspondence from the Auditor General for Scotland to the Scottish Commission for Public Audit, dated 20 October 2009. Available online at: http://www.scottish.parliament.uk/s3/committees/scpa/papers-09/scpap09-03.pdf

13 Scottish Commission for Public Audit. Official Report, 16 September 2009, Col 216.

14 Scottish Commission for Public Audit. Official Report, 5 November 2008, Col 155.

15 Audit Scotland Autumn Budget Revision 2009-10. Available online at: http://www.scottish.parliament.uk/s3/committees/scpa/papers-09/scpap09-02.pdf

16 Scottish Commission for Public Audit. Official Report, 16 September 2009, Col 225.

17 Scottish Commission for Public Audit. Official Report, 16 September 2009, Cols 225-6.

18 Scottish Commission for Public Audit. Official Report, 28 October 2009, Col. 246

19 Audit Scotland Budget Proposal 2010-11 and Fee Strategy September 2009. Available online at: http://www.scottish.parliament.uk/s3/committees/scpa/papers-09/scpap09-03.pdf

20 Scottish Commission for Public Audit. Official Report, 28 October 2009, Cols 235-6.

21 Supplementary correspondence from the Auditor General for Scotland to the Scottish Commission for Public Audit, dated 3 November 2009. Available online at:

22 Scottish Commission for Public Audit. Official Report, 28 October 2009, Col 245.

23 Scottish Commission for Public Audit. Official Report, 28 October 2009, Col 232.

24 Scottish Commission for Public Audit. Official Report, 16 September 2009, Col 210.

25 Scottish Commission for Public Audit. Official Report, 28 October 2009, Col 232.

26 Scottish Commission for Public Audit. Official Report, 28 October 2009, Cols 238-9.

27 Scottish Commission for Public Audit. Official Report, 16 September 2009, Col 212.

28 Scottish Commission for Public Audit. Official Report, 28 October 2009, Col 236.

29 Scottish Commission for Public Audit. Official Report, 16 September 2009, Col 210.

30 Scottish Commission for Public Audit. Official Report, 28 October 2009, Col 234.

31 Scottish Commission for Public Audit. Official Report, 28 October 2009, Col 234

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