Back to the Scottish Parliament Public Audit Committee Report
Archive Home

Business Bulletin 1999-2011

Minutes of Proceedings 1999-2011

Journal of Parliamentary Proceedings Sessions 1 & 2

Committees Sessions 1, 2 & 3

Annual reports

SP Paper 285 PAU/S3/09/R6
Next

6th Report, 2009 (Session 3)

The First ScotRail passenger rail franchise

CONTENTS

Remit and membership

Report
Introduction

Committee consideration
Background

The AGS report

The business case provided to the Minister
External consultation on the franchise extension

Consultation and commercial confidentiality

Governance arrangements at Transport Scotland

The investment decision making board

The criteria under which the franchise extension was considered
Agreement of the Auditor General for Scotland’s report with the accountable officer
The role of Mr Guy Houston, former Director of Finance and Corporate Services

The declaration and management of Mr Houston’s interests

Annexe A: Extracts from the Minutes

Annexe B: Oral Evidence and Associated Written Evidence

Oral Evidence

14 January 2009 (1st Meeting, 2009 (Session 3))

Dr Malcolm Reed, Chief Executive, Transport Scotland
Bill Reeve, Director of Rail Delivery, Transport Scotland
Steven McMahon, Economic Advisor, Transport Scotland
Gary Bogan, Head of Network Relations and Futures, Transport Scotland
Sir John Elvidge, Permanent Secretary, Scottish Government

21 January 2009 (2nd Meeting, 2009 (Session 3))

Stewart Stevenson MSP, Minister for Transport, Infrastructure and Climate Change, Scottish Government
Gary Bogan, Head of Network Relations and Futures, Transport Scotland
Steven McMahon, Economic Advisor, Transport Scotland
Robert Black, Auditor General for Scotland
Barbara Hurst, Director of Public Reporting (Health & Central Government), Audit Scotland
Angela Cullen, Assistant Director of Public Reporting (Central Government), Audit Scotland
Mark MacPherson, Portfolio Manager (Central Government), Audit Scotland

25 March 2009 (6th Meeting, 2009 (Session 3))

Guy Houston, former Director of Finance and Corporate Services, Transport Scotland
Sir John Elvidge, Permanent Secretary, Scottish Government
Paul Gray, Director of Change and Corporate Services, Scottish Government

Supplementary Written Evidence

Correspondence between the Public Audit Committee and Dr Malcolm Reed, former Chief Executive and Accountable Officer, Transport Scotland.

Correspondence between the Public Audit Committee and Sir John Elvidge, Permanent Secretary, The Scottish Government

Correspondence between the Public Audit Committee and Stewart Stevenson MSP, Minister for Transport, Infrastructure and Climate Change, The Scottish Government

Correspondence between the Public Audit Committee and Guy Houston, former Director of Finance and Corporate Services, Transport Scotland

Correspondence between the Public Audit Committee and David Middleton, Chief Executive and Accountable Officer, Transport Scotland.

Correspondence between the Public Audit Committee and John Swinney MSP, Cabinet Secretary for Finance and Sustainable Growth, The Scottish Government.

Remit and Membership

Remit:

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

(a) any accounts laid before the Parliament;

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

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

(Standing Orders of the Scottish Parliament, Rule 6.7)

Membership:

Willie Coffey
Cathie Craigie
George Foulkes
Murdo Fraser (Deputy Convener)
Hugh Henry (Convener)
Anne Mclaughlin
Nicol Stephen
Andrew Welsh

Committee Clerking Team:

Clerk to the Committee
Tracey White

Senior Assistant Clerk
Joanna Hardy

Assistant Clerk
Jason Nairn

Committee Assistant
Jennifer Bell

The First ScotRail passenger rail franchise

The Committee reports to the Parliament as follows—

INTRODUCTION

1. This report sets out the Committee’s findings in relation to the report by the Auditor General for Scotland (AGS) entitled The First ScotRail passenger rail franchise (The AGS report).

Committee consideration

2. The Committee first considered the AGS report at its meeting on 10 December 2008 and subsequently took oral evidence on 14 January 2009 from:

Dr Malcolm Reed, Chief Executive, Bill Reeve, Director of Rail Delivery, Steven McMahon, Economic Adviser, and Gary Bogan, Head of Network Relations and Futures, Transport Scotland;

and

Sir John Elvidge, Permanent Secretary, Scottish Government;

and on 21 January 2009 from:

Stewart Stevenson MSP, Minister for Transport, Infrastructure and Climate Change, Scottish Government;

Gary Bogan, Head of Network Relations and Futures, and Steven McMahon, Economic Adviser, Transport Scotland;

and

Robert Black, Auditor General for Scotland;

Barbara Hurst, Director of Public Reporting (Health & Central Government), Angela Cullen, Assistant Director of Public Reporting (Central Government), and Mark MacPherson, Portfolio Manager (Central Government), Audit Scotland;

and on 25 March 2009 from:

Mr Guy Houston, former Director of Finance and Corporate Services, Transport Scotland;

Sir John Elvidge, Permanent Secretary, and Paul Gray, Director of Change and Corporate Services, Scottish Government.

3. It is an unusual step for the Public Audit Committee to take formal evidence from the AGS. On this occasion it was thought necessary when aspects of the evidence received from Dr Malcolm Reed, the Accountable Officer for Transport Scotland1 appeared to conflict with the AGS’s findings and his introduction to the report which the AGS gave at the meeting of 10 December.

4. The Committee’s scrutiny focussed on issues surrounding the extension of the franchise and examined the following four key areas:

  • The role of Mr Guy Houston, who was Transport Scotland’s Director of Finance and Corporate Services between May 2006 and 28 November 2008;
  • The information provided to the Minister to inform the decision to proceed with the franchise extension;
  • The lack of external consultation on the franchise extension; and
  • The criteria used to assess whether a franchise extension would be appropriate.

These areas are explored more fully in the sections which follow. The report also includes a section which deals with the process of agreeing AGS reports.

BACKGROUND

5. Most passenger rail services in Scotland are provided through a franchise contract between Scottish Ministers and the private train operating company First ScotRail Limited. First ScotRail began operating the franchise in October 2004, following a tendering process. The contract was awarded by the Strategic Rail Authority (SRA) and the Strathclyde Passenger Transport Executive (SPTE), in consultation with the then Scottish Executive.2

6. In November 2005, the Scottish Executive took over responsibility from the SRA and the SPTE for letting, subsidising and managing the franchise and for monitoring First ScotRail’s performance. The government agency, Transport Scotland, was created in 2006 by the Scottish Executive. Within its broad remit, the new agency is responsible for all matters relating to the franchise.

7. The First ScotRail franchise was initially established as a seven-year term with the option to extend the term by a further three years. By 2006, Transport Scotland became concerned that key aspects of the franchise contract were no longer fit for purpose and that the revenue share arrangements could discourage further service growth and improvements. This was due to the fact that the company had, during the first year of the franchise, reached a point at which, under the terms of the franchise agreement, it was returning 80 per cent of additional revenue to the Scottish Government. The AGS report illustrates how this disincentive can arise.3 In April 2008, following a rigorous appraisal process4, Scottish Ministers extended the franchise to November 2014. A number of changes to the contract were secured on agreement of the extension. These included:

  • more challenging punctuality and capacity compliance targets;
  • increased revenue targets;
  • changes to the revenue share and support arrangements; and
  • introduction of a profit cap to guard against First ScotRail achieving unexpected profit levels.5

8. In exchange for the extension and the change in revenue share arrangements, Transport Scotland secured a guaranteed £73.1 million investment from First ScotRail – a figure based on an assessment of potential future revenue growth. Scottish Ministers will determine how to use this investment, which could be used to reduce subsidy or to invest in service improvements.

9. First ScotRail will receive £2.5 billion (based on 2004/05 prices) in Scottish Government subsidy for the franchise over its ten year term.

The AGS report

10. The key findings outlined in the AGS report are:

  • Transport Scotland is generally managing the franchise contract effectively, but there is some scope to improve;
  • Transport Scotland makes only limited information about the franchise contract and associated performance readily accessible to passengers, user groups and others;
  • Transport Scotland’s review of the franchise contract included a rigorous appraisal process, and it has secured a guaranteed £73.1 million investment by First ScotRail. However, governance arrangements for the franchise extension could have been better managed; and
  • First ScotRail’s train running and quality of service is good and performance is improving in most areas.

11. The AGS also commented on the entry in Transport Scotland’s register of interests showing that the Director of Finance and Corporate Services held shares and share options in FirstGroup and that he was present at key meetings in March 2008 at which the rail franchise extension was discussed.

12. Transport Scotland has accepted many of the recommendations set out in the AGS report. For example, Transport Scotland is working with industry partners to improve its performance measures, it will establish a single source from which stakeholders can access information on the franchise and it has confirmed that its future funding arrangements have been secured. Transport Scotland will also develop a detailed project plan for the next franchise and carry out a consultation to determine whether it should include an extension clause.6

13. The Committee welcomes the finding by the AGS that Transport Scotland is managing the franchise effectively.

14. The Committee notes that First ScotRail will receive £2.5 billion in government subsidy for the franchise over its ten-year term and welcomes the guaranteed £73.1 million investment from First ScotRail which Transport Scotland achieved through its negotiation of the extension, and the improvements that should result from this investment. The Committee further notes that an option to open the franchise to competition did not exist when the extension was being considered. The Committee is therefore not in a position to state whether the £73.1 million investment represents the best possible return from the £2.5 billion subsidy.

15. While some evidence was led to justify the case for the franchise extension being renewed at this time, the Committee sets out in the passages which follow some reservations surrounding the processes involved in the franchise extension.

the business case provided to the Minister

The Auditor General for Scotland’s report

16. The AGS report stated that “Transport Scotland did not provide the Minister for Transport, Infrastructure and Climate Change with a fully documented business case” to inform his decision on the franchise extension.7 The report found, however, that “Transport Scotland used a rigorous option appraisal process when considering the extension and its alternatives.”8 The Minister received presentations, based on this option appraisal work.

Evidence to the Committee

17. During evidence, Transport Scotland, the Permanent Secretary and the Minister provided the Committee with details of the processes which led to the decision by the Minister to extend the franchise. Various meetings took place between Ministers and Transport Scotland between December 2006 and March 2008, including an in-depth briefing given to members of the new administration in September 2007. At this meeting, Transport Scotland was asked to pursue the option of an extension to the franchise. Dr Reed recorded that agreement had been reached with senior FirstGroup representatives on 5 March 2008 and on 19 March Transport Scotland agreed to seek the Minister’s views on the terms of this deal. The Minister then received a “detailed walk-through of all of the key issues in the deal.” 9 The Minister approved the extension of the franchise on 27 March.

18. The Committee heard that the decision to extend the First ScotRail franchise was taken by the Minister without the involvement of the full Scottish Cabinet.10

19. Dr Reed told the Committee that “I am satisfied–and, I believe, ministers were satisfied–that the information we gave them was more than adequate for ministers to take a decision on the franchise extension.”11

20. The Permanent Secretary told the Committee that, in his opinion, “Ministers are, by and large, the best judges of when they have sufficient information to satisfy their accountability for the decisions that they make” and that “the crucial question is whether the analysis was available and whether the key information was in front of ministers.”12

21. The Minister told the Committee that—

“Ministers–myself in particular–were involved in looking at a range of figures related to the proposal over quite a period” … “it is true that a set of high-level slides was used to focus the discussion at the decision-making meeting, but you should be clear that the meeting was by no means the first engagement of ministers.”13

22. During evidence to the Committee, the AGS said—

“the report notes—as the Committee has also acknowledged during its evidence sessions—that a fully documented business case was not provided to the minister. I will clarify the significance that I think should be attached to that. I fully acknowledge and accept the point, which was made by Sir John Elvidge to the committee, that ministers, suitably advised by senior civil servants, should be seen as the best judges of whether they have sufficient information to make a decision, depending on the circumstances. However, the First ScotRail franchise is a very big contract that is worth about £2.5 billion over the 10-year life of the contract. I am in no doubt that a fully documented business case should have been brought together to provide a clear basis for supporting the formal decision to commit a very significant amount of public funds. However, a fully documented business case was not readily available to the Audit Scotland team during the course of the audit.”14

23. The AGS told the Committee that—

“although the documented business case was not brought together in one place so that the auditor could sit down and examine it, at the end of what was a really challenging and complex audit examination, the team was satisfied that, having reviewed lots and lots of paperwork, in totality it was a robust process that was based on sound analysis and appropriate evidence.”15

24. The Scottish Public Finance Manual (SPFM) currently states that full business cases must be prepared for projects involving sums of public money greater than £5m for capital projects or £1m per annum expenditure. Business cases must be made available both to ministers at the time of decision-making and to auditors after the event.

25. The Committee accepts that the material existed within Transport Scotland which would constitute a business case and that this material was the result of a rigorous appraisal process. The Committee notes, however, that this information was not compiled and provided, in full, to ministers. Nor was it readily accessible to auditors.

26. While the Committee understands that it is a matter for ministers to satisfy themselves on the adequacy of the material provided to them to support decision-making, it is nevertheless important that the SPFM is adhered to.

27. The Committee recommends that in future fully documented business cases must be produced to inform ministerial decisions in line with the SPFM and that these are always provided to Ministers. The Committee seeks an assurance from the Permanent Secretary that this will happen.

external consultation on the franchise extension

Consultation and commercial confidentiality

The Auditor General for Scotland’s report

28. Some stakeholder organisations (regional transport partnerships, Passenger Focus and the Scottish Trades Union Congress) have reported that they were concerned at the lack of consultation on the franchise review and would have wished to be involved in discussions to consider any additional benefits that could be secured, or potential risks that might arise, from the extension. The AGS report records that First ScotRail informed Transport Scotland that the potential agreement to extend the franchise was price sensitive. Price sensitive information is defined as “information or data related to a company’s trading or any other affairs which is likely, if generally known, to have an influence on its share price. Use of such information prior to general release could lead to criminal charges of Insider Trading”.16 Transport Scotland was concerned about whether the negotiations on the franchise review and extension could influence market activity and breach financial regulations and therefore decided against public disclosure. The AGS report noted that Transport Scotland did not secure separate advice on this point, but that Transport Scotland was of the view that it balanced appropriately commercial sensitivities and the public interest.17

Evidence to the Committee

29. During evidence to the Committee, Dr Reed argued that—

“disclosure removes potential value that could be obtained from the deal” ... “If we had let the market know that negotiations were going on, in effect the share price would have discounted the outcome of the negotiation and we would not have been able to achieve the full value that we achieved.”18

30. Steven McMahon of Transport Scotland explained that—

“additional value was secured from our estimate of the worth of the deal to FirstGroup as an entity. We could have lost value in that element of the deal if our intention to extend the contract had been disclosed to the market. Our estimate of the additional value to be derived was based on numerous factors, one of which was anticipation of how the franchise extension might positively impact on FirstGroup’s share price.”19

31. The Committee heard from Dr Reed that the Department for Transport’s guide to franchise procurement states “the best value for taxpayers and passengers can be extracted only if commercial confidentiality is observed.”20

32. Transport Scotland officials went on to explain further the decision not to consult with stakeholders over the franchise extension and stated that “the franchise was awarded for seven years, with an extension for three years that would be dependant on good performance. By any manifest, objective test of good performance, First ScotRail satisfied that criterion, so there was nothing to consult on. If we had consulted, we would have delayed the realisation of the substantial benefits from the franchise extension.”21

33. Transport Scotland officials told the Committee of the consultation which has taken place since the franchise was extended, which examines how to apply the benefit gained from the franchise extension. The Committee also heard that there was public consultation on Scotland’s Railways,22 which was published in 2006 and sets out what stakeholders wanted from the railway network. Malcolm Reed stated that—

“I cannot see how an additional round of consultation would have added any value to that process. What it would have done, without a doubt, is delay the realisation of the benefits that we have now achieved.”23

34. The Minister said of the confidentiality surrounding the franchise extension process that—

“it was a legitimate course of action. In my professional life I have become extremely familiar with the issue of market sensitivity” … “the consultation that we have now carried out justifies the choice of that particular approach in that particular circumstance.”24

35. The AGS declined to comment on the approach taken by Transport Scotland, saying that—

“The significance that is attached to commercially sensitive issues in the contract is a matter for Transport Scotland's professional judgment. We are not in a position to second-guess or challenge that judgment.”25

36. The Committee notes the precedents for applying commercial confidentiality to the franchise extension arrangements but regrets the fact that there was no opportunity for stakeholders such as unions and passenger groups to contribute to the process.

37. The Committee regrets the lack of openness and transparency surrounding the franchise extension but, as stated earlier, notes that the terms of the contract did not allow it to be opened up to competition before 2011. The decision to exercise the option to extend makes it difficult for the Committee to determine whether best value for money for the public purse has been achieved.

38. The Committee recommends that, during deliberations on future franchise extensions, the Scottish Government and its agencies should consider how it would be possible to hold meetings with stakeholders such as unions and passenger groups on an ‘in principle’ basis which would avoid breaching commercial confidentiality.

39. The Scottish Government should consider whether the regular collection of stakeholders’ views would produce a useful resource which could be drawn on during future franchise negotiations.

governaNce arrangements at transport scotland

The investment decision making board

40. The AGS report records the fact that Transport Scotland’s board consists of the chief executive and five executive directors, along with two non-executive members. The board acts in an advisory capacity, with Transport Scotland’s chief executive being formally accountable for the performance of the organisation and for the advice given to Scottish Ministers.

41. Transport Scotland also has an investment decision making (IDM) board, consisting of the chief executive and its five executive directors, which assists the chief executive with major investment decisions.

42. Transport Scotland has agreed that its non-executive members should not be part of the IDM board. Accordingly, non-executive members of the board were not involved in the franchise review and extension options.

43. During evidence, Dr Reed explained that these arrangements were consistent with the process followed by the Department for Transport, which restricts franchise matters to a small group of its executive directors. He went on to describe the rationale behind the arrangements—

“First, the non-executive directors form our audit committee. It was their view that their independence as an audit committee would be compromised if they were part of decisions that they would subsequently scrutinise. The second reason is a simple matter of practicality. IDM boards often have to be called at short notice to deal with an emerging investment decision, and IDM meetings often last for half a working day. Our non-executive directors have other jobs to do and we cannot expect them to attend at short notice.”26

44. The Committee notes that, in general, non-executive board members do not sit on investment decision-making groups or boards within executive agencies. The Committee asks that the AGS’s review of the role of boards across the Government examines this issue.27

the criteria under which THE franchise extension WAS considered

The Auditor General for Scotland’s report

45. The AGS report states that—

“the original contract contained an option to extend the franchise but did not specify the conditions under which an extension should be considered, or the criteria to be used to decide whether an extension might be appropriate. Transport Scotland reports that criteria were established to determine whether the extension should be awarded. However, no formal record was made of the criteria being approved”.28

Evidence to the Committee

46. Dr Reed told the Committee that—

“there were no extension criteria in the contract” … “but, when we began to consider an extension, the first thing we did was develop criteria.”29

47. Steven McMahon (Economic Adviser, Transport Scotland) outlined the criteria which were used to inform the decision to extend the franchise—

“There were five key areas of assessment: the performance up to that point of the franchisee; the economic and policy context; incentives for future growth; transaction costs; and risk and uncertainty.”30

48. Audit Scotland witnesses confirmed that—

“there is clear evidence from our review that criteria were developed … it is not clear at what stage and by whom they were approved.”31

49. The Committee is of the view that greater transparency would have been achieved had criteria for the consideration of an extension to the franchise been written into the original contract.

50. The Committee endorses the AGS’s view that the next franchise contract should specify the criteria that will be used to decide whether an extension is appropriate, should the contract contain an extension option.

AGREEMENT OF THE Auditor General for Scotland’S REPORT WITH THE ACCOUNTABLE OFFICER

Background

51. When the AGS took up his duties in 2000, a protocol was agreed for the clearance of his reports with accountable officers for the purpose of ensuring that they are factually accurate. The Scottish Public Finance Manual contains guidance for accountable officers on this process. The clearance process normally takes three weeks.

Evidence

52. During evidence to the Committee, Dr Reed said that—

“we were, just before the report was due to go to for printing, presented with significant further revisions that had not been discussed with us. We therefore did not have the opportunity to engage as fully as we would have wished.”32

53. The AGS, during his evidence to the Committee stated that “the only issue in that category relates to the shares and share options in FirstGroup that were held by the director of Finance and Corporate Services.”33 Specifically, paragraph 71 of the report was brought in at the later stage, along with some minor changes to the wording of paragraph 70. Audit Scotland staff confirmed that Transport Scotland had an opportunity to see the paragraphs prior to publication in order to confirm factual accuracy, in keeping with the agreed arrangements between Audit Scotland and audited bodies.34

54. The AGS and his colleagues explained that the information about Mr Houston’s shareholding, although included in Transport Scotland’s register of interests and annual accounts, was not specifically drawn to the attention of the Audit Scotland study team by Transport Scotland. Barbara Hurst of Audit Scotland described the confidential nature of the internal processes involving the franchise extension. She said—

“the local audit team did not know that it was going on, and our study team, which was in there considering the extension of the rail franchise, did not know that negotiations were going on to extend the franchise. Once we did know, there was no audit trail to show what had gone on, in terms of managing the conflict of interest.”35

55. The AGS went on to say that—

“I took the view that it was most certainly a material interest and therefore required it to be introduced into the report.”36

56. In a letter to the Committee, Dr Reed contended that Audit Scotland would have been aware of Mr Houston’s interests through the publication of Transport Scotland’s annual accounts – published in September 2007 – and was also formally made aware of them on 22 June 2007.37

57. In relation to the process of agreeing the AGS report, while the Committee accepts that Mr Houston’s shareholdings were a matter of public record in the annual accounts, it would have been helpful had Transport Scotland specifically brought them to the attention of the study team at the outset of the audit.

58. The Committee notes the difficulties caused by the fact that one new paragraph, and some wording changes to an existing paragraph, were brought forward at a late stage in the finalisation of the AGS report but accepts that, where such changes do not relate to matters of fact, this is a regular and acceptable feature of the work of Audit Scotland. The Committee notes that Audit Scotland secured the agreement of the chief executive of Transport Scotland to the inclusion of the facts contained in the paragraphs, and to the entire report. The Committee does not accept Dr Reed’s criticisms of the way in which Audit Scotland conducted itself during the process and considers these criticisms to be unfounded and unacceptable.

the role of MR GUY HOUSTON, FORMER Director of Finance and Corporate Services

The declaration and management of Mr Houston’s interests

The Auditor General’s report

59. As set out in the AGS report, Transport Scotland’s register of interests indicates that Mr Houston held shares and share options in FirstGroup (of which First ScotRail is a subsidiary). This interest is also included in Transport Scotland’s annual accounts for both 2006/07 and 2007/08.

60. FirstGroup’s annual returns between March 2006 and March 2008 record the fact that Mr Houston significantly increased the number of shares he held during this period. The return of 31 March 2006 records holdings of 3,083 shares, the return of 31 March 2007 records holdings of 7,531 shares and the return for 31 March 2008 shows 12,375 shares were held. During this period, the price of FirstGroup shares varied between 415.8 pence and 616.4 pence per share, with the higher price reached in February 2007.

61. The Committee learned that the increase in Mr Houston’s shareholdings during his tenure with Transport Scotland was the result of Mr Houston exercising share options which had been granted to him during his employment with FirstGroup. The share options, which were in three batches, could be exercised only within specific windows of time, which fell during his subsequent employment with Transport Scotland.38

The Civil Service Code and staff handbook

62. The Civil Service Code requires civil servants to declare interests to their department or agency if they would be able, as a result of their position, to further those interests. It states that civil servants “must not be involved in taking any decision which could affect the value of their private investments.”39

63. The Permanent Secretary also provided the Committee with an extract of the Civil Service Staff Handbook. The relevant passage states that “If you have or may be proposing to acquire a financial interest in a business or institution with which you may have to deal officially you should immediately report such an interest to senior line management” … “Any deliberate failure to make a disclosure will be considered a matter of misconduct.”40

The appointment process

64. The Permanent Secretary told the Committee that “it is not my experience that candidates in most recruitment processes are routinely asked to identify any conflicts of interest that they might have.”41 The Permanent Secretary confirmed that, once a contract is offered and accepted, a civil servant becomes bound by the civil service code, stating that “we do not write the whole civil service code into people's contracts, but [Mr Houston] would be aware at that point [on his appointment to Transport Scotland] that he was subject to the civil service code.”42

65. Dr Reed confirmed that, at the time of Mr Houston’s appointment, he had no knowledge of Mr Houston’s shareholdings.43 He also stated that Mr Houston had “declared them in the normal course of events during his first year of employment.”44

66. At the Committee meeting on 14 January, the Permanent Secretary confirmed that “good practice must be for disclosure to happen as soon as possible”.45 In a letter to the Committee dated 2 February 2009, he advised the Committee that “there is no standard interview question asked of potential recruits to the senior civil service concerning their interests and the potential for a conflict of interest”. He added that “since the Committee meeting on 14 January, a question has been added to the external Senior Civil Service application form which asks the applicant to indicate whether they are aware of any possible conflict of interest which might arise should they be appointed.” The Permanent Secretary has also requested that the Scottish Government’s Human Resources team review SCS recruitment procedures to see whether anything further is required.46

67. In later evidence to the Committee, the Permanent Secretary set out two steps that had been taken in order to improve the identification and management of interests.47 Firstly, he informed the Committee that changes to the recruitment process now mean that it is “not possible to recruit someone without the identification of an interest being discussed at that stage.” Secondly, he stated that rather than the previous system of a “once-and-for-all” arrangement being put in place, anyone with private financial interests now has six-monthly discussions with their line managers on the management of those interests.

68. With regard to the disclosure of potential conflicts of interest, the Committee is concerned that the Permanent Secretary’s view is that disclosure should happen “as soon as possible” whereas Dr Reed seemed content that this had happened “during the first year” of Mr Houston’s employment. The civil service staff handbook is unequivocal when it states that staff should “immediately report such an interest to senior line management”. The Committee observes that there is only one possible interpretation of the word “immediately” and that neither of these approaches can be said to have met that heavy onus. The Committee does not accept that “as soon as possible” has the same definition as “immediately”. The Committee is critical of the failure of senior civil servants to follow the civil service handbook in this regard.

69. The Committee asks that the Permanent Secretary reports back to the Committee with a copy of the new guidelines regarding recruitment and the management of conflicts of interest.

70. The Committee recognises that there is an increasing propensity for the private and public sectors to work more closely together, creating more opportunities to share and transfer skills and experience. The Committee acknowledges that such closer working can bring many benefits. However, differences in culture and working environments mean that staff who join the public sector must be made aware of, understand and observe the relevant rules, including in relation to managing potential conflicts of interest. This is necessary in order to protect employees and employers and to ensure the best use of public resources.

71. The Committee therefore welcomes the review by the Scottish Government of both Senior Civil Service recruitment procedures and the guidance on the declaration and registration of interests. The Committee believes that the amended system must be applied rigorously, to ensure the disclosure of interests in advance of appointment. The Committee notes that new arrangements mean that those holding a private financial interest will have six-monthly discussions with line managers. The Committee seeks an assurance that these arrangements are written into formal line management procedures and rigorously adhered to.

72. In order to ensure that the public sector continues to secure the right skills and experience, while ensuring relevant rules and standards are met, the Committee recommends that the Scottish Government considers methods of management of interests which would protect both employees and employers from any perception of wrongdoing.

The management of Mr Houston’s interests

73. In a letter to the Committee, Dr Reed confirmed that Mr Houston formally registered his interests in FirstGroup on 19 February 2007, some nine months after his appointment, as part of the routine process of preparing the annual accounts. Mr Houston then wrote to Dr Reed on 14 March 2007 about the arrangements for managing any potential conflict with his interests in FirstGroup.48

74. During evidence, Mr Houston stated that he had first made an oral declaration of his interests “within weeks” of taking up employment with Transport Scotland.49 When asked why it had then taken nine months to put this declaration in writing, he stated that “There are no timescale requirements with regard to disclosure ... disclosure should take place when it is appropriate. A set of annual reports was due, and my view was that the matter should be put on the public record at that time”.50 The Permanent Secretary, when asked about the adequacy of these arrangements, conceded that “it would have been better for a detailed protocol to be in place earlier.”51

75. During his evidence, Dr Reed outlined the steps taken by Transport Scotland to manage any potential conflict of interest. He told the Committee that “we ensured that his interest was properly recorded” and “we put in place management arrangements to ensure that [he] was not involved in decision making that could be construed as affecting his interest in FirstGroup.”52 In a letter to the Committee, Dr Reed set out the arrangements which he agreed with Mr Houston to ensure that any potential conflict of interest was properly managed. These were:

“a. Mr Houston would continue to be at arms length in relation to any negotiations with First ScotRail on the franchise costs;

b. Mr Houston would be party to negotiations in relation to any contractual changes in either concessionary travel scheme, but any decision would need to be ratified by a fellow director; and

c. Any other financial decision made by himself that would impact on FirstGroup or any of its subsidiaries was to be ratified by a fellow director.”53

76. The management arrangements also included an agreement that Mr Houston’s shareholding in FirstGroup would “not increase above current levels”.54

77. Dr Reed also stated during his evidence to the Committee that “I do not regard [Mr Houston’s] shareholding—in view of its size—as a material interest”.55

78. In principle, the Committee would regard a shareholding by an employee of Transport Scotland in FirstGroup of any value as a potential conflict of interest, regardless of the arrangements in place to manage the potential conflict. The Committee disagrees with Dr Reed’s attitude towards Mr Houston’s shareholding, and is of the clear view that, given its substantial value, it did represent a significant material interest.

79. In his evidence, the Permanent Secretary stated that “a set of protocols for managing [the interest] was put in place; they centred on ensuring that Mr Houston could never sign off decisions that might be material to his interests.”56 He added that “it would have been better if everyone had been aware of the issue [the interest in FirstGroup] during the [recruitment] process.”57 During later evidence on this issue, the Permanent Secretary stated that “I do not think that Malcolm Reed's decisions were unreasonable.”58

80. The Committee considers that the management of potential conflicts of interests of civil servants rests with the civil service and not with the auditors.

81. The Committee notes Mr Houston’s assertion that he had verbally declared his interests “within weeks” of his appointment to Transport Scotland but they had not been put in writing and properly recorded until some considerable time after. The Committee also notes that Dr Reed stated that Mr Houston had given a verbal indication of his interests “during the first year of his employment.” The Committee finds that the handling of Mr Houston’s interests was unsatisfactory, inappropriate and could be construed as being in breach of the Civil Service Code. The Committee notes that there was no agreed protocol written down to manage Mr Houston’s interest until he had been working at Transport Scotland for at least nine months. We find it entirely inappropriate that it was left to Mr Houston to set out in writing the arrangements for handling his interest and believes that this should have been done by his line manager, Dr Reed, at a much earlier date.

82. The Committee recommends that the Permanent Secretary ensures that clear guidelines are urgently produced to address this issue.

83. The Committee considers that Mr Houston was to a certain extent let down by his employer and the fault for that lies firstly with his line manager. We also believe that the Permanent Secretary, Sir John Elvidge, has a duty to ensure that robust arrangements are in place to deal with such occurrences and that these are enforced. The Civil Service Handbook was not enforced in this case.

84. The Committee believes that the arrangements put in place to manage the potential conflict of interest between Mr Houston’s role and his shareholding were untimely and insufficient and have led to concern on our part regarding Transport Scotland’s decision-making.

85. The Committee believes that both individual employees and employers must take responsibility for declaring and registering interests and ensuring that robust arrangements are put in place to manage those interests in a way which ensures transparency.

86. The Committee recommends that the Scottish Government should consider whether standard processes beyond those attached to the recruitment procedures should be adopted to manage potential conflicts of interests. These could include a minimum requirement that staff declare any relevant interests at all meetings to which the interest relates, the recording of such potential conflicts in the minutes of meetings and the exclusion of staff from meetings, or parts of meetings, which discuss matters pertaining to their interests.

Mr Houston’s attendance at meetings in relation to the franchise

87. Transport Scotland’s review of the franchise contract took place over a period of approximately 18 months, between autumn 2006 and spring 2008.59 Dr Reed told the Committee that, at a meeting on 5 March 2008, the “terms of a deal were struck” with FirstGroup representatives that Transport Scotland felt able to recommend to Ministers.60 The Minister for Transport, Infrastructure and Climate Change approved the franchise extension on 27 March 2008.

88. The AGS report records that Mr Houston was present at key meetings in March 2008 at which the rail franchise extension was discussed. The minutes of these meetings do not record if Mr Houston declared an interest or removed himself from discussions about the franchise extension.61

89. In oral evidence, Dr Reed stated that—

“Mr Houston was a participant only at a very late stage in the process. He attended two meetings after the deal had been struck, one of which was simply to discuss the handling of the deal. The second meeting was held after ministers had taken the decision to proceed with the extension. He was, therefore, not a participant in the process and played no part in shaping or negotiating the deal.”62

90. However, Dr Reed also acknowledged that “it would have been more appropriate if he had not been part of those discussions.”

91. Audit Scotland staff told the Committee that the arrangements for dealing with Mr Houston’s interests were verbally explained to Audit Scotland’s rail franchise study team late in the audit process and they did not see a written set of arrangements at any time. The AGS stated that Dr Reed had given Audit Scotland assurances that Mr Houston did not take part in the decision-making process. However, he added that “given the insufficiency of the records, on the basis of the evidence available to us, the audit team cannot provide a positive assurance on that.”63 During evidence, Barbara Hurst, Audit Scotland, explained that Audit Scotland’s local audit team (responsible for the annual external audit of Transport Scotland) discussed with Transport Scotland the necessary disclosures in its 2006/07 accounts but that the team had no recollection of seeing the letter setting out the arrangements.64

92. Of Mr Houston’s presence during meetings to discuss the franchise, the Permanent Secretary stated that—

“As we have clear evidence that his involvement in meetings was post the decision being made, I do not think that I would describe it as unacceptable.”65

93. The Minister stated that he had no concerns over Mr Houston’s involvement in the discussions on the franchise extension “given that it post-dated the decision [to extend the franchise].”66 He added that “it is not for me to handle the interest, it is for the individual.”67

94. During evidence on 21 January 2009, the Committee learned that Mr Houston was present at the meeting which took place on 19 March 2008, at which Transport Scotland agreed the proposal to seek ministers’ views on whether to extend the franchise.68

95. Mr Houston described the role of the finance department (under his directorship) to the Committee—

“we would simply consolidate information that we had been given … from rail, concessionary fares and roads team that we would consolidate. We would then send information up the line” … “The rail directorate was entitled to make decisions with the approval of the chief executive. Financial decisions did not have to be taken through me.”69

96. The Committee has obtained extracts of the minutes of 15 meetings which took place between March 2007 and November 2008 at which the ScotRail franchise was discussed. The minutes confirm Mr Houston’s presence but do not detail individual contributions to discussions. The minute of a meeting which took place on 23 January 2008 confirms that the franchise extension was discussed at that meeting.

97. A letter from the Permanent Secretary confirmed that Mr Houston was present at the meetings but argued that—

“Mr Houston’s participation was consistent both with the arrangements he [Malcolm Reed] had agreed with him, in respect of the handling of potential conflicts of interest in relation to FirstGroup and his broader financial management responsibilities.” 70

98. During oral evidence, Mr Houston told the Committee that—

“I was at lots of meetings at which the First ScotRail franchise was discussed in relation to performance, human resources, communications and all sorts of issues that related to First ScotRail. I was not involved in financial decision-making meetings… the key thing to remember is that the onus was then on me, in knowing that there might be an extension to do nothing with my shares and not trade during that period” and “there is a crucial difference between receiving information on progress, and receiving knowledge and using it”71 … “I made sure that I did not trade. If I gained any knowledge—which I did—I made sure that I did not trade when I gained that knowledge.”72

99. The Committee was given wholly inaccurate information on the meetings attended by Mr Houston and it took much extra effort on the Committee’s part before a more complete picture emerged. The Committee notes, in particular, that the Permanent Secretary informed the Committee that Mr Houston had only attended meetings subsequent to the decision to extend the franchise but that it subsequently came to light, after repeated probing on the part of the Committee, that this was not the case. This is totally unacceptable.

100. The Committee notes that there is a distinction between meetings to discuss the operation of the ScotRail franchise and those which discussed the franchise extension but considers that a clear conflict of interest exists in relation to both issues. The Committee considers that it would have been good practice both for Mr Houston to declare his interest and for the minutes of all the meetings at which the rail franchise was discussed to record the declared interest, and whether he took part in the discussions or the decision-making.

101. The Committee believes that the attendance at meetings of someone with a pecuniary interest gives rise to a real concern about conflict of interest. Transport Scotland must ensure that minutes of meetings are robust and more accurately reflect the participation of individuals with a pecuniary interest in the business of the meeting. The Committee requires confirmation from Transport Scotland that this safeguard has now been put in place. The Committee recommends that the Permanent Secretary ensures that clear guidelines are urgently produced to address this issue across the public sector.

102. The Committee considers that, regardless of whether or not Mr Houston took part in the proceedings of meetings, or had any role in decision-making, he was privy to confidential information during March 2008 which he could potentially have used to his material advantage. The Committee notes Mr Houston’s assertion that he did not trade in shares between his involvement in the meetings and his departure from Transport Scotland. Mr Houston has, however, accepted that he used some shares to cover the tax liability on exercise of a share option and that he also transferred all of his shares in FirstGroup to his wife while employed by Transport Scotland.

103. The Committee is not convinced that receiving knowledge and taking no action demonstrates that there was no misuse of that information. It can equally be the case in certain circumstances that taking no action on receiving knowledge is the most beneficial course to take. We are therefore not persuaded by Mr Houston’s reasoning in this regard. Furthermore, the Committee believes that the onus does not lie with the employee to decide whether or not to receive or use knowledge which might potentially be applied to further his or her interests.

The departure of Mr Houston from Transport Scotland

104. It is a matter of public record that Mr Houston resigned from Transport Scotland, effective as of 28 November 2008.

105. The Committee was interested to learn more about the sequence of events which led to the resignation of Mr Houston and whether his departure had any consequences for the public purse. Specifically, the Committee wished to know whether Mr Houston received any enhancement to his entitlements following his resignation.

106. Both Dr Reed and the Permanent Secretary declined to answer questions regarding the details of Mr Houston’s departure during oral evidence on 14 January, citing the requirements of the Data Protection Act 1998.

107. When questioned on the details of Mr Houston’s departure, and whether he had expressed any views on Mr Houston’s continued employment, the Minister stated that “the beliefs of ministers are quite irrelevant to the employment situation of any civil servant.”73 In a letter to the Committee74, the Minister reiterated that “decisions relating to the employment of civil servants are a matter for the Permanent Secretary”. The Committee wrote again to the Minister to request an unequivocal answer to its question. In his response, the Minister stated that “I gave no indication to him, or to any of his staff, including the staff of Transport Scotland … that I wished Guy Houston to leave the employment of Transport Scotland”.75

108. The Permanent Secretary, in a letter to the Committee, stated that—

“Ministers did not seek at any point to influence my judgement about Mr Houston’s continuing employment.”76

109. During evidence, the Permanent Secretary told the Committee that, normally, three months’ notice is required of senior civil servants wishing to leave. He confirmed that, in the case of Mr Houston’s departure, this requirement was waived.77 He added that—

“I often take the view that, when someone senior is going to leave the organisation, it is better for the organisation not to continue to work with someone who will not live with the consequences of the decisions in which they are involved. I think that work will progress better if people are not in a state of uncertainty about whether what a senior manager says today will be the instructions under which they will operate in two months' time. I think that there is often a business case for making breaks cleanly. Where there are any other factors that might complicate that—it would be naive not to recognise that Mr Houston's name was in the public domain, which was bound to complicate the conduct of business—there is another reason for saying that the business of the organisation is likely to go forward better if the break happens sooner rather than later.”78

110. In a letter to the Committee, the Permanent Secretary stated that—

“I can give the Committee my assurance that our reasons for agreeing to Mr Houston’s departure on the terms we did were grounded in matters unrelated to the rail franchise extension, including my view that I wished the new Chief Executive of Transport Scotland to have freedom to restructure his senior team. I can also give the Committee the information that the financial arrangements related to his departure were consistent with the legal and contractual entitlements which apply in such cases.”79

111. The Committee was interested to know how common it is for senior civil servants who resign to be offered payment in lieu of notice and other enhancements. The Permanent Secretary told the Committee that, of the six senior civil servants who had resigned over the past five years, two had received a termination/settlement payment. During oral evidence, the Permanent Secretary confirmed that Mr Houston was not one of them.80

112. During evidence to the Committee, Mr Houston described his reaction to the publication of the AGS report81

“I just felt that this was going to cause an embarrassment to ministers” … “I just assumed that it would make life much easier for all concerned if I resigned on the spot”82 … “The decision was mine and mine only.”83

113. Following discussions with the Scottish Government Human Resources team, Mr Houston entered into a compromise agreement with the Scottish Government. The contents of the agreement are confidential and it is therefore, regrettably, not possible for the Committee to determine whether public funds were used to make a payment in lieu of notice or any other additional payments nor whether other terms were agreed in relation to Mr Houston’s departure.

114. The Scottish Public Finance Manual (SPFM) states at paragraph six that—

“In considering terms of severance, early retirement or redundancy packages – whether compulsory or voluntary – public bodies to which the SPFM is applicable should ensure that issues of regularity, propriety and value for money are fully taken into account. These include the following specific requirements…any undertakings about confidentiality should leave transactions open to proper public scrutiny; and, at paragraph 9 that “Compensation should not be offered in order to avoid normal management procedures, disciplinary action, unwelcome publicity or reputational damage.”

115. Through oral and written evidence, the Committee learned that Mr Houston contacted Human Resources within the Scottish Government on 25 November 2008, met with its Director on 26 November, and signed a compromise agreement on 28 November 2008, with his resignation being effective from that day.

116. The Minister stated in a letter to the Committee that “I was verbally informed on 25 November 2008 that Mr Houston had resigned, effective from 28 November 2008”.84 During oral evidence to the Committee, Mr Houston stated that “there was no agreement [on his resignation] on 25 November”.85When asked when he informed the Permanent Secretary of Mr Houston’s resignation, Paul Gray (Director of Change and Corporate Services, Scottish Government) stated that “That would have been after the meeting that I had with Mr Houston on 26 November, because that was the first time that I had any basis for knowing his intention.”86 The Minister subsequently informed the Committee that “the date in my letter was correct but it did not accurately reflect the content of our discussion … the fact that Mr Houston had decided to step down from his position in the Scottish Government was communicated to Ministerial Offices late on 27 November”.87

117. The Committee has not received a clear or reliable explanation from the Scottish Government on the sequence of events surrounding the departure of Mr Houston.

118. The Committee is strongly critical of the difficulty it faced in gaining clear and precise answers to questions surrounding the timetable of events leading to Mr Houston’s departure. The Committee expects those providing written and oral evidence to ensure that it is factual, consistent and complete.

119. The Committee accepts that there is sometimes a business reason for allowing notice to be waived when a member of staff resigns. However, the SPFM makes it clear that “compensation should not be offered in order to avoid normal management procedures, disciplinary action, unwelcome publicity or reputational damage”. In this case, the Committee has been unable to obtain any information about the terms of Mr Houston’s resignation and is therefore not in a position to comment on whether the SPFM has been adhered to in relation to the use of public funds.

120. The Committee believes that the Presiding Officer and the Parliament should reflect on whether issues of confidentiality supersede the right of committees and the Scottish Parliament to hold to account those responsible for the management of public funds where there is a refusal to provide information.

121. The minute of a meeting on 21 November 2008 records the fact that Mr Houston informed the Board of Transport Scotland that he no longer held shares in FirstGroup. It states that “Mr Houston informed the Board that he no longer held shares in FirstGroup and the Board agreed that he could remain for the discussion as there was no conflict of interest”.88 The Committee heard that Mr Houston transferred his shareholdings in FirstGroup to his wife for personal reasons in the week beginning 17 November 2008.89 During evidence to the Committee, Mr Houston stated that “The meeting did not involve financial decisions and therefore, as the minutes state, there was no conflict of interest—not because I did not own the shares any more, but because it was not a financial decision-making meeting.”90 He added that “The reason that a conflict of interest did not arise was that the meeting was not a financial decision-making meeting; the reason was not that I had the shares or that my wife had the shares. The sentence is too short.”91 The Permanent Secretary told the Committee that “I recall being told at some stage that Mr Houston had done something with his shareholding, but I regarded that as wholly irrelevant to the issues.”92

122. The Committee considers it notable that Mr Houston transferred his shares in FirstGroup to his wife within a week of learning of the inclusion of the paragraph on his interests in the forthcoming AGS report and, furthermore, that the Permanent Secretary was informed of this.

123. The Committee is concerned that the minute of the meeting of 21 November 2008, and the fact that the Permanent Secretary had been informed of the shares transfer, gives the impression that Mr Houston had disposed of his shares in an attempt to remove a perception that there was a conflict of interest. The Committee notes that, under the civil service code, a conflict of interest also exists when a family member of a civil servant holds relevant shares.

124. The Committee regrets that the minute-taking within Transport Scotland failed to give a clear account of what occurred at the meeting.

Wider issues

125. During the course of its inquiry, the Committee was given incomplete or incorrect information on a number of occasions. The Committee considers it discourteous and obstructive that some of the evidence gathered during the course of its inquiry was only made available after repeated requests. The Committee also regrets that, on a number of occasions, information had to be corrected following further probing by the Committee. The Committee was given, at first, incorrect information on meetings which took place between Mr Houston and the Scottish Government which precipitated his departure from Transport Scotland. The Committee had to make repeated requests in order to obtain an answer to the question of whether ministers had sought to direct civil servants regarding his departure. The Committee also received incorrect information on the number and timing of the meetings which Mr Houston had attended, at which the franchise was discussed, during his employment with Transport Scotland.

126. The Committee’s work has been frustrated by having to prise information from senior civil servants and having persistently to question responses given. The Committee is concerned that the behaviour of those holding information of interest to this Committee has implications for all committees of the Parliament. The Committee requests that the Presiding Officer gives consideration as to how parliamentary committees can discharge their functions when there is a lack of co-operation and transparency on the part of others.

127. The Committee is of the view that openness and transparency are the best means by which to remove any public concerns about the conduct of public bodies. In the context of this inquiry, information was not given in an open and transparent way and, as a consequence, important issues remain outstanding.

Annexe A: EXTRACTS FROM THE MINUTES

18th Meeting, 2008 (Session 3) Wednesday 10 December 2008

Section 23 report: The Committee received a briefing from the Auditor General for Scotland on his report entitled "the First Scotrail passenger rail franchise".

Consideration of approach (in private): The Committee considered its approach to the Auditor General for Scotland's report entitled "the First Scotrail passenger rail franchise". The Committee agreed to invite Malcolm Reed, the Accountable Officer for Transport Scotland, Sir John Elvidge, Permanent Secretary of the Scottish Government and the Minister for Transport, Infrastructure and Climate Change to give oral evidence to the Committee.

1st Meeting, 2009 (Session 3) Wednesday 14 January 2009

Section 23 report: The Committee took evidence on the Auditor General for Scotland's report entitled "the First ScotRail passenger rail franchise" from—

Malcolm Reed, Chief Executive, Bill Reeve, Director of Rail Delivery, Steven McMahon, Economic Adviser, and Gary Bogan, Head of Network Relations and Futures, Transport Scotland;

Sir John Elvidge, Permanent Secretary, Scottish Government.

Consideration of evidence (in private): The Committee considered the evidence received at agenda item 2. The Committee agreed to write to witnesses to follow up issues raised during evidence. The Committee also agreed to invite the Auditor General for Scotland to give evidence on his report at the next meeting of the Committee.

2nd Meeting, 2009 (Session 3) Wednesday 21 January 2009

Section 23 report: The Committee took evidence on the Auditor General for Scotland's report entitled "The First ScotRail passenger rail franchise" from—

Stewart Stevenson MSP, Minister for Transport, Infrastructure and Climate Change, Scottish Government;

Gary Bogan, Head of Network Relations and Futures, and Steven McMahon, Economic Adviser, Transport Scotland;

Robert Black, Auditor General for Scotland;

Barbara Hurst, Director of Public Reporting (Health & Central Govt), Angela Cullen, Assistant Director of Public Reporting (Central Govt), and Mark MacPherson, Portfolio Manager (Central Govt), Audit Scotland.

Consideration of evidence (in private): The Committee considered the evidence received at agenda item 2. The Committee agreed to write to the Minister for Transport, Infrastructure and Climate Change and Malcolm Reed, Chief Executive, Transport Scotland to seek further information on issues which arose during evidence. The Committee agreed to consider written responses from witnesses in private at its next meeting.

3rd Meeting, 2009 (Session 3) Wednesday 4 February 2009

Section 23 report (in private): The Committee considered responses from the Accountable Officer, the Permanent Secretary and the Minister for Transport, Infrastructure and Climate Change on the Auditor General for Scotland's report entitled "The First Scotrail passenger rail franchise." The Committee agreed to write to the Permanent Secretary, the Minister for Transport, Infrastructure and Climate Change, the Cabinet Secretary and the First Minister to seek further information on issues raised during the discussion. In particular, the Committee agreed to press the permanent secretary for disclosure of information relating to the departure of Guy Houston from Transport Scotland.

4th Meeting 2009 (Session 3) Wednesday 25 February 2009

Section 23 report (in private): The Committee considered a response from the Permanent Secretary on the Auditor General for Scotland's report entitled "the First Scotrail rail passenger franchise" and considered the next steps in its inquiry. The Committee agreed to write again to the Permanent Secretary to seek further information on issues raised during the discussion. The Committee also agreed to invite Guy Houston to give oral evidence and to consider a draft report at its next meeting.

5th Meeting 2009 (Session 3) Wednesday 11 March 2009

Section 23 report (in private): The Committee considered correspondence on the Auditor General for Scotland's report entitled "The First Scotrail passenger rail franchise" and considered the next steps in its inquiry. The Committee agreed to write to the Permanent Secretary to seek further information on issues raised during the discussion. The Committee also agreed to invite the Permenant Secretary to give further oral evidence.

6th Meeting 2009 (Session 3) Wednesday 25 March 2009

Section 23 report: The Committee took evidence on the Auditor General for Scotland's report entitled "The First ScotRail passenger rail franchise" from—

Guy Houston, former Director of Finance and Corporate Services, Transport Scotland;

Sir John Elvidge, Permanent Secretary, and Paul Gray, Director of Change and Corporate Services, Scottish Government.

Consideration of approach (in private): The Committee considered the evidence taken at item 3 and considered the next steps in its inquiry. The Committee agreed to seek further information from witnesses on a number of issues which were raised during the discussion. The Committee also agreed not to release the written evidence associated with the inquiry at this stage.

8th Meeting 2009 (Session 3) Wednesday 29 April 2009

Section 23 report (in private): The Committee considered a draft report on the Auditor General for Scotland's report entitled "The First ScotRail passenger rail franchise". The Committee agreed to consider a further draft at its meeting on 20 May.

10th Meeting 2009 (Session 3) Wednesday 20 May 2009

Section 23 report (in private): The Committee considered a draft report and correspondence from the Permanent Secretary on the Auditor General for Scotland's report entitled "The First ScotRail passenger rail franchise". The Committee agreed to consider a further draft of the report at its meeting on 3 June. The Committee also agreed to write to the Permanent Secretary on a number of issues raised during discussion.

11th Meeting 2009 (Session 3) Wednesday 3 June 2009

Section 23 report (in private): The Committee considered a draft report on the Auditor General for Scotland's report entitled "The First ScotRail passenger rail franchise". The Committee agreed the report, subject to revisions, and the arrangements for its publication.

annexe B: oral evidence and associated written evidence

Public Audit Committee 10 December 2008 Cols 762 - 786

Public Audit Committee 14 January 2009 Cols 818 - 874

Public Audit Committee 21 January 2009 Cols 876 - 913

Public Audit Committee 25 March 2009 Cols 1008 - 1069

letter to Malcolm Reed, former chief executive and accountable officer, transport scotland, from the convener of the public audit committee, 15 january 2009

I am writing to thank you for attending the Committee’s meeting on 14 January 2009. The Committee was grateful for your attendance.

At the meeting you offered to provide several pieces of follow up information to the Committee.

The Committee would be grateful if you could provide details of the date on which Mr Houston declared his interests in First Scotrail together with details of the arrangements put in place by you to manage this potential conflict.

The Committee would also be grateful if you could provide some further detail on the decision on non-executive members of the Board not being part of the Investment Decision Making Board, and on the number of Transport Scotland staff involved in the review process that led to the extension.

Finally, can you provide the Committee with details of the steps that Transport Scotland has taken to implement the recommendations contained in the Auditor General for Scotland’s report?

The official report of the meeting will be available at the following link on Monday 19 January: http://www.scottish.parliament.uk/s3/committees/publicAudit/index.htm

I would be grateful if you could provide the follow up information to the Committee by close of play on 28 January 2009.

Please also find enclosed a witness feedback form. I would be grateful if you could complete and return the form via the pre-paid envelope provided.

Should you require any further information please do not hesitate to contact the Clerk, Tracey Reilly on 0131 348 5390 or by email at pa.committee@scottish.parliament.uk.

letter to Malcolm Reed, former chief executive and accountable officer, transport scotland, from the convener of the public audit committee, 16 january 2009

Further to my letter of 15 January, there is one other issue that I wish to raise with you.

At the meeting on Wednesday 14th January you stated that Ministers were made aware in December 2006 that extension was an option and that Ministers had indicated that it was something they wished you to consider. You went on to note that Ministers in the current administration were advised that you had been considering the option of franchise extension in June or July 2007 and confirmed that it was something they also wished to pursue. More detailed discussion of the franchise performance then took place with Ministers in September 2007.

Further to these comments, I would be grateful if you could advise the Committee:

  • When was this advice provided to Ministers?
  • To whom was the advice given? Were there were other copy recipients of any advice?
  • Was the advice on the potential extension one of a range of options given to Ministers?
  • Did Ministers a) note that extension was an option, b) authorise further work on a number of options or b) authorise further work specifically on the potential for extension?

I would be grateful if you could provide the follow up information to the Committee by close of play on 28 January 2009.

Should you require any further information please do not hesitate to contact the Clerk, Tracey Reilly on 0131 348 5390 or by email at pa.committee@scottish.parliament.uk.

letter to Malcolm Reed, former chief executive and accountable officer, transport scotland, from the convener of the public audit committee, 22 january 2009

At its meeting on 21 January, the Committee took evidence on the above report from Stewart Stevenson MSP, Minister for Transport, Infrastructure and Climate Change and from Robert Black, the Auditor General for Scotland.

The Committee would like some clarification on the following points:

The Director of Finance and Corporate Services
  • Were you aware of any complaints regarding Guy Houston’s work or of any investigations into these matters?
  • Can you confirm that Mr Houston was present at meetings on 19 March and 28 March regarding the franchise extension? Would you please provide the Committee with copies of the minutes of these meetings? Regardless of whether any votes were taken at these meetings, can you confirm whether Mr Houston took part in discussions?
  • Can you confirm that, as set out in the AGS’s report, the Minister approved the franchise extension on 27 March 2007?
  • If there are any other meetings at which Mr Houston was present concerning the franchise, would you please provide details, including minutes of those meetings?
  • Can you confirm the date on which Mr Houston resigned?
  • Prior to his resignation, did Ministers express to you any concerns regarding Mr Houston’s continued employment with Transport Scotland?
Clearing the AGS report

During your evidence to the Committee on 14 January, you stated that “we were, just before the report was due to go for printing, presented with significant further revisions that had not been discussed with us. We therefore did not have the opportunity to engage as fully as we would have wished”.

  • Can you provide the Committee with details on what these revisions were?
  • Specifically, can you confirm that you were given sight of paragraphs 70 and 71 of the report and were given an opportunity to comment on them?

If there are any other points you would wish to raise with the Committee following the evidence taken from the Auditor General for Scotland, please include them in your reply to this letter.

letter from Malcolm Reed, former chief executive and accountable officer, transport scotland, to the convener of the public audit committee, 3 february 2009

Thank you for your letters of 15, 16 and 22 January 2009 and for the opportunity to address the committee on 14 January 2009.

I will address the points you have raised in your letters by topic as follows:The Director of Finance and Corporate Services

Mr Houston declared his share interests on 19 February 2007 as part of the disclosure requirements for the completion of the 2006/7 Annual Accounts. In response Mr Houston and I agreed a set of processes which would ensure that any potential conflict that this interest gave rise to was properly managed. The operative clauses are:

a. Mr Houston would continue to be at arms length in relation to any negotiations with First ScotRail on the franchise costs.

b. Mr Houston would be party to negotiations in relation to any contractual changes in either concessionary travel scheme, but any decision would need to be ratified by a fellow director.

c. Any other financial decision made by himself that would impact on First Group or any of its subsidiaries was to be ratified by a fellow director.

As a matter of practicality, the circumstances envisaged under (c) did not subsequently arise. So far as (b) is concerned, the contractual arrangements for the concessionary travel schemes apply to the whole bus industry rather than First Group alone, but Mr Houston was not in fact involved in the financial negotiations that have taken place with bus industry representatives as part of the current review of the operation of the concessionary travel schemes.

I was not aware of any complaints about Mr Houston’s work, nor were any concerns expressed to me by Ministers. On the matter of any investigation, I would refer you to the Permanent Secretary’s separate response on this issue.

Mr Houston left the civil service with effect from 28 November 2008.

The role of non-executive directors in the Investment Decision Making Board

You have asked about the role of non-executive directors in the Investment Decision Making (IDM) Board. As my evidence on 14 January makes clear, and the Audit Scotland report correctly identified, our non-executive directors are not included in the IDM. This is with their agreement, and has been the case since the inception of Transport Scotland’s internal governance arrangements.

Part of my surprise that this issue has been raised in its current form by the Auditor General stems from the fact that the operations and procedures of Transport Scotland’s boards had already been reviewed by Audit Scotland. This review was reported in November 2007 under the title Transport Scotland Overview of Corporate Governance, and reached a generally favourable view on the progress that Transport Scotland had made in establishing its governance processes.

This Audit Scotland report explicitly noted in Appendix B paragraph 8 that the non-executive directors took no role in the IDM due to the sensitive or controversial projects that might be considered there. The report further noted that the constitution of Transport Scotland’s Audit Committee entirely from non-executive directors was in accordance with best practice.

Had Audit Scotland retained any reservations around this allocation of roles I would have expected that they would have conveyed this either within that review report and its recommendations or through our continuing interaction on the subject of governance, including Audit Scotland’s regular attendance at Transport Scotland’s Audit Committee.

Formulation and finalisation of the contract extension

Two Transport Scotland staff from our Rail Delivery directorate were involved day-to-day in the negotiation of the franchise extension with First ScotRail, supported by line management and three expert internal advisers, two of whom were from the Rail Delivery Directorate and one from our Strategy & Investment Directorate.

You asked some follow-on questions in your letter of 16 January about the initial advice given to the new government in summer 2007. I spoke to the Minister for Transport, Infrastructure and Climate Change and the Cabinet Secretary for Finance and Sustainable Growth on 4 June 2007. At that time, as the Audit Scotland report narrates, we were examining three options – to do nothing, to review the contract to 2011 or to review and extend. Ministers indicated that they were happy that we continue to review all options and to report progress in due course.

The process thereafter was as described in Audit Scotland’s report and in my evidence to the Committee. Within this, the final elements and values of the review and extension were agreed at a meeting with senior FirstGroup representatives on 5 March 2008. This was the point at which the terms of a deal were struck which I felt able, as Agency Accountable Officer, to recommend to Ministers.

On Mr Houston’s involvement in the process, I attach as Appendix A copies of the minutes of the meetings on 19 and 28 March as requested, though with redactions to exclude sections dealing with advice to Ministers. These minutes note Mr Houston’s presence, but as their purpose was to record decisions and actions they do not constitute an account of individual contributions to the discussions.

You also asked in your letter of 22 January about other meetings at which Mr Houston was present concerning the franchise. This is a wide-ranging request, since the franchise is routinely considered at a number of internal meetings, but I attach as Appendix B relevant minute extracts, redacted either as above or to reflect commercial confidentiality.

The Minister approved the franchise extension on 27 March 2008.

Clearing and responding to the Audit Scotland report

In replying to your questions on clearing the AGS report, it will I think be helpful if I put my evidence into context.

When we first received a draft of the report from Audit Scotland under cover of a letter dated 8 October 2008 we entered into the usual process with them whereby we gave our views, comments and where appropriate proposed amendments to the Audit Scotland team, working to an anticipated publication date of 20 November 2008. Where appropriate, we were given the chance to provide fresh evidence to the team in support of our position. On that basis, as I said in evidence to the committee, we had around three quarters of the 70 or so amendments we proposed accepted to some degree by the Audit Scotland team and I believe that the report was better for this close and open working.

On 14 November 2008, which was in fact the day on which we had been informed the report would be sent for printing, I received, from Barbara Hurst, new drafting which it was proposed would go into the final report and which dealt with two substantive points – the first paragraph related to the role of the non-executive directors and the IDM, and contained an unsupportable assertion regarding the suitability of our approach, the second to the interests and role of Mr Houston.

I expressed concern at the proposed late insertion of these paragraphs on the basis that, in the original form presented to me they raised new and substantive issues late in the day and well outwith the established processes.

Whilst I and my team worked over the course of 14 November and the early part of the next week to agree a form of words with Audit Scotland, which certainly helped improve on the initial proposed drafting, I remain of the view that had these issues been raised earlier and through the appropriate process, better drafting could have been agreed.

I am afraid I cannot therefore accept either the evidence led by Audit Scotland before the Committee that there was only one issue raised in their late correspondence or the suggestion that there was an implied duty to disclose Mr Houston’s interest which Transport Scotland failed to discharge. In our view, Mr Houston’s interest was a matter of public record and had been fully and formally disclosed to Audit Scotland on two separate occasions. It is really for the Auditor General to comment upon how his organisation acts upon information which is already available to it.

Furthermore, I have to advise the Committee that at no stage in the review process was I interviewed by the Audit Scotland team, despite my role as accountable officer; before the telephone conversation with Barbara Hurst on 14 November I had had only two high-level contacts with the Auditor General where matters relating to the review were discussed: the first by telephone soon after the extension was announced when we discussed the background to the decision to extend and the issues of confidentiality; the second at a meeting on 5 September 2008 when, as part of a broad discussion about the engagement between our two organisations, Mr Black and I discussed how to facilitate the work of his review team in this instance. Similarly, the Director of Rail Delivery was not interviewed as part of the review itself, and was only involved at the pre-review stage, as part of the initial scoping. It is, of course, entirely for Audit Scotland to decide who they wish to interview during a review, but if there are high-level issues about governance I would have expected these to be raised directly with senior staff as part of the formal review process, if necessary by reopening the review rather than while previously-agreed documents are being finalised for printing.

Of the additional issues raised at this late stage by Audit Scotland, the draft paragraph which related to the role of non-executive directors was again a reprise of information which had long been known and understood by Audit Scotland. (I would refer, for example, to the November 2007 report on our processes mentioned above.) Similarly the role of the IDM in the franchise extension was clear to the audit team from the outset. In the light of this I found the comments they proposed to insert unacceptable. I believe, therefore, that the interaction between our two organisations and the eventual clarity of the report on these aspects suffered from a lack of adequate time to consider and frame alternative drafting against an impending print deadline.

I cannot comment on why Audit Scotland failed to mention, when giving their evidence on 21 January 2009, that this particular issue was also raised at this late stage and therefore included in my exchange with Ms Hurst. For Transport Scotland’s part I am content that this issue could have been raised at any time in the preceding 5 weeks, through the appropriate process.

Similarly, Guy Houston’s interest in FirstGroup had been made clear to Audit Scotland on 22 June 2007 and is mentioned in our accounts for the year 2006/7 published September 2007. Likewise Mr Houston’s role or rather lack thereof in all rail franchising matters was clear to Audit Scotland’s team from the outset of their review. Similarly, I cannot comment on why Audit Scotland should defer consideration of our annual accounts until the last days of a lengthy and detailed review, but I would reiterate that I cannot accept that there was a duty to disclose which was not met, nor an opportunity to disclose which was not taken.

If I have raised these points at length this is because, whilst I accept entirely the view that Audit Scotland must be free to report without fear or favour to the Committee, this right cannot act so as to deprive the organisation reviewed of the right to challenge the findings contained in the Report, including as expanded on in evidence. Accordingly, and in the light of the invitation in your letter of 22 January I attach (Appendix C) a commentary on those principal issues where I feel that this further explanation or clarification would assist.

In each area of chief concern to the Committee - the “business case/plan/rigorous appraisal” and what was or should have been shown to Ministers; the role of non-executive directors; and Mr Houston’s shares and options and the critical distinction between the recording of process and propriety - I believe that the committee would have been helped by an earlier articulation by Audit Scotland of these issues during their extensive review process, particularly where the Auditor General intended to focus upon them in the subsequent report and in evidence to the Committee.

Lastly, as all parties have agreed, the report produced by Audit Scotland contains a number of useful recommendations. As requested in your letter, I have attached as a further annex (Appendix D) a breakdown of our response to the recommendations contained in the Audit Scotland report. which I hope is useful.

Appendix A

EXTRACTS FROM MINUTES OF MEETINGS – 19 AND 28 MARCH 2008

MEETING Project Golden Key – Director Level Discussion

DATE 19 March 2008

TOPIC

Values

GB updated the attendees on the progress of PGK negotiations to date. The group noted that a value had been provisionally agreed, consisting of

  • £25m to 2011 with a realigned profit cap; and
  • £65m to 2014 with a realigned profit cap.

In addition, colleagues noted that the First Group contribution had been agreed at £6 million, based on a contract extension. GB advised that this contribution could potentially increase to £7.5 million, predicated on the reinvestment of the negotiated £65m. GB advised that £3m of the Group contribution had been attached to a further set of innovations. These were noted as

  • Reduced ticketing for Commonwealth Games;
  • Smartcard; and
  • ‘Third Sector’ Community Projects.

MEETING Investment Decision Making Board

DATE 28 March 2008

TOPIC

Agenda Item 1: Minutes of Previous Meeting and Matters Arising

As this was a IDM Special, minutes of the previous meeting will be dealt with at the next main IDM.

Agenda Item 2: Project Golden Key (Paper IDM (08)13)

2. David Binnie, Gary Bogan and Steven Feeney introduced paper IDM (08)13 which sought agreement to: change the ‘revenue cap’ element of the First ScotRail Franchise Agreement; extend the contract by three years; approve the creation of a profit share mechanism in the contract; and reinvest the negotiated value back into the contract.

In discussion the following points were made:

a) The Board noted that the scheduling of this special IDM meeting was unfortunate given that the ministerial discussion held the previous afternoon had already agreed the principles of the Project Golden Key deal. However, the Board confirmed their consent to all recommendations contained within the Board paper, with the focus of the discussions thereafter concerning the handling strategy for Project Golden Key;

b) In anticipation of an early announcement, the Board emphasised the need to protect commercially-sensitive information, both internally and externally. (ACTION: Malcolm Reed to liaise with Permanent Secretary to agree internal handling strategy. Gary Bogan to provide lines to take for Malcolm Reed’s discussion with Permanent Secretary); and

c) The Board approved an emergency communications plan involving Campbell Docherty from Transport Scotland and colleagues from Core Government Communications. In addition, the Board requested that the media planner be updated to reflect when each proposed initiative would be implemented. (ACTION: Project team to arrange creation and implementation of communications plan and report on the process surrounding a project announcement during parliamentary recess. Project team to compile a media planner for the announcement of individual initiatives).

Following discussion, the Directors’ Board agreed to:

a) Raise the ‘Profit Cap’ element of the Franchise contract from 102% and 106% to 110% and 114%. Moreover, they agreed that the ‘Collar’ element should be varied from 98% to 90% and 94% to 86% respectively which would hold constant revenue support risk for Government.

b) Extend the First ScotRail Franchise Agreement by three years (to 2014);

c) Create a profit-share element within the Franchise Agreement, set at £30 million per annum;

d) Recommend to Scottish Ministers that the £71 million flowing from the Franchisee should be reinvested back into the franchise contract; and

e) A contingent communications plan should be created and implemented following the ministerial decision to announcement Project Golden Key during w/c 3rd March 2008.

Appendix B

SCOTRAIL FRANCHISE DISCUSSIONS ATTENDED BY GUY HOUSTON

DATE MEETING EXTRACT OF MINUTE RELEASED
2006 MEETINGS
n/a n/a n/a
2007 MEETINGS
19/3/2007 TS AUDIT COMMITTEE YES
20/4/2007 RAIL POLICY GROUP YES
16/5/2007 RAIL POLICY GROUP YES
16/6/2007 RAIL POLICY GROUP YES
28/8/2007 RAIL POLICY GROUP YES
25/9/2007 RAIL POLICY GROUP YES
20/11/2007 RAIL POLICY GROUP YES
18/12/2007 RAIL POLICY GROUP YES
2008 MEETINGS
23/1/2008 FRANCHISE EXTENSION MEETING YES
23/1/2008 RAIL POLICY GROUP YES
20/2/2008 RAIL POLICY GROUP YES
29/2/2008 FRANCHISE EXTENSION MEETING NO – No minute taken
19/3/2008 RAIL POLICY GROUP YES
18/5/2008 TS AUDIT COMMITTEE YES
1/10/2008 RAIL POLICY GROUP YES
29/10/2008 RAIL POLICY GROUP YES
21/11/2008 TS BOARD MEETING YES

MEETING - Transport Scotland Audit Committee

DATE - Monday 19 March 2007

TOPIC

2. Internal Audit Update:

An update on the Internal Audit report was presented by Allan Smith, with key outlines that 2 comprehensive assurances had been given to Network Rail and Scotrail Programmes within Rail Delivery.

MEETING – Rail Policy Group

DATE – 20 April 2007

TOPIC

4 Network Rail and First ScotRail Performance Action and Briefing
 
  • Paper had been tabled.
  • Paper noted

MEETING - Rail Policy Group

DATE – 16 May 2007

TOPIC

4 Network Rail and First ScotRail Franchise Action and Briefing
 
  • IJ presented rolling stock paper for the lease of 17 class 158 2 car units from Angel Trains. Agreed to proceed with discussions on lease.
  • JE presented paper on forecast demand noting work ongoing.
  • Discussion on percentage growth rate and use of TMfS model. Agreed this validates 3% background growth appropriate to include in the HLOS.
  • IJ to instruct First ScotRail to initiate dialogue with Angel Trains.
  • JE and David Binnie to work together to consolidate work and present a clear business case for rolling stock.
  • Workshop to be held on demand forecasting, inviting Ian Docherty to attend, in late summer.

MEETING Rail Policy Group

DATE 16 JUNE 2007

TOPIC

5 Network Rail and First ScotRail Franchise Action and Briefing
 
  • Performance update
 

MEETING Rail Policy Group

DATE 28 August 2007

TOPIC

4 Rail Delivery Action and Briefing
  Project Golden Key
Discussion on progression of project golden key and some of the issues outlined in paper RPG (07) 07 including link with spending review decisions, fares policy and integrated ticketing policy. Gary Bogan confirmed meeting with Minister on 12 September to introduce Golden Key.
AP24: Gary Bogan to circulate proposed presentation for Minister to Janet Egdell, Frances Duffy, Guy Houston and Fiona Donald by 7 September.

MEETING Rail Policy Group

DATE 25 September 2007

TOPIC

2 Strategy Action and Briefing
 

Inverness Services and stations
CK presented paper RPG(07)02.

North Highland line:

Discussion on implications of
North Highland timetable recast, TS funding of additional driver and 2 crew for 4th service to Wick and the provision of a new station at Conan bridge by HITRAN. Agreed to support the above.

Invernet 1
Discussion on continued support and funding of the Invernet 1 services as trial period is nearing end. BR requested check position of other trial services Agreed to continue funding of Invernet 1 through the franchise and timetable recast.

 

 

 

 





AP29: CK and franchise team to clarify position of any other trial services.


AP30: CK to discuss timetable issues with FSR and confirm when ministerial announcement on Invernet 1 services may be made.


5 NR and FSR performance Action and Briefing
 

Contents of paper RPG (07)06 noted.
Discussion on performance and anticipated Autumn effect on overall annual performance. Discussion on Dalmarnock pumps and recent flooding.




GH raised issue of Flexi passes not all being much cheaper than daily returns.

 

 

AP32: DD to clarify reasons for flooding problem at Dalmarnock 2 weeks ago.

AP33: Ivor Jones to clarify variance in fares between flexi pass and daily returns.


MEETING Rail Policy Group

DATE 20 November 2007

TOPIC

5
  • NR and FSR performance
  • Action and Briefing
 
  • Contents of paper RPG (07)04 noted.
  • Discussion on performance and Autumn effect on overall annual performance.
  • Brief discussion on unofficial strikes by drivers within FSR. DB confirmed monitoring situation.
  • December 2008 timetable changes
  • JE presented paper RPG(07)05.
  • All agreed paper helpful.
 

MEETING Rail Policy Group

DATE 18 December 2007

TOPIC

1 Introduction Action

  • Minutes of 20 November 2007 were approved without amendment.
  • Action Points (See attached list)
  • AP2: In consultation with Waverley project team provide a paper dealing with revenue protection issues. Ongoing.
  • AP 30: - To discuss timetable issues with FSR and confirm when ministerial announcement on Invernet 1 services may be made. Cleared
  • AP33: - Clarify variance in fares between flexi pass and daily return tickets. Confirmed savings advertised based on single tickets.
  • FSR have investigated issues with Flexi pass recognition at ticket gates and have advised only issue at Larbet.
  • AP41: - Provide copy of recent letter on Edinburgh Park services to Rail Policy Group members. Cleared

 




  • AP2: Ivor Jones to provide a paper for 23 January meeting.

 

 

 



  • AP43: DB to double check issue now resolved at all stations


4 Rail Delivery Action and Briefing
  Edinburgh – Fife – Aberdeen
DB presented paper RPG(07)05 Discussion on timetabling, costs and Laurencekirk stops. To ensure no bias to either Glasgow or Edinburgh services as a result of changes.

FD leaves

Class 314 retention
GD presented paper RPG(07) 06Discussion on life extension work.
  • All agreed program of works to proceed with Angel financing.
  • Agreed Rail Performance should discuss with First ScotRail the options for reinvesting any savings to offset future rolling stock costs and to extend the lease for c314 to 2014.
AP44: CK to re-look at Laurencekirk business case and stopping pattern envisaged.

AP45: DB to obtain net revenue figures for route following timetable changes and feed into NMF. Paper to be brought back to January 2008

5 NR and FSR performance Action and Briefing
 

Contents of paper RPG (07) 07 noted. Discussion on performance and Autumn effect on overall annual performance.Disscussion on recent rollingstock issues DB confirmed GD working with First ScotRail to resolve issues.

Discussion on whether First ScotRail have any hot standby units as per franchise agreement.

 

 

 

AP46: DB to clarify situation with availability of Hot Standby units.

MEETING Project Golden Key – Director Level Discussion

DATE 23 January 2008

TOPIC

Item Notes Action
3.1

FUND ALLOCATION

The issue of the allocation of funds falling from the conclusion of the Project Golden Key (PGK) deal was the main item for discussion.

BR advised that to assist with fully understanding the additional funding required to fulfil the requirements of the rolling stock programme, he would arrange for a re-fresh of the Rail Business Plan.

  • Rolling Stock aspect of Rail Business Plan to be reviewed and refreshed as necessary. To assist, the PGK team agreed to check for double-counting regarding budget forecasts for rolling stock.
 

3.2

Negotiating Behaviours

BR suggested that the PGK team alter the contract to include a clause which would encourage the Franchisee to use reasonable endeavours to:· Improve services over time e.g.

  • improve journey time;
  • Create quality management systems to improve service provision; and
  • Show a commitment to improving the provision of information topassengers during disruption periods.

The PGK team agreed to look to discuss with the franchisee the inclusion of lines around these issues within the Heads of Terms.

ACTION:·

  • GB/SF to discuss with franchisee the possibilities of including the ‘’reasonable endeavours’ points noted above within the Heads of Terms.
 

MEETING Rail Policy Group

DATE 23 January 2008

TOPIC

4 Rail delivery Action and Briefing
 

First ScotRail – Station Investment Plan 2008/09 update.
DB presented paper RPG(08)07.
Discussion on proposed work.

 

5 NR and FSR performance Action and Briefing
  Contents of paper RPG (08)08 noted.
Discussion on performance and effect on overall annual performance.
Discussion on communications strategy for performance. Confirmed this is being considered for inclusion in core briefing.
 

MEETING Rail Policy Group

DATE 20 February 2008

TOPIC

5 NR and FSR performance Action and Briefing
  Contents of paper RPG(08)06 noted.
Discussion on performance and effect on overall annual performance.
 

MEETING Rail Policy Group

DATE 19 March 2008

TOPIC

4 Rail Delivery Action and Briefing
  Dunbar Local Services
IJ presented paper RPG(08)06.
Discussion on paper. All agreed paper with clarification of 21:30 + 22:30 service.
 
5 NR and FSR performance Action and Briefing
  Public Register – Franchise
IJ presented paper RPG(08)07 for info.

Monthly Performance - UpdateContents of paper RPG(08)08 noted.
 

MEETING Rail Policy Group

DATE 1 October 2008

TOPIC

4 Rail Delivery Action and Briefing
  Haymarket
DD presented paper RPG(08)05.
Discussion on capacity & HISAM. All agreed FSR to fulfil franchise commitment to improve disabled access with negotiations to bring completion to 2010.
AP41: Haymarket capacity to be added to baseline for EGIP.

5 NR and FSR performance Action and Briefing
  Franchise and Network Rail
Monthly Performance – update paper RPG(08)06 noted.
MR noted overcrowding on E&G during weekend. Agreed passenger figures to be looked at.
AP42: DB to look at passenger figures and review capacity on E&G.

MEETING Rail Policy Group

DATE 29 October 2008

TOPIC

6 NR and FSR performance Action and Briefing
  Franchise and Network Rail
Monthly Performance – update paper RPG(08)07 noted.
 

MEETING Transport Scotland Directors Board Meeting

DATE 21 November 2008

TOPIC

Agenda Item 3 - Scotrail Franchise - TSDB(08)38

Guy Houston informed the Board that he no longer had shares in First Group and the Board agreed that he could remain for the discussion as there was no conflict of interest

Heather Battson and Alastair Fyffe presented this paper to the Board. It was the first of the 6 monthly reports that had been requested by the Board. The Board agreed that the report was helpful in setting out the detail of the franchise extension and that in future the October reports should focus on performance and achievements and the April report on financial information. The Board also discussed the challenges for Transport Scotland in managing the franchise and that the while the general position was fine , it needed to be improved. Relationships with key stakeholder such as FRS, ORR and NR were also discussed and the Board agreed these were crucial to effective delivery. The Board requested that the 6 monthly updates also include a description of each initiative and what TS is doing on NR and ORR engagement on these. (Action - Bill Reeve to ensure these are included). In addition the team should look at the target s and incentives to ensure we are using the best ones for success criteria, taking into consideration international comparisons and benchmarking. These should be included in any future contract and briefing to the board. The Board also requested that wi-fi access etc on trains needed to be looked at and reported back to the Board (Action - Bill Reeve to update the Board at the January meeting).

Appendix C (40KB pdf)

Appendix D

AUDIT SCOTLAND REPORT - THE FIRST SCOTRAIL PASSENGER RAIL FRANCHISE

RESPONSE TO REPORT RECOMMENDATIONS

SECTION 1 - FRANCHISE MANAGEMENT

Transport Scotland should consider allocating and monitoring a budget for franchise performance payments.

We accept this recommendation. In doing so, however, we should point out that the forecasting method used is the approved industry best practice and the variations between forecast and actual performance cannot be foreseen using this methodology.

Transport Scotland should improve stakeholder engagement by clarifying its consultation arrangements, for passenger rail and transport needs overall. This should identify the parties to be consulted, the aspects they are to be consulted on, and the type and timing of consultation.

We do not accept this recommendation. As noted in the report, Transport Scotland consults with relevant stakeholders as appropriate on specific projects and proposals for which it is responsible, including passenger rail matters. Consultation on transport needs overall is managed by the Scottish Government’s transport directorate, which is responsible for advising Ministers on transport policy as a whole. Transport Scotland plays a supportive role in these consultations, so developing a separate approach in parallel to these established arrangements would be a duplication of efforts.

Transport Scotland should review performance measures to improve alignment with passenger and wider government priorities.

We accept this recommendation. We will work and negotiate with our industry partners to improve our performance measures where necessary to better support passenger priorities and fulfil broader government commitments.

Transport Scotland should establish a single source from which stakeholders can easily access the information they consider relevant regarding the franchise; provide contact details for further information requests; and include a guide to the franchise contract and a summary of performance meetings which identify key elements for passengers and taxpayers.

We accept this recommendation. Discussions have opened with industry partners and our legal advisers to put in place the recommended actions. We are seeking to have this information publicly available in April 2009.

The Scottish Government may also wish to consider introducing versions of the service quality incentive regime (SQUIRE) for other transport and service providers.

This recommendation is for other parts of government to consider and act upon. We in Transport Scotland have highlighted the recommendation to relevant government colleagues, and are in discussion with them regarding any assistance we can provide in their consideration of its implementation

SECTION 2 – FRANCHISE EXTENSION

Transport Scotland should clarify whether all funding commitments relating to the franchise are secured until the end of the extended franchise term in November 2014. Where funding has not been secured, Transport Scotland should clarify the arrangements.

We have acted upon this recommendation. The total amount of ongoing liabilities until the end of the franchise term in November 2014 total circa £1.5m, and provision has been made to fund them.

Transport Scotland should continue to develop its management and planning arrangements, including development of a systematic project plan for awarding the next franchise. This should identify the key stages and their timeframes, consultation strategy, decision-making criteria and reporting and approval arrangements.

We are acting upon this recommendation. We will develop a detailed project plan for the next franchise, drawing upon best practice elsewhere in Great Britain as well as the experience that is already available in Scotland.

Transport Scotland should specify under what conditions an extension will be considered or the criteria that will be used to decide whether an extension is appropriate, should the next franchise agreement include an extension option.

We accept this recommendation. The consultation undertaken prior to the next franchise contract will explore whether an extension clause should exist in the next franchise let. Should it be determined the next contract should include an extension clause, we will work with stakeholders to establish appropriate extension criteria.

Transport Scotland should consider any relevant recommendations from the recent National Audit Office report on letting rail franchises.

We accept this recommendation.

SECTION 3 FIRST SCOTRAIL’S PERFORMANCE

The Scottish Government should consider introducing an obligation for all public transport providers to consult with other affected transport providers when proposing service or timetable changes to assist further integrated transport improvements.

This recommendation is for other parts of government to consider and act upon. We in Transport Scotland have highlighted this recommendation to relevant government colleagues, and are in discussion with them regarding any assistance we could provide in their consideration of its implementation.

letter to sir john elvidge, permanent secretary, the scottish government, from the convener of the public audit committee, 15 january 2009

I am writing to thank you for giving oral evidence to the Audit Committee at its meeting on 14 January 2009. The Committee was grateful for your attendance.

I note that you offered to revert to the Committee on a number of points and these are summarised below for convenience.

The interests of the former Director of Finance and Corporate Services

  • On what date did the former Director of Finance and Corporate Services make a declaration of his interests in First ScotRail Group?

Data Protection Act

During evidence, you told members that the provisions of the Data Protection Act 1998 prevented you from disclosing the details of any financial settlement reached between the Scottish Government and the former Director of Finance and Corporate Services.

  • Can you tell the Committee which provisions of the Act prevent you from providing the information which you were asked for?

  • The Committee requests that you review this decision and consider whether any information can be provided to the Committee, on a strictly confidential basis, if necessary. Specifically, can you indicate if Mr. Houston received any payment beyond his salary for the period worked and accrued holiday entitlement?

  • Can you also confirm which of the parties requested the period of notice to be waived?

Resignations by senior Civil Servants

  • On how many occasions in the past five years have senior civil servants left the civil service with less than 3 years service?

  • How many of those who left asked to leave?

  • How many of those who asked to leave received a) payment in lieu of notice and/or b) other enhancements beyond payments for hours worked or holidays due?

Recruitment to the Civil Service and declaration of interests

  • Is there a best practice guide for those recruiting staff to the civil service? If so, can you provide details of this to the Committee?

  • Is there a standard interview question to all potential recruits to the civil service regarding the candidates’ interests and whether these might conflict with fulfilling the duties of the vacancy?

  • Does current civil service practice require candidates for posts to disclose details of their interests either:

    • at the interview?

    • on being offered a contract or otherwise in advance of their employment?

  • Can you indicate what advice/instructions are given to candidates and new staff about when any potential interests should be disclosed? Specifically, can you confirm that it is not currently standard practice for candidates and new starts to receive guidance about the requirements in the civil service code related to declaring interests?

  • Can you confirm that current guidelines and practice will be reviewed, when this will be completed, and agree to provide the Committee with details of changes made?

The Official Report of the meeting will be published by Monday 19 January and will be available at the following link: http://www.scottish.parliament.uk/s3/committees/publicAudit/index.htm

I would be grateful for a response by close of 28 January 2009. Please copy your response to Tracey Reilly, Clerk to the Audit Committee, Room T3.60, The Scottish Parliament, Holyrood, Edinburgh, EH99 1SP email: pa.committee@scottish.parliament.uk. Should you require any further information please do not hesitate to contact the Clerk.

letter to sir john elvidge, permanent secretary, the scottish government, from the convener of the public audit committee, 16 january 2009

Further to my letter of 15 January, there is one other issue that I wish to raise with you.

In his evidence on Wednesday 14th January, Malcolm Reed told the Committee that Ministers were made aware in December 2006 that extension was an option and that Ministers had indicated that it was something they wished Transport Scotland to consider. He went on to note that Ministers in the current administration were advised that Transport Scotland had been considering the option of franchise extension in June or July 2007 and confirmed that it was something they also wished to pursue. More detailed discussion of the franchise performance then took place with Ministers in September 2007.

Given that this evidence discloses the content of advice given to Ministers, I hope that it will be possible for any further requests by the Committee for information provided to Ministers on this issue to be answered positively.

letter to sir john elvidge, permanent secretary, the scottish government, from the convener of the public audit committee, 22 january 2009

As you will be aware, at its meeting on 21 January, the Committee took evidence on the above report from Stewart Stevenson MSP, Minister for Transport, Infrastructure and Climate Change and from Robert Black, the Auditor General for Scotland. The official report of the meeting will be available at the following link on Tuesday 27 January: http://www.scottish.parliament.uk/s3/committees/publicAudit/index.htm

As a further supplementary question to your own evidence, can you tell the Committee whether Ministers expressed to you, or any other senior civil servant, any concerns regarding the continued employment of Mr Houston by Transport Scotland?

I would be grateful if you could provide this information to the Committee by close of play on 28 January if possible and in any event before the close of Tuesday 3 February, as members are anxious to consider matters further at the Committee’s next meeting on 4 February. Should you require any further information please do not hesitate to contact the Clerk, Tracey Reilly on 0131 348 5390 or by email at pa.committee@scottish.parliament.uk.

Yours sincerely

letter from sir john elvidge, permanent secretary, the scottish government, to the convener of the public audit committee, 3 february 2009

Thank you for your letter of 15 January 2009 following on from my oral evidence session to the Audit Committee on 14 January. I am also responding to your further letter of 22 January which raised a supplementary question. As I offered at the session on 14 January, I am writing to provide further comment on a number of points as follows:-

The Interests of the former Director of Finance and Corporate Services

1. On 19 February 2007 the former Director of Finance and Corporate Services, Transport Scotland signed a disclosure form for Transport Scotland’s Annual Accounts 2006/07. The form included his shareholder interest in First Group plc. The former Director wrote to the Chief Executive on 14 March 2007 about the arrangements for managing any potential conflict with his interests in First Group plc.

Data Protection Act

2. The Committee will recognise that there are mutual obligations of trust and confidence between employers and their staff, including obligations to keep certain personal and private matters confidential. Details of any financial arrangement between an employer and an individual member of staff fall into that category. The First Principle of the Data Protection Act 1998 - set out in Schedule 1 to the Act - provides that personal data shall be processed fairly and lawfully. Providing details of any financial settlement would constitute the processing of personal data. Unless one of the conditions in Schedule 2 is met, such processing would be unlawful. The importance of the obligation on employers not to unlawfully process personal data about their staff (current and former) is emphasised in the Employment Practices Data Protection Code. I have carefully considered and reviewed the position, but for the reasons stated I am unable to provide the Committee with any additional information.

Resignations by Senior Civil Servants

4. In the last 5 years there have been 6 permanent members of the Senior Civil Service (SCS) who have left the organisation with less than 3 years service with the Scottish Government. Four of these resigned in the normal way while the other two received a termination/settlement payment. (These figures do not take into account holders of SCS posts on a fixed term appointment or inward secondment basis paid at levels comparable to the SCS or Special Advisers.)

Recruitment to the Civil Service and Declaration of Interests

4. Recruitment to the Senior Civil Service (SCS) is made on the basis of merit and fair and open competition in accordance with the Civil Service Commissioners’ Recruitment Code and the Commissioners Guide on Senior Recruitment (www.civilservicecommissioners.org) and the Civil Service Management Code (http://www.civilservice.gov.uk/iam/codes/csmc/index.asp). The appropriate website links to these documents are provided.

5. There is no standard interview question asked of potential recruits to the SCS concerning their interests and the potential for a conflict of interest. Given that sometimes recruitment is to a grade rather than a specific post this would not always be practical. However, the information provided as part of the recruitment package to external applicants includes a copy of the Civil Service Code which sets out the core values of the civil service and the standards expected of a civil servant (copy of Code attached at Annex A). The code includes a reference to not misusing official positions or information acquired in the course of official duties to further private interests or those of others. In addition the SCS contract of employment includes a section on conduct which sets out the requirements governing the avoidance of conflicts interest and standards of conduct expected of an employee and refers the employee to further information which is available on the internal HR intranet site in the staff handbook section. The contract also includes a further copy of the Code. The HR intranet (in the Staff Handbook section) advises:-

“If you have or may be proposing to acquire a financial interest in a business or institution with which you may have to deal officially you should immediately report such an interest to senior line management (usually your countersigning officer) and copy the report to S1 Spur Saughton House If you know that your spouse, co-habitee or close relative has acquired a private financial interest (e.g. a shareholding) in a business with which you may have had to deal officially, senior line management must be informed. It does not necessarily follow that having such an interest would disqualify you from continuing to act in any particular matter. However, the Scottish Government must be in a position to determine that issue and it is not one for you alone to consider. Any deliberate failure to make a disclosure will be considered a matter of misconduct. See section on Register of Interests below.

In addition, to provide transparency in the Scottish Government's governance arrangements and support compliance with the Financial Reporting Manual, SCS staff are required to register any interests in the case management section of the eHR self referral facility. See section on Register of Interests below.

If you are in doubt as to the proper course of action you should consult your line manager and the HR Shared Service Centre Phone: 0131-244-8500 email: hr.help@scotland.gsi.gov.uk. The guiding principle should be that, when in doubt, it is always better to declare any possible conflict of interest rather than risk being challenged, and facing disciplinary or legal action.

The circumstances of different parts of the Scottish Government vary widely, and senior management in each business area may, in consultation with the HR Shared Service Centre, issue additional guidance from time to time which is more sharply focused on the work of individual units. Such advice may extend to prohibiting staff in certain areas from holding or dealing in certain kinds of financial interests.

Register of Interests

Staff in Bands A-C are required to register their interests where there is the potential for a conflict of interest to arise in the case management section of the eHR self referral facility. Staff in the SCS are required to register all relevant interests. You are required to register the following information:

  • Any business interests (including directorships)

  • Holdings of shares or other securities which you or members of your immediate family (i.e. spouse, partner, children, children of partner, dependents of you or your partner) hold which you or members of your immediate family would be able to further as a result of your official position.

  • Any other financial interest where there is the potential for a conflict of interest to arise as a result of your official position.

  • Private interests in organisations where there could be the potential for a conflict of interest to arise - for example, membership of clubs, societies and other organisations.”

6. The requirement to register interests (such as share holdings) on the e HR facility was introduced in March 2008. An explanatory note was issued to all SCS on 28 March 2008 about the arrangements.

7. The onus is on the individual to disclose and register their interests. When they are being recruited to a specific post this could be raised at any time during the recruitment or contract process. In general most recruits do not raise this with their line manager until they are in post and fully understand the contact they have with outside organisations and the opportunity for a conflict to arise.

8. Since the Committee meeting on 14 January a question has been added to the external SCS application form which asks the applicant to indicate whether they are aware of any possible conflict of interest which might arise should they be appointed. I have also requested HR to review the SCS recruitment procedures to see if anything further is required and also the guidance on interests. We would aim for this to be completed by the end of March 2009 and I will write to the Committee again at that stage with the details of any changes.

Supplementary Question

9. I can confirm that I briefed the Cabinet Secretary for Finance and Sustainable Growth and the Minister for Transport, Infrastructure and Climate Change on 25 November 2008 about Guy Houston. Both the Cabinet Secretary and the Minister noted the position and indicated that they expected that this would be dealt with by me, through normal administrative and management procedures.

I hope this helps clarify the position. I have copied this response to Tracey Reilly, Clerk to the Audit Committee.

letter to sir john elvidge, permanent secretary, the scottish government, from the convener of the public audit committee, 9 February 2009

As you will be aware, at its meeting on 4 February, the Committee considered written responses from the Minister for Transport, Infrastructure and Climate Change, Dr Malcolm Reed (as Accountable Officer for Transport Scotland) and you. A number of issues arose in discussion.

The Data Protection Act and s 23 of the Scotland Act

Members were disappointed that you felt unable to provide the Committee with the information requested in relation to Mr Houston’s departure.

The Committee acknowledges that the information called for is personal data and that the First Data Protection Principle will have to be complied with unless the application of the Data Protection Act is superseded by a requirement imposed under Section 23 of the Scotland Act. However, the Committee questions whether disclosure in the present circumstances would in fact be unlawful.

As you note in your letter, the First Data Protection Principle requires that personal data should be processed fairly and that at least one of the conditions in Schedule 2 should be met. In assessing whether data is processed fairly, it has been recognised by the Information Commissioner that, in general, more senior staff and those carrying out public functions should expect more information about them to be disclosed (see for example the Commissioner’s technical guidance on access to information about public authorities’ employees). The same approach has been adopted by the Information Tribunal. In its decision on appeal numbers EA/2006/0015 & 0016 it stated-

"…we find that when assessing the fair processing requirements under the DPA that the considerations given to the interests of data subjects who are public officials where data are processed for a public function, is no longer first or paramount. Their interests are still important but where data subjects carry out public functions, hold elective office or spend public funds they must have the expectation that their public actions will be subjected to greater scrutiny than would be the case with their private lives."

The significance of the public interest is also acknowledged in the Employment Practices Data Protection Code, to which you referred in your letter. The section of the code relating to disclosure requests contains the following guidance, “Only disclose confidential information if the worker has clearly agreed or you are satisfied that despite the duty of confidence the worker’s interest or the wider public interest justifies disclosure”.

In relation to Schedule 2, the Committee was surprised by the implicit assumption in your response that none of the conditions in the schedule was met. The Committee has been advised that both condition 5(d) (processing necessary for the exercise of functions of a public nature exercised in the public interest) and condition 6 (processing necessary for legitimate interests pursued by third party except where unwarranted) appear to be applicable.

In the present case the Committee finds it difficult to avoid the conclusion that the combination of the seniority of the employee in question, the involvement of public funds, the strong public interest in disclosure and the Committee’s own role would satisfy the fairness test and meet at least one of the conditions in Schedule 2, and that disclosure would therefore be lawful.

I would also draw your attention to the powers of the Scottish Parliament under section 23 of the Scotland Act 1998. These powers, in conjunction with Rules 12.4.1 of the Parliament’s standing orders would enable the Committee to compel the production of this information. Clearly, it would be regrettable if the Committee was required to use these powers to gain access to this information, particularly as this would be the first occasion for the Parliament having to do so. The Committee accordingly invites you to take note of the foregoing comments and to review your decision in relation to the application of the Data Protection Act.

If, following review, you remain of the view that disclosure is prohibited under DPA the Committee has indicated that it would be strongly minded to overcome this obstacle by imposing a requirement for disclosure under Section 23.

Meetings attended by Guy Houston

The Committee was told by Malcolm Reed on 14 January that Mr Houston was a participant only at a very late stage in the process and that he only attended two meetings, both of which took place after the deal had been struck. (Col 820 of the Official Report refers). The Minister for Transport, Climate Change and Infrastructure also emphasised that Mr Houston was not involved in the decision making process. (Col 882-3 refers) However, Annex B of Malcolm Reed’s letter of 3 February identifies 17 meetings relating to the First Scotrail Franchise attended by Mr Houston. In particular, the Committee understands that the meetings on 28 August 2007, 23 January and 29 February 2008 included consideration of the contract review and the possible extension of the franchise. The Committee would be grateful if you could clarify this apparent conflict in the evidence presented to members. As you will know, the Committee attaches great importance to receiving full and accurate information in order to carry out their parliamentary duties effectively.

Concerns about Mr Houston’s work

The Committee is aware that concerns had been expressed in some quarters regarding Mr Houston’s work in relation to concessionary fares and the M80 contract. Were you aware of any concerns in relation to Mr Houston’s work on these matters, or of any investigations or actions, by Transport Scotland or the Scottish Government more widely, on these concerns?

The Committee also wishes to know whether Ministers expressed to you, at any stage, any concerns or views about Mr Houston’s continuing employment? I would note that while advice provided to Ministers may be regarded as confidential, the Committee believes that the question of whether Ministers expressed any concerns regarding Mr Houston’s continued employment falls outside this exemption.

For the avoidance of doubt, the Committee’s request for this information should also be read in the context of the paragraphs above in relation to the Data Protection Act and s 23 of the Scotland Act.

I would be grateful for a response to this letter as soon as possible and no later than close of Wednesday 18 February. Should you have any queries please contact the clerk to the committee at pa.committee@scottish.parliament.uk.

letter from sir john elvidge, permanent secretary, the scottish government, to the convener of the public audit committee, 18 february 2009

Thank you for your letter of 9 February.

The Data Protection Act and s23 of the Scotland Act.

I agree with the Committee that the application of the law on data protection is a matter of judgement in individual cases. The obligation to take a view in this case rests on the Scottish Government, in this case, because we are responsible as employer for the handling of the relevant personal data. The Committee is correct in inferring that I have taken the view that none of the conditions in Schedule 2 to the Data Protection Act is met in this case.

Firstly, the obligation on me is to be satisfied that the requirement of necessity included in both conditions 5(d) and 6 is met. In order to do so, I would need to be able to see a connection between the substance of the Committee’s consideration of the AGS report on the First Scotrail Passenger Rail Franchise and the data which we hold about Mr Houston’s departure. On the basis of the totality of the information available to me, I am unable to satisfy myself that there is such a connection. The inherent difficulty is that the Committee does not have access to the information on which I base that judgement; and I cannot share that information without going even further into the difficulties of data protection.

Secondly, before either of the above conditions apply the disclosure would have to lawful under the first principle of the Data Protection Act. I consider that both Article 8 of the European Convention of Human Rights as well as the general law of confidentiality requires to be respected in this case.

In reaching this view I have considered the approach taken by the Information Tribunal in its decision on appeal numbers EA/2006/0015 & 0016. The Committee’s request for further information does however appear to be quite different to the circumstances of that particular case. I note that decision related to the publication of MPs' travel expenses where much of the information sought was already in the public domain. The issue related to a further breakdown of those expenses rather than a request for information that had not been published in any format. The case also did not touch on the relationship of employer and employee. It is my view that this relationship is one of the key issues to be considered in deciding whether disclosure of the information requested by the Committee would be lawful.

I would also draw the Committee’s attention to another recent decision of the Information Commission which appears to be more in point with the current circumstances. (Rotherham NHS Foundation Trust – FS50147017.) It relates to a request for information about the financial packages given to former public officials on their departure from their employment. The public authority and former employees had agreed compromise agreements, and the information requested was not in the public domain. The Commissioner stated in this case that “where a compromise agreement has been agreed between parties a balance has to be struck between a public authority’s duty to be transparent and accountable about how and why it decided to spend public money in a particular way and its duty to respect their employees’ reasonable expectations of privacy.” The Commissioner found that in the circumstances of that case disclosure would contravene the first data protection principle. I would advise that the Scottish Government and Mr Houston entered into a compromise agreement at the time of Mr Houston’s departure.

I have given careful further consideration to how we might resolve this position in a way which respects the Committee’s interests but preserves Mr Houston’s data protection rights.

I can give the Committee my assurance that our reasons for agreeing to Mr Houston’s departure on the terms we did were grounded in matters unrelated to the rail franchise extension, including my view that I wished the new Chief Executive of Transport Scotland to have freedom to restructure his senior team. I can also give the Committee the information that the financial arrangements related to his departure were consistent with the legal and contractual entitlements which apply in such cases.

If this is not a sufficient basis for the Committee to satisfy itself, the alternative would be to find a basis for disclosure of more information to the Committee in a way which transfers the data protection obligation in respect of Mr Houston to the Parliament. I am advised that use of section 23 would - subject to the provisions of s23(9) - achieve this but I acknowledge the other reasons which weigh against use of that route. I am also advised that disclosure of information by me to you, as Convener, on a confidential basis would also achieve this effect; although it would be important to have confirmation that the Parliament’s legal advisers shared the view that the Parliament would be bound by the Data Protection Act in respect of any further disclosure of the information. However, this would not remove the legal obligation on the Scottish Government which, in my judgement, prevents the disclosure of the information.

Meetings attended by Guy Houston

I have had an opportunity to discuss with Dr Reed Mr Houston’s involvement in meetings where the franchise extension was raised, and the evidence which he gave to the committee on Mr Houston’s involvement in, or knowledge of, the franchise extension.

The point that Dr Reed wished to emphasise to the Committee was that Mr Houston played no part in the process to evaluate, negotiate or agree the franchise extension and that he was an active participant in meetings about the extension of the contract only at a late stage. Dr Reed’s discussion of the two meetings which took place after the deal was struck (those in March 2008) was in the context of paragraph 71 of the Audit Scotland report, where these are the meetings referred to and which were, from the report of the Committee’s proceedings on 10 December 2008, the meetings in which the committee appeared to have most interest.

It had not been Dr Reed’s intention to suggest that these were the only meetings attended by Mr Houston at which the franchise or the franchise extension were discussed. As indicated in his letter of 3 February, franchise matters arose routinely at a number of meetings at which Mr Houston was present, and there were also occasions where the Finance Director was copied into papers for information. As stated in Dr Reed’s evidence (Col 827), Mr Houston was broadly aware of the work being done to consider a franchise extension, which was appropriate given Mr Houston’s roles in managing the overall finances of Transport Scotland and as director responsible for corporate communications. As has already been stated, he was not however involved in the formulation of decisions or recommendations on the extension itself, nor on its desirability, values or content.

You asked specifically about three meetings: those on 28 August 2007, 23 January 2008, and 29 February 2008. The meeting on 28 August 2007 took place before detailed proposals had been developed for presentation to Ministers on 18 September 2007 to seek their firm agreement to the resumption of negotiations with First Group about the future development of the franchise (Col 841) and the relevant agenda item related to the potential link with other policy areas, such as the spending review and fares and integrated ticketing policy (all areas where Mr Houston had a role), rather than the financial content of any future discussion with First Group. I have been advised by other participants that, although the note of the meeting does not record this fact, Mr Houston had left the meeting (which commenced at 3pm) before that agenda item was reached, and his diary records that he was intending to leave Glasgow on the 17.30 train.

The meeting on 23 January 2008 was a director-level discussion at which two general aspects of the franchise negotiation with First Group were considered: how in principle funds arising from a successful outcome might be applied against existing rail development commitments, and how qualitative aspects of franchise performance could be factored into the negotiation. Again, this discussion did not involve consideration of the specific financial terms under negotiation with First Group, and Dr Reed has told me that he satisfied himself that Mr Houston’s participation was consistent both with the arrangements he had agreed with him, in respect of the handling of potential conflicts of interests in relation to First Group and his broader financial management responsibilities.

The meeting on 29 February 2008 was an informal pre-meeting for a scheduled high-level meeting between the Chief Executives of Transport Scotland and First Group on 5 March. No note was taken of that meeting, but a subsequent action email dated 3 March 2008 records an agreed outcome in terms of handling arrangements, a non-financial area for which Mr Houston was the responsible director. Since that note is concerned with advice to Ministers it is not however releasable.

Concerns about Mr Houston’s work

I was aware of the nature of performance discussions with Mr Houston. I was also aware of the substance of discussions of broader organisational performance on some specific issues.

In relation to the issues on which you indicate that the Committee is aware of concerns expressed in some quarters, it may be helpful if I say that the only expression of concern in relation to the concessionary fares regime of which I am aware appears to me to be an opportunistic response to media coverage of Mr Houston’s departure by an individual bus operator, which had overclaimed a six figure sum of concessionary fare reimbursement and which is disputing the action which Transport Scotland is taking to recover the overclaimed amount. The case has been handled in line with Transport Scotland’s standard procedures for such situations, with which I understand Audit Scotland to be content. The handling has been conducted, as normal, by the Head of the Concessionary Travel Unit. I understand that the editor of Scotland on Sunday has acknowledged, in response to a complaint from Transport Scotland, that his paper’s reporting of this issue was imbalanced. In my view, it is a clear example of the risks of exposing Mr Houston to trial by media and the importance of scrupulous observance of his legal rights.

In relation to the M80 contract, there were some issues of process which were of concern to me and to Ministers. Mr Houston was one of a number of staff who dealt with the relevant issues. There is continuing consideration of the scope for improved practice within parts of the Scottish Government as a result of our review of those specific events.

Finally, Ministers did not seek at any point to influence my judgement about Mr Houston’s continuing employment. I kept them informed of my thinking on senior staffing issues in Transport Scotland in order to provide them with assurance that Transport Scotland would continue to have a satisfactory level of operational capability.

letter to sir john elvidge, permanent secretary, the scottish government, from the convener of the public audit committee, 20 February 2009

I refer to your letter of 18 February 2009 in relation to the AGS report on the First Scotrail Passenger Rail Franchise. As you will be aware, the Committee is due to consider this letter at its meeting on 25 February. I will write to you after that meeting to let you have an update on the Committee’s deliberations. However, there are two preliminary questions that I wanted to raise with you.

I note your assurance that the reasons for agreeing to Mr Houston’s departure were grounded in matters unrelated to the franchise extension, and your wish that the incoming Chief Executive of Transport Scotland should have the freedom to restructure his senior team. I understand that the new Chief Executive is now in place and I would be grateful if you could provide an update on whether he has made any other changes to his senior team, or whether Mr Houston’s post was the only one affected by this change.

In relation to the Committee’s request for information relating to Mr Houston’s departure, I would emphasise that the Committee has at no time requested details of the exact package agreed between the Scottish Government and Mr Houston. Rather, the Committee seeks to find out whether it was the case that Mr Houston handed in his notice or otherwise requested to leave Transport Scotland or whether it was suggested to him that he might leave, or he was otherwise asked to leave the organisation. The only matter of detail that the Committee has requested is whether Mr Houston received any enhancement above and beyond pay for his hours worked and holidays accrued.

I would be grateful if you could provide this information to the Committee by close of play on Wednesday 4 March. Should you require any further information please do not hesitate to contact the Clerk, Tracey Reilly on 0131 348 5390 or by email at pa.committee@scottish.parliament.uk.

letter to sir john elvidge, permanent secretary, the scottish government, from the convener of the public audit committee, 3 march 2009

I refer to your letter of 18 February 2009 in relation to the AGS report on the First Scotrail Passenger Rail Franchise. As you will be aware, the Committee considered this letter at its meeting on 25 February.

The Committee was minded to invite you to give further oral evidence on this topic. However, before issuing any formal invite there are a number of areas in which the Committee wishes to receive more information.

Management arrangements agreed between Dr Reed and Guy Houston

The Committee wishes to receive a copy of the full set of management arrangements entered into between Dr Reed and Guy Houston, as referred to in Dr Reed’s letter of 3 February 2009.

Communication between Transport Scotland and the Scottish Government

The Committee wishes to receive copies of all written communications, either hard copy or email, between Transport Scotland and the Scottish Government in relation to the extension of the Scotrail Franchise, the Auditor General for Scotland’s report on the issue and the departure of Mr Houston from Transport Scotland. This request should cover all communications between 1 March 2008 and the date of this letter.

Issues relating to s 23 of the Scotland Act

The Committee would welcome clarification of certain comments in the final paragraph of the section of your letter under the heading of The Data Protection Act and s23 of the Scotland Act. You state in the final sentence of that paragraph that disclosure on a confidential basis would not remove the legal obligation on the Scottish Government which, in your judgement, prevents the disclosure of information. Can you confirm the nature of the legal obligation to which you refer?

In the context of section 23 your letter makes express reference to section 23(9) which sets out circumstances in which a person is not obliged to answer a question or produce a document called for pursuant to the section. It is not clear to the Committee if this was intended to suggest that the Scottish Government would in fact have grounds for invoking section 23(9). In the interests of clarity I would therefore be grateful if you would indicate if you consider that section 23(9) is applicable to the information called for and, if so, on what grounds.

Confidentiality

As you are aware, the Committee has invited Guy Houston to give evidence on 25 March 2009. I am conscious that Mr Houston may feel constrained from answering questions relating to his departure on the grounds of confidentiality, whether arising from a confidentiality clause in the compromise agreement or otherwise. As you have consistently made clear that your inability to provide the Committee with the requested information has been purely out of consideration for Mr Houston’s data protection rights, I assume that the Scottish Government would, for its part, be happy to waive confidentiality so as to permit Mr Houston to answer such questions if he is otherwise willing to do so. I would be grateful if you would confirm that this is the case and that Mr Houston can be advised accordingly.

I would be grateful if you could provide this information to the Committee by close of play on Tuesday 10 March. Should you require any further information please do not hesitate to contact the Clerk, Tracey Reilly on 0131 348 5390 or by email at pa.committee@scottish.parliament.uk.

letter from sir john elvidge, permanent secretary, the scottish government, to the convener of the public audit committee, 10 march 2009

Thank you for your letters of 20 February and 3 March, the second of which intimated that the Committee might wish to invite me to give further oral evidence on this subject. I would be pleased to appear if the Committee would find that helpful.

You raised two issues in your letter of 20 February.

In relation to restructuring of the senior team at Transport Scotland, the new Chief Executive and I are in discussion about options and the timescale and process for reaching a decision. In my judgement, any change affecting Mr Houston’s former post would also be likely to have implications for at least one other senior post.

The Committee also asked further questions about the departure of Guy Houston from Transport Scotland and, in response to points I made in my letter to you of 18 February about the legal constraints surrounding disclosure of the information requested, commented that the Committee had at no time requested details of the exact package agreed between the Scottish Government and Mr Houston. This has not been made clear in past exchanges. In the course of taking oral evidence from Dr Reed on 14 January, the Committee specifically asked “What were the financial terms of his departure”. This line of questioning was picked up again by the Committee when taking evidence from me, when I was asked whether I could not say what financial terms were agreed as part of his departure as a consequence of the Data Protection Act 1998. The Scottish Government’s oral and written responses to the Committee to date on this subject have been provided on the basis that it would not be lawful for us to disclose the information sought. The legality or otherwise of disclosing information depends, to a very great extent, on precisely what information is being sought.

I am able to tell the Committee that the initiative for the discussions which led to Mr Houston’s departure came from him. I can also say that Mr Houston was expressing a willingness to discuss the possibility of stepping down rather than intimating a firm decision to do so. On the terms of Mr Houston’s departure, I can confirm that no payment was made which was inconsistent with his legal and contractual entitlement.

Turning to your letter of 3 March, the Committee asked a number of questions under the following headings.

Management arrangements between Dr Reed and Guy Houston

The Committee asked for a copy of the full set of management arrangements entered into between Dr Reed and Guy Houston, as referred to in Dr Reed’s letter to the Committee of 3 February. Apart from the fact that the arrangements set out in Dr Reed’s letter of 3 February were accompanied by an undertaking by Mr Houston that he would not increase his shareholding in First Group plc above the levels he had disclosed to Dr Reed, there was no written agreement which goes beyond the arrangements set out in Dr Reed’s letter.

Communication between Transport Scotland and the Scottish Government

The Committee asked for copies of all written communications between Transport Scotland and the Scottish Government in relation to the extension of the Scotrail Franchise, the Auditor General’s report on the issue and the departure of Mr Houston. All documentation pertaining to the extension of the Scotrail Franchise already has been made available in confidence to Audit Scotland during the course of their preparation of the AGS report on the franchise. The issues, therefore, are the wider disclosure of such documentation and the different status of documentation relating to the departure of Mr Houston. The nature of some of the written information held by the Scottish Government that could be construed as falling within the scope of the Committee’s request is such that I would require further advice about the implications of disclosure. As your letter of 3 March does not specify precisely what information the Committee wishes to see, nor make clear what material link exists, in the Committee’s view, between the information requested and the substance of the Committee’s consideration of the AGS report, I am unable to commission adequate advice on the impact of disclosure. I am therefore unable at the present time to go beyond the level of disclosure already undertaken, or available to Audit Scotland, by providing the Committee with the material requested.

Issues relating to Section 23 of the Scotland Act

The Committee asked me to confirm to which legal obligation I referred in my letter of 18 February, in the context of my offering the view that disclosure of information relating to Mr Houston in confidence to you, as Convenor, would not remove the legal obligation on the Scottish Government which, in my judgement, prevents the disclosure of the information. The legal obligation is the one I described in the third substantive paragraph of my letter of 18 February, which is to keep confidential the information requested due to the provisions of the Data Protection Act, Article 8 of ECHR and the general law of confidentiality.

The Committee also asked whether I consider that s23(9) is applicable to the information requested and, if so, on what grounds. Until it is clear what actual information is sought by the Committee, I am unable to judge whether s23(9) might be applicable.

Confidentiality

The Committee asked whether the Scottish Government would be willing to waive confidentiality so as to permit Mr Houston to answer questions about his personal circumstance, if he is otherwise willing to do so. Throughout the exchanges I have had with the Committee on the subject of Mr Houston’s departure, I have been mindful of the fact that the issues raised go beyond the obligations the Scottish Government has in respect of Mr Houston personally. The obligations I referred to in my previous evidence (DPA, ECHR and the general law of confidentiality) impact on the relationship between the Scottish Government and all its employees. It is my responsibility to ensure that the Scottish Government is a robust corporate body. One possible implication of waiving confidentiality in this case is that civil servants more generally would lose confidence in the Scottish Government as an employer, should they consider that in the future their right to confidentiality was likely to be waived.

Quite separate from the specific circumstances of Mr Houston’s case, it is important to remember that one of the purposes of confidentiality clauses in Compromise Agreements is to allow both parties to reach a conclusion and move on, and if that option (which is available to all employers, including the Scottish Parliament, in terms of s203 of the Employment Rights Act) is to be denied to public sector bodies, the likely outcome will be a significant rise in the number of matters which have to be resolved in the Court/Tribunal system, with a corresponding increase in the amount of

public funds which are required to deal with such matters, to say nothing of the potential reputational damage to both employers and individuals.

As a result of the considerations above, I do not think it would be appropriate to comment on how the Scottish Government might respond to Mr Houston’s own response to the Committee’s invitation or attempt to pre-judge any legal advice he may seek himself. On a technical point, it may be helpful to note that the waiving of confidentiality could only be in terms of the compromise agreement and not the Official Secrets Act (OSA). As a former civil servant, Mr Houston would be unable to answer the Committee’s questions if doing so would breach the OSA.

I hope that this letter is helpful, including in explaining some of the wider issues associated with a substantive response to the Committee which goes beyond the additional information I have provided. As I stated at the outset of this letter, I would be pleased to expand upon and discuss these issues through giving further oral evidence to the Committee, if you would find that helpful.

letter to sir john elvidge, permanent secretary, the scottish government, from the convener of the public audit committee, 12 march 2009

I refer to your letter of 10 March 2009 in relation to the AGS report on the First Scotrail Passenger Rail Franchise. The Committee considered this letter at its meeting on 11 March.

The Committee would like to invite you to give further evidence and I am therefore writing to formally invite you to give evidence to the Committee on the morning of Wednesday 25 March 2009.

Arrangements for Oral Evidence

Your evidence session will take place on the morning of 25 March. The clerk will be in touch regarding precise timings once these are finalised. Your evidence session will take place in public. I would be grateful if you could confirm your willingness to attend along with the names and titles of any supporting team colleagues, up to four in total, who can effectively contribute to the session.

At the start of your evidence session, you may wish to make an opening statement. If so, I would be grateful if this could be kept to less than two minutes. I would like to draw your attention to the enclosed guidance for witnesses:

http://www.scottish.parliament.uk/vli/publicInfo/documents/Witnessleaflet.pdf

If you wish a named official other than yourself to deal with the meeting arrangements and correspondence, please could you provide the name, telephone number and address of this contact, and all subsequent correspondence will be sent to him or her.

I would be grateful if you could confirm your willingness to attend the meeting, and provide the names and designations of those attending with you, by close of Wednesday 18 March 2009 to enable the agenda to be finalised.

Written Evidence

In advance of this evidence, the Committee have requested further details on the following issues:

Mr Houston’s contract of employment

The Committee would be grateful if you would provide a copy of Mr Houston’s contract of employment. Can you please also provide the Committee with a copy of the standard terms and conditions contained in the senior civil service employment contract and confirm whether or not the contract entered into for Mr Houston was for a fixed or indefinite period.

Management arrangements between Malcolm Reed and Guy Houston

The Committee notes that the management arrangements contained the points set out in Dr Reed’s letter of 3 February 2009. The Committee further notes that these arrangements were accompanied by an undertaking by Mr Houston that he would not increase his shareholding in First Group plc “above the levels he had disclosed to Dr Reed”. The Committee again requests a hard copy of these arrangements. The Committee also wishes to know the nature and extent of the shareholding disclosed to Dr Reed and the dates of the correspondence which was exchanged following the disclosure of Mr Houston’s shareholdings. I would point out that Mr Houston’s shareholdings are a matter of public record and are obtainable from Companies House, as with any other shareholding. The Committee does not, therefore, anticipate any barrier to the provision of this information.

Compromise agreement

You say that it is not possible to answer whether, in your opinion, s 23(9) of the Scotland Act is applicable until it is clear what information is requested by the Committee. In the interests of clarity, the Committee is considering whether to request the compromise agreement entered into by Guy Houston and the Scottish Government. Should the Committee decide to invoke Section 23 of the Scotland Act to require you to produce this document, what grounds do you believe that Section 23(9) of the Act would provide to allow a refusal on your part? If so, please set out an explanation for this view.

The terms of Mr Houston’s departure

The Committee notes your assurance that no payment was made to Mr Houston which was inconsistent with his legal and contractual entitlement. In the interests of absolute clarity, could you please tell the Committee:

Whether Mr Houston received a payment in lieu of notice?

Whether Mr Houston received any other compensatory payment in addition to that in lieu of notice?

Please provide the Committee with the figures relating to any such payments. The Committee understands that information about Mr Houston’s remuneration will appear in the annual accounts for Transport Scotland for 2008/09. Bearing this in mind, the Committee sees no reason why they cannot be provided now.

On the point of there being a material link to the AGS’s report, the Committee considers that the nature and terms of Mr Houston’s departure are of direct relevance to the report, given that the report raises issues regarding Mr Houston’s role, his interests and his attendance at meetings in relation to the franchise.

I would be grateful if you could provide this information to the Committee by close of play on Wednesday 18 March. Should you require any further information please do not hesitate to contact the Clerk, Tracey Reilly on 0131 348 5390 or by email at pa.committee@scottish.parliament.uk.

letter to sir john elvidge, permanent secretary, the scottish government, from the convener of the public audit committee, 18 march 2009

I refer to your letter of 10 March 2009 in relation to the AGS report on the First Scotrail Passenger Rail Franchise.

The Committee would be grateful if you would provide copies of:

  • Any written or emailed communications between Guy Houston and Transport Scotland concerning Guy Houston’s shareholdings and the management of his interests; and

  • Any written or emailed communications between the Scottish Government and Transport Scotland concerning Guy Houston’s shareholdings and the management of his interests.

I would be grateful if you could provide this information to the Committee as soon as possible and no later than close of play on Tuesday 31 March. Should you require any further information please do not hesitate to contact the Clerk, Tracey Reilly on 0131 348 5390 or by email at pa.committee@scottish.parliament.uk.

letter from sir john elvidge, permanent secretary, the scottish government, to the convener of the public audit committee, 18 march 2009

Thank you for your letter of 12 March, in which you invited me to give oral evidence to the Committee on 25 March. I write to confirm that I would be pleased to appear, together with Paul Gray, Director of Change and Corporate Services. I also confirm that I would like to make a very brief opening statement.

You asked a number of questions, following on from our earlier exchanges of correspondence, under the following headings.

Mr Houston’s contract of employment

The Committee asked for a copy of Mr Houston’s contract of employment and a copy of the standard terms and conditions contained in the senior civil service employment contract. I attach a copy of the latter. As I regard the contract of employment issued to Guy Houston in March 2006 as personal data under the terms of the Data Protection Act 1998 I am unable to provide the Committee with a copy. I have however enclosed, as requested, a copy of the standard SCS contract template.

The Committee also asked whether Mr Houston’s contract was fixed or indefinite. Upon appointment, Mr Houston became a permanent civil servant.

Management arrangements between Malcolm Reed and Guy Houston

The Committee asked for a hard copy of the management arrangements between Dr Reed and Mr Houston. I note that Mr Houston wrote to the Committee on 16 March enclosing a copy of a letter he sent to Malcolm Reed on 14 March 2007, which set out the management arrangements.

The Committee asked for the dates of correspondence on this subject. I understand that the letter provided to the Committee by Mr Houston is the only relevant correspondence. Dr Reed agreed the arrangements described in the letter in a meeting with Mr Houston on 4 April 2007.

The Committee asked what was the nature and extent of Mr Houston’s shareholdings. I note that Mr Houston provided the Committee with information about his shareholdings in his letter of 16 March.

Compromise agreement

The Committee asked whether I consider that the Scottish Government might have grounds to refuse a request, under section 23(9) of the Scotland Act, to disclose the compromise agreement entered into by Mr Houston and the Scottish Government; and, if so, for an explanation of why I might hold such a view.

124.I would not want to pre–judge this matter but there are a number of issues that the Scottish Government would need to consider if it was to receive such a request. I would refer the Committee to the final six paragraphs in my letter of 18 February, in which I set out in some detail the concerns I have about the implications of disclosure of information about Mr Houston’s departure, in terms of: the Scottish Government’s duties under data protection legislation; Article 8 of ECHR; the general law of confidentiality; the potential impact of disclosure on the effectiveness of the HR operations of the Scottish Government (and, by extension, any public sector organisation, including the Scottish Parliament); and the absence of an explanation of what material link exists between the findings of the AGS report and our reasons for agreeing to the departure of Mr Houston which, as I have already explained to the Committee in my letter of 18 February, were grounded in matters unrelated to the franchise extension.

The terms of Mr Houston’s departure

The Committee asked whether Mr Houston received a payment in lieu of notice or any additional compensatory payment and for the precise figures of any payments. I consider that data protection provisions apply to this information and, therefore, I refer the Committee to the response I provided at paragraph 2 of my letter of 2 February and expanded on at paragraphs 2-9 of my letter of 18 February and paragraphs 4-5 of my letter of 10 March.


Footnotes:

1 Dr Malcolm Reed announced his retirement from Transport Scotland on 22 December 2008, his last day with the Scottish Government was 17 February 2009.

2 Since September 2007, the Scottish Executive has been known as the Scottish Government.

3 Audit Scotland. (2008) The First ScotRail passenger rail franchise, p 7, Exhibit 3

4 Audit Scotland. (2008) The First ScotRail passenger rail franchise, p 18

5 Audit Scotland. (2008) The First ScotRail passenger rail franchise, p 6

6 Transport Scotland, letter to Public Audit Committee, 3 February 2009

7 Audit Scotland. (2008) The First ScotRail passenger rail franchise, p 22

8 Audit Scotland. (2008) The First ScotRail passenger rail franchise, p 18

9 Scottish Parliament Public Audit Committee. Official Report, 14 January 2009, col 831

10 Scottish Parliament Public Audit Committee. Official Report, 21 January 2009, col 892

11 Scottish Parliament Public Audit Committee. Official Report, 14 January 2009, col 831

12 Scottish Parliament Public Audit Committee. Official Report, 14 January 2009, col 870-871

13 Scottish Parliament Public Audit Committee. Official Report, 21 January 2009, col 890

14 Scottish Parliament Public Audit Committee. Official Report, 21 January 2009, col 896

15 Scottish Parliament Public Audit Committee. Official Report, 21 January 2009, col 907

16 London South East, independent share and general financial information website www.lse.co.uk/financeglossary.asp?searchTerm=&iArticleID=265&definition=price_sensitive [accessed on 29 January 2009]

17 Audit Scotland. (2008) The First ScotRail passenger rail franchise, p 22

18 Scottish Parliament Public Audit Committee. Official Report, 14 January 2009, col 838

19 Scottish Parliament Public Audit Committee. Official Report, 14 January 2009, col 838

20 Scottish Parliament Public Audit Committee. Official Report, 14 January 2009, col 843

21 Scottish Parliament Public Audit Committee. Official Report, 14 January 2009, col 842

22 Scottish Government. (Dec 2006) A document which sets out Transport Scotland's plan over the next 20 years for potential intervention over the short, medium and longer term to ensure that Scotland's railway network continues to improve.

23 Scottish Parliament Public Audit Committee. Official Report, 14 January 2009, col 844

24 Scottish Parliament Public Audit Committee. Official Report, 21 January 2009, cols 891-892

25 Scottish Parliament Public Audit Committee. Official Report, 21 January 2009, col 910

26 Scottish Parliament Public Audit Committee. Official Report, 14 January 2009, col 836

27 Audit Scotland will examine the role of public sector boards, including Executive Agencies, in a study to be reported in spring 2010.

28 Audit Scotland. (2008) The First ScotRail passenger rail franchise, p 21

29 Scottish Parliament Public Audit Committee. Official Report, 14 January 2009, col 846

30 Scottish Parliament Public Audit Committee. Official Report, 14 January 2009, col 846

31 Scottish Parliament Public Audit Committee. Official Report, 21 January 2009, col 904

32 Scottish Parliament Public Audit Committee. Official Report, 14 January 2009, col 819

33 Scottish Parliament Public Audit Committee. Official Report, 21 January 2009, col 895

34 Scottish Parliament Public Audit Committee. Official Report, 21 January 2009, col 902

35 Scottish Parliament Public Audit Committee. Official Report, 25 March 2009, col 1044

36 Scottish Parliament Public Audit Committee. Official Report, 21 January 2009, col 897

37 Dr Malcolm Reed, letter to Public Audit Committee, 3 February 2009

38 Letter from Mr Guy Houston to Dr Malcolm Reed, 14 March 2007

39 The Civil Service Management Code section 4.3.8

40 Permanent Secretary, letter to the Public Audit Committee, 3 February 2009

41 Scottish Parliament Public Audit Committee. Official Report, 14 January 2009, col 854

42 Scottish Parliament Public Audit Committee. Official Report, 14 January 2009, col 855

43 Scottish Parliament Public Audit Committee. Official Report, 14 January 2009, col 824

44 Scottish Parliament Public Audit Committee. Official Report, 14 January 2009, col 819

45 Scottish Parliament Public Audit Committee. Official Report, 14 January 2009, col 855

46 Permanent Secretary, letter to the Public Audit Committee, 3 February 2009

47 Scottish Parliament Public Audit Committee. Official Report, 25 March 2009, col1065

48 Permanent Secretary, letter to the Public Audit Committee, 2 February 2009

49 Scottish Parliament Public Audit Committee. Official Report, 25 March 2009, col 1010

50 Scottish Parliament Public Audit Committee. Official Report, 25 March 2009, col 1021

51 Scottish Parliament Public Audit Committee. Official Report, 25 March 2009, col1053

52 Scottish Parliament Public Audit Committee. Official Report, 14 January 2009, col 825

53 Dr Malcolm Reed, letter to the Public Audit Committee, 3 February 2009

54 Letter from Mr Guy Houston to Dr Malcolm Reed, 14 March 2007

55 Scottish Parliament Public Audit Committee. Official Report, 14 January 2009, col 820

56 Scottish Parliament Public Audit Committee. Official Report, 14 January 2009, col 862

57 Scottish Parliament Public Audit Committee. Official Report, 14 January 2009, col 850

58 Scottish Parliament Public Audit Committee. Official Report, 25 March 2009, col 1051

59 Audit Scotland. (2008) The First ScotRail passenger rail franchise, p 20

60 Dr Malcolm Reed, letter to the Public Audit Committee, 3 February 2009

61 Audit Scotland. (2008) The First ScotRail passenger rail franchise, pp 21-22

62 Scottish Parliament Public Audit Committee. Official Report, 14 January 2009, col 820

63 Scottish Parliament Public Audit Committee. Official Report, 21 January 2009, col 904

64 Scottish Parliament Public Audit Committee. Official Report, 25 March 2009, col 1044

65 Scottish Parliament Public Audit Committee. Official Report, 14 January 2009, col 863

66 Scottish Parliament Public Audit Committee. Official Report, 21 January 2009, col 882

67 Scottish Parliament Public Audit Committee. Official Report, 21 January 2009, col 886

68 Scottish Parliament Public Audit Committee. Official Report, 21 January 2009, col 908

69 Scottish Parliament Public Audit Committee. Official Report, 25 March 2009, col 1024-1026

70 Permanent Secretary, letter to Public Audit Committee, 18 February 2009

71 Scottish Parliament Public Audit Committee. Official Report, 25 March 2009, col 1013

72 Scottish Parliament Public Audit Committee. Official Report, 25 March 2009, col 1030

73 Scottish Parliament Public Audit Committee. Official Report, 21 January 2009, col 877

74 Minister for Transport, Infrastructure and Climate Change, letter to the Public Audit Committee, 9 April 2009

75 Minister for Transport, Infrastructure and Climate Change, letter to Public Audit Committee, 14 April 2009

76 Permanent Secretary, letter to Public Audit Committee, 18 February 2009

77Scottish Parliament Public Audit Committee. Official Report, 14 January 2009, col 852

78Scottish Parliament Public Audit Committee. Official Report, 14 January 2009, col 872

79Permanent Secretary, letter to Public Audit Committee, 18 February 2009

80 Scottish Parliament Public Audit Committee. Official Report, 25 March 2009, col 1050

81Audit Scotland. (2008) The First ScotRail passenger rail franchise

82 Scottish Parliament Public Audit Committee. Official Report, 25 March 2009, col 1035

83 Scottish Parliament Public Audit Committee. Official Report, 25 March 2009, col 1042

84 Minister for Transport, Infrastructure and Climate Change, letter to the Public Audit Committee, 3 February 2009.

85 Scottish Parliament Public Audit Committee. Official Report, 25 March 2009, col 1042

86 Scottish Parliament Public Audit Committee. Official Report, 25 March 2009, col 1061

87 Minister for Transport, Infrastructure and Climate Change, letter to the Public Audit Committee, 9 April 2009.

88 Copy of minute of meeting held on 21 November 2008. Supplied by Transport Scotland, 3 February 2009.

89Scottish Parliament Public Audit Committee. Official Report, 25 March 2009, col 1016 and Mr Guy Houston, letter to the Public Audit Committee, 14 April 2009

90Scottish Parliament Public Audit Committee, Official Report, 25 March 2009, col 1014

91Scottish Parliament Public Audit Committee, Official Report, 25 March 2009, col 1015

92Scottish Parliament Public Audit Committee, Official Report, 25 March 2009, col 1068

Next